<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 28, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INSTRON CORPORATION
(AND ITS SUBSIDIARIES IDENTIFIED ON THE FOLLOWING PAGE)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
MASSACHUSETTS 3829 042057203
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
100 ROYALL STREET
CANTON, MA 02021
(781) 828-2500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JAMES M. MCCONNELL
INSTRON CORPORATION
100 ROYALL STREET
CANTON, MA 02021
(781) 828-2500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
CHRISTOPHER M. KELLY THOMAS N. LITTMAN
JONES, DAY, REAVIS & POGUE KIRTLAND CAPITAL PARTNERS III, L.P.
901 LAKESIDE AVENUE 2550 SOM CENTER ROAD, SUITE 105
CLEVELAND, OHIO 44114 WILLOUGHBY HILLS, OHIO 44094
216/586-3939 440/585-9010
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the effective date of this registration statement.
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. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
13 1/4 Senior Subordinated Notes Due
2009................................ $60,000,000 100% $60,000,000 $15,840
-------------------------------------------------------------------------------------------
Subsidiary Guarantees of 13 1/4 Senior
Subordinated Notes Due 2009(2)...... N/A N/A N/A N/A
-------------------------------------------------------------------------------------------
Total............................... $60,000,000 100% $60,000,000 $15,840
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no registration
fee is required with respect to the Subsidiary Guarantees.
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 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
ADDRESS,
INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE
JURISDICTION NUMBER, INCLUDING
OF PRIMARY STANDARD AREA CODE, OF
INCORPORATION INDUSTRIAL IRS REGISTRANT'S
OR CLASSIFICATION EMPLOYER PRINCIPAL
NAME ORGANIZATION CODE NUMBER ID NO. EXECUTIVE OFFICES
---- -------------- ---------------- ---------- -------------------
<S> <C> <C> <C> <C>
Instron Realty Trust.......... Massachusetts 6519 04-8113049 **
IRT-II Trust.................. Massachusetts 6519 04-6879407 **
Instron Schenck Testing
Systems Corp................ Massachusetts 3829 04-3335122 **
Instron Japan Company, Ltd.... Massachusetts 3829 04-2383267 **
Instron Asia Limited.......... Massachusetts 3829 04-2697765 **
Instron/Lawrence
Corporation................. Pennsylvania 3829 23-1884645 **
</TABLE>
- ---------------
** 100 Royall Street, Canton, MA 02021; (781) 828-2500.
i
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
INSTRON MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND INSTRON IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 28, 1999
PROSPECTUS
$60,000,000
OFFER TO EXCHANGE
ALL OUTSTANDING 13 1/4% SENIOR SUBORDINATED NOTES DUE
2009
FOR 13 1/4% SENIOR SUBORDINATED NOTES DUE 2009
OF
INSTRON CORPORATION
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
CENTRAL STANDARD TIME, ON , 2000
LOGO
------------------------
THE REGISTERED NOTES
- The terms of the exchange notes to be issued are substantially identical
to the outstanding notes that Instron issued on September 29, 1999,
except for transfer restrictions and registration rights relating to the
outstanding notes that will not apply to the exchange notes.
- Interest on the notes accrues at the rate of 13 1/4% per year, payable in
cash every six months on March 15 and September 15, with the first
payment on March 15, 2000.
- The notes are not secured by any collateral.
- There is no existing market for the notes, and we do not intend to apply
for their listing on any securities exchange or to seek approval for
quotation through any automated quotation system.
MATERIAL TERMS OF THE EXCHANGE OFFER
- Expires at 5:00 p.m., Central Standard Time, on , 2000,
unless extended.
- The exchange offer is not subject to any condition other than that it
must not violate applicable law or any applicable interpretation of the
Staff of the Securities and Exchange Commission.
- All outstanding notes that are validly tendered and not validly withdrawn
will be exchanged for equal principal amount of exchange notes which are
registered under the Securities Act of 1933.
- Tenders of outstanding notes may be withdrawn at any time prior to the
expiration of the exchange offer.
- Instron will not receive any cash proceeds from the exchange offer.
------------------------
Please consider carefully the "Risk Factors" beginning on page 9 of this
prospectus.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE SECURITIES TO BE DISTRIBUTED IN THE EXCHANGE OFFER,
NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this prospectus is January , 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 8
Special Note Regarding Forward-Looking
Statements.......................... 15
The Exchange Offer.................... 16
The Recapitalization.................. 24
Use of Proceeds....................... 24
Capitalization........................ 25
Unaudited Pro Forma Condensed
Consolidated Financial Data......... 26
Selected Historical Consolidated
Financial Data...................... 31
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 33
Business.............................. 42
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Management............................ 53
Executive Compensation................ 55
Security Ownership.................... 58
Certain Relationships and Related
Transactions........................ 60
Description of New Senior Credit
Facility............................ 63
Description of Notes.................. 64
Certain United States Federal Income
Tax Considerations.................. 100
Plan of Distribution.................. 106
Legal Matters......................... 106
Experts............................... 106
Available Information................. 106
Index to Financial Statements......... F-1
</TABLE>
<PAGE> 5
PROSPECTUS SUMMARY
The following is a summary of the more detailed information appearing
elsewhere in this prospectus. This summary is not complete and does not contain
all the information you should consider. You should read the entire prospectus
carefully, including the "Risk Factors" and the financial statements and related
notes. Unless the context requires otherwise:
- "we," "us," "our" and "Instron" and similar terms include all of our
consolidated subsidiaries; and
- the pro forma information contained in this prospectus gives effect to
the recapitalization described below, our acquisition of Satec Systems,
Inc. and our acquisition of the remaining 49% of our Instron Schenck
Testing Systems ("IST") joint venture as if each occurred as of the
beginning of the period stated for income statement data, and at the date
stated for balance sheet data.
THE EXCHANGE OFFER
THE EXCHANGE OFFER......... We offer to exchange $60.0 million in principal
amount of our 13 1/4% Senior Subordinated Notes due
September 15, 2009, which have been registered
under the federal securities laws, for $60.0
million principal amount of our outstanding
unregistered 13 1/4% Senior Subordinated Notes due
September 15, 2009, which we issued on September
29, 1999 in a private offering. You have the right
to exchange your outstanding notes for exchange
notes with substantially identical terms.
We issued the outstanding notes on September 29,
1999 as part of a unit offering. Each unit
consisted of $1,000 principal amount of outstanding
notes and one warrant to purchase 0.5109 of a share
of our common stock. As of the date of this
prospectus, the units have separated into
outstanding notes and warrants. We are not
registering the warrants or our common stock as
part of this exchange offer or in a separate
offering at this time.
REGISTRATION RIGHTS
AGREEMENT.................. We issued the outstanding notes on September 29,
1999 to Donaldson, Lufkin & Jenrette Securities
Corporation. At that time, Instron signed a
registration rights agreement with Donaldson,
Lufkin & Jenrette, which requires us to conduct
this exchange offer.
This exchange offer is intended to satisfy those
rights set forth in the registration rights
agreement. After the exchange offer is complete,
you will no longer be entitled to registration
rights with respect to outstanding notes that you
do not exchange.
IF YOU FAIL TO EXCHANGE
YOUR OUTSTANDING NOTES..... If you do not exchange your outstanding notes for
exchange notes in the exchange offer, you will
continue to be subject to the restrictions on
transfer provided in the outstanding notes and the
indenture governing those notes. In general, you
may not offer or sell your outstanding notes unless
they are registered under the federal securities
law or are sold in a transaction exempt from or not
subject to the registration requirements of the
federal securities laws and applicable state
securities laws.
EXPIRATION DATE............ The exchange offer will expire at 5:00 p.m.,
Central Standard Time, on 2000,
unless we decide to extend the expiration date. See
"The Exchange Offer -- Expiration Date; Extensions;
Amendments."
CONDITIONS TO THE EXCHANGE
OFFER.................... The exchange offer is subject to conditions that we
may waive. The exchange offer is not conditioned
upon any minimum amount of outstand-
1
<PAGE> 6
ing notes being tendered for exchange. See "The
Exchange Offer -- Conditions."
We reserve the right, subject to applicable law, at
any time and from time to time:
- to extend the exchange offer or to terminate the
exchange offer if specified conditions have not
been satisfied; and
- to amend the terms of the exchange offer in any
manner consistent with the registration rights
agreement.
See "The Exchange Offer -- Expiration Date;
Extensions; Amendments."
PROCEDURES FOR TENDERING
OUTSTANDING NOTES........ If you wish to tender your outstanding notes for
exchange, you must:
- complete and sign the enclosed Letter of
Transmittal by following the related
instructions; and
- send the Letter of Transmittal, as directed in
the instructions, together with any other
required documents, to the exchange agent,
either:
(1) with the outstanding notes to be tendered; or
(2) in compliance with the specified procedures
for guaranteed delivery of the outstanding
notes.
Brokers, dealers, commercial banks, trust companies
and other nominees may also effect tenders by
book-entry transfer.
Please do not send your Letter of Transmittal or
certificates representing your outstanding notes to
us. Those documents should only be sent to the
exchange agent. Questions regarding how to tender
and requests for information should be directed to
the exchange agent. See "The Exchange
Offer -- Exchange Agent."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS........ If your outstanding notes are registered in the
name of a broker, dealer, commercial bank, trust
company or other nominee, we urge you to contact
that person promptly if you wish to tender your
outstanding notes in accordance with the exchange
offer. See "The Exchange Offer -Procedures for
Tendering."
WITHDRAWAL RIGHTS.......... You may withdraw the tender of your outstanding
notes at any time prior to the expiration date of
the exchange offer by delivering a written notice
of your withdrawal to the exchange agent. You must
also follow the withdrawal procedures as described
under the heading "The Exchange Offer -- Withdrawal
of Tenders."
RESALES OF EXCHANGE
NOTES...................... We believe that you will be able to offer for
resale, resell or otherwise transfer exchange notes
issued in the exchange offer without compliance
with the registration and prospectus delivery
provisions of the federal securities laws, provided
that:
- you are acquiring the exchange notes in the
ordinary course of business;
- you are not participating, and have no
arrangement or understanding with any person to
participate, in the distribution of the exchange
notes; and
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<PAGE> 7
- you are not an affiliate of Instron, or if you
are an affiliate, you will comply with the
registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
As defined in Rule 405 of the Securities Act, an
affiliate of Instron is a person that "controls
or is controlled by or is under common control
with" Instron.
Our belief is based on interpretations by the
Commission, as set forth in no-action letters
issued to third parties unrelated to Instron. The
Staff has not considered this exchange offer in the
context of a no-action letter, and we cannot assure
you that the Staff would make a similar
determination with respect to this exchange offer.
If our belief is not accurate and you transfer an
exchange note without delivering a prospectus
meeting the requirements of the federal securities
laws or without an exemption from these laws, you
may incur liability under the federal securities
laws. We do not and will not assume or indemnify
you against this liability.
Each broker-dealer that receives exchange notes for
its own account in exchange for outstanding notes
that were acquired by that broker-dealer as a
result of market-making or other trading activities
must agree to deliver a prospectus meeting the
requirements of the federal securities laws in
connection with any resale of the exchange notes.
See "The Exchange Offer -- Resale of the Exchange
Notes."
EXCHANGE AGENT............. The exchange agent for the exchange offer is
Norwest Bank Minnesota, National Association. The
address, telephone number and facsimile number of
the exchange agent are set forth in "The Exchange
Offer -Exchange Agent" and in the Letter of
Transmittal.
USE OF PROCEEDS............ We will not receive any cash proceeds from the
exchange offer.
THE EXCHANGE NOTES
ISSUER..................... Instron Corporation
100 Royall Street
Canton, MA 02021
(781) 828-2500
EXCHANGE NOTES............. $60.0 million in aggregate principal amount of
13 1/4% Senior Subordinated Notes due 2009.
MATURITY DATE.............. September 15, 2009.
INTEREST RATE AND PAYMENT
DATES.................... Interest on the notes will accrue at the rate of
13 1/4% per annum, payable semiannually in cash in
arrears on March 15 and September 15 of each year,
commencing March 15, 2000.
OPTIONAL REDEMPTION........ On or after September 15, 2004, we may redeem some
or all of the notes at any time at the redemption
prices described in "Description of Notes --
Optional Redemption."
Before September 15, 2002, we may redeem up to 35%
of the notes with the proceeds of certain offerings
of our common equity at the price listed in
"Description of Notes -- Optional Redemption."
3
<PAGE> 8
MANDATORY REPURCHASE
OFFER...................... If we sell certain assets or we experience specific
kinds of changes in control, we must offer to
repurchase the notes at the prices listed in
"Description of Notes -- Repurchase at the Option
of Holders." See "Risk Factors -- Financing Change
of Control Offer."
SUBSIDIARY GUARANTEES...... The notes will be jointly and severally guaranteed
on an unsecured senior subordinated basis by our
existing and future domestic subsidiaries. Our
foreign subsidiaries will not guarantee payment on
the notes. For the nine months ended October 2,
1999, our foreign subsidiaries accounted for 234.0%
of our EBITDA.
RANKING.................... These notes and the subsidiary guarantees are
senior subordinated debts.
They rank behind all of our and the subsidiary
guarantors' current and future indebtedness, other
than indebtedness that expressly provides that it
is not senior to these notes and the subsidiary
guarantees.
As of October 2, 1999, the notes were subordinated
to approximately $46.5 million of senior debt.
In addition, the notes are subordinated to all
liabilities, including trade payables, of our
foreign subsidiaries, which are not guarantors. On
October 2, 1999, these notes were effectively
junior to $30.0 million of indebtedness and other
liabilities, including trade payables, of these
non-guarantor subsidiaries.
COVENANTS.................. We will issue the notes under an indenture with
Norwest Bank Minnesota, National Association, as
trustee. The indenture will contain covenants that
place limitations on our ability and the ability of
our subsidiaries to:
- borrow money;
- pay dividends on stock or repurchase stock;
- make investments;
- use assets as security in other transactions; and
- sell certain assets or merge with or into other
companies.
For more details, see the section "Description of
Notes -- Certain Covenants."
THE COMPANY
We are a world leader in the manufacture, marketing and servicing of
materials and structural testing systems, software and accessories. Materials
testing focuses on the mechanical properties of materials, including tensile
strength, compressive strength, fracture properties and hardness. Structural
testing simulates the life cycle of components or complete products in order to
verify their design, durability and performance capabilities. Our products are
used by research scientists, design engineers and quality control personnel to
evaluate the mechanical properties and performance of various materials,
components and structures in the following applications:
- quality control and specification testing;
- research and development of new materials to enhance product performance;
and
- the search for new applications and markets for existing materials.
Our systems are used to test the strength, durability, hardness, impact
resistance and other characteristics of practically all materials intended for
industrial and consumer use by stretching, compressing, cycling or twisting
them. Our reach extends well beyond testing extremely complex materials used in
automobiles, airplanes,
4
<PAGE> 9
buildings or bridges. It includes testing food, clothing, sporting equipment,
children's toys and a wide range of other products. For example, our customers
use our systems to test:
- the strength and durability of exotic materials used for space
exploration;
- the exacting quality requirements of prosthetic limbs and other
orthopedic equipment;
- the strength and durability of seatbelts;
- the texture of fruit used in the production of ice cream; and
- the quality and formability of sheet metal.
As a result, we have a highly diverse base of end users of our systems,
including BASF A.G., Ben & Jerry's Homemade, Inc., British Aerospace plc,
DaimlerChrysler Corporation, E.I. du Pont de Nemours and Company, General
Electric Company, Honda Motor Co., Ltd., Massachusetts Institute of Technology,
Minnesota Mining and Manufacturing Company, National Aeronautics & Space
Administration, The Procter & Gamble Company and United States Surgical
Corporation, among many others. For the nine months ended October 2, 1999, we
had total revenue of $151.0 million and EBITDA of $2.3 million.
The market we serve for materials testing systems is estimated to be
approximately $450 million in 1998 revenue and is estimated to be growing at 4%
to 8% annually. Although no independent industry information is available, we
believe that the market we serve for structural testing systems is approximately
$750 million in 1998 revenue, which together with the materials testing segment
of the market we serve totals $1.2 billion, and is estimated to be growing at 8%
to 10% annually. We attribute this growth to, among other things:
- the search for new materials and new applications of existing materials
to create better products;
- ongoing total quality management initiatives by manufacturers, including
ISO 9000 certification;
- the increase in global manufacturing and transfer of materials and
products;
- manufacturers' need to reduce the cost of, and time required to develop,
new products, and increase the reliability of their products; and
- increasing regulatory, safety and environmental requirements.
THE RECAPITALIZATION
On September 29, 1999, we merged with a wholly owned subsidiary of Kirtland
in connection with a recapitalization of Instron. The recapitalization was
completed through the following transactions:
- Kirtland and its affiliates acquired approximately 88.3% of our common
stock for $54.2 million in cash;
- members of our management retained shares with an aggregate value of
approximately $3.6 million, or approximately 5.9% of our common stock,
and including retained options an aggregate value of approximately $6.4
million, or approximately 9.9% of our total equity;
- three other stockholders retained shares with an aggregate value of
approximately $3.5 million, or approximately 5.8% of our common stock;
- selling stockholders will receive approximately $153.5 million in cash in
connection with our redemption of their equity interests;
- we repaid approximately $17.4 million of our indebtedness;
- we incurred fees and expenses of approximately $10.2 million in
connection with the recapitalization;
- we completed an offering of 60,000 units comprised of $60.0 million of
the outstanding notes and 60,000 warrants to purchase 30,654 shares of
our common stock; and
- we entered into an $80.0 million new senior credit facility with National
City Bank, under which we borrowed $30.0 million in term loan borrowings
and approximately $16.5 million in revolving credit borrowings.
5
<PAGE> 10
See "Certain Relationships and Related Transactions."
THE EQUITY INVESTOR
Kirtland is a privately funded investment group with over $300 million in
committed equity capital. Kirtland and its predecessors have been buying and
building manufacturing and distribution businesses since 1978. Kirtland
currently has a controlling interest in Unifrax Corporation, a manufacturer of
ceramic fiber products, as well as controlling interests in a number of other
industrial manufacturing companies.
RISK FACTORS
YOU SHOULD REFER TO THE SECTION ENTITLED "RISK FACTORS" FOR AN EXPLANATION
OF SOME RISKS OF INVESTING IN THE SECURITIES.
6
<PAGE> 11
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
(Dollars and shares in thousands)
The following table presents our summary historical and unaudited pro forma
financial data as of and for the periods shown below. The data, except for
bookings of new orders, backlog, and EBITDA, are derived from (1) our audited
consolidated financial statements, (2) our unaudited quarterly condensed
consolidated financial statements, and (3) our unaudited pro forma condensed
consolidated financial statements. Each of these financial statements is
contained elsewhere in this prospectus. The unaudited pro forma condensed
consolidated statement of income data for the nine-month period ended October 2,
1999 give effect to the recapitalization as if it had occurred on January 1,
1999. Because the information in this table is only a summary, you should read
our annual and quarterly financial statements and the related notes, the
unaudited pro forma consolidated financial data and the related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in this prospectus.
<TABLE>
<CAPTION>
ACTUAL
--------------------------------------------------------------- PRO FORMA
NINE MONTHS ENDED NINE MONTHS
YEARS ENDED DECEMBER 31, --------------------------- ENDED
-------------------------------- SEPTEMBER 26, OCTOBER 2, OCTOBER 2,
1996 1997 1998 1998 1999 1999
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Total revenue........................ $153,113 $155,660 $183,029 $114,961 $150,953 $150,953
Income (loss) from operations(1)..... 9,145 12,571 9,646 3,686 (4,154) 8,640
Income (loss) before income
taxes(2)........................... 7,385 11,555 20,333 14,476 (4,547) (1,180)
Net income (loss).................... 4,582 7,164 11,459 7,828 (4,357) (790)
OTHER DATA:
EBITDA(3)............................ $ 15,329 $ 18,880 $ 27,671 $ 19,656 $ 2,266 $ 15,060
Depreciation and amortization........ 6,873 6,494 7,106 5,167 6,446 6,446
Capital expenditures(4).............. 4,473 4,176 5,841 5,182 4,116 4,116
Bookings of new orders............... 161,692 150,020 166,515 102,056 153,917 153,917
Backlog.............................. 34,361 28,748 74,477 31,870 72,967 72,967
Ratio of earnings to fixed
charges(5)(6)(7)................... 3.8x 5.6x 9.4x 8.3x -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 2, 1999
---------------------
<S> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 34,220
Total assets................................................ 168,639
Total long-term debt........................................ 90,000
Stockholders' deficit....................................... 13,831
</TABLE>
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(1) In March 1996, we recorded a special items charge to operations to implement
a workforce reduction and consolidate some manufacturing operations. We took
a pre-tax charge of $1,812 ($1,123 net of taxes) to cover these actions.
Income from operations in 1998 and the nine months ended September 26, 1998
reflects a special items charge to operations to consolidate our European
operations and write-down the value of non-performing assets. We took a
pretax charge of $4,975 ($4,232 net of taxes) in the first quarter of 1998
to cover these actions. In September 1999, we recorded a non-recurring
compensation expense of $12,606 ($9,296 net of tax) directly attributable to
the recapitalization. Income from operations excludes foreign exchange gain
or loss.
(2) Income (loss) before income taxes in 1998 and the nine months ended
September 26, 1998 reflects a non-operating pre-tax gain of $11,076 ($6,867
net of taxes) recorded in the first quarter of 1998 in connection with our
sale of 42 acres of excess land in Canton, Massachusetts.
(3) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is presented because we believe it is frequently used
by securities analysts, investors and other interested parties in the
evaluation of companies in our industry. However, other companies in our
industry may calculate EBITDA differently than we do. EBITDA is not a
measurement of financial performance under generally accepted accounting
principles and should not be considered as an alternative to cash flow from
operating activities or as a measure of liquidity or as an alternative to
net income as indicators of our operating performance or any other measures
of performance derived in accordance with generally accepted accounting
principles. See the Statement of Cash Flow indicated in our financial
statements.
(4) Excludes capital expenditures of acquired businesses prior to the date of
acquisition.
(5) Earnings used in computing the ratio of earnings to fixed charges consist of
pre-tax earnings before losses from equity investments and fixed charges.
Fixed charges are defined as interest expense related to debt, amortization
expense related to deferred financing costs, accretion of debt discount and
a portion of rental charges representative of interest.
(6) Due to our loss in the nine months ended October 2, 1999, the ratio coverage
was less than 1:1. We must generate additional earnings of $187 to achieve a
coverage ratio of 1:1.
(7) Due to our pro forma loss in the nine month period ended October 2, 1999,
the ratio coverage was less than 1:1. We must generate additional pro forma
earnings of $871 to achieve a coverage ratio of 1:1.
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RISK FACTORS
Before you invest in the exchange notes, you should consider carefully the
following factors, in addition to the other information contained in this
prospectus.
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR
FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THESE
NOTES.
We now have and, after this offering, we will continue to have a
significant amount of indebtedness. The following chart shows certain important
credit statistics and is presented assuming we had completed this offering as of
the date or at the beginning of the period specified below and applied the
proceeds as intended:
<TABLE>
<CAPTION>
AT
OCTOBER 2, 1999
(DOLLARS IN THOUSANDS)
<S> <C>
Total indebtedness.......................................... $109,644
Stockholders' deficit....................................... $ 13,831
</TABLE>
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
the exchange notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, research and development efforts and other general
corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- adversely affect the value of the securities;
- place us at a competitive disadvantage compared to our competitors that
have less debt;
- limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds.
Failing to comply with those covenants could result in an event of
default which, if not cured or waived, could have a material adverse
effect on us; and
- limit our ability to pursue and consummate strategic acquisitions.
See "Description of Notes -- Repurchase at the Option of Holders -- Change
of Control" and "Description of New Senior Credit Facility."
ADDITIONAL BORROWINGS AVAILABLE -- DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND
OUR SUBSIDIARIES MAY BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT.
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit us
or our subsidiaries from doing so. Our new senior credit facility has unused
commitments of up to $31.9 million less outstanding letters of credit and demand
guarantees, after completion of this offering, and all of those borrowings would
be senior to the notes and the subsidiary guarantees. As part of our business
strategy, we intend to pursue strategic acquisitions in the future and we likely
will finance a substantial portion of any acquisitions with additional
indebtedness. If new debt is added to our and our subsidiaries' current debt
levels, the related risks that we and they now face could increase.
See "Capitalization," "Selected Historical Consolidated Financial Data" and
"Description of Notes -- Repurchase at the Option of Holders -- Change of
Control" and "Description of New Senior Credit Facility."
ABILITY TO SERVICE DEBT -- TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A
SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness,
including the exchange notes, and to fund planned capital expenditures and
research and development efforts will depend on our ability to generate
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<PAGE> 13
cash in the future. This, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control.
Based on our current level of operations and anticipated cost savings and
operating improvements, we believe our cash flow from operations, available cash
and available borrowings under our new senior credit facility will be adequate
to meet our future liquidity needs for the foreseeable future.
We cannot assure you, however, that our business will generate sufficient
cash flow from operations, that currently anticipated cost savings and operating
improvements will be realized on schedule or that future borrowings will be
available to us under our new senior credit facility or elsewhere in an amount
sufficient to enable us to pay our indebtedness, including these exchange notes,
or to fund our other liquidity needs. We may need to refinance all or a portion
of our indebtedness, including the exchange notes, on or before maturity. We
cannot assure you that we will be able to refinance any of our indebtedness,
including our new senior credit facility and these exchange notes, on
commercially reasonable terms or at all.
RESTRICTIVE DEBT COVENANTS -- OUR BUSINESS IS RESTRICTED BY THE DEBT COVENANTS
CONTAINED IN OUR NEW SENIOR CREDIT FACILITY AND THE INDENTURE GOVERNING THE
EXCHANGE NOTES.
The indenture governing the exchange notes will limit what we and our
restricted subsidiaries may do. The provisions of the indenture will limit our
ability to:
- incur more debt;
- pay dividends, make distributions or repurchase stock;
- make some investments;
- create liens;
- enter into transactions with affiliates;
- enter into sale and leaseback transactions;
- merge or consolidate; and
- transfer and sell assets.
There are a number of important exceptions to these covenants, which are
more fully described under "Description of Notes."
The new senior credit facility contains many similar and more stringent
limitations. In addition, it requires us to comply with certain financial ratios
and tests. If we breach any of these covenants we would default under the new
senior credit facility and, as a result, may be prohibited from making any
payments to you. In addition, under certain circumstances, all amounts borrowed
under the new senior credit facility, plus interest, may be declared to be due
and payable, which would be an event of default under the indenture. See
"Description of New Senior Credit Facility."
These restrictions in the indenture and the new senior credit facility, in
combination with our high level of debt, could limit our ability to respond to
market conditions or meet extraordinary capital needs, or could adversely affect
our ability to finance our future acquisitions, operations or capital needs, or
engage in other business activities that could be in our interest.
SUBORDINATION -- YOUR RIGHT TO RECEIVE PAYMENTS ON THE EXCHANGE NOTES IS JUNIOR
TO OUR EXISTING INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. FURTHER,
THE GUARANTEES OF THE EXCHANGE NOTES ARE JUNIOR TO ALL OF OUR GUARANTORS'
EXISTING INDEBTEDNESS AND POSSIBLY TO ALL OF THEIR FUTURE BORROWINGS.
The exchange notes and the subsidiary guarantees rank behind all of our and
the subsidiary guarantors' existing indebtedness and all of our and their future
borrowings, except any indebtedness that expressly provides that it ranks equal
with, or subordinated in right of payment to, the exchange notes and the
guarantees. As a result, upon any distribution to our creditors or the creditors
of the guarantors in a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or the guarantors or our or their property, the
holders of senior
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<PAGE> 14
debt of Instron and the guarantors will be entitled to be paid in full in cash
before any payment may be made with respect to these exchange notes or the
subsidiary guarantees.
In addition, all payments on the exchange notes and the subsidiary
guarantees will be blocked in the event of a payment default on senior debt and
may be blocked for up to 179 of 360 consecutive days in the event of certain
non-payment defaults on senior debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to Instron or the guarantors, holders of the exchange notes
will participate with trade creditors and all other holders of subordinated
indebtedness of Instron and the guarantors in the assets remaining after we and
the subsidiary guarantors have paid all of the senior debt. However, because the
indenture requires that amounts otherwise payable to holders of the exchange
notes in a bankruptcy or similar proceeding be paid to holders of senior debt
instead, holders of the exchange notes may receive less, ratably, than holders
of trade payables in any such proceeding. In any of these cases, we and the
subsidiary guarantors may not have sufficient funds to pay all of our creditors
and holders of exchange notes may receive less, ratably, than the holders of
senior debt.
On October 2, 1999, the outstanding notes and the subsidiary guarantees
were subordinated to $46.5 million of senior debt, and approximately $31.8
million, less outstanding letters of credit and demand guarantees, remained as
unborrowed commitments of senior debt under our new senior credit facility.
NOT ALL SUBSIDIARIES ARE GUARANTORS -- YOUR RIGHT TO RECEIVE PAYMENTS ON THESE
NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR SUBSIDIARIES
DECLARE BANKRUPTCY, LIQUIDATE, OR REORGANIZE.
Some but not all of our subsidiaries guarantee the outstanding notes and
will guarantee the exchange notes. In the event of a bankruptcy, liquidation or
reorganization of any of the non-guarantor subsidiaries, holders of their
indebtedness and their trade creditors will generally be entitled to payment of
their claims from the assets of those subsidiaries before any assets are made
available for distribution to us. On October 2, 1999, the notes were effectively
junior to $30.0 million of indebtedness and other liabilities, including trade
payables, of these non-guarantor subsidiaries. The non-guarantor subsidiaries
generated 234.0% of our EBITDA for the nine-month period ended October 2, 1999
and held 33.0% of our consolidated assets as of October 2, 1999.
SIGNIFICANT INTERNATIONAL OPERATIONS -- WE ARE SUBJECT TO RISKS RELATING TO OUR
FOREIGN OPERATIONS.
Foreign operations represent a significant portion of our business. For the
nine months ended October 2, 1999, approximately 44% of our total revenue was
derived from sales in the United States, approximately 38% from sales in Europe
and approximately 18% from sales to the rest of the world. Our reported revenue
outside the United States accounted for 54.7% of our total revenue in 1998,
59.4% in 1997 and 61.1% in 1996. Bookings from Asia declined by 30% in 1998
compared to 1997 due to the economic downturn in this region and devaluation of
Asian currencies. We expect revenue from foreign markets to continue to
represent a significant portion of our total revenue. We own manufacturing
facilities in England and lease manufacturing facilities in Germany. We also
sell domestically manufactured products to foreign customers. Our foreign
operations are subject to risks in addition to the risks of our domestic
operations. The risks that relate to our foreign operations include:
- political, economic and social conditions in the foreign countries where
we conduct operations;
- currency risks and exchange controls, including risks related to the
introduction of the euro;
- potential inflation in the applicable foreign economies;
- the impact of import duties on our costs and prices;
- foreign taxation of our earnings and payments received by us; and
- regulatory changes affecting our international operations.
These risks may adversely affect our business.
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<PAGE> 15
CONCENTRATION OF STOCK OWNERSHIP -- KIRTLAND CONTROLS ALL MATTERS SUBMITTED TO
STOCKHOLDER VOTES AND THIS CONTROL MAY ADVERSELY AFFECT HOLDERS OF THE
SECURITIES.
As a result of the recapitalization, Kirtland controls approximately 88.3%
of the voting power of our outstanding common stock. Therefore, Kirtland is able
to control the vote on all matters submitted to a stockholder vote, including
the election of directors, amendments to our articles of organization and our
by-laws and approval of significant corporate mergers. See "Certain
Relationships and Related Transactions -- The Recapitalization." Some decisions
about our operations or financial structure may present conflicts of interests
between Kirtland and the holders of the exchange notes. For example, Kirtland
may be willing to approve acquisitions, divestitures or transactions undertaken
by us that it believes could increase the value of its equity investment in
Instron. These kinds of transactions, however, may increase the financial risk
to you.
ACQUISITION STRATEGY -- WE MAY EXPERIENCE DIFFICULTIES IN IDENTIFYING
ACQUISITION CANDIDATES AND INTEGRATING ACQUIRED BUSINESSES. IN ADDITION, OUR
ACQUISITION STRATEGY MAY INVOLVE THE INCURRENCE OF ADDITIONAL INDEBTEDNESS OR
ISSUANCES OF COMMON STOCK.
In 1998, we acquired Satec and purchased the remaining 49% interest in our
IST joint venture. As part of our business strategy, we intend to pursue
strategic acquisitions in the future. We cannot assure you that we will succeed
in identifying acquisition candidates or in consummating any acquisitions. If
any acquisitions are consummated, we cannot assure you that these acquisitions
will be successfully integrated or operated profitably. Acquisitions can present
significant challenges to management due to the increased time and resources
required to properly integrate management, employees, accounting controls,
personnel and administrative functions. In addition, identifying acquisition
candidates and integrating them upon consummation may divert management's
attention from the operation of our core business. We may encounter these or
other difficulties, and we may not be able to realize the benefits that we hope
to achieve from future strategic acquisitions.
When we acquired the remaining interest in IST, we assumed several
contracts for structural testing systems that resulted in substantially less
profit than we had expected and that have taken us longer to complete than we
had anticipated. We cannot assure you that we will achieve expected
profitability levels or anticipated delivery dates in our structural testing
business in the future due to the scale and technical risks involved in some of
our customer contracts.
In addition, as we pursue our acquisition strategy in the future, we may
incur additional indebtedness or issue additional equity. These future
incurrences of indebtedness or issuances of equity could have a material adverse
effect on your interests in the securities.
YEAR 2000 COMPLIANCE -- ANY COMPUTER-RELATED PROBLEMS RELATED TO THE YEAR 2000
MAY ADVERSELY AFFECT OUR BUSINESS.
Internal Business Systems
We are highly dependent on our computer software in operating our business.
Although the impact of Year 2000 issues on our future revenue is difficult to
assess, it is a risk that should be considered in evaluating our business. We
believe the current versions of our products and our internal information
systems are or will be Year 2000 compliant but we cannot make absolute
assurances that we have identified all the issues and can resolve them in a
timely manner, or that there will not be failures or disruptions to operations
that could result in a material adverse effect on our business. We do not expect
material liabilities or operational difficulties with respect to our operating
systems, although any material failure of these systems could have a material
adverse effect on our business. Material failures could result in:
- our inability to order components necessary for our products;
- the malfunctioning of our manufacturing or service processes;
- our inability to properly bill and collect payments from our customers;
and
- errors or omissions in accounting and financial data.
11
<PAGE> 16
Customers and Suppliers
We also depend on the proper functioning of the computer systems of third
parties, particularly our customers and suppliers. The failure of one of our
customers' or suppliers' systems to appropriately handle Year 2000 complications
could cause material adverse effects on our business.
For more information on our Year 2000 program, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Year 2000."
FLUCTUATIONS IN QUARTERLY RESULTS -- OUR QUARTERLY RESULTS HAVE FLUCTUATED
SIGNIFICANTLY IN THE PAST AND MAY FLUCTUATE SIGNIFICANTLY IN THE FUTURE.
Our quarterly operating results have varied significantly depending on a
number of factors. These factors include:
- timing of receipt of system orders from, and shipments to, major
customers;
- bookings and deliveries of our large structural testing system projects;
- variations in product mix and product margins;
- economic conditions prevailing within geographic markets;
- market acceptance of new products and services;
- timing and levels of operating expenditures; and
- exchange rate fluctuations.
Historically, our sales are highest in the fourth quarter of each year due
to the ordering pattern of our customers, which favors fourth quarter deliveries
before budget authorizations expire. Sales in the first quarter are usually low
as it takes time to rebuild in-process inventory levels after the heavy fourth
quarter delivery requirements have been satisfied. Also, third quarter sales are
generally low due to vacation patterns of both our production workers and
customer technical personnel needed for acceptance testing. We may be unable to
adjust costs in a timely manner to compensate for a material revenue shortfall
because a large portion of our costs is fixed and our expense levels are based
in part on our expectations of future revenue. The seasonal factors affecting
sales are usually reflected in quarterly operating income.
The structural testing systems business that we conduct through IST is
characterized by relatively larger contract sizes and longer delivery periods
than our materials testing systems business. Accordingly, we believe that the
acquisition of IST has increased the fluctuations we experience in our quarterly
results.
CYCLICALITY -- THE CYCLICAL NATURE OF THE INDUSTRIES WE CURRENTLY SERVE COULD
ADVERSELY AFFECT OUR BUSINESS AND ABILITY TO SATISFY OUR OBLIGATIONS UNDER THE
NOTES.
A substantial percentage of our revenue is derived from customers that are
in industries and businesses that are cyclical in nature and subject to changes
in general economic conditions, including the automotive and automotive supply
industry, which we believe accounted for approximately 20% of our pro forma
revenue for the nine months ended October 2, 1999. General economic or
industry-specific downturns in cyclical industries could have a material adverse
effect on our business.
SIGNIFICANT COMPETITION -- WE MAY BE UNABLE TO COMPETE SUCCESSFULLY IN OUR
INDUSTRY, WHICH COULD ADVERSELY AFFECT OUR BUSINESS AND OUR ABILITY TO SATISFY
OUR OBLIGATIONS UNDER THE EXCHANGE NOTES.
We compete with a number of other manufacturers, some of which have greater
financial, technical and marketing resources than do we. The intensity of the
competition varies by product line and by geographic area. Competition in the
United States is the greatest in our industry because we have one major domestic
competitor, MTS Systems Corporation. Competition in foreign markets is greatest
in Germany and Japan, where there are major local manufacturers. The principal
competitive factors are:
- engineering excellence;
- the quality and technical capability of the equipment;
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<PAGE> 17
- responsiveness to customer needs;
- quality of service; and
- price.
RELIANCE ON KEY PERSONNEL -- OUR FAILURE TO ATTRACT AND RETAIN KEY PERSONNEL
COULD ADVERSELY AFFECT OUR BUSINESS.
Our future success is significantly dependent on our experienced senior
management. Although we have entered into agreements with a number of our senior
executives, which provide incentives for continuing employment, the loss of the
services of any one of these key executives could have a material adverse effect
on our business. Additionally, we are dependent on the continuing contributions
of our project managers, scientists, and other key professionals. Of particular
importance are our employees who maintain close relationships with our
customers.
TAX CONSIDERATIONS -- THE NOTES WILL BE ISSUED WITH ORIGINAL ISSUE DISCOUNT.
The outstanding notes were issued with original issue discount (OID) for
United States federal income tax purposes in an amount equal to the excess of
the principal amount due at maturity on the notes over their "issue price,"
which is described in "Certain United States Federal Income Tax Considerations."
Each United States holder of a note will be required to include in taxable
income for any particular taxable year a portion of the OID in advance of
receiving cash to which the OID is attributable. For additional information
regarding the OID associated with the notes, as well as some other federal
income tax considerations relevant to the purchase, ownership and disposition of
the notes, warrants and shares of common stock issuable upon exercise of the
warrants, see "Certain United States Federal Income Tax Considerations."
FINANCING CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE
INDENTURE.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all of the exchange notes. However,
it is possible that we will not have sufficient funds at the time of the change
of control to make the required repurchase of exchange notes. In addition,
restrictions in our new senior credit facility currently prohibit us from making
such repurchases and any future credit agreement may contain a similar
restriction. Certain important corporate events, such as leveraged
recapitalizations that would increase the level of our indebtedness, might not
constitute a "Change of Control" under the indenture. See "Description of
Notes -- Repurchase at the Option of Holders -- Change of Control."
FRAUDULENT CONVEYANCE MATTERS -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER
SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN
PAYMENTS RECEIVED FROM GUARANTORS.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of that guarantor if, among
other things, the guarantor, at the time it incurred the indebtedness evidenced
by its guarantee:
- received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee; and
- was insolvent or rendered insolvent by reason of such incurrence; or
- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.
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<PAGE> 18
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, was greater than
the fair saleable value of all of its assets; or
- if the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
- it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that each guarantor, after giving effect to its
guarantee of the outstanding notes, is not insolvent, does not have unreasonably
small capital for the business in which it is engaged and has not incurred debts
beyond its ability to pay such debts as they mature. There can be no assurance,
however, as to what standard a court would apply in making such determinations
or that a court would agree with our conclusions in this regard. Each guarantee
also contains a provision intended to limit the liability of the guarantor to
the maximum amount of liability the guarantor could incur without causing the
incurrence of its obligations under the guarantee to be a fraudulent transfer.
We cannot assure you, however, that this provision will be effective.
NO PRIOR MARKET FOR THE SECURITIES -- YOU CANNOT BE SURE THAT ACTIVE TRADING
MARKETS WILL DEVELOP FOR THESE SECURITIES.
There is no established trading market for the outstanding notes or the
exchange notes. We have been informed by Donaldson, Lufkin & Jenrette that it
intends to make a market in these securities. However, it may cease its
market-making at any time. In addition, the liquidity of the trading markets in
these securities, and the market prices quoted for these securities, may be
adversely affected by changes in the overall market for high yield securities
and by changes in our financial performance or prospects or in the prospects for
companies in our industry generally. As a result, you cannot be sure that active
trading markets will develop for these securities.
RESTRICTIONS ON TRANSFER OF OUTSTANDING NOTES -- IF YOU DO NOT EXCHANGE YOUR
OUTSTANDING NOTES YOU MAY HAVE DIFFICULTY IN TRANSFERRING THEM AT A LATER TIME.
We will issue exchange notes in exchange for the outstanding notes after
the exchange agent receives your outstanding notes, the letter of transmittal
and all related documents. You should allow adequate time for delivery if you
choose to tender your outstanding notes for exchange. Outstanding notes that are
not exchanged will remain subject to restrictions on transfer and will not have
any rights to registration.
If you do participate in the exchange offer for the purpose of
participating in the distribution of the exchange notes, you must comply with
the registration and prospectus delivery requirements of the Securities Act of
1933 for any resale transaction. Each broker-dealer who holds outstanding notes
for its own account due to market-making or other trading activities and who
receives exchange notes for its own account must acknowledge that it will
deliver a prospectus in connection with any resale of the exchange notes. If any
outstanding notes are not tendered in the exchange or are tendered but not
accepted, the trading market for the outstanding notes could be negatively
affected due to the limited number of outstanding notes expected to remain
outstanding following the completion of the exchange offer.
TECHNOLOGICAL CHANGE -- OUR FAILURE TO MAINTAIN OUR POSITION AS A TECHNOLOGY
LEADER IN OUR INDUSTRY COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
We operate in a competitive industry characterized by technological change.
If we are not able to maintain our position as a technology leader in the
industries in which we compete, our business could be adversely affected. Our
ability to maintain our position as a technology leader depends upon many
factors, including:
- the ability of our competitors to develop new products that are
equivalent or superior to our products;
- advancements in the development of virtual testing methods using computer
modeling; and
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<PAGE> 19
- the timely incorporation of technological advances into our existing
products and services and commercial acceptance of future products and
services.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS -- WE ARE SUBJECT TO RISKS FROM
INCREASED LEGISLATIVE AND REGULATORY AUTHORITY RELATING TO ENVIRONMENTAL ISSUES.
We are subject to a wide variety of federal, state, local, and foreign
environmental laws and regulations. These laws and regulations control our use,
handling, treatment, storage, discharge and disposal of hazardous wastes used or
generated in our business. Additionally, we are subject to federal, state,
local, and foreign laws and regulations regarding the following matters:
- employee health and safety; and
- permitting and licensing requirements.
If we fail to comply with present or future environmental laws or
regulations, we could be subject to future liabilities or our operations could
be interrupted. In addition, future environmental laws and regulations could
restrict our ability to expand our facilities or could require us to acquire
costly equipment or to incur other significant expenses in connection with our
business. Although compliance with these laws and regulations has not had any
material adverse effects on our business, you should be aware that other
problems identified in the future or future changes in environmental
requirements could have a material adverse effect on us.
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
FORWARD LOOKING STATEMENTS -- OUR FORWARD LOOKING STATEMENTS ARE SUBJECT TO A
VARIETY OF FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
CURRENT BELIEFS.
A number of statements made in this prospectus are not historical or
current facts, but deal with potential future circumstances and developments.
Those statements are qualified by the inherent risks and uncertainties
surrounding future expectations generally, and also may materially differ from
our actual future experience involving any one or more of these matters and
subject areas. We have attempted to identify, in context, some of the factors
that we currently believe may cause actual future experience and results to
differ from our current expectations regarding the relevant matter or subject
area. The operation and results of our business also may be subject to the
effect of other risks and uncertainties in addition to the relevant qualifying
factors identified elsewhere in the foregoing "Risk Factors" section, including,
but not limited to:
- the impact of fluctuations in exchange rates and the uncertainties of
operating in a global economy including fluctuations in the economic
conditions of the foreign and domestic markets we serve, which can affect
the demand for our products and services;
- our ability to successfully manage and integrate the products and
operations of recently acquired companies;
- our ability to identify and successfully consummate strategic
acquisitions;
- the impact of year 2000 issues;
- the success of the automobile industry, which is the major purchaser of
some of our structural testing products; and
- general economic conditions.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
On September 29, 1999, we issued and sold $60.0 million in principal amount
of the outstanding notes to Donaldson, Lufkin & Jenrette. The outstanding notes
were sold as part of a unit consisting of $1,000 principal amount of outstanding
notes and one warrant to purchase 0.5109 of a share of our common stock. As of
the date of this prospectus, the units have separated into outstanding notes and
warrants. We are not registering the warrants or our common stock as part of
this exchange offer or in a separate offering at this time. Donaldson, Lufkin &
Jenrette sold the outstanding notes to a limited number of "Qualified
Institutional Buyers," as defined under the Securities Act. In connection with
the sale of the outstanding notes, we entered into a registration rights
agreement, dated as of September 29, 1999 with Donaldson, Lufkin & Jenrette.
Under that agreement, we must, among other things, use our reasonable best
efforts to file with the Commission a registration statement under the
Securities Act covering the exchange offer and to cause that registration
statement to become and remain effective under the Securities Act. Upon the
effectiveness of that registration statement, we must also offer each holder of
the outstanding notes the opportunity to exchange its securities for an equal
principal amount of exchange notes. You are a holder with respect to the
exchange offer if you are a person in whose name any outstanding notes are
registered on our books or any other person who has obtained a properly
completed assignment of outstanding notes from the registered holder.
We are making the exchange offer to comply with our obligations under the
registration rights agreement. A copy of the registration rights agreement has
been filed as an exhibit to the registration statement of which this prospectus
is a part.
In order to participate in the exchange offer, you must represent to us,
among other things, that:
- the exchange notes being acquired in accordance with the exchange offer
are being obtained in the ordinary course of business of the person
receiving the exchange notes;
- neither you nor any other person with whom you have any arrangement or
understanding is engaging in or intends to engage in a distribution of
those exchange notes;
- you are not an affiliate of Instron. An affiliate is any person who
"controls or is controlled by or is under common control with" Instron;
- if you are an affiliate of Instron, you will comply with requirements of
the Securities Act applicable to affiliates; and
- you are not acting on behalf of any person who could not truthfully make
these representations.
RESALE OF THE EXCHANGE NOTES
Based on a previous interpretation by the Staff of the Commission set forth
in no-action letters issued to third parties, including Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated
(available June 5, 1991), Mary Kay Cosmetics, Inc. (available June 5, 1991),
Warnaco, Inc. (available October 11, 1991), and K-111 Communications Corp.
(available May 14, 1993), we believe that the exchange notes issued in the
exchange offer may be offered for resale, resold, and otherwise transferred by
you, except if you are an affiliate of Instron, without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the representations set forth in " -- Purpose and Effect of the Exchange
Offer" apply to you. The Staff has not considered this exchange offer in the
context of a no-action letter, and we cannot assure you that the Staff would
make a similar determination with respect to the exchange offer.
If you tender in the exchange offer with the intention of participating in
a distribution of the exchange notes, you cannot rely on the interpretation by
the Staff of the Commission as set forth in no-action letters issued to third
parties unrelated to Instron and you must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. In the event that our belief regarding resale is
inaccurate, those who transfer exchange notes in violation of the prospectus
delivery
16
<PAGE> 21
provisions of the Securities Act and without an exemption from registration
under the federal securities laws may incur liability under these laws. We do
not and will not assume or indemnify you against this liability.
The exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of outstanding notes in any jurisdiction in which the
exchange offer or the acceptance of the exchange offer would not be in
compliance with the securities or blue sky laws of the particular jurisdiction.
Each broker-dealer that receives exchange notes for its own account in exchange
for outstanding notes, where the outstanding notes were acquired by that
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of the exchange notes. In order to facilitate the disposition of
exchange notes by broker-dealers participating in the exchange offer, we have
agreed to make a reasonable number of copies of this prospectus, as it may be
amended or supplemented from time to time, available for delivery by those
broker-dealers to satisfy their prospectus delivery obligations under the
Securities Act.
Any holder that is a broker-dealer participating in the exchange offer must
comply with the procedures set forth for broker-dealers in the enclosed Letter
of Transmittal. Under the registration rights agreement, we are not required to
amend or supplement the prospectus for a period exceeding 180 days after the
expiration date of the exchange offer, except in limited circumstances where we
suspend use of the registration statement. We may suspend use of the
registration statement if:
- an order suspending the effectiveness of the registration statement or
preventing the use of any prospectus is entered, or any proceeding is
initiated to obtain this type of order;
- we receive notice that the qualification or exemption from qualification
of the registration statement or any of the exchange notes to be sold by
any broker-dealer for offer or sale in any jurisdiction has been
suspended, or any proceeding is initiated or threatened to obtain a
suspension;
- any information becomes known that makes any statement made in the
registration statement, prospectus or any document incorporated by
reference in either, untrue in any material respect, or that requires
changes in, or amendments to any of these documents to correct or clarify
the statement;
- we determine that a post-effective amendment to the registration
statement is appropriate.
We have not entered into any arrangement or understanding with any person to
distribute the exchange notes to be received in the exchange offer. See "Plan of
Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the Letter of Transmittal, we will accept any and all outstanding notes
validly tendered and not withdrawn prior to 5:00 p.m., Central Standard Time, on
the day the exchange offer expires.
As of the date of this prospectus, $60.0 million in principal amount of the
notes are outstanding. This prospectus, together with the Letter of Transmittal,
is being sent to all registered holders of the outstanding notes on this date.
There will be no fixed record date for determining registered holders of the
outstanding notes entitled to participate in the exchange offer, however,
holders of the outstanding notes must tender their certificates therefor or
cause their outstanding notes to be tendered by book-entry transfer prior to the
expiration date of the exchange offer to participate.
The form and terms of the exchange notes will be the same as the form and
terms of the outstanding notes except that the exchange notes will be registered
under the Securities Act and therefore will not bear legends restricting their
transfer. Following consummation of the exchange offer, all rights under the
registration rights agreement accorded to holders of outstanding notes,
including the right to receive additional incremental interest on the
outstanding notes, to the extent and in the circumstances specified in the
registration rights agreement, will terminate.
We intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement and applicable federal securities laws.
Outstanding notes that are not tendered for exchange under the exchange offer
will remain outstanding and will be entitled to the rights under the related
indenture. Any
17
<PAGE> 22
outstanding notes not tendered for exchange will not retain any rights under the
registration rights agreement and will remain subject to transfer restrictions.
See " -- Consequences of Failure to Exchange."
We will be deemed to have accepted validly tendered outstanding notes when,
as and if we have given oral or written notice of our acceptance to the exchange
agent. The exchange agent will act as agent for the tendering holders for the
purposes of receiving the exchange notes from us. If any tendered outstanding
notes are not accepted for exchange because of an invalid tender, the occurrence
of other events set forth in this prospectus, or otherwise, certificates for any
unaccepted outstanding notes will be returned, or, in the case of outstanding
notes tendered by book-entry transfer, those unaccepted outstanding notes will
be credited to an account maintained with The Depository Trust Company, without
expense to the tendering holder of those outstanding notes as promptly as
practicable after the expiration date of the exchange offer. See " -- Procedures
for Tendering."
Those who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange in
accordance with the exchange offer. We will pay all charges and expenses, other
than applicable taxes described below, in connection with the exchange offer.
See " -- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date is 5:00 p.m., Central Standard Time on
, 2000, unless we, in our sole discretion, extend the
exchange offer, in which case, the expiration date will be the latest date and
time to which the exchange offer is extended. We must use our best efforts to
consummate the exchange offer on or prior to the 30th day following the date the
registration statement is declared effective.
To extend the exchange offer, we must notify the exchange agent by oral or
written notice prior to 8:00 a.m., Central Standard Time, on the next business
day after the previously scheduled expiration date and make a public
announcement of the extension.
We reserve the right:
- to extend the exchange offer or to terminate the exchange offer if any of
the conditions set forth below under "-- Conditions" are not satisfied by
giving oral or written notice of the extension or termination to the
exchange agent; or
- to amend the terms of the exchange offer in any manner consistent with
the registration rights agreement.
Any delay in acceptances, extension, termination, or amendment will be
followed as promptly as practicable by oral or written notice of the delay to
the registered holders of the outstanding notes. If we amend the exchange offer
in a manner that constitutes a material change, we will promptly disclose the
amendment by means of a prospectus supplement that will be distributed to the
registered holders of the outstanding notes, and we will extend the exchange
offer for a period of five to ten business days, depending upon the significance
of the amendment and the manner of disclosure to the registered holders of the
outstanding notes, if the exchange offer would otherwise expire during the five
to ten business day period.
Without limiting the manner in which we may choose to make a public
announcement of any delay, extension, amendment, or termination of the exchange
offer, we will have no obligation to publish, advertise, or otherwise
communicate that public announcement, other than by making a timely release to
an appropriate news agency.
Upon satisfaction or waiver of all the conditions to the exchange offer, we
will accept, promptly after the expiration date of the exchange offer, all
outstanding notes properly tendered and will issue the exchange notes promptly
after acceptance of the outstanding notes. See " -- Conditions" below. For
purposes of the exchange offer, we will be deemed to have accepted properly
tendered outstanding notes for exchange when, as and if we have given oral or
written notice of our acceptance to the exchange agent.
In all cases, issuance of the exchange notes for outstanding notes that are
accepted for exchange in accordance with the exchange offer will be made only
after timely receipt by the exchange agent of certificates for those outstanding
notes or a timely confirmation of book-entry transfer of the outstanding notes
into the exchange agent's account at The Depository Trust Company, a properly
completed and duly executed Letter of
18
<PAGE> 23
Transmittal, and all other required documents; provided, however, that we
reserve the absolute right to waive any defects or irregularities in the tender
of outstanding notes or in the satisfaction of conditions of the exchange offer
by holders of the outstanding notes. If any tendered outstanding notes are not
accepted for any reason set forth in the terms and conditions of the exchange
offer, if the holder withdraws the previously tendered outstanding notes, or if
outstanding notes are submitted for a greater principal amount of outstanding
notes than the holder desires to exchange, then the unaccepted, withdrawn or
portion of non-exchanged outstanding notes, as appropriate, will be returned as
promptly as practicable after the expiration or termination of the exchange
offer, or, in the case of outstanding notes tendered by book-entry transfer,
those unaccepted, withdrawn or portion of non-exchanged outstanding notes, as
appropriate, will be credited to an account maintained with The Depository Trust
Company, without expense to the tendering holder of these outstanding notes.
CONDITIONS
Without regard to other terms of the exchange offer, we will not be
required to exchange any exchange notes for any outstanding notes and may
terminate the exchange offer before the acceptance of any outstanding notes for
exchange, if:
- the exchange offer is not registered under the Securities Act of 1933 on
the appropriate form; or
- the exchange offer fails to comply with all applicable rules and
regulations under the Exchange Act.
If we determine that any of these conditions are not satisfied, we may
refuse to accept any outstanding notes and return all tendered outstanding notes
to the tendering holders, or, in the case of outstanding notes tendered by
book-entry transfer, credit those outstanding notes to an account maintained
with The Depository Trust Company
PROCEDURES FOR TENDERING
To tender in the exchange offer, you must complete, sign and date an
original or facsimile Letter of Transmittal, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver the Letter of Transmittal to the exchange agent prior to the expiration
date of the exchange offer. In addition, either:
- certificates for the outstanding notes must be received by the exchange
agent, along with the Letter of Transmittal; or
- a timely confirmation of transfer by book-entry of those outstanding
notes, if the book-entry procedure is available, into the exchange
agent's account at The Depository Trust Company, as set forth in the
procedure for book-entry transfer described below, which the exchange
agent must receive prior to the expiration date of the exchange offer; or
- you must comply with the guaranteed delivery procedures described below.
To be tendered effectively, the exchange agent must receive the Letter of
Transmittal and other required documents at the address set forth below under
" -- Exchange Agent" prior to the expiration of the exchange offer.
If you tender your outstanding notes and do not withdraw them prior to the
expiration date of the exchange offer, you will be deemed to have an agreement
with us in accordance with the terms and subject to the conditions set forth in
this prospectus and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR RISK. INSTEAD
OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT YOU USE AN OVERNIGHT OR HAND
DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE OF
THE EXCHANGE OFFER. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT
TO US. YOU MAY REQUEST YOUR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES, OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR YOU.
Any beneficial owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company, or other nominee and who
wishes to tender its outstanding notes should contact the
19
<PAGE> 24
registered holder promptly and instruct that registered holder to tender the
outstanding notes on the beneficial owner's behalf. If the beneficial owner
wishes to tender its outstanding notes on the owner's own behalf, that owner
must, prior to completing and executing the Letter of Transmittal and delivering
its outstanding notes, either make appropriate arrangements to register
ownership of the outstanding notes in that owner's name or obtain a properly
completed assignment from the registered holder. The transfer of registered
ownership of outstanding notes may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an eligible institution, unless the
outstanding notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal; or
- for the account of an eligible institution.
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, each of the
following is deemed an eligible institution:
- a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.;
- commercial bank;
- trust company having an office or correspondent in the United States; or
- eligible guarantor institution as provided by Rule 17Ad-15 of the
Exchange Act.
If the Letter of Transmittal is signed by a person other than the
registered holder of any outstanding notes, the outstanding notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as his, her or its name appears on the outstanding notes.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the Letter of Transmittal or any outstanding notes or bond power,
those persons should so indicate when signing, and unless we waive evidence
satisfactory to us of their authority to so act this evidence must be submitted
with the Letter of Transmittal.
We will determine all questions as to the validity, form, eligibility,
including time of receipt, acceptance of tendered outstanding notes, and
withdrawal of tendered outstanding notes, in our sole discretion. All of these
determinations by us will be final and binding. We reserve the absolute right to
reject any and all outstanding notes not properly tendered or any outstanding
notes our acceptance of which would, in the opinion of our counsel, be unlawful.
We also reserve the right to waive any defects, irregularities or conditions of
tender as to particular outstanding notes. Our interpretation of the terms and
conditions of the exchange offer, including the instructions in the Letter of
Transmittal will be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of outstanding notes must be cured
within the time we determine. Although we intend to notify holders of
outstanding notes of defects or irregularities with respect to tenders of
outstanding notes, neither we nor the exchange agent or any other person will
incur any liability for failure to give this notification. Tenders of
outstanding notes will not be deemed to have been made until defects or
irregularities have been cured or waived. Any outstanding notes received by the
exchange agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the exchange
agent to the tendering holders of outstanding notes, unless otherwise provided
in the Letter of Transmittal, as soon as practicable following the expiration
date of the exchange offer.
In addition, we reserve the right, in our sole discretion, to purchase or
make offers for any outstanding notes that remain outstanding subsequent to the
expiration date of the exchange offer. We also reserve the right, as set forth
above under " -- Conditions," to terminate the exchange offer and, to the extent
permitted by applicable law and the terms of agreements relating to our
outstanding indebtedness, purchase outstanding notes in the open market, in
privately negotiated transactions or otherwise. The terms of any purchases or
offers could differ from the terms of the exchange offer.
If the holder of outstanding notes is a broker-dealer participating in the
exchange offer that will receive exchange notes for its own account in exchange
for outstanding notes that were acquired as a result of market-
20
<PAGE> 25
making activities or other trading activities, that broker-dealer will be
required to acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of the exchange notes and otherwise
agree to comply with the procedures described above under " -- Resale of the
Exchange Notes." That broker-dealer, however, by so acknowledging and delivering
a prospectus, will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
In all cases, issuance of exchange notes in accordance with the exchange
offer will be made only after timely receipt by the exchange agent of
certificates for the outstanding notes or a timely confirmation of book entry
transfer of outstanding notes into the exchange agent's account at The
Depository Trust Company, a properly completed and duty executed Letter of
Transmittal, and all other required documents. If any tendered outstanding notes
are not accepted for any reason set forth in the terms and conditions of the
exchange offer or if outstanding notes are submitted for a greater principal
amount of outstanding notes than the holder of outstanding notes desires to
exchange, the unaccepted or portion of non-exchanged outstanding notes will be
returned as promptly as practicable after the expiration or termination of the
exchange offer, or, in the case of outstanding notes tendered by book-entry
transfer into the exchange agent's account at The Depository Trust Company in
accordance with the book-entry transfer procedures described below, the
unaccepted or portion of non-exchanged outstanding notes will be credited to an
account maintained with The Depository Trust Company, without expense to the
tendering holder of outstanding notes.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the outstanding notes at The Depository Trust Company for the purposes of the
exchange offer within two business days after the date of this prospectus. Any
financial institution that is a participant in The Depository Trust Company's
systems may make book-entry delivery of outstanding notes by causing The
Depository Trust Company to transfer the outstanding notes into the exchange
agent's account at The Depository Trust Company in accordance with The
Depository Trust Company's procedures for transfer. However, although delivery
of outstanding notes may be effected through book-entry transfer at The
Depository Trust Company, the Letter of Transmittal or facsimile of the Letter
of Transmittal, with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the exchange
agent at the address set forth below under " -- Exchange Agent" on or prior to
the expiration date of the exchange offer, unless the holder complies with the
guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their outstanding notes and (1) whose
outstanding notes are not immediately available or (2) who cannot deliver their
outstanding notes, the Letter of Transmittal, or any other required documents to
the exchange agent prior to the expiration date, may effect a tender if:
- The tender is made through an eligible institution;
- Prior to the expiration date of the exchange offer, the exchange agent
receives from that eligible institution a properly completed and duly
executed Notice of Guaranteed Delivery, by facsimile transmission, mail
or hand delivery, setting forth the name and address of the holder, the
certificate number(s) of the outstanding notes and the principal amount
of outstanding notes tendered and stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange
trading days after the expiration date of the exchange offer, the Letter
of Transmittal, together with the certificate(s) representing the
outstanding notes in proper form for transfer or a confirmation of
book-entry transfer, as the case may be, and any other documents required
by the Letter of Transmittal will be deposited by the eligible
institution with the exchange agent; and
- The exchange agent receives the properly completed and executed Letter of
Transmittal, as well as the certificate(s) representing all tendered
outstanding notes in proper form for transfer and other documents
required by the Letter of Transmittal within three New York Stock
Exchange trading days after the expiration date of the exchange offer.
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<PAGE> 26
Upon request to the exchange agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided, tenders of outstanding notes may be withdrawn
at any time prior to 5:00 p.m., Central Standard Time, on the expiration date of
the exchange offer.
To withdraw a tender of outstanding notes in the exchange offer, a written
or facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth herein prior to 5:00 p.m., Central Standard Time,
on the expiration date of the exchange offer. Any notice of withdrawal must:
- specify the name of the person having deposited the outstanding notes to
be withdrawn;
- identify the outstanding notes to be withdrawn;
- be signed by the holder in the same manner as the original signature on
the Letter of Transmittal by which the outstanding notes were tendered or
be accompanied by documents of transfer sufficient to have the exchange
agent register the transfer of the outstanding notes in the name of the
person withdrawing the tender; and
- specify the name in which any outstanding notes are to be registered, if
different from that of the person who deposited the outstanding notes to
be withdrawn.
We will determine all questions as to the validity, form, and eligibility
of the notices, and our determination will be final and binding on all parties.
Any outstanding notes so withdrawn will be deemed not to have been validly
tendered for purposes of the exchange offer, and no exchange notes will be
issued with respect to those outstanding notes unless the outstanding notes so
withdrawn are validly retendered.
Any outstanding notes that have been tendered but that are not accepted for
payment will be returned to the holder of those outstanding notes, or in the
case of outstanding notes tendered by book-entry transfer, will be credited to
an account maintained with The Depository Trust Company, without cost to the
holder as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn outstanding notes may be
retendered by following one of the procedures described above under
" -- Procedures for Tendering" at any time prior to the expiration date of the
exchange offer.
TERMINATION OF CERTAIN RIGHTS
All rights given to holders of outstanding notes under the registration
rights agreement will terminate upon the consummation of the exchange offer
except with respect to our duty:
- to keep the registration statement effective until the closing of the
exchange offer and for a period not to exceed 180 days after the
expiration date of the exchange offer; and
- to provide a reasonable number of copies of the latest version of this
prospectus to any broker-dealer that requests copies of this prospectus
for use in connection with any resale by that broker-dealer of exchange
notes received for its own account in accordance with the exchange offer
in exchange for outstanding notes acquired for its own account as a
result of market-making or other trading activities, subject to the
conditions described above under " -- Resale of the Exchange Notes."
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed exchange
agent for the exchange offer. Questions and requests for assistance, requests
for additional copies of this prospectus or the Letter of
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<PAGE> 27
Transmittal, and requests for copies of the Notice of Guaranteed Delivery with
respect to the outstanding notes should be addressed to the exchange agent as
follows:
<TABLE>
<S> <C> <C>
BY REGISTERED OR BY HAND DELIVERY OR
CERTIFIED MAIL: OVERNIGHT COURIER: IN PERSON:
Norwest Bank Minnesota, Norwest Bank Minnesota, Norwest Bank Minnesota,
National Association National Association National Association
Corporate Trust Operations Corporate Trust Operations Northstar East Bldg.
P.O. Box 1517 Norwest Center 608 2nd Ave. S.
Minneapolis, MN 55480-1517 Sixth and Marquette 12th Floor
Minneapolis, MN 55479-0113 Corporate Trust Services
Minneapolis, MN 55479-0113
</TABLE>
BY FACSIMILE:
(612) 667-4927
CONFIRM BY TELEPHONE
(612) 667-9764
FEES AND EXPENSES
We will pay the expenses of soliciting tenders in connection with the
exchange offer. The principal solicitation is being made by mail; however,
additional solicitation may be made by telecopier, telephone, or in person by
officers and regular employees of ours or our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We, 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 with the exchange
offer.
We estimate that our cash expenses in connection with the exchange offer
will be approximately $ . These expenses include registration fees, fees and
expenses of the exchange agent, accounting and legal fees, and printing costs,
among others.
We will pay all transfer taxes, if any, applicable to the exchange of the
outstanding notes for exchange notes. The tendering holder of outstanding notes,
however, will pay applicable taxes if certificates representing outstanding
notes not tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
outstanding notes tendered, or
- if tendered, the certificates representing outstanding 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
the outstanding notes in the exchange offer.
If satisfactory evidence of payment of the transfer taxes or exemption from
payment of transfer taxes is not submitted with the Letter of Transmittal, the
amount of the transfer taxes will be billed directly to the tendering holder and
the exchange notes may not be delivered until the transfer taxes are paid.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the exchange offer is voluntary. Holders of the
outstanding notes are urged to consult their financial and tax advisors in
making their own decisions on what action to take.
Outstanding notes that are not exchanged for the exchange notes in the
exchange offer will not have any rights under the registration rights agreement
and will remain restricted securities for purposes of the federal
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<PAGE> 28
securities laws. Accordingly, the outstanding notes may not be offered, sold,
pledged, or otherwise transferred except in accordance with applicable
securities laws:
- to us or any of our subsidiaries;
- to a "Qualified Institutional Buyer" within the meaning of Rule 144A
under the Securities Act purchasing for its own account or for the
account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A;
- in an offshore transaction complying with Rule 904 of Regulation S under
the Securities Act;
- in accordance with an exemption from registration under the Securities
Act provided by Rule 144 thereunder, if available;
- to "Institutional Accredited Investors" in a transaction exempt from the
registration requirements of the Securities Act; or
- in accordance with an effective registration statement under the
Securities Act.
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a result of
the exchange offer. The exchange notes will be recorded at the same carrying
value as the outstanding notes, as reflected in our accounting records on the
date of the exchange. The expenses of the exchange offer will be amortized over
the remaining term of the exchange notes.
THE RECAPITALIZATION
On September 29, 1999, we merged with a wholly owned subsidiary of Kirtland
in connection with a recapitalization of Instron. The recapitalization was
completed through the following transactions:
- Kirtland and its affiliates acquired approximately 88.3% of our common
stock for $54.2 million in cash;
- members of our management retained shares with an aggregate value of
approximately $3.6 million, or approximately 5.9% of our common stock,
and including retained options an aggregate value of approximately $6.4
million, or approximately 9.9% of our total equity;
- three other stockholders retained shares with an aggregate value of
approximately $3.5 million, or approximately 5.8% of our common stock;
- selling stockholders will receive approximately $153.5 million in cash in
connection with our redemption of their equity interests;
- we repaid approximately $17.4 million of our indebtedness;
- we incurred fees and expenses of approximately $10.2 million in
connection with the recapitalization;
- we completed an offering of 60,000 units comprised of $60.0 million of
the outstanding notes and 60,000 warrants to purchase 30,654 shares of
our common stock; and
- we entered into an $80.0 million new senior credit facility with National
City Bank, under which we borrowed $30.0 million in term loan borrowings
and approximately $16.5 million in revolving credit borrowings.
See "Certain Relationships and Related Transactions."
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes. Because we are exchanging the exchange notes for the outstanding notes,
which have substantially identical terms, the issuance of the exchange notes
will not result in any increase in our indebtedness.
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<PAGE> 29
CAPITALIZATION
The following table sets forth as of October 2, 1999 the actual
consolidated capitalization of Instron. You should read this table in
conjunction with the financial statements and related notes and the pro forma
financial statements and related notes appearing elsewhere in this prospectus.
See the Unaudited Pro Forma Condensed Consolidated Financial Data contained in
this prospectus and "Certain Relationships and Related Transactions."
<TABLE>
<CAPTION>
AS OF
OCTOBER 2, 1999
---------------
(IN THOUSANDS)
<S> <C>
Total debt, including current maturities:
Existing short term credit and borrowing facilities....... 3,144
New senior credit facility:
Revolving credit borrowings (1)........................ 16,500
Term loan borrowings................................... 30,000
13 1/4% Senior Subordinated Notes due 2009................ 60,000
-------
Total debt........................................ 109,644
-------
Stockholders' deficit:
Recapitalized common stock................................ 557
Additional paid in capital................................ 50,179
Accumulated deficit....................................... (58,408)
Accumulated other comprehensive loss...................... (6,159)
-------
Total stockholders' deficit....................... (13,831)
-------
Total capitalization...................................... $95,813
=======
</TABLE>
- ---------------
(1) As of October 2, 1999, we had $31.8 million of undrawn commitments of senior
debt under our new senior credit facility, less approximately $10.2 million
of outstanding letters of credit and demand guarantees.
25
<PAGE> 30
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
We prepared the following unaudited pro forma condensed consolidated
financial data of Instron to give effect to the recapitalization. As a leveraged
recapitalization, the historical basis of our assets and liabilities was not
affected by the recapitalization. For a discussion of the recapitalization and
the related transactions, see "The Recapitalization."
The pro forma adjustments presented are based upon available information
and assumptions that we believe are reasonable under the circumstances. We
derived the historical condensed consolidated statement of income data for the
nine months ended October 2, 1999, from our unaudited condensed consolidated
financial statements included in this prospectus. We derived the historical
condensed consolidated statement of income data for the year ended December 31,
1998 from our audited consolidated financial statements included in this
prospectus.
The unaudited pro forma condensed consolidated statement of income data of
Instron for the periods presented give effect to the following transactions, as
if each transaction had occurred as of the beginning of the period presented:
(1) the recapitalization, (2) the acquisition of Satec, and (3) the acquisition
of the remaining interest in IST.
You should read the unaudited pro forma financial data in conjunction with
our historical consolidated financial statements and related notes,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the other financial data included elsewhere in this prospectus,
as well as the information concerning the recapitalization contained in "The
Recapitalization."
We are providing the pro forma financial data and related notes to you for
informational purposes only. This data and the notes do not necessarily reflect
the results of operations or financial position that we would have actually
achieved had the events referred to above or in the notes to the unaudited pro
forma financial data been consummated as of the dates and for the periods
indicated and are not intended to project our financial position or results of
operations for any future period.
26
<PAGE> 31
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME DATA
FOR THE NINE MONTHS ENDED OCTOBER 2, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
FOR THE FOR THE
NINE MONTHS NINE MONTHS
ENDED RECAPITALIZATION ENDED
OCTOBER 2, 1999 ADJUSTMENTS OCTOBER 2, 1999
<S> <C> <C> <C>
Revenue:
Sales......................................... $125,431 $125,431
Service....................................... 25,522 25,522
-------- --------
Total Revenue......................... 150,953 150,953
-------- --------
Cost of Revenue:
Sales......................................... 75,117 75,117
Service....................................... 17,587 17,587
-------- --------
Total Cost of Revenue................. 92,704 92,704
-------- --------
Gross Profit.......................... 58,249 58,249
-------- --------
Operating expenses:
Selling and administrative.................... 41,558 $ 375(a) 41,370
(563)(b)
Research and development...................... 8,239 8,239
Recapitalization compensation expense......... 12,606 (12,606)(d) --
-------- -------- --------
Total operating (income) expenses............. 62,403 (12,794) 49,609
-------- -------- --------
Income (loss) from operations................. (4,154) 12,794 8,640
-------- -------- --------
Other (income) expense:
Interest Expense.............................. 1,097 9,427(c) 10,524
Interest Income............................... (730) (730)
Foreign exchange losses....................... 26 26
-------- -------- --------
Total other expenses.......................... 393 9,427 9,820
-------- -------- --------
Income (loss) before income taxes............... (4,547) 3,367 (1,180)
Provision (benefit) for income taxes............ (190) (3,510)(e) (390)
3,310(d)
-------- -------- --------
Net income (loss)............................... $ (4,357) $ 3,567 $ (790)
======== ======== ========
Weighted average number of basic common
shares........................................ 6,866 557
======== ========
Loss per share -- basic......................... $ (0.63) $ (1.42)(h)
======== ========
Weighted average number of diluted common
shares........................................ 6,866 557
======== ========
Loss per share -- diluted....................... $ (0.63) $ (1.42)(h)
======== ========
Dividends declared.............................. $ 0.04 --(g)
======== ========
</TABLE>
27
<PAGE> 32
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME DATA
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
FOR THE YEAR FOR THE YEAR
ENDED PRO FORMA ENDED
DECEMBER 31, ACQUISITION INCLUDING RECAPITALIZATION DECEMBER 31,
1998 ADJUSTMENTS(f) ACQUISITIONS ADJUSTMENTS 1998
<S> <C> <C> <C> <C> <C>
Revenue:
Sales..................... $152,879 $33,283 $186,162 $186,162
Service................... 30,150 3,436 33,586 33,586
-------- ------- -------- --------
Total Revenue.......... 183,029 36,719 219,748 219,748
-------- ------- -------- --------
Cost of Revenue:
Sales..................... 91,410 22,094 113,504 113,504
Service................... 19,644 2,369 22,013 22,013
-------- ------- -------- --------
Total Cost of
Revenue.............. 111,054 24,463 135,517 135,517
-------- ------- -------- --------
Gross Profit........... 71,975 12,256 84,231 84,231
-------- ------- -------- --------
Operating expenses:
Selling and
administrative............ 48,869 10,046 58,915 $ 500(a) 58,665
(750)(b)
Research and development.... 8,485 3,315 11,800 11,800
Special items charge........ 4,975 4,975 4,975
-------- ------- -------- --------- --------
Total operating
(income) expenses.... 62,329 13,361 75,690 (250) 75,440
-------- ------- -------- --------- --------
Income (loss) from
operations........... 9,646 (1,105) 8,541 250 8,791
-------- ------- -------- --------- --------
Other (income) expense
Gain on sale of land...... (11,076) (11,076) (11,076)
Interest expense.......... 1,175 740 1,915 12,116(c) 14,031
Interest income........... (943) (943) (943)
Foreign exchange losses... 157 37 194 194
-------- ------- -------- --------- --------
Total other (income)
expenses............... (10,687) 777 (9,910) 12,116 2,206
-------- ------- -------- --------- --------
Income (loss) before income
taxes....................... 20,333 (1,882) 18,451 (11,866) 6,585
Provision (benefit) for
income taxes................ 8,874 (715) 8,159 (4,510)(e) 3,649
-------- ------- -------- --------- --------
Net income (loss)........... $ 11,459 $(1,167) $ 10,292 $ (7,356) $ 2,936
======== ======= ======== ========= ========
Weighted average number of
basic common shares....... 6,668 557
======== ========
Earnings per
share -- basic............ $ 1.72 $ 5.27(h)
======== ========
Weighted average number of
diluted common shares..... 7,066 562
======== ========
Earnings per
share-diluted............. $ 1.62 $ 5.22(h)
======== ========
Dividends declared.......... $ 0.16 -- (g)
======== ========
</TABLE>
28
<PAGE> 33
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME DATA
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
----------------------------
TWELVE NINE
MONTHS ENDED MONTHS ENDED
DECEMBER 31, OCTOBER 2,
1998 1999
------------ ------------
<S> <C> <C>
(a) Reflects the annual fee payable to Kirtland for
management and financial consulting services provided to
us...................................................... $ 500 $ 375
(b) Estimated cost savings, principally related to
directors' fees, legal costs and administrative support,
as a direct result of the recapitalization.............. $ (750) $ (563)
(c) Reflects the following:
1. Interest resulting from revolving loan borrowings of
$30,000 under the $80,000 new senior credit facility
at an assumed interest rate of LIBOR plus 3.0%
(8.4%)(Actual borrowings at October 2, 1999 were
approximately $19,600. The additional borrowings of
$11,400 represent the funding of working capital
requirements and recapitalization related fees.)...... $ 2,520 $1,890
2. Interest resulting from term loan borrowings of
$30,000 under the $80,000 new senior credit facility
at an assumed interest rate of LIBOR plus 3.0%
(8.4%)................................................ 2,520 1,890
3. Interest resulting from the issuance of the
outstanding notes with a face value of $60,000 at an
interest rate of 13 1/4%.............................. 7,950 5,963
4. Interest resulting from accretion of original issue
discount on the notes, related to the assumed value of
the warrants.......................................... 225 169
5. Amortization of debt issuance costs of $6,400
associated with the new senior credit facility and the
notes................................................. 816 612
6. Elimination of historical interest expense or interest
expense pro forma for acquisitions under existing
borrowings............................................ (1,915) (1,097)
-------- ------
Total.................................................. $ 12,116 $9,427
======== ======
</TABLE>
Debt issuance costs have been apportioned between the notes, the revolving
loan portion of the new senior credit facility and the term loan portion of
the new senior credit facility. Cost allocated to the notes are amortized
over a ten year period and costs allocated to the revolving loan and term
loan portions under the new senior credit facility are amortized over five
and one half years.
(d) Upon consummation of the recapitalization on September 29, 1999, the Company
recorded a pre-tax non-recurring charge of $12,606 ($9,296 net of tax) for
compensation expense directly attributable to the recapitalization. The
October 2, 1999 unaudited Pro Forma Condensed Consolidated Statement of
Income Data has been adjusted to exclude this non-recurring charge and
related tax benefit.
<TABLE>
<CAPTION>
PRO FORMA
----------------------------
TWELVE NINE
MONTHS ENDED MONTHS ENDED
DECEMBER 31, OCTOBER 2,
1998 1999
<S> <C> <C>
(e) Reflects the tax effect of pro forma adjustments (a),
(b), and (c), assuming an effective tax rate of 38%..... $(4,510) $(3,510)
</TABLE>
29
<PAGE> 34
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME DATA -- CONTINUED
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<S> <C> <C> <C>
(f) Represents the pre-acquisition results for Satec for the period January 1, 1998 to
August 4, 1998 and the pre-acquisition results for the remaining interest in IST for the
period January 1, 1998 to September 27, 1998.
(g) Currently, Instron does not expect to declare dividends.
(h) Pro forma basic and diluted earnings per share have been calculated giving effect to the
new capital structure of Instron. Pro forma weighted average number of basic common
shares includes shares of our common stock outstanding, assuming the recapitalization
was consummated at the beginning of the period presented. Pro forma weighted average
number of diluted common shares includes shares of our common stock outstanding plus the
effect of any dilutive potential common shares that were outstanding during the period,
assuming the recapitalization was consummated at the beginning of the period presented.
Potential common shares include rollover options held by management and warrants issued
upon the recapitalization. The following is a reconciliation of the pro forma basic and
dilutive potential shares of our common stock outstanding.
</TABLE>
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
YEAR ENDED OCTOBER 2,
DECEMBER 31, 1998 1999
<S> <C> <C>
Weighted average number of basic common shares
outstanding........................................... 557 557
Dilutive potential common shares...................... 5 --
---- ----
Weighted average number of dilutive common shares
outstanding......................................... 562 557
==== ====
The dilutive potential common shares have been excluded from the calculation of weighted
average number of diluted common shares outstanding for the nine months ended October 2,
1999, as their inclusion would have an antidilutive effect on loss per share.
</TABLE>
30
<PAGE> 35
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated historical, financial
and other data of Instron for the five years ended December 31, 1998, which have
been derived from, and should be read in conjunction with, the consolidated
financial statements of Instron included in this prospectus, including the Notes
to Consolidated Financial Statements and Management's Discussions and Analysis
of Financial Condition and Results of Operations.
The selected consolidated data for the nine months ended September 26, 1998
and October 2, 1999 have been derived from, and should be read in conjunction
with, Instron's unaudited condensed consolidated financial statements included
in this prospectus. Data for the nine months ended October 2, 1999 is not
necessarily indicative of the results to be expected for the full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, --------------------------
---------------------------------------------------- SEPTEMBER 26, OCTOBER 2,
1994 1995 1996 1997 1998 1998 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Total revenue...................... $136,192 $150,571 $153,113 $155,660 $183,029 $114,961 $150,953
Research & development............. 8,062 8,782 8,616 6,959 8,485 5,191 8,239
Income (loss) from operations(1)... 8,082 8,921 9,145 12,571 9,646 3,686 (4,154)
Income (loss) before income
taxes(2)......................... 6,979 7,684 7,385 11,555 20,333 14,476 (4,547)
Net income......................... 4,537 4,995 4,582 7,164 11,459 7,828 (4,357)
OTHER DATA:
Depreciation and amortization...... $ 5,815 $ 6,784 $ 6,873 $ 6,494 $ 7,106 $ 5,167 $ 6,446
Bookings of new orders............. 138,947 155,092 161,692 150,020 166,515 102,056 153,917
Backlog............................ 32,687 36,136 34,361 28,748 74,477 31,870 72,967
EBITDA(4).......................... 13,855 15,891 15,329 18,880 27,671 19,656 2,266
Capital expenditures............... 4,286 4,510 4,473 4,176 5,841 5,182 4,116
Cash flow from operating
activities....................... 9,143 6,361 9,824 16,989 5,276 (4,641) 16,222
Cash flow from investing
activities....................... (5,029) (8,325) (12,163) (6,227) (6,764) (5,027) (5,409)
Cash flow from financing
activities....................... (5,278) 1,790 3,120 (10,619) 6,115 9,582 (8,889)
Ratio of earnings to fixed
charges(3)(5).................... 3.9x 3.8x 3.8x 5.6x 9.4x 8.3x --
FINANCIAL POSITION:
Working capital.................... $ 33,849 $ 38,259 $ 44,094 $ 41,942 $ 55,241 $ 43,476 $ 34,220
Total assets....................... 102,294 113,334 121,833 118,985 158,254 138,731 168,639
Total long-term debt............... 11,018 11,225 17,409 7,600 13,216 12,737 90,000
Stockholders' equity (deficit)..... 51,926 56,102 62,401 66,254 79,584 75,918 (13,831)
PER SHARE OF COMMON STOCK:
Net income per basic share......... $ .72 $ .79 $ .72 $ 1.11 $ 1.72 $ 1.19 $ (0.63)
Net income per diluted share....... .72 .78 .70 1.05 1.62 1.10 (0.63)
Dividends declared................. .12 .15 .16 .16 .16 .12 .04
Book value......................... 8.26 8.85 9.68 9.82 11.46 10.95 (24.83)
</TABLE>
(footnotes on following page)
31
<PAGE> 36
(1) In March 1996, we recorded a special items charge to operations to implement
a workforce reduction and consolidate some manufacturing operations. We took
a pre-tax charge of $1,812 ($1,123 net of taxes) to cover these actions.
Income from operations in 1998 reflects a special items charge to operations
to consolidate our European operations and write-down the value of
non-performing assets. We took a pretax charge of $4,975 ($4,232 net of
taxes) to cover these actions. In September 1999, we recorded a
non-recurring compensation expense of $12,606 ($9,296 net of tax) directly
attributable to the recapitalization. Income from operations excludes
foreign exchange gain or loss.
(2) Income before taxes in 1998 reflects non-operating pre-tax gain of $11,076
($6,867 net of taxes recorded) in connection with our sale of 42 acres of
excess land in Canton, Massachusetts.
(3) Earnings used in computing the ratio of earnings to fixed charges consist of
pre-tax earnings before losses from equity investments and fixed charges.
Fixed charges are defined as interest expense related to debt, amortization
expense related to deferred financing costs and a portion of rental charges
representative of interest.
(4) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is presented because we believe it is frequently used
by securities analysts, investors and other interested parties in the
evaluation of companies in our industry. However, other companies in our
industry may calculate EBITDA differently than we do. EBITDA is not a
measurement of financial performance under generally accepted accounting
principles and should not be considered as an alternative to cash flow from
operating activities or as a measure of liquidity or as an alternative to
net income as indicators of our operating performance or any other measures
of performance derived in accordance with generally accepted accounting
principles. See the Statement of Cash Flow indicated in our financial
statements.
(5) Due to our loss in the nine months ended October 2, 1999, the ratio coverage
was less than 1:1. We must generate additional earnings of $187 to achieve a
coverage ratio of 1:1.
32
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a world leader in the manufacture, marketing and servicing of
materials and structural testing systems, software and accessories. Materials
testing focuses on the mechanical properties of material, including tensile
strength, compressive strength, fracture properties and hardness, in order to
qualify or determine the capabilities of the material. Structural testing
simulates the life cycle of components or complete products in order to verify
their design and performance capabilities. Our products are used by research
scientists, design engineers and quality control personnel to evaluate the
mechanical properties and performance of various materials, components and
structures in the following applications:
- quality control and specification testing;
- research and development of new materials to enhance product performance;
and
- the search for new applications and markets for existing materials.
We recognize revenue from product sales at the time of shipment. For
services, we recognize revenue at the time the service is performed and ratably
over the contract period for service maintenance contracts. Bookings for a
period recognize the receipt of a firm committed order from a customer that
includes a full detailed product specification and agreed to terms and
conditions. Backlog as of a specific date is the total of all outstanding
customer orders received and counted as bookings that have yet to be shipped and
recognized as sales. Prior to the acquisition of IST, we generally experienced a
close correlation between backlog at the end of a specific quarter and our
shipments for the subsequent quarter. IST's structures business is characterized
by relatively larger contract sizes and longer delivery periods, and because our
current backlog now includes IST, we believe that our total backlog at the end
of a quarter is no longer a predictable indicator of shipments for the next
quarter.
RECENT ACQUISITIONS
Satec. We acquired substantially all the assets of Satec in August 1998 for
approximately $12.6 million in cash. Satec is a manufacturer of a range of
materials testing equipment sold primarily in the United States with annual
revenue of approximately $18.0 million at time of acquisition. We accounted for
this acquisition under the purchase method of accounting. We have included
Satec's operating results in our consolidated results of operations from the
date of acquisition. Satec's reported revenue was approximately $8.8 million and
net income was $356,000 for the last five months of 1998.
IST. Prior to September 27, 1998, we were a 51% owner of IST, a joint
venture formed in November 1996 with another partner. We accounted for the joint
venture using the equity method of accounting. Our revenue from IST was
approximately $11.4 million for the first nine months of 1998, $6.9 million for
the twelve months of 1997 and $519,000 for the last two months of 1996, and our
net losses associated with IST for the same periods were $902,000, $876,000 and
$69,000. These revenues include the shipment of systems from Instron to IST
under the terms of a manufacturing and supply agreement at substantially reduced
gross margins compared to our normal margins, and commission income earned by
Instron for selling IST products. The losses include these low margin orders
contributed to the joint venture as well as the time and effort necessary to
consolidate the operations and technology of the two contributing partners. On
September 27, 1998, we exercised our option to purchase the remaining 49% of IST
for $2.7 million in cash. The full results of operations from the IST business
have been included in our consolidated results since that date. IST had revenue
of approximately $18.4 million and net income of $78,000 for the fourth quarter
of 1998.
We believe these acquisitions enhance our ability to compete effectively in
the materials and structural testing industry by broadening our product range
and application capability. In addition, we believe that we can improve some
aspects of the operating results of the above acquisitions by reducing
manufacturing costs and other administrative expenses.
33
<PAGE> 38
Other. Financial comparisons of our results of fiscal 1997 and 1996 are
impacted by the sale of our Laboratory MicroSystems division to Axiom Systems in
April 1997. Laboratory MicroSystems' revenue was approximately $1.2 million in
the first quarter of 1997 and $5.6 million in 1996. Laboratory MicroSystems had
no significant impact on our net income in either year.
THE RECAPITALIZATION
On September 29, 1999 we completed a recapitalization of Instron. In the
recapitalization, Kirtland and its affiliates acquired approximately 88.3% of
our common stock. Members of our management retained approximately 5.9% of our
common stock and three other stockholders retained approximately 5.8% of our
common stock. We also entered into an $80.0 million new senior credit facility,
repaid approximately $17.4 million of existing debt and incurred approximately
$10.2 million in fees and expenses. See "The Recapitalization."
RESULTS OF OPERATIONS
The following table sets forth selected financial and operating data and
the percentage relationship of the listed items to our total revenue for the
periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, --------------------------------------
----------------------------------------------------------- SEPTEMBER 26, OCTOBER 2,
1996 1997 1998 1998 1999
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue........ $153,113 100.0% $155,660 100.0% $183,029 100.0% $114,961 100.0% $150,953 100.0%
Total cost of
revenue............ 88,642 57.9 91,489 58.8 111,054 60.7 68,767 59.8 92,704 61.4
-------- -------- -------- -------- --------
Gross profit......... 64,471 42.1 64,171 41.2 71,975 39.3 46,194 40.2 58,249 38.6
Operating expenses:
Selling and
administrative... 44,898 29.3 44,641 28.7 48,869 26.7 32,342 28.1 41,558 27.5
Research and
development...... 8,616 5.6 6,959 4.5 8,485 4.6 5,191 4.5 8,239 5.5
Special items
charge........... 1,812 1.2 -- -- 4,975 2.7 4,975 4.3 --
Recapitalization
compensation
expense.......... -- -- -- -- -- -- -- -- 12,606 8.4
-------- -------- -------- -------- --------
Total operating
expenses........... 55,326 36.1 51,600 33.1 62,329 34.1 42,508 36.9 62,403 41.3
-------- -------- -------- -------- --------
Income (loss) from
operations......... 9,145 6.0 12,571 8.1 9,646 5.3 3,686 3.2 (4,154) (2.8)
-------- -------- -------- -------- --------
Other (income)
expenses:
Gain on sale of
land............. -- -- -- -- (11,076) (6.1) (11,076) (9.6) -- --
Interest expense... 1,548 1.0 1,465 0.9 1,175 0.6 819 0.7 1,097 .07
Interest income.... (477) (0.3) (634) (0.4) (943) (0.5) (806) (0.7) (730) 0.5
Foreign exchange
(gains) losses... 689 0.4 185 0.1 157 0.1 273 0.2 26 0.0
-------- -------- -------- -------- --------
Total other
expenses........... 1,760 1.1 1,016 0.7 (10,687) (5.8) (10,790) (9.4) 393 .3
Income before income
taxes.............. 7,385 4.8 11,555 7.4 20,333 11.1 14,476 12.6 (4,547) (3.0)
Provision for income
taxes.............. 2,803 1.8 4,391 2.8 8,874 4.8 6,648 5.8 (190) (0.1)
-------- -------- -------- -------- --------
Net income........... $ 4,582 3.0 $ 7,164 4.6 $ 11,459 6.3 $ 7,828 6.8 $ (4,357) (2.9)
======== ======== ======== ======== ========
EBITDA............... $ 15,329 10.01 $ 18,880 12.1 $ 27,671 15.12 $ 19,656 17.1 $ 2,266 1.5
======== ======== ======== ======== ========
</TABLE>
34
<PAGE> 39
NINE MONTHS ENDED OCTOBER 2, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 26,
1998
Total Revenue. Total revenue for the nine months ended October 2, 1999,
increased by 31.3% from the same period in 1998. This increase is due primarily
to the inclusion of Satec and IST products and services. If revenue attributable
to Satec and IST were excluded for both the first nine months of 1999 and the
first nine months of 1998, total revenue for the first nine months of 1999 would
have been $100.5 million compared to $100.6 million for the same period in 1998.
Foreign sales accounted for approximately 56% of the consolidated first nine
months revenue compared to 53% in 1998.
Bookings of New Orders. Bookings for the first nine months of 1999
increased by 50.8% from the corresponding period in 1998. The increase is due
primarily to the inclusion of Satec and IST in 1999 and higher activity in all
our major markets, including the Far East.
Backlog. The Company's order backlog was $73.0 million at October 2, 1999,
compared to $63.5 million at July 3, 1999 and compared to $74.5 million at
year-end 1998. Prior to the acquisition of IST, we generally experienced a close
correlation between backlog at the end of a specific quarter and our shipments
for the subsequent quarter. IST's structures business is characterized by
relatively larger contract values and longer delivery periods and because our
current backlog now includes IST, we believe that our total backlog at the end
of a quarter is no longer a predictable indicator of shipments for the next
quarter. If order backlog attributable to Satec and IST was excluded from both
the third and second quarters of 1999 and 1998, order backlog would have been
$29.1 million at the end of the third quarter of 1999, compared to $28.0 million
for the second quarter of 1999 and compared to $29.5 million at year-end 1998.
Gross Profit. Gross profit as a percentage of revenue decreased to 38.6%
compared with 40.2% in the first nine months of 1998. This decrease is primarily
due to lower than expected margins on IST shipments.
Selling and Administrative Expenses. Total selling and administrative
expenses, for the first nine months of 1999, increased by 28.4% compared to the
same period in 1998 due primarily to the inclusion of Satec and IST in 1999. As
a percentage of revenue, selling and administrative expenses were 27.5% compared
to 28.1% for the same period last year.
Research and Development Expenses. Research and development expenses, for
the first nine months of 1999, increased by 58.7% compared with the same period
in 1998. This increase is primarily due to the inclusion of Satec and IST in
1999. In addition, software development costs of $1.7 million were capitalized
during the first nine months of 1999 compared with $787,000 in the first nine
months of last year. This increase is due primarily to the capitalization of
costs associated with an integrated software suite for our Structures business.
On a pro forma basis, as if Satec and IST were wholly owned in 1998 and
development costs software were reported as period expenses, research and
development costs would have increased by 11.0%. This increase reflects our
current investment in upgrading our core product platforms.
Operating Expenses. Operating expenses in the first nine months of 1998
included a special items charge of $5.0 million, to reflect the cost of
consolidating European operations and to write down the value of certain non-
performing assets. The special items charge includes termination benefits, the
costs to shut down and exit a manufacturing facility, other asset impairments
and other related costs. We closed down a manufacturing plant in Germany,
relocated sales and service personnel to another location in Germany and moved
the manufacturing operation to the United Kingdom. During the first nine months
of 1999, we paid $1.9 million for termination benefits and related costs.
Operating Income (Loss). Losses from operations for the first three
quarters of 1999 include recapitalization compensation expense of $12.6 million
arising from the merger agreement between Instron and Kirtland. Without one-time
charges, income from operations for the first three quarters would have been
$8.5 million compared to $8.7 million for the same period last year. This
decline in income from operations is due primarily to losses from our structures
business.
Net Interest Expense. During the first nine months of 1999, we recorded net
interest expense of $367,000 compared with interest expense of $13,000 for the
same period in 1998. This net increase was due to an increase in interest
expense resulting from higher average borrowings (related to the purchase of
Satec and IST) and to lower interest income received on notes receivable.
35
<PAGE> 40
Foreign Exchange Gains and Losses. Foreign exchange losses of $26,000 for
the first nine months of 1999 resulted primarily from movements of the British
pound against certain European currencies. In the first nine months of 1998, we
had foreign exchange losses of $273,000.
Other. A non-operating gain of $11.1 million was recorded in the first
quarter of 1998 on the sale of excess land in Canton, Massachusetts.
Income Taxes. The consolidated effective tax rate of 4.2% for the first
nine months of 1999 reflects the impact of the Recapitalization charge upon U.S.
based income and the likelihood that we will not be able to fully utilize
foreign tax credits in 1999. This compares to the consolidated effective tax
rate of 45.9% for the first nine months of 1998 which is higher than our normal
effective tax rate due to non-deductible expenses relating to the 1998 special
items charge.
Net Income (Loss). Net loss for the first nine months of 1999 was $4.4
million compared to net income of $7.8 million for the same period last year.
This decrease is due primarily to expenses related to the recapitalization.
EBITDA. EBITDA for the first nine months of 1999, after adjusting for the
one time recapitalization compensation expense of $12.6 million, was $14.9
million. This represents an increase of 9.7% when compared to EBITDA for the
first nine months of 1998 of $13.6 million, after being adjusted to exclude the
special items charge of $4.9 million and the gain on the sale of land of $11.1
million.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997; AND YEAR
ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Total Revenue. Total revenue of approximately $183.0 million in fiscal 1998
increased by 17.6% from revenue of approximately $155.7 million in fiscal 1997
due primarily to the acquisitions of Satec and IST. Total revenue in fiscal 1997
increased by 1.7% from revenue of approximately $153.1 million in fiscal 1996.
If revenue attributable to IST, Satec and Laboratory MicroSystems were excluded
from both 1998 and 1997, total revenue for 1998 would have been $144.4 million
compared to $147.6 million in 1997, a decrease of 2.1%. This decrease is largely
due to the impact of the economic downturn in the Asian markets.
Bookings of New Orders. Bookings of new orders were approximately $166.5
million in fiscal 1998. Bookings on a pro forma basis, including the annual
bookings of IST and Satec, would have been approximately $212.7 million in 1998
compared to $220.1 million in 1997, a decrease of 3.4%. This decrease is due
largely to the impact of the economic downturn in the Asian markets.
Backlog. Our backlog of orders was approximately $74.5 million at December
31, 1998, an increase of 159.1% from the $28.7 million at December 31, 1997. The
increase was due primarily to the inclusion of the IST and Satec backlogs in
1998. The year end 1997 backlog decreased by 16.3% from 1996.
Gross Profit. The gross profit margins for the three years ended December
31, 1998 were 42.1%, 41.2% and 39.3% for 1996, 1997 and 1998, respectively. The
trend of decreasing margins is due principally to the impact of supplying IST
with structures systems at lower than normal profit margins. Gross margins
excluding IST; Satec and Laboratory MicroSystems were 42.8% in 1996, 42.7% in
1997 and 44.3% in 1998. This improvement in 1998 is due in part to improved
service margins and the benefit of actions previously taken to reduce
manufacturing costs.
Selling and Administrative Expenses. The 1998 selling and administrative
expenses of approximately $48.9 million increased by 9.5% from 1997 due
principally to the inclusion of expenses relating to Satec and IST. As a
percentage of revenue, selling and administrative expenses decreased to 26.7% in
1998, compared to 28.7% in 1997 and 29.3% in 1996.
Research and Development Expenses. Research and development expenses
increased by 21.9% in 1998 and decreased by 19.2% in 1997. The increase in 1998
is due primarily to the inclusion of the development efforts of Satec and IST.
The decrease in 1997 compared to 1996 resulted from certain Instron engineering
resources
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($2.0 million in 1997) being used to develop new products for IST in accordance
with the joint venture agreement, which were reimbursed by IST. During the three
years ended December 31, 1998, we capitalized certain software development
costs. (See Note 1 of Notes to 1998 Consolidated Financial Statements). If
research and development expenses were restated, for comparison purposes, by
including capitalized software development costs as period expenses, by
adjusting engineering expenses for the effect of Satec and IST and the
disposition of Laboratory MicroSystems as previously discussed, research and
development expenses of the ongoing business would have increased by 7.5% in
1998. As a percentage of total revenue, research and development expenditures,
on a comparable basis, represented 7.0% in 1998, 6.4% in 1997 and 6.4% in 1996.
Operating Income. Operating income decreased by 23.3% to approximately $9.6
million in 1998, compared to approximately $12.6 million in 1997 and
approximately $9.1 million in 1996. As a percentage of total revenue, operating
income represented 5.3% in 1998, 8.1% in 1997 and 6.8% in 1996. Operating income
for 1998 includes a special items charge of approximately $5.0 million for the
cost of consolidating European operations and to write down the value of
non-performing assets. We have closed down a manufacturing plant in Germany,
relocated sales and service personnel to another Instron location in Germany,
and moved the manufacturing operations to the United Kingdom. The majority of
these actions were completed in the fourth quarter, and substantially all cash
disbursements were made by the end of the first quarter of 1999. Before the
effect of the special items charge, operating income in 1998 was approximately
$14.6 million or 8.0% of total revenue and increased by 16.3% compared to 1997
due primarily to certain improved product and service margins and the positive
contribution of Satec and IST in the fourth quarter.
Net Interest Expense. Net interest expense decreased by 72.0% in 1998 and
by 22.0% in 1997. The net decrease in both 1998 and 1997 was due to reduced
interest expense resulting from lower average borrowings and was further reduced
by interest income received on notes receivable and temporary bank deposits.
Foreign exchange losses of $157,000 in 1998 resulted from the strengthening of
the British pound against certain European currencies. Foreign exchange losses
of $185,000 in 1997 resulted from the strengthening of the U.S. dollar against
certain Asian currencies.
Income Taxes. Income before taxes was 11.1% of total revenue in 1998,
compared to 7.4% in 1997 and 4.8% in 1996. Excluding the special items charge
and the non-operating gain on the sale of the land in 1998, as well as the
special items charge in 1996, income before taxes as a percentage of total
revenue was 7.8% in 1998, 7.4% in 1997 and 6.0% in 1996. The consolidated
effective tax rate was 43.6% in 1998 compared to 38.0% in 1997 and 1996. This
higher effective tax rate is due to certain non-deductible expenses relating to
the special items charge. A detailed reconciliation of our effective tax rate
and the United States statutory tax rate appears in Note 6 of Notes to
Consolidated Financial Statements.
Net Income. Instron reported net income of approximately $11.5 million, or
$1.62 per diluted share of common stock, for the year ended December 31, 1998,
compared with approximately $7.2 million, or $1.05 per diluted share, in 1997.
Net income in 1998 included a special items charge to operations of
approximately $5.0 million ($4.2 million net of taxes) and a non-operating gain
on the sale of land of approximately $11.1 million ($6.9 million net of taxes).
If these special items are excluded, net income in 1998 was approximately $8.8
million, or $1.25 per diluted share, an increase of 23.2% from 1997, due
primarily to improved product and service margins, the positive contribution of
Satec and IST in the fourth quarter, and a decline in net interest expense.
Net income in 1996 included a special items charge to operations of $1.8
million ($1.1 million net of taxes). Excluding the effect of the special items
charge in 1996, net income increased by 25.6% in 1997 due primarily to increased
revenue of the on-going business, a decline in interest expense and lower
foreign exchange losses.
EBITDA. EBITDA for the year ended December 31, 1998 of approximately $27.7
million increased from $18.9 million for the year ended December 31, 1997. The
increase was due primarily to high electromechanical shipments and the inclusion
of Satec and IST products and services. EBITDA increased to $18.9 million in
1997 from approximately $15.3 million for the year ended December 31, 1996.
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LIQUIDITY AND CAPITAL RESOURCES
In the first nine months of 1999, we generated cash flows from operating
activities of $ 16.2 million, due primarily to a $5.0 million decrease in
accounts receivable and $6.4 million increase in accounts payable and accrued
expenses. These operating funds were primarily used to fund capital expenditures
of $4.1 million, software development costs of $1.7 million and partially pay
off, prior to the merger, existing lines of credit and borrowings.
In connection with the recapitalization, we entered into the new senior
credit facility consisting of a $30 million term loan facility and a $50 million
revolving credit facility. In addition, we incurred $60 million of debt through
the sale of the outstanding 13 1/4% senior subordinated notes.
Principal and interest under the Senior Credit Facility and interest
payments on the Senior Subordinated Notes represent significant liquidity
requirements for us. As of October 2, 1999, we had $31.9 million of available
credit under the $50 million Revolving Credit Facility. See "Description of New
Senior Credit Facility."
With respect to the $30 million borrowed under the term loan facility, we
are required to make scheduled repayments in twenty two quarterly installments
of principal with interest thereon on the first day of each January, April, July
and October commencing January 1, 2000. The senior subordinated notes will
mature in 2009, and bear interest at 13 1/4%. The revolving credit facility
matures in April 2005; with all amounts then outstanding becoming due.
As a result of the substantial indebtedness incurred in connection with the
recapitalization, it is expected that our interest expense will be significantly
higher and will have a greater proportionate impact on net income in comparison
to periods before the recapitalization.
Our operating activities generated cash of $5.3 million in 1998 and $17.0
million in 1997. Investing activities used $6.8 million in 1998 and $6.2 million
in 1997, while financing activities provided $6.1 million in 1998 and used $10.6
million in 1997. Our primary source of funds in 1998 and 1997 was net cash
generated by operations, supplemented in 1998 by the net proceeds of the sale of
42 acres of excess land in Canton, Massachusetts for $13.5 million in cash. The
net cash generated by operations in 1998 consisted primarily of net income, as
adjusted for the non-cash effect of depreciation and amortization expense, which
was partially offset by an increase in accounts receivable.
At December 31, 1998, accounts receivable were $65.8 million compared to
$48.2 million at year end 1997 which reflects higher fourth quarter revenue in
1998, and the consolidation of Satec and IST balance sheets. Inventories of
$36.1 million increased by $12.1 million due to the consolidation of Satec and
IST. The inventory turnover ratio increased to 2.97x from 2.87x at the end of
1997.
Our principal investment activities during 1998 included the purchase of
Satec for $12.6 million, the buyout of the remaining 49% of IST for $2.7
million, capital expenditures of $5.8 million, and the development of software
products for $1.5 million. We plan to make capital expenditures of approximately
$6.3 million in fiscal 1999, principally for manufacturing equipment and
information systems, and develop and enhance our software products.
Our total debt outstanding at year-end 1998 was $19.6 million compared to
$13.7 million at the end of 1997. The ratio of total debt to debt plus equity at
year-end 1998 increased to 19.8% from 17.1% in 1997. The increase in debt was
primarily due to funding acquisitions in 1998.
Our principal source of liquidity is cash flow generated from operations
and borrowings under the $50.0 million revolving portion of our new $80.0
million senior credit facility. See "Description of New Senior Credit Facility."
Our principal use of liquidity will be to meet debt service requirements,
finance our capital expenditures, implement our business strategy, including
potential acquisitions, fund research and development efforts and provide
working capital. We expect that capital expenditures in 1999 will be
approximately $6.3 million, of which approximately $3.5 million will be used for
maintenance purposes. The balance of the 1999 capital expenditures will be used
for equipment purchases development and enhancements of our software
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products. Our debt service obligations could have important consequences to you
as a holder of the notes. See "Risk Factors -- Substantial Leverage."
Our ability to make payments on and to refinance our indebtedness,
including these notes, and to fund planned capital expenditures and research and
development efforts will depend on our ability to generate cash in the future.
This, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control.
Given our present capital structure, we believe our present capital
resources and anticipated operating cash flows are sufficient to meet our cash
requirements to finance operations, fund interest payments, repay loan
installments and finance capital expenditures for the foreseeable future.
We cannot assure you, however, that our business will generate sufficient
cash flow from operations, that currently anticipated cost savings and operating
improvements will be realized on schedule or that future borrowings will be
available to us under our new senior credit facility or elsewhere in an amount
sufficient to enable us to pay our indebtedness, including these notes, or to
fund our other liquidity needs. We may need to refinance all or a portion of our
indebtedness, including these notes, on or before maturity. We cannot assure you
that we will be able to refinance any of our indebtedness, including our new
senior credit facility or these notes, on commercially reasonable terms or at
all.
SEASONALITY
Historically, our sales are highest in the fourth quarter of each year due
to the ordering pattern of our customers, which favors fourth quarter deliveries
before budget authorizations expire. Our sales in the first quarter are usually
low as it takes time to rebuild in-process inventory levels after the heavy
fourth quarter delivery requirements have been satisfied. Also, third quarter
sales are generally low due to vacation patterns of both our production workers
and customer technical personnel needed for acceptance testing. The seasonal
factors affecting sales are usually reflected in quarterly net income.
EURO CURRENCY ISSUE
On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing currencies
("legacy currencies") and one common currency -- the euro. The euro now trades
on currency exchanges and may be used in business transactions. Beginning in
January 2002, new euro-denominated bills and coins will be issued, and legacy
currencies will be withdrawn from circulation. Our operating subsidiaries
affected by the euro conversion have established plans to address the systems
and business issues raised by the euro currency conversion.
These issues include, among others:
- the need to adapt computer and other business systems and equipment to
accommodate euro-denominated transactions; and
- the competitive impact of cross-border price transparency, which may make
it more difficult for businesses to charge different prices for the same
products on a country-by-country basis, particularly once the euro
currency is issued in 2002.
We anticipate that the euro conversion will not have a material adverse
impact on our financial condition or results of operations.
YEAR 2000
We support the exchange of information relating to the Year 2000 issue and
designate the information following below as the Year 2000 Readiness Disclosure
within the meaning of the Year 2000 Information and Readiness Disclosure Act.
Information set forth herein regarding the Year 2000 compliance of non-Instron
products and services are "republications" under the Year 2000 Information and
Readiness Disclosure Act and are based on information supplied by other
companies about the products and services they offer. We have not
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independently verified the contents of these republications and take no
responsibility for the accuracy or completeness of information contained in such
republications.
The term "Year 2000 issue" is a general term used to describe various
business-related problems that may result from the improper processing by
computer systems of dates after 1999. The Year 2000 issue affects virtually all
companies and all organizations. We have identified our Year 2000 non-compliance
risks in four categories:
- internal business systems;
- internal electronic equipment and embedded chip technology;
- external non-compliance by our suppliers; and
- software systems products supplied by us to our customers.
INTERNAL BUSINESS SYSTEMS
We have an active, ongoing program to insure that our business systems will
be Year 2000 compliant. We began this program to identify and correct Year 2000
issues in 1996. In accordance with this program, we are following a four-step
process to address the Year 2000 issue. The first stage consisted of auditing
our major business systems and telecommunication switches. This stage identified
a couple of minor issues but due to the installation of a new enterprise
resource planning system in 1996 at our two primary manufacturing sites, the
exposure was minimal and was corrected by August 1999. The second stage, begun
in September 1997, is an audit of all departmental systems and network operating
systems. This audit has been completed and formed the basis for the third stage
which identified the corrective actions required, and outlined the necessary
plan of action. The final stage, which is nearly complete, includes the
implementation and testing of all required modifications.
Accordingly, we are confident that our internal business systems will be
made Year 2000 compliant in a timely manner. We have made capital expenditures
of approximately $0.6 million in 1999 to upgrade computing, networking and
telecommunications systems as part of our plan to address the Year 2000 issue.
Although the costs associated with identifying and implementing the necessary
plan of action are not expected to be material to our financial position, there
can be no assurance to this effect.
We have initiated an audit of the business systems of our two recent
acquisitions, Satec and IST. So far, there has been no indication of any major
Year 2000 issue that cannot be resolved in a timely manner.
INTERNAL ELECTRONIC EQUIPMENT AND EMBEDDED CHIP TECHNOLOGY
The audit process has identified certain telecommunication equipment that
needs to be upgraded to address the Year 2000 issue. We plan to replace this
equipment in the third quarter of 1999, and are finalizing the review of office
and facilities equipment such as machine tools, photocopiers, security systems
and other systems which may be impacted by the Year 2000 issue. We estimate that
the total cost of completing any modifications, upgrades or replacements of this
equipment will not have a material adverse effect on our business. This estimate
is being monitored and will be revised as additional information becomes
available.
SUPPLIERS
We have nearly completed a communication program with key suppliers of
computers, equipment, parts and material used, operated and maintained by
Instron. This program is intended to identify and, to the extent possible,
resolve issues with suppliers involving the Year 2000 issue. However, we have
limited or no control over the actions of these third-party suppliers. Any
failure of these suppliers to resolve Year 2000 issues with their systems in a
timely manner could have a material adverse effect on our business.
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INSTRON SUPPLIED SYSTEMS AND SOFTWARE TO CUSTOMERS
We believe that we have substantially identified and resolved all potential
Year 2000 issues with all of the software products that we are currently
developing and marketing. Existing software on installed machines may not be
Year 2000 compliant and communication programs have been initiated to advise
customers on how to upgrade or replace their existing systems. Management
believes that it is not possible to determine with complete certainty that all
Year 2000 issues affecting our products have been identified due to the
complexity of these systems and the fact that these products interact with other
third-party vendor products and operate on computer systems which are not under
our control. Any such failures to identify or remediate Year 2000 issues
affecting our systems and software products could have a material adverse effect
on our business.
The information presented above sets forth the key steps taken by Instron
to address the Year 2000 issue. We cannot make absolute assurances that we have
identified all the issues, can resolve them in a timely manner, and that there
will be no failures or disruptions to operations which could result in a
material adverse effect on our business.
QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
We are exposed to market risk related to changes in foreign currency
exchange rates. We occasionally enter into foreign exchange contracts to manage
and reduce the impact of changes in foreign currency exchange rates. We do not
enter into derivatives or other financial instruments for trading or speculative
purposes. The exposures are associated with certain accounts receivable
denominated in local currencies and certain foreign revenue transactions.
At December 31, 1998, the face amount of our outstanding forward currency
contracts to buy and sell U.S. dollars, Japanese yen and certain European
currencies was $6.3 million. A 10% fluctuation in exchange rates for these
currencies would change the fair value by approximately $0.3 million. However,
any change in the fair value of the contracts would be offset by changes in the
underlying value of the transactions being hedged.
The hypothetical movement disclosed above was estimated by calculating the
fair value of the forward currency contracts at December 31, 1998, and comparing
that with those calculated using hypothetical forward currency exchange rates.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The statement
is effective for fiscal years beginning after June 15, 1999. Management is
currently evaluating the effects of this change on its recording of derivatives
and hedging activities. We will adopt SFAS No. 133 for our fiscal year ending
December 31, 2000.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1 "Internal Use Software," which provides
guidance on the accounting for the costs of software developed or obtained for
internal use. SOP 98-1 is effective for fiscal years beginning after December
15, 1998. Management does not expect the statement to have a material impact on
our financial position or results of operations.
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BUSINESS
THE COMPANY
We are a world leader in the manufacture, marketing and servicing of
materials and structural testing systems, software and accessories. Materials
testing focuses on the mechanical properties of materials, including tensile
strength, compressive strength, fracture properties and hardness. Structural
testing simulates the life cycle of components or complete products in order to
verify their design, durability and performance capabilities. Our products are
used by research scientists, design engineers and quality control personnel to
evaluate the mechanical properties and performance of various materials,
components and structures in the following applications:
- quality control and specification testing;
- research and development of new materials to enhance product performance;
and
- the search for new applications and markets for existing materials.
Our systems are used to test the strength, durability, hardness, impact
resistance and other characteristics of practically all materials intended for
industrial and consumer use by stretching, compressing, cycling or twisting
them. Our reach extends well beyond testing extremely complex materials used in
automobiles, airplanes, buildings or bridges. It includes testing food,
clothing, sporting equipment, children's toys and a wide range of other
products. For example, our customers use our systems to test:
- the strength and durability of exotic materials used for space
exploration;
- the exacting quality requirements of prosthetic limbs and other
orthopedic equipment;
- the strength and durability of seatbelts;
- the texture of fruit used in the production of ice cream; and
- the quality and formability of sheet metal.
As a result, we have a highly diverse base of end users of our systems,
including BASF A.G., Ben & Jerry's Homemade, Inc., British Aerospace plc,
DaimlerChrysler Corporation, E.I. du Pont de Nemours and Company, General
Electric Company, Honda Motor Co., Ltd., Massachusetts Institute of Technology,
Minnesota Mining and Manufacturing Company, National Aeronautics & Space
Administration, The Procter & Gamble Company and United States Surgical
Corporation, among many others. For the nine months ended October 2, 1999, we
had total revenue of $151.0 million and EBITDA of $2.3 million.
The market we serve for materials testing systems is estimated to be
approximately $450 million in 1998 revenue and is estimated to be growing at 4%
to 8% annually. Although no independent industry information is available, we
believe that the market we serve for structural testing systems is approximately
$750 million in 1998 revenue, which together with the materials testing segment
of the market we serve totals $1.2 billion, and is estimated to be growing at 8%
to 10% annually. We attribute this growth to, among other things:
- the search for new materials and new applications of existing materials
to create better products;
- ongoing total quality management initiatives by manufacturers, including
ISO 9000 certification;
- the increase in global manufacturing and transfer of materials and
products;
- manufacturers' need to reduce the cost of, and time required to develop,
new products, and increase the reliability of their products; and
- increasing regulatory, safety and environmental requirements.
COMPETITIVE STRENGTHS
LEADING MARKET POSITION. In 1998, we believe we held the leading market
position in the worldwide materials testing market with an approximate one-third
market share as measured by revenue. We compete with
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numerous other manufacturers in the materials testing equipment market
worldwide. While we believe that three others each have materials testing annual
revenue in excess of $40 million, most of the other competitors are local
manufacturers with less than $10 million in annual revenue. We attribute our
leading worldwide position in materials testing to our advanced technology,
global service and distribution network, breadth of product offerings, name
recognition and strong reputation for providing solutions to testing needs, and
supporting the largest installed base in the industry. Although industry
information is limited, we believe we are one of the largest participants in the
worldwide structural testing market.
EXTENSIVE INSTALLED BASE. We believe we have the largest installed base of
materials testing equipment in the world, and, with the acquisition of IST, one
of the largest installed bases of structural testing equipment in the world. We
believe that the Instron name enjoys strong name recognition among our
customers. As a result, a substantial majority of our 1998 pro forma total
revenue was derived from sales to existing customers. In addition, approximately
30% of our total revenue for the nine months ended October 2, 1999 was derived
from the servicing of, and sale of accessories for, our installed equipment
base. By building upon our extensive installed base, we have developed strong
service capabilities to meet our customers' needs on a worldwide basis.
GLOBAL REACH. We have created a sales and service network that enables us
to support our customers globally. We have sales and service offices in 14
United States cities and 17 foreign countries, including Brazil, Canada, China,
France, Germany, Italy, Japan, Korea, Singapore, and the United Kingdom. We
offer our primary software and operating systems in six different languages
because we recognize the importance of serving a global market. Our global
presence is an important competitive factor for many reasons, including:
- we are able to provide our global customers uniform testing equipment and
related support services in order to ensure worldwide consistency in
their test results;
- our customers demand skilled, local support staff to assist them by
providing ongoing support and ensuring that our products meet their
specialized needs; and
- it allows us to market an application solution developed for one customer
to other customers around the world.
TECHNICAL EXPERTISE. Our ability to provide our customers with
comprehensive solutions to their physical testing needs is based upon more than
50 years of technical experience focused on materials testing, a reputation for
superior design, consistent quality, advanced technology and excellent customer
support. We employ over 100 highly trained engineers in sales positions and an
additional 240 product development and support staff who work closely with
customers to create new materials and structural testing solutions. We believe
our investment in engineering develops relationships with our customers that
result in a high degree of loyalty and significant repeat business. Our
experience over many decades has allowed us to develop a significant knowledge
base. In addition, we offer an extensive portfolio of accessories that enable us
to support a wide range of customer applications. We believe this provides a
significant competitive advantage because existing and potential competitors may
find it difficult to develop a comparable knowledge base and accessory
portfolio.
UNIVERSAL PRODUCT DESIGN. We have developed a modular approach to the
development and manufacturing of our products. This approach allows us to
configure standard mechanical components, electronic controllers, software and
accessories to meet the needs of the majority of our customers' requirements. As
a result, we have been able to address a diverse range of customer needs through
different configurations of our standard systems rather than through
customization. This approach provides benefits including:
- leveraging our research and development activities across virtually all
of our product lines;
- lowering manufacturing costs by generating a higher volume of standard
components; and
- reducing the variety of products that require support by our sales and
service force.
DIVERSE CUSTOMER BASE. Our customer base is well diversified both
geographically and by end user application and industry. For the nine months
ended October 2, 1999, approximately 44% of our total revenue was derived from
sales in the United States, approximately 38% from sales in Europe and
approximately 18% from sales to the rest of the world. The end user markets we
serve include aerospace, automotive,
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biotechnology, consumer products, food production, metals, packaging, plastics,
textiles, and numerous others. As a result, no one customer accounted for more
than 5% of 1998 pro forma total revenue.
BUSINESS STRATEGY
Our goal is to enhance our position as a leading provider of materials and
structural testing systems. Our strategies to achieve this goal include:
STRENGTHEN OUR CORE BUSINESS. We will continue to introduce new products
and further develop existing product platforms by efficiently leveraging our
design and engineering capabilities. For example, we recently developed several
new products and upgraded others, including:
- a new generation controller and software platform that supports our
complex systems business;
- a major redesign of our hardness product line that has improved the
accuracy and consistency of hardness testing results; and
- a new product aimed at the emerging asphalt testing business.
GROW SERVICE BUSINESS. We intend to expand our service business by
continuing to leverage our installed base of equipment, our technical expertise,
our global reach and the market recognition of our brand names. Including
acquisitions, revenue from our service business has grown over the past five
years at a compound annual rate of 12%. Our strategy to continue to grow this
business includes:
- expanding our worldwide equipment calibration capability to support ISO
9000 and other quality requirements;
- developing new service products, including consulting and training
programs; and
- establishing direct marketing and sales support for our service business.
CONTINUE TO ENHANCE COST POSITION. We continually seek ways to further
enhance our cost position. We intend to continue to lower manufacturing costs
by, in part, efficiently incorporating the operations of acquired businesses
into our manufacturing capacity wherever possible. In addition, in 1997, we
started an initiative to rationalize and consolidate our manufacturing
operations. On October 17, 1998, we transferred manufacturing operations from
our Ludwigshafen plant in Germany to our lower-cost facilities in the United
Kingdom, for which we incurred a restructuring charge of $2.8 million and are
now achieving cost savings, which we expect will be approximately $1.0 million
annually.
MAKE STRATEGIC, SYNERGISTIC ACQUISITIONS. Since 1993, we have consummated
five acquisitions and a joint venture with an aggregate of $94 million of
revenue when acquired. Through these transactions we have strengthened and
broadened our expertise and product offerings in materials and structural
testing. We will continue to pursue strategic acquisitions and joint ventures
that:
- can be assimilated into our existing infrastructure;
- leverage our existing worldwide sales, service and application support
network;
- can be incorporated into our manufacturing capabilities;
- broaden our product and service offerings;
- enable us to upgrade acquired companies' products and installed bases
using our technology on an ongoing basis; and
- enable us to upgrade our installed base with the technology of companies
we acquire.
For example, in August 1998, we acquired Satec, a leading supplier of materials
testing equipment to the metals, aerospace and automotive industries, with
annual revenue of approximately $18 million. We are integrating Satec's domestic
sales and service organization and are utilizing our international sales network
to increase Satec's revenue. We are also incorporating our advanced controllers
and software into Satec's product offerings.
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<PAGE> 49
PRINCIPAL MARKETS
Our principal markets are industries, academic institutions, and
governments -- organizations that seek to understand the characterization and
properties of materials and products.
INDUSTRY. Most manufacturing industries use either materials or structural
testing systems as a part of their research and development and quality-control
activities. Industrial research focuses upon developing new materials,
substitute materials, or new uses for existing materials that reduce
manufacturing or operating costs and improve product quality and durability. The
following examples show how some customers use our products in industries that
typically have high levels of materials and structural testing activity:
- Automotive Industry. Automotive companies use our catapult structural
testing systems built by IST to simulate real-life automobile crashes.
These simulated crashes are of vital importance in evaluating and
improving safety devices in vehicles. In addition, automotive companies
use our products extensively in designing virtually all of a vehicle's
materials, parts, sub-assemblies and assemblies, from steering
components, struts and shock absorbers to seatbelts, light switches and
door latches. These components are stretched, pulled, twisted, squeezed,
and vibrated using our products to ensure that high quality levels are
maintained.
- Sports and Recreation. Sports equipment manufacturers use our products to
test the hardness of golf balls and baseball bats, to measure the impact
resistance of bicycle helmets and elbow pads and to determine the
durability of mountain bike components. In addition, manufacturers of
snowboards use our impact testing systems to gain a better understanding
of how snowboards will behave on ski slopes. Specifically, these systems
simulate rock and ice impacts during a snowboarder's jumps and turns.
- Aerospace. Aerospace companies use our products to repeatedly deform and
break exotic metals, composites and ceramics to simulate in-use
conditions of these materials in stressful situations like rocket
launches and the re-entry of satellites and space shuttles into the
Earth's atmosphere.
- Civil Engineering. Engineers use our products to test the tensile
properties of iron, steel and other metals and to measure the fatigue and
crack resistance of these materials. The test results help engineers
determine how these metals will be used in real world structures like
bridges and buildings. Engineers also use our products to compress
asphalt and concrete at a variety of temperatures and humidity levels to
determine how these materials will endure years of use in roads and
highways.
- Biotechnology. The joining of engineers and medicine in biotechnology is
producing a stream of innovations that range from new implants and
orthopedic surgical techniques to replacements for human organs. Our high
quality test systems are helping to make these advances possible by
allowing our customers to comply with stringent FDA requirements.
ACADEMIC INSTITUTIONS. Academic institutions use our products for research
and instruction in materials science and other applications. For example,
researchers at universities use our products for a variety of research programs
from testing the bonding properties of dental materials to measuring the effects
of food texture on taste. We place particular emphasis on academic institutions
because we believe that scientists and engineers trained on Instron equipment
will then influence additional sales of our products later in their careers in
the public or private sector.
GOVERNMENTS. Government and governmental agency use of our products is
generally concentrated in the following areas:
- Defense, Space and Civil Engineering Programs. Research programs
sponsored by governments support the development of materials and
technology for such programs as advanced space stations, better armor on
fighting vehicles, safer bridges and longer lasting road surfaces.
- Determination and Enforcement of Safety Standards and Other Legal
Requirements. Our systems are used by worldwide agencies to, among other
things, monitor the quality and performance of safety belts, airbags,
welds in nuclear power stations and prosthetic devices.
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<PAGE> 50
PRINCIPAL PRODUCTS
GENERAL
We offer a comprehensive range of general-purpose materials testing
systems, application software and accessories. Our products generally fall
within one of two basic categories of testing instruments. These categories are
referred to as "static" and "dynamic," and differ mainly in the means that they
use to apply force to a test specimen. For example, a static system testing a
cloth specimen may gradually apply more and more force to the cloth by pulling
on it from two sides until the cloth tears. The system would measure the precise
force applied to the cloth throughout the test. That same cloth may be tested by
one of the dynamic systems by repeatedly applying force to the cloth over and
over again by stretching it from two points to simulate the wear and tear that
the cloth would endure if used as a seat belt or as an article of clothing.
Many tests can be carried out equally well with either a static or dynamic
test machine. However, if the test requires extremely rapid rates of applying
force, or subjects the test material to rapidly fluctuating force, then a
dynamic test machine is appropriate. Our product offerings vary in:
- the force capacity of the machines, with smaller machines designed for
testing small samples at relatively low levels of force, to large
machines that can apply tons of force to samples;
- the complexity of the drive system that the instrument uses to apply
force to test samples; and
- the sophistication of the control electronics, the computer system, and
the software used to administer tests and analyze data.
Beyond the distinctions between static and dynamic testing machines, we
divide our testing products into five general product lines based on the market
segments served and the applications of the machines.
ELECTROMECHANICAL INSTRUMENTS
Electromechanical test instruments are static systems that typically
stretch or compress the material being tested. These instruments consist of a
frame, which supports the sample to be tested and the mechanical moving parts
that are used to apply force to the sample, and electronic components to control
the test and analyze the test data. The term "electromechanical" is derived from
this use of mechanical moving parts controlled by electronic components. These
systems continuously measure the precise force being applied to test materials
and the effect of this force on the material. They also analyze the results of
the test, and either print, graph or electronically display them. Often referred
to as universal testers, with applications in almost every industry, uses of our
electromechanical instruments include:
- testing the texture of food products;
- measuring the strength properties of ceramics at extremely high
temperatures;
- ensuring that building material can bear heavy snow loads or sustain high
winds; and
- ensuring that plastic components have the necessary strength to replace
metal.
Our electromechanical product offerings include the cost effective Series
4400 product line and the high-performance Series 5500 product line. The Series
5500 systems are usually used for research and development and are equipped with
sophisticated software and many accessories. Our electromechanical instruments
are also used for quality-control applications, which usually require fewer
accessories and less breadth of application capability than do research and
development applications. The prices of our electromechanical systems generally
range from $15,000 to $150,000. Static systems and related accessories accounted
for approximately 52.6% of our reported revenue in 1998.
SERVOHYDRAULIC SYSTEMS
Servohydraulic systems are dynamic testing instruments that allow repeated
deformation of the material being tested to simulate in-use conditions over an
extended period of time. The moving parts of these systems that apply force to
the test material are controlled using hydraulics. The term "servohydraulic"
derives from this
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<PAGE> 51
control system. These instruments also contain electronic components that
control the test and analyze the test data.
Software, computer control, and data analysis are features routinely added
to basic servohydraulic systems. The computer may be used to command the
application of force to simulate real-life use conditions. It is also used to
store and analyze data and display parameters of performance and endurance for
test materials or test components.
We utilize our engineering expertise to customize our servohydraulic
systems to fit the needs of our customers' particular test applications.
Machines can be configured not only to stretch or compress the material being
tested, but also to simultaneously twist it or subject it to other forms of
complex testing. Our servohydraulic systems are used, among other things, to
ensure that:
- turbine blades meet their performance requirements;
- artificial knee joints can withstand the forces associated with walking
and jumping; and
- bullet proof vests are effective.
The prices of our servohydraulic systems generally range from $40,000 to
$500,000 with the exception of our structural testing systems discussed below.
Servohydraulic testing systems accounted for approximately 22.6% of our reported
revenue in 1998.
STRUCTURAL TESTING (SIMULATION)
Our IST division designs and builds dynamic testing systems that are used
to determine the integrity of complete structures, like automobiles. These
systems are used to simulate real-life conditions while testing a wide range of
automotive components, from suspension and steering systems to entire vehicles.
They typically consist of several components designed to push and pull the
structure at different points, and sensors that collect and transmit the
resulting data to a central processing unit. These testing instruments are
called "structural" or "simulation" systems because they often test complete
structures by simulating the conditions that the structure may be forced to
endure in real life. For example, engineers use our systems to:
- validate the ability of automobile steering systems to withstand axial
and radial forces; and
- simulate the effectiveness of seatbelts and other restraints.
The prices of our structural testing systems generally range from $400,000
to several million dollars. These systems accounted for approximately 15.8% of
our reported revenue in 1998.
HARDNESS SYSTEMS
A hardness testing instrument works by forcing an "indentor" into the test
material's surface. The depth of penetration or the size of the impression is
the measure of the material's hardness. For example, our hardness systems are
used to test the properties of metals that will be made into coins, railway
tracks, aircraft and automobiles. We are a leader in "Rockwell" testing, the
most widely used technique. Our high-end Series 2000 Rockwell testing machine
incorporates advanced control features from our electromechanical instruments
and we believe it is the most advanced testing machine in the hardness testing
market. Hardness machines are calibrated by using a block of material with a
predetermined hardness value. We also manufacture and sell these sample blocks
as part of our hardness testing business.
The prices of our hardness testing machines range from $2,000 to $20,000.
Hardness systems and related accessories accounted for approximately 7.0% of our
reported revenue in 1998.
IMPACT TESTING
Impact testing instruments measure fracture properties of test materials or
the energy absorbed by material after an impact event.
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<PAGE> 52
Our "Wolpert" and "Satec" impact testing products are used primarily in
metals applications. Wolpert testers are high-end products that offer
sophisticated data acquisition electronics and software; Satec testers are
simpler and less costly. These systems test materials by applying precise force
and measuring the results using electronic instrumentation and software.
Our impact products also include much more sophisticated "Dynatup"
instrumented impact testers for determining fracture and energy absorbing
properties of polymers and components.
Among the uses of our impact products are:
- testing helmets to ensure they will meet the demands of actual use; and
- determining the "sweet spot" of golf clubs and tennis racquets.
The prices of our impact testing instruments range from $5,000 to $150,000.
Impact testing systems and related accessories accounted for approximately 2.0%
of our reported revenue in 1998.
SERVICE
We have approximately 239 field service engineers that offer a wide range
of services to our customers in support of our product lines. These service
offerings include calibration, extended warranties, software support, upgrade
contracts, training and telephone support. Among our business strategies for the
future is the expansion of our service business. See "-- Business
Strategy -- Grow Service Business."
Our service business accounted for approximately 16.0% of our reported
revenue in 1998. The service revenue is included in the percentage amounts for
our static and dynamic systems set forth above.
OTHER PRODUCTS AND ACCESSORIES
We manufacture and sell a wide range of other products and accessories. The
products include durometers, impact testers, and asphalt binder testers. Typical
accessories include:
- application software to control tests and record results;
- grips that are used to hold test specimens in place;
- optical/video extensometers that measure precisely the deformation of the
material being tested without actually contracting it;
- robotic devices that automatically feed test specimens to our systems;
and
- environmental control accessories that allow researchers to vary
temperature and humidity.
Accessories can be included with the initial purchase or subsequently
purchased in order to expand the capability of the original machine. We also
have license agreements with third parties for the exclusive sale of certain
products, including software, in the material and structural testing industry.
These other products and accessories for static and dynamic equipment purchased
separately from the original sale of equipment are included in the percentage
amounts for static and dynamic systems set forth above.
MANUFACTURING AND PROPERTIES
We have established a worldwide manufacturing "Center of Excellence" for
each major product line, while still maintaining customization capabilities and
sales support close to customers. This allows us to concentrate production
volumes in specific factories in order to optimize our customer response
capabilities while reducing inventories and costs.
Our manufacturing facilities focus on the final assembly and testing of
complete systems. We pursue a strategy of outsourcing sub-assembly processes
where feasible. We maintain two primary machine shops, which supply key
components for our product lines. In general, we have no critical proprietary
manufacturing processes. Annual capital expenditure supports the maintenance of
our current facilities, the replacement of machine tools and our cost reduction
programs.
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The table below provides summary information on each of our manufacturing
facilities.
<TABLE>
<CAPTION>
SIZE
LOCATION OWNED/LEASED (SQ. FT.) PRINCIPAL USES
<S> <C> <C> <C>
Canton, MA Owned 155,000 Corporate Headquarters, Research
& Development and Manufacturing
Binghamton, NY Leased 35,000 Manufacturing
Grove City, PA Owned 53,500 Manufacturing
Darmstadt, Germany Leased 70,000 Research & Development and
Manufacturing
High Wycombe, UK Owned 120,000 European Headquarters, Research &
Development and Manufacturing
</TABLE>
Canton, MA. Our Canton, MA facility serves as our world headquarters, as
well as the worldwide "Center of Excellence" for electromechanical and most
hardness and impact equipment. It serves as the customization center for
servohydraulic testing instruments for North America and assembles structural
testing equipment for IST primarily for the Americas. Operations consist of
custom engineering, final assembly and testing, with a very small machine shop
supporting engineering and customization requirements. The facility operates
assembly lines for electromechanical, impact and hardness machines. The site is
located on 24 acres of land that we own with a 155,000 square foot facility,
approximately 47,000 square feet of which is dedicated to manufacturing.
Binghamton, NY. Our Binghamton, NY site is a leased 35,000 square foot
facility with all but 4,000 square feet focused on production. The operation is
dedicated to machining components as a satellite to the Canton operation. The
Binghamton facility has 15 major machine tools, as well as a standard complement
of small manual drills, lathes, etc. Our lease expires on August 31, 2006, and
we have the right to renew for an additional 5-year term.
Grove City, PA. Our Grove City, PA facility, which is located approximately
40 miles from Pittsburgh, served as Satec's headquarters before its acquisition.
The facility currently manufactures Satec products, including electromechanical,
servohydraulic and temperature chambers, through a vertically integrated
manufacturing process. The site includes machining, welding, sheet metal shear,
punch and bend, and electronic assembly, as well as final assembly and testing
capabilities. The 53,500 square foot facility is located on over 100 acres of
land that we own, with 18,000 square feet of office space.
Darmstadt, Germany. Located approximately 30 miles from Frankfurt, Germany,
our Darmstadt facility, which is the primary engineering, assembly, and test
facility for IST, is leased from Carl Schenck AG and is located in their large
central manufacturing compound. The lease, executed in April 1998, is for an
initial
5-year term, and gives us the right to renew for an additional 5-year term.
IST's manufacturing and office space consists of 70,000 square feet. This
facility is fully equipped for the system integration and testing of major
structural testing systems and provides most of its output to Europe and Asia.
High Wycombe, UK. Our High Wycombe, UK facility is located approximately 30
miles northwest of London's Heathrow Airport. It serves as our worldwide "Center
of Excellence" for servohydraulic equipment, pendulum impact machines and other
key components and accessories. It is also our European center for customization
of electromechanical and some hardness equipment. The facility primarily
performs final assembly and testing with a significant machine shop located on
site. The site consists of 7 acres of land that we own and an approximately
120,000 square foot facility.
In addition to the properties discussed above, we have 35 sales offices and
demonstration centers located throughout the United States and in 17 foreign
countries. We believe that all of our properties are adequate and suitable for
our present needs.
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<PAGE> 54
RESEARCH AND DEVELOPMENT
We maintain major research-and-development staffs at our U.S. and U.K.
manufacturing facilities. These development staffs often work directly with
industrial and government researchers and the materials-science departments of
universities to create leading-edge solutions to materials-testing applications.
We are a pioneer in the development and application of
electronic-measurement and drive-systems techniques in materials testing
systems. We have continuously designed, developed, and marketed state-of-the-art
testing systems, software, and accessories, including digitally controlled
static and dynamic testing systems.
In 1998, we expensed approximately $8.5 million on research and development
activities, compared with $7.0 million in 1997, and $8.6 million in 1996. We
also capitalized software development costs of approximately $1.5 million in
1998, $637,000 in 1997 and $1.1 million in 1996. During these years, our
engineering resources have been utilized to develop new products for IST in
accordance with the joint venture agreement. The costs associated with these
development efforts were reimbursed by IST. If our research and development
expenses were restated, for comparison purposes, by including software
development costs as period expenses, and by adjusting engineering expenses for
the effect of IST and Satec and the disposition of Laboratory MicroSystems, our
research and development expenses of the ongoing business would have increased
by 7.5% in 1998. In recent years, we have focused our research-and-development
expenditures on:
- creating new product platforms for static and dynamic product lines;
- developing new hardness testing machines;
- developing new software and enhancements; and
- redesigning products to reduce manufacturing costs.
SALES AND MARKETING
We believe that our global distribution and service network is a key
competitive advantage in serving a diverse array of customers worldwide with a
broad range of applications. In order to achieve optimal focus on the needs of
our customers, we employ a variety of sales channels, including direct sales,
agents, distributors, telesales, and a developing Internet channel. We employ
over 100 highly trained engineers in sales positions who are typically
responsible for over 90% of our product revenue and pursue business on a
geographic basis. Materials testing has three sales divisions located in North
America, Europe, and Asia Pacific/Latin America. Each sales division is
responsible for recruiting, training, sales management, sales strategy, service
management, compensation, and determining best practices in that region. This
local management is of particular importance outside North America, where market
conditions, local suppliers, and regional differences tend to proliferate.
The purchasing cycle for a materials testing system in a typical laboratory
is several years with the laboratory manager the key decision maker in any
purchase decision. Given this relatively long sales cycle and our
well-diversified customer base, both geographically and by end user, we use
marketing mailings, seminars, advertisements, and trade shows to promote our
products. Direct sales professionals focus on the sales leads that are generated
in order to tailor systems to meet a potential customer's specific market need.
Over the course of over 50 years, we believe we have built the largest installed
base of materials testing equipment in the world, and, with the acquisition of
IST, one of the largest installed bases of structural testing equipment in the
world, as well as a wide array of accessories for a broad range of applications.
With this extensive base of application-specific knowledge, customers often
contact us for new purchases without any solicitation by our sales engineers. We
estimate that orders from existing customers represent approximately 80% of our
annual reported 1998 revenue in the United States and over 50% of our annual
reported 1998 revenue outside the United States.
COMPETITIVE CONDITIONS
We compete with a number of other manufacturers, some of whom have greater
financial, technical and marketing resources than we do. The intensity of the
competition varies by product line and by geographic area. Competition in the
United States is greatest in the dynamic line where we have one major domestic
competitor,
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<PAGE> 55
MTS Systems Corporation. Competition in foreign markets is greatest in Germany
and Japan, where there are major local manufacturers. The principal competitive
factors are:
- engineering excellence;
- the quality and technical capability of the equipment;
- responsiveness to customer needs;
- quality of service; and
- price.
RAW MATERIALS
Although we are dependent upon a limited number of suppliers for certain
components, we have not experienced significant problems in procurement or
delivery of any essential materials, parts or components. Substantially all
purchasing is accomplished on a competitive basis while maintaining a level of
inventory sufficient to provide support of customer-servicing requirements and
meet scheduled delivery dates.
PATENTS AND TRADEMARKS
We have several patents in the United States and in foreign countries.
However, we rely principally on our engineering and technological capabilities
rather than on these patents to maintain our position in the industry. The
trademarks "Dynatup," "Shore," "Rockwell" and "Instron" and the device mark are
registered trademarks of Instron. Under current law, these trademarks may be
renewed indefinitely as long as they are maintained in use.
ENVIRONMENTAL CONSIDERATIONS
Compliance with federal, state, local and foreign laws and regulations
relating to protection of the environment has not had, and we do not expect it
to have, any material adverse effects on us.
NUMBER OF EMPLOYEES
At October 2, 1999 we employed 1,435 people worldwide.
FOREIGN OPERATIONS
Foreign operations represent a significant portion of our business. For the
nine months ended October 2, 1999, approximately 44% of our total revenue was
derived from sales in the United States, approximately 38% from sales in Europe
and approximately 18% from sales to the rest of the world. Our revenue outside
the United States accounted for 55% of our total revenue in 1998, 59% in 1997
and 61% in 1996. Bookings from Asia declined by 30% in 1998 compared to 1997 due
to the economic downturn in this region. In addition, because of the devaluation
of Asian currencies, our revenue from this region was substantially reduced in
1998. We expect revenue from foreign markets to continue to represent a
significant portion of our total revenue. We own manufacturing facilities in
England and lease manufacturing facilities in Germany. We also sell domestically
manufactured products to foreign customers. Our foreign operations are subject
to risks in addition to the risks of our domestic operations. The risks that
relate to our foreign operations include:
- political, economic and social conditions in the foreign countries where
we conduct operations;
- currency risks and exchange controls, including risks related to the
introduction of the euro;
- potential inflation in the applicable foreign economies;
- the impact of import duties on our costs and prices;
- foreign taxation of our earnings and payments received by us; and
- regulatory changes affecting our international operations.
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<PAGE> 56
These risks may adversely affect our business. Financial information
concerning domestic and foreign operations appears in Notes 1 and 2 in the
"Notes to Consolidated Financial Statements" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," included as part of
this prospectus.
LEGAL PROCEEDINGS
We are party to various litigation matters arising in the ordinary course
of business. We cannot estimate with certainty the ultimate legal and financial
liability with respect to this litigation, but we believe, based on our
examination of these matters, experience to date and discussions with counsel,
that any ultimate liability will not be material to our business or results of
operations.
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<PAGE> 57
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information with respect to persons who are
currently members of the Board of Directors or executive officers of Instron.
<TABLE>
<CAPTION>
YEARS OF
NAME AGE POSITION SERVICE
<S> <C> <C> <C>
James M. McConnell................... 58 Director, President and Chief 9
Executive Officer
Linton A. Moulding................... 46 Chief Financial Officer and Vice 14
President
Joseph E. Amaral..................... 52 Vice President, General Manager, 21
North America Operations
John R. Barrett...................... 45 Treasurer and Vice President of 11
Corporate Development
Jonathan L. Burr..................... 51 Vice President, Corporate Director of 20
Human Resources
Yahya Gharagozlou.................... 43 Vice President, Corporate Technical 18
Director
Arthur D. Hindman.................... 56 Vice President, General Manager, Asia 20
Pacific / Latin America
William J. Milliken.................. 45 Vice President, Corporate Director of 2
Manufacturing
Norman L. A. Smith................... 53 Vice President and Managing Director 17
of Instron Limited
Raymond A. Lancaster................. 53 Director --
Thomas N. Littman.................... 36 Director --
Dennis J. Moore...................... 61 Director 5
John F. Turben....................... 64 Director --
</TABLE>
James M. McConnell joined Instron in 1990 as President and Chief Executive
Officer. From 1987 to 1990, he was President and Chief Executive Officer of
Automatic Switch Company, and from 1986 to 1987, he was President of Rosemont,
Inc. (both are wholly owned subsidiaries of Emerson Electric Co.). He has been a
Director of Instron since April 1990. Mr. McConnell is also a director of ESCO
Electronics Corporation.
Linton A. Moulding joined Instron in 1985. He has held positions as
Corporate Controller, Director of U.S. Operations, Corporate Vice President of
Manufacturing and Vice President of Finance and Treasurer. In 1993, he was
elected Chief Financial Officer of Instron.
Joseph E. Amaral joined Instron in 1978. Since 1985, Mr. Amaral has held
positions as Corporate Technology Manager, Corporate Product Planning Manager,
and Vice President, Corporate Technical Director. In March 1995, he was elected
Vice President, General Manager of North America Operations.
John R. Barrett joined Instron in 1988 as Assistant Treasurer. From 1979 to
1988, he held various financial management positions with Computervision
Corporation. In 1993, he was elected Treasurer of Instron. In 1998, he was
elected Treasurer and Vice President of Corporate Development.
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<PAGE> 58
Jonathan L. Burr joined Instron in 1979. He has held positions as Personnel
Administrator, Director of Personnel and Corporate Director of Human Resources.
In 1993 he was elected Vice President, Corporate Director of Human Resources.
Mr. Burr is the son of George S. Burr, who was Vice Chairman of the Board of
Directors before the recapitalization.
Yahya Gharagozlou joined Instron in 1981. He has held positions as
Corporate Product Manager for Software, Marketing Manager and Director of
Engineering. In 1996, he was elected Vice President, Corporate Technical
Director.
Arthur D. Hindman joined Instron in 1979. Since 1979, Mr. Hindman has held
positions as Manager, Marketing Administration, International Sales Manager, and
General Manager, Asia/Latin America. In 1993, he was elected Vice President and
General Manager, Asia Pacific/Latin America. Mr. Hindman is the son of Harold
Hindman, who was Chairman of the Board of Directors before the recapitalization.
William J. Milliken joined Instron in 1997 as Vice President, Corporate
Director of Manufacturing. From 1988 to 1997, he was Director of Manufacturing
for Otis Elevator Company's Asia division. From 1978 to 1988 he held various
financial and manufacturing management positions within General Motors
Corporation.
Norman L. A. Smith joined Instron Limited in 1982 as Marketing Director
Designate and assumed the position of Director in 1983. In January 1996, he was
promoted to Deputy Managing Director and was elected Vice President of Instron
and Managing Director of Instron Limited in November 1996.
Raymond A. Lancaster joined Instron in 1999 as a director in connection
with the recapitalization. Mr. Lancaster joined Kirtland as a Managing Partner
in 1995. Prior to joining Kirtland, Mr. Lancaster was a General Partner of Key
Equity Partners and was responsible for KeyCorp's Private Equity Group. Mr.
Lancaster is a member of Kirtland's Advisory Board and is a Director of
Fairmount Minerals, Ltd., Management Reports, Inc., PVC Container Corporation,
Shore Bridge Corp., STERIS Corporation and Stonebridge Industries, Inc.
Thomas N. Littman joined Instron in 1999 as a director in connection with
the recapitalization. Mr. Littman joined Kirtland as a Partner in 1995 after
working as an Associate with the law firm of Jones, Day, Reavis & Pogue. He
serves as Director of R Tape Corp. and Stonebridge Industries, Inc.
Dennis J. Moore joined Instron as a director in 1994. Mr. Moore is Chairman
and Chief Executive Officer of ESCO Electronics Corporation, a diversified
producer of defense systems and commercial products. From 1990 to 1992 he was
President and Chief Operating Officer of ESCO.
John F. Turben joined Instron in 1999 as a director in connection with the
recapitalization. Mr. Turben founded the predecessor to Kirtland Capital
Partners in 1977. He is a Managing Partner of Kirtland and serves as Chairman of
The Hickory Group, Ltd., PVC Container Corporation and Harrington and Richardson
1871, Inc. He is a Director of NACCO Industries, Inc., Unifrax Corporation,
TruSeal Technologies Inc., Stonebridge Industries, Inc. and a Manager and Vice
Chairman of Gries Financial LLC.
DIRECTOR COMPENSATION
Directors receive reasonable and customary compensation in connection with
their service on our Board of Directors.
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<PAGE> 59
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation awarded to, earned by or paid
to our Chief Executive Officer and our other four most highly compensated
executive officers during each of the years ended December 31, 1998, 1997 and
1996. We have not granted stock appreciation rights to any of our executive
officers for these periods.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------------------------
-------------------- SECURITIES
NAME AND PRINCIPAL ANNUAL RESTRICTED STOCK UNDERLYING ALL OTHER
POSITIONS YEAR SALARY BONUS AWARDS(1) OPTIONS(#) COMPENSATION(2)
<S> <C> <C> <C> <C> <C> <C>
James M. McConnell...... 1998 $325,769 $214,176 -- -- $4,800
President and Chief 1997 280,000 208,447 $612,500(3) -- 4,750
Executive Officer 1996 279,808 134,200 -- 50,000 4,500
Linton A. Moulding...... 1998 165,769 66,585 -- -- 4,777
Chief Financial
Officer 1997 149,346 67,165 306,250(3) -- 4,750
1996 132,808 32,560 -- 15,000 4,500
Joseph E. Amaral........ 1998 155,500 56,221 -- -- 4,800
Vice President and 1997 142,808 58,200 306,250(3) -- 4,750
General Manager North 1996 137,846 41,145 -- 15,000 4,500
America Operations
William J. Milliken..... 1998 155,769 53,544 -- -- 865
Vice President, 1997(4) 28,846 24,283 351,063(5) -- --
Corporate Director of
Manufacturing
Yahya Gharagozlou....... 1998 149,808 54,096 -- -- 4,800
Vice President, 1997 124,115 53,166 306,250(3) -- 4,545
Corporate Technical 1996 101,384 22,375 -- -- 3,334
Director
</TABLE>
- ---------------
(1) Amounts shown represent dollar value of the restricted stock on the date of
grant.
(2) Amount shown represents matching contributions made under our 401(k) Plan.
(3) We awarded Mr. McConnell 50,000 shares and we awarded Messrs. Moulding,
Amaral and Gharagozlou 25,000 shares of common stock in the form of
restricted stock on May 14, 1997, valued at $12.25 per share based on the
closing stock price on the date of the grant. Based on the December 31, 1998
closing stock price of $17.25, Mr. McConnell's shares of restricted stock
had an aggregate value of $862,500 and Messrs. Moulding, Amaral and
Gharagozlou's shares of restricted stock had an aggregate value of $431,250.
As a result of the recapitalization, 25,340 shares of restricted stock will
be converted into restricted stock of the surviving corporation. As amended,
the restricted stock award agreements governing these shares will provide
for vesting of the restricted stock on May 14, 2004, or earlier depending on
our financial results. Prior to the recapitalization, dividends on the
restricted stock awards were paid at the same rate as paid to all
stockholders.
(4) Mr. Milliken joined Instron in October 1997, as Vice President, Corporate
Director of Manufacturing. Salary for 1997 in the table reflects a partial
year.
(5) We awarded Mr. Milliken 20,500 shares of common stock in the form of
restricted stock on October 29, 1997 valued at $17.125 per share based on
the closing stock price on the date of the grant. Based on the December 31,
1998 closing stock price of $17.25, Mr. Milliken's shares of restricted
stock had an aggregate value of $353,625. The restricted stock vests after
seven years, or sooner if certain financial targets are met, or upon a
change in control. Dividends on the restricted stock awards are paid at the
same rate as paid to all stockholders.
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<PAGE> 60
SEVERANCE AND OTHER AGREEMENTS
During the past six years, we entered into Executive Severance Agreements
with ten of our current executive officers and five additional key employees.
The severance agreements, other than Mr. McConnell's, were amended in connection
with the recapitalization. Each agreement, other than Mr. McConnell's, provides
that the employee will receive severance benefits if he is terminated by Instron
(other than for cause or by reason of his death, disability or retirement), or
by the employee for "Good Reason" (as defined in the severance agreements)
within 24 months after a "Change in Control" (as defined in the severance
agreements). Mr. McConnell's severance agreement provides that he will receive
severance benefits if his employment is terminated for any reason within 24
months after a Change in Control. The severance agreements generally provide for
the following severance benefits:
- a lump-sum payment equal to 200% of the employee's "base amount" (as
defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as
amended); and
- subject to specified limitations, the provision of a "gross-up" payment
to an executive officer if he becomes subject to an excise tax as a
result of receiving change-in-control severance benefits (including the
value of accelerated vesting of options and restricted stock).
PENSION PLANS
The following table sets forth a range of estimated annual retirement
benefits under Instron's U.S. Employees' Pension Plan for persons in the
compensation and years of service classification specified.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFIT
----------------------------------------------------------
AVERAGE ANNUAL 30 OR MORE
COMPENSATION(1) 10 YEARS 15 YEARS 20 YEARS 25 YEARS YEARS
<S> <C> <C> <C> <C> <C>
$125,000............................... $ 20,833 $31,250 $41,667 $52,083 $ 62,500
150,000............................... 25,000 37,500 50,000 62,500 75,000
175,000............................... 29,167 43,750 58,333 72,917 87,500
200,000............................... 33,333 50,000 66,667 83,333 100,000
</TABLE>
- ---------------
(1) Section 401(a)(17) of the Internal Revenue Code limits the compensation
taken into account in calculating an employee's retirement benefit. The
limit for compensation paid in 1998 was $160,000.
Our calculation of retirement benefits under our pension plan is based on
average annual compensation, which includes salary and performance compensation,
for the highest five full consecutive twelve-month periods out of the last ten
full consecutive twelve-month periods preceding retirement or termination of
employment. Under our pension plan, as of December 31, 1998, the employees
listed in the Summary Compensation Table were credited with the years of service
shown in the following chart:
<TABLE>
<S> <C>
Joseph E. Amaral............................................ 21 years
Yahya Gharagozlou........................................... 14 years
William J. Milliken......................................... 1 year
Linton A. Moulding.......................................... 14 years
James M. McConnell.......................................... 9 years
</TABLE>
The estimated annual benefit for years of service in the table above is computed
on the basis of payment of a straight line life annuity at the normal retirement
age of 65. The amounts in the table do not reflect plan offsets for benefits
provided under Instron's former Employee' Profit Sharing Retirement Plan nor the
required Pension Plan offsets for social security payments.
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<PAGE> 61
STOCK OPTION PLANS
The tables included in this offering memorandum reflect stock award
information with respect to executive officers. Upon the consummation of the
recapitalization, we will not grant any further stock awards and will grant
options rights to reflect the executive's future contributions to the business.
See "Certain Relationships and Related Transactions -- The Recapitalization --
Grant of New Options to Management."
The following table sets forth information regarding options exercised in
1998 and options held at December 31, 1998 by our executive officers named in
the Summary Compensation Table. During the fiscal year ended December 31, 1998,
no officer named in the Summary Compensation Table received any stock options.
AGGREGATE EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END(#) AT FISCAL YEAR END (1)
SHARES ACQUIRED VALUE ------------------------------ ----------------------------
NAME ON EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
James M. McConnell... 193,422 1,740,798 124,500 37,500 $679,563 $160,938
Linton A. Moulding... 4,250 21,250 41,250 11,250 227,344 48,281
Joseph E. Amaral..... -- -- 44,069 11,250 245,974 48,281
William J.
Milliken........... -- -- -- -- -- --
Yahya Gharagozlou.... -- -- 19,500 11,000 94,125 47,344
</TABLE>
- ---------------
(1) Represents the total gain that would be realized if all options, for which
the December 31, 1998 stock price of $17.25 was greater than the exercise
price, were exercised.
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<PAGE> 62
SECURITY OWNERSHIP
The following table sets forth information regarding the ownership of
Instron common stock by:
- the stockholders we know to be beneficial owners of more than five
percent (5%) of the outstanding shares of Instron common stock;
- each of our directors;
- each of our executive officers;
- all directors and executive officers of Instron as a group; and
- other persons as required.
The table shows the beneficial ownership interests of the parties listed
above as of the date of this prospectus. Unless otherwise indicated, we believe
that each of the stockholders listed has sole voting and investment power with
respect to their beneficially owned shares of common stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT(2)
<S> <C> <C>
Kirtland Partners Ltd.(3)................................... 492,480 84.56%
2550 SOM Center Road Suite 105
Willoughby Hills, Ohio 44094
George S. Burr.............................................. 12,000 2.06
Helen L. Burr............................................... 4,000 *
The Harold Hindman Trust--1969(4)........................... 16,000 2.75
James M. McConnell(5)....................................... 19,585 3.36
Linton A. Moulding(6)....................................... 11,409 1.96
Joseph E. Amaral (7)........................................ 3,000 *
Kenneth L. Andersen(8)...................................... 3,567 *
John R. Barrett (9)......................................... 458 *
Jonathan L. Burr(10)........................................ 8,329 1.43
The Jonathan L. Burr Trust--1965(11)........................ 4,000 *
Yahya Gharagozlou(12)....................................... 1,062 *
Arthur D. Hindman(13)....................................... 2,552 *
William J. Milliken......................................... 2,189 *
Norman L. Smith............................................. 1,800 *
Raymond A. Lancaster(3)..................................... -- --
Thomas N. Littman........................................... -- --
Dennis J. Moore............................................. -- --
John F. Turben(3)........................................... -- --
All Directors and executive officers as a group (14
persons)(14).............................................. 58,042 9.97
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise set forth above, the address of the listed stockholders is
c/o Instron Corporation, 100 Royall Street, Canton, Massachusetts 02021.
(2) These percentages are based on the number of outstanding shares of Instron
common stock upon the consummation of the recapitalization on a fully
diluted basis (assuming the exercise of all retained options and excluding
any effect of the warrants issued in connection with the outstanding
notes). The calculation
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<PAGE> 63
of these percentages of a fully diluted basis results in some percentages
in this table varying from disclosures elsewhere in this prospectus.
(3) Kirtland Partners Ltd. is the general partner of Kirtland Capital Partners
III L.P. and the managing member of each of Kirtland Capital Company III
LLC and ISN Investments Ltd. As such, Kirtland Partners Ltd. will exercise
complete control over the shares of Instron common stock held by each
entity, including voting control and investment decisions with respect to
all the shares. Each of John F. Turben, Raymond A. Lancaster, John G.
Nestor and William R. Robertson is an executive officer, manager and member
of Kirtland Partners Ltd., and as a result of these positions, may be
deemed to have beneficial ownership of the shares of Instron common stock
held by these entities. Messrs. Turben, Lancaster, Nestor and Robinson
disclaim beneficial ownership of all shares of common stock held by
Kirtland.
(4) The Harold Hindman Trust -- 1969 is a trust of which Harold Hindman and
Robert N. Shapiro are the trustees and Harold Hindman is the sole
beneficiary, but with respect to which Harold Hindman has sole voting and
dispositive power over the shares.
(5) The number shown includes 2,400 shares of restricted common stock.
(6) The number shown includes 8,700 shares that Mr. Moulding has the right to
acquire upon the exercise of retained options and 2,709 shares owned as a
joint tenant with his wife, Jane Elizabeth Moulding.
(7) The number shown is the number of shares that Mr. Amaral has the right to
acquire upon the exercise of his retained options.
(8) The number shown includes (a) 268 shares of restricted common stock and (b)
3,300 shares that Mr. Andersen has the right to acquire upon the exercise
of his retained options.
(9) The number shown represents shares of restricted common stock.
(10) The number shown includes (a) 329 shares of restricted common stock and (b)
8,000 shares that Mr. Burr has the right to acquire upon the exercise of
his retained options.
(11) The Jonathan L. Burr Trust -- 1965 is a trust of which Preston Saunders,
Robert C. Pomeroy and Mary-Kathleen O'Connell are the trustees and Jonathan
L. Burr is the sole beneficiary, but with respect to which Jonathan L. Burr
has shared voting power (with Robert S. Burr, Susan Burr Carlo and Leslie
B. Barresi) and sole dispositive power over the shares.
(12) The number shown includes 1,062 shares of restricted common stock.
(13) The number shown includes (a) 552 shares of restricted common stock and (b)
2,000 shares that Mr. Hindman has the right to acquire upon the exercise of
his retained options.
(14) The number shown includes (a) 5,068 shares of restricted common stock and
(b) 25,000 shares that executive officers have the right to acquire upon
the exercise of retained options.
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<PAGE> 64
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE RECAPITALIZATION
On May 6, 1999, we entered into a merger agreement with Kirtland and ISN
Acquisition Corporation to effect a recapitalization of Instron. The parties
amended the merger agreement on August 5, 1999 by Amendment No. 1 to, among
other things, permit the closing of the recapitalization to occur in September
rather than August. In the recapitalization, which was consummated on September
29, 1999, Kirtland and its affiliates acquired approximately 88.3% of our
outstanding common stock. Members of our management retained approximately 5.9%
of our outstanding common stock and three other stockholders retained an
approximate 5.8% equity interest in Instron. Kirtland and its affiliates
contributed approximately $54.2 million in cash to Instron in the
recapitalization.
Management. The members of management who participated in the
recapitalization agreed with Kirtland to exchange, in a series of transactions,
an aggregate of 165,210 shares of our common stock they owned prior to the
recapitalization (of which 25,340 shares were restricted) that resulted in their
ownership of 32,951 shares of our common stock after the recapitalization (of
which 5,068 shares are restricted). The shares of restricted stock are governed
by the Instron Corporation 1992 Stock Incentive Plan and amended restricted
stock award agreements. The amended restricted stock award agreements provide
for vesting of the restricted stock on May 14, 2004, or earlier depending on our
financial results, and amend the definitions of "cause" and "good reason."
In addition, options to purchase up to an aggregate of 125,000 shares of
our common stock held by members of management were converted into options to
purchase up to an aggregate of 25,000 shares of our common stock following the
recapitalization. Each of these retained options is fully vested and
exercisable. The retained options represented approximately 4.3% of our common
stock, assuming the exercise of all retained options.
Other Stockholders. Three other stockholders agreed with Kirtland to
exchange, in a series of transactions, an aggregate of 160,000 shares of our
common stock they owned prior to the recapitalization that resulted in their
ownership of 32,000 shares of our common stock after the recapitalization.
Cash payments to members of management and the other stockholders. Members
of management and the three other stockholders did not convert all the shares
and options to purchase shares of our common stock that they owned prior to the
recapitalization. In the recapitalization, members of management and the three
other stockholders were entitled to receive $22.00 per share in cash for their
unconverted shares of our common stock, including shares of restricted common
stock owned by some members of management. They were also entitled to receive
cash based on the number of shares of our common stock underlying their
unconverted options and the difference between the applicable per share exercise
price of the options and $22.00.
Members of management and three other stockholders received cash payments,
directly or indirectly, upon consummation of the recapitalization. The members
of management, James M. McConnell, Joseph E. Amaral, Kenneth L. Andersen, John
R. Barrett, Jonathan L. Burr, The Jonathan L. Burr Trust -- 1965, Yahya
Gharagozlou, Arthur D. Hindman, William J. Milliken, Linton A. Moulding and
Norman L. Smith, received an aggregate of approximately $14.9 million and
retained equity, including options and restricted stock, with a value of
approximately $6.4 million. The three other stockholders, George S. Burr, Helen
L. Burr, and The Harold Hindman Trust -- 1969 (includes cash for shares owned of
record by Harold Hindman, a trustee and the sole beneficiary of The Harold
Hindman Trust -- 1969), received an aggregate of $15.9 million and retained
equity with a value of approximately $3.5 million. The value of retained equity
is based upon a value of $22.00 per share adjusted for the reverse stock split
that took place upon consummation of the recapitalization. We believe that the
members of management used a substantial portion of the payments they received
to repay debt incurred in connection with prior exercises of options and to pay
tax obligations associated with the exercise of options and the vesting of
restricted stock.
Grant of New Options to Management. In the recapitalization, we adopted the
Instron Corporation 1999 Stock Option Plan and reserved for issuance under this
plan 10% of the aggregate number of shares of common stock outstanding on a
fully diluted basis immediately following the recapitalization. We granted to
members of
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<PAGE> 65
management options to purchase, in the aggregate, 40% of the shares reserved
under the plan following the recapitalization. Each option is exercisable at the
fair market value per share determined in good faith by our Board of Directors.
Confidentiality and Noncompetition Agreements with Members of Management.
In order to induce Kirtland to enter into the recapitalization, at the effective
time of the recapitalization each of the members of management entered into a
confidentiality and noncompetition agreement with us. Under the agreement, each
member of management will maintain the confidentiality of business information
and will not engage in competition for so long as he is employed with us or any
of our subsidiaries and thereafter until the first anniversary of the date on
which he last worked for us.
Severance Agreements with Members of Management. Each member of management,
other than Mr. McConnell, amended his existing executive severance agreement
upon the closing of the recapitalization to modify the definition of "good
reason." As amended, the severance agreements provide that a termination
constitutes "good reason" if we fail to maintain the executive in a position
with responsibilities associated with a vice president level or higher, or if
the executive's title is reduced to below a vice president or, except for John
R. Barrett, the executive is no longer a member of our executive committee. The
amended severance agreements do not apply to any termination that occurs after
the second anniversary of the recapitalization, or to any change in control
after the recapitalization.
Deferred Compensation Agreement with James M. McConnell. At the effective
time of the recapitalization, we entered into a deferred compensation agreement
with Mr. McConnell to replace his existing executive severance agreement. Under
this agreement, we credited $1.2 million to a nonforfeitable deferred
compensation account. We will credit interest on the value of the account in
arrears on the last business day of each quarter at a rate of interest equal to
the composite "prime rate" as quoted for that day. The account will be paid in
five annual installments commencing on the fifth anniversary of the
recapitalization. Commencement of payments will be accelerated in the event of
Mr. McConnell's disability, death or termination without cause. Upon a change in
control, the account will be paid to Mr. McConnell in a lump sum.
In the event that any payment under the deferred compensation agreement
would be an "excess parachute payment" within the meaning of the Code, then we
may propose that the payments to be made under the agreement be reduced so that
no portion of the payment, if so reduced, constitutes an excess parachute
payment. If Mr. McConnell agrees to any such reduction, interest credited to the
account will be reduced so that no portion of the interest to be paid, as so
reduced, constitutes an excess parachute payment. If Mr. McConnell does not
agree to this reduction, then we may accelerate payments to Mr. McConnell so
that no payment to Mr. McConnell will constitute an excess parachute payment.
Mr. McConnell is entitled to receive an additional "gross-up payment" to the
extent necessary to offset any federal, state and local income tax, employment
tax and excise tax upon the excess parachute payment.
Voting Agreement. Under a voting agreement, dated as of May 6, 1999,
members of management, three other stockholders, and some of their affiliates
agreed with ISN Acquisition Corporation to vote all of the shares of our common
stock owned by them in favor of the recapitalization. These individuals also
agreed (1) not to dispose of any common stock, or deposit any common stock into
a voting trust or enter into a voting agreement or arrangement with respect to
voting any voting shares, (2) to waive their appraisal rights, and (3) at
Kirtland's request, to take further lawful actions as may be necessary or
desirable to consummate the recapitalization. The common stock subject to these
voting agreements represents approximately 22.4% of our outstanding common
stock. The voting agreement terminated upon the consummation of the
recapitalization.
Fees and Expenses. In connection with the recapitalization, we agreed to
pay for the reasonable fees and expenses of legal counsel for members of our
management up to an aggregate of $85,000. We also agreed to pay for the
reasonable fees and expenses of three other stockholders' legal counsel up to an
aggregate of $40,000.
Indemnification and Insurance. The merger agreement contains standard
indemnification provisions for our former or current directors, officers,
employees, fiduciaries or agents. In addition, before the recapitalization, we
purchased an extended reporting period endorsement under our then-existing
directors' and officers' liability insurance coverage for our directors and
officers.
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<PAGE> 66
Special Committee. The members of the Special Committee of our Board of
Directors were treated in the recapitalization as public stockholders with
respect to their shares of our common stock. Upon consummation of the
recapitalization, Mr. Young received $550,000 as cash merger consideration and
Mr. Moore received $55,000 as cash merger consideration. The third member of the
Special Committee, Mr. Smith, did not own any shares of our common stock. None
of the members of the Special Committee held or now hold any options to purchase
our common stock.
STOCKHOLDERS AGREEMENT
Upon consummation of the recapitalization, all of our stockholders entered
into a stockholders agreement. The stockholders agreement provides that our
stockholders may not transfer their shares of common stock except under
specified circumstances. Under the stockholders agreement, we have a right of
first refusal in the event that any stockholder wishes to sell shares of our
common stock, or, in the event that we do not exercise our right of first
refusal, the nontransferring stockholders, other than any management stockholder
who is no longer an employee, will have the opportunity to purchase the shares.
The stockholders agreement also provides that the stockholders will have the
opportunity to participate in some sales of our common stock by Kirtland, and
Kirtland has the right to cause the other stockholders to participate in some of
these sales. In addition, the stockholders agreement provides for certain "puts"
and "calls" upon the termination of a management stockholder's employment with
Instron, and provides that if Kirtland purchases shares of our common stock
following the closing of the Recapitalization, the stockholders have the right
to purchase their pro rata share of the number of shares to be issued to
Kirtland.
REGISTRATION RIGHTS AGREEMENT
Upon consummation of the recapitalization, Kirtland and its affiliates,
members of our management and Instron entered into a registration rights
agreement. Under this registration rights agreement, the parties have the right
to participate, or "piggy-back," in equity offerings initiated by us that are
registered under the Securities Act, subject, in the case of members of our
management, to the approval of the underwriters involved with any equity
offering and other customary terms and conditions.
ADVISORY SERVICES AGREEMENT
At the closing of the recapitalization, Kirtland and Instron entered into
an advisory services agreement under which Kirtland will provide management
consulting and financial advisory services to Instron for an annual fee in the
amount of $500,000. The advisory services agreement includes customary
indemnification provisions in favor of Kirtland. Also at the closing of the
recapitalization, we paid Kirtland a financing fee of $750,000 and reimbursed
Kirtland for its out-of-pocket expenses as compensation for its services as
financial advisor.
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<PAGE> 67
DESCRIPTION OF NEW SENIOR CREDIT FACILITY
General. As part of the recapitalization, we entered into a new senior
credit facility with National City Bank, as agent, providing for a revolving
credit facility of up to $50.0 million (subject to an available borrowing base)
and a term loan facility of $30.0 million, maturing in five and one-half years,
unless terminated sooner upon certain events of default. If terminated upon an
event of default, all outstanding advances under the new credit facility may be
required to be immediately repaid. The revolving portion of the new senior
credit facility can be used to complete permitted acquisitions or for working
capital and other general corporate purposes. Borrowings under the new senior
credit facility will bear interest, at our option, at either the higher of the
federal funds rate plus 0.5% and the prime rate, or a LIBOR rate, in each case
plus an applicable margin. Our ability to borrow under the new senior credit
facility will be subject to our compliance with the covenants described below.
Guarantees and Security. All of our obligations under the new senior credit
facility are and will be secured by a first priority lien on substantially all
of the properties and assets of Instron and our existing and future domestic
subsidiaries. In addition, our obligations under the new senior credit facility
are and will be secured by a first priority pledge of and security interest in
all of the outstanding capital stock of our existing domestic subsidiaries and
future domestic subsidiaries and a pledge of 65% of the outstanding capital
stock of some foreign subsidiaries. Certain of our foreign subsidiaries have
also granted a lien on substantially all of their properties and assets.
Financial Covenants. The new senior credit facility requires that we meet
and maintain certain financial ratios and tests, including:
- a minimum consolidated net worth and minimum consolidated EBITDA;
- a maximum consolidated leverage ratio (total debt to EBITDA) and senior
leverage ratio (senior debt to EBITDA);
- a minimum consolidated interest coverage ratio (EBITDA to interest
expense); and
- a minimum consolidated fixed charge coverage ratio (EBITDA to interest
expense plus other fixed charges).
Other Covenants. The new senior credit facility also contains covenants
that limit the ability of us and our operating subsidiaries to take various
actions, including:
- incurring additional indebtedness and liens and entering into some
leases;
- fundamentally changing corporate structure, including mergers,
consolidations and liquidations;
- acquiring and disposing of property;
- making principal payments on indebtedness (including these notes) prior
to maturity, dividends and capital stock purchases;
- making investments;
- making capital expenditures;
- making some modifications to organizational documents;
- changing fiscal periods;
- entering into sale and leaseback transactions;
- entering into affiliate transactions;
- entering into agreements restricting distributions;
- amending the acquisition documents;
- granting negative pledges; and
- making a material change in the nature of our business.
Events of Default. The new senior credit facility contains customary events
of default with respect to us and our operating subsidiaries, including defaults
with respect to other indebtedness.
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<PAGE> 68
DESCRIPTION OF NOTES
THE UNITS
The outstanding notes were issued in connection with a unit offering on
September 29, 1999. Each unit consisted of one $1,000 principal amount note and
one warrant to purchase 0.5109 of a share of common stock, par value $0.01 per
share, of Instron. The outstanding notes and the warrants began to trade
separately when the registration statement with respect to the registered
exchange offer for the outstanding notes, of which this prospectus is a part,
was declared effective under the Securities Act.
THE EXCHANGE NOTES
You can find the definitions of some terms used in this description under
the subheading "Certain Definitions." In this description, the word "Company"
refers only to Instron Corporation and not to any of its subsidiaries.
The Company will issue the Notes under an Indenture (the "Indenture") by
and among itself, the Guarantors and Norwest Bank Minnesota, National
Association, 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").
The following description is a summary of the material provisions of the
Indenture and the Registration Rights Agreement. It does not restate those
agreements in their entirety. We urge you to read the Indenture because it, and
not this description, defines your rights as a holder of the Notes. Copies of
the Indenture are available as set forth below under "-- Additional
Information." Certain defined terms used in this description but not defined
below under "-- Certain Definitions" have the meanings assigned to them in the
Indenture.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
THE NOTES
The Notes will be:
- general unsecured obligations of the Company;
- subordinated in right of payment to all existing and future Senior Debt
of the Company;
- pari passu in right of payment with any future senior subordinated
Indebtedness of the Company; and
- unconditionally guaranteed by the Guarantors.
THE GUARANTEES
The Notes will be guaranteed by all of the existing and future Domestic
Subsidiaries of the Company.
Each Guarantee of the Notes will be:
- a general unsecured obligation of the Guarantor;
- subordinated in right of payment to all existing and future Senior Debt
of the Guarantor; and
- pari passu in right of payment with any future senior subordinated
Indebtedness of the Guarantor.
Not all of our subsidiaries guarantee the Notes. In the event of a
bankruptcy, liquidation or reorganization of any of these non-guarantor
subsidiaries, these non-guarantor subsidiaries will pay the holders of their
debts and their trade creditors before they will be able to distribute any of
their assets to us. The non-guarantor subsidiaries generated 234.0% of our
EBITDA for the nine-month period ended October 2, 1999 and held 33.0% of our
consolidated assets as of October 2, 1999. See note 8 to our Unaudited
Consolidated Financial Statements included at the back of this prospectus for
more detail about the division of our consolidated revenues and assets between
our guarantor and non-guarantor subsidiaries.
As of the date of this prospectus, all of our subsidiaries are "Restricted
Subsidiaries." However, under the circumstances described below under the
subheading "-- Certain Covenants -- Designation of Restricted and Unrestricted
Subsidiaries," we will be permitted to designate certain of our subsidiaries as
"Unrestricted
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<PAGE> 69
Subsidiaries." Our Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants in the Indenture. Our Unrestricted Subsidiaries will not
guarantee the Notes.
PRINCIPAL, MATURITY AND INTEREST
The Indenture provides for the issuance by the Company of Notes with a
maximum aggregate principal amount of $150.0 million, of which $60.0 million was
issued on September 29, 1999. The Company may issue additional notes (the
"Additional Notes") from time to time after this offering. Any offering of
Additional Notes is subject to the covenant described below under the caption
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock." The Notes and any Additional Notes subsequently issued under the
Indenture would be treated as a single class for all purposes under the
Indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase. The Company will issue Notes in denominations of $1,000 and
integral multiples of $1,000. Initially, the Notes will be issued in the form of
one or more global Notes. See "-- Book Entry, Delivery and Form." The Notes will
mature on September 15, 2009.
Interest on the Notes will accrue at the rate of 13 1/4% per annum and will
be payable semi-annually in arrears on March 15 and September 15, commencing on
March 15, 2000. The Company will make each interest payment to the Holders of
record on the immediately preceding March 1 and September 1.
Interest on the Notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a Holder has given wire transfer instructions to the Company, the
Company will pay all principal, interest and premium and Liquidated Damages, if
any, on that Holder's Notes in accordance with those instructions. All other
payments on Notes will be made at the office or agency of the Paying Agent and
Registrar within the City and State of New York unless the Company elects to
make interest payments by check mailed to the Holders at their addresses set
forth in the register of Holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee will initially act as Paying Agent and Registrar. The Company
may change the Paying Agent or Registrar without prior notice to the Holders,
and the Company or any of its Subsidiaries may act as Paying Agent or Registrar.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
SUBSIDIARY GUARANTEES
The Guarantors will jointly and severally guarantee the Company's
obligations under the Notes. Each Subsidiary Guarantee will be subordinated to
the prior payment in full of all Senior Debt of that Guarantor. The obligations
of each Guarantor under its Subsidiary Guarantee will be limited as necessary to
prevent that Subsidiary Guarantee from constituting a fraudulent conveyance
under applicable law. See "Risk Factors -- Fraudulent Conveyance Matters."
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A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into (whether or not the
Guarantor is the surviving Person), another Person, other than the Company or
another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) either:
(a) the Person acquiring the property in a sale or disposition or the
Person formed by or surviving any such consolidation or merger assumes
all the obligations of that Guarantor under the Indenture, its
Subsidiary Guarantee and the Registration Rights Agreement pursuant to a
supplemental indenture and appropriate Collateral Documents satisfactory
to the Trustee; or
(b) the Net Proceeds of such sale or other disposition are applied in
accordance with the "Asset Sale" provisions of the Indenture.
The Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with a sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of
merger or consolidation) to a Person that is not (either before or after
giving effect to the transaction) a Subsidiary of the Company, if the
Guarantor applies the Net Proceeds of that sale or other disposition in
accordance with the "Asset Sale" provisions of the Indenture;
(2) in connection with any sale of all of the Capital Stock of a
Guarantor to a Person that is not (either before or after giving effect to
the transaction) a Subsidiary of the Company, if the Company applies the
Net Proceeds of that sale in accordance with the "Asset Sale" provisions of
the Indenture; or
(3) if the Company properly designates any Restricted Subsidiary that is
a Guarantor as an Unrestricted Subsidiary.
See "-- Repurchase at the Option of Holders -- Asset Sales."
OPTIONAL REDEMPTION
At any time prior to September 15, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes issued
under the Indenture at a redemption price of 113.250% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date, with the net cash proceeds of one or more Qualified Equity
Offerings; provided that:
(1) at least 65% of the aggregate principal amount of Notes issued under
the Indenture remains outstanding immediately after the redemption
(excluding Notes held by the Company and its Subsidiaries); and
(2) the redemption must occur within 45 days of the date of the closing
of the Qualified Equity Offering.
Except pursuant to the preceding paragraph, the Notes will not be
redeemable at the Company's option prior to September 15, 2004.
On or after September 15, 2004, the Company may redeem all or, from time to
time, a part of the Notes upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the applicable redemption date, if redeemed during the twelve-month
period beginning on September 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2004........................................................ 106.625%
2005........................................................ 104.417%
2006........................................................ 102.208%
2007 and thereafter......................................... 100.000%
</TABLE>
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MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
SUBORDINATION
The payment of principal, interest and premium and Liquidated Damages, if
any, on the Notes will be subordinated to the prior payment in full of all
Senior Debt of the Company, including Senior Debt incurred after the date of the
Indenture.
The holders of Senior Debt will be entitled to receive payment in full of
all Obligations due in respect of Senior Debt (including interest after the
commencement of any bankruptcy proceeding at the rate specified in the
applicable Senior Debt) before the Holders of Notes will be entitled to receive
any payment with respect to the Notes (except that Holders of Notes may receive
and retain Permitted Junior Securities and payments made from the trust
described under "-- Legal Defeasance and Covenant Defeasance"), in the event of
any distribution to creditors of the Company:
(1) in a liquidation or dissolution of the Company;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of the Company's assets and liabilities.
The Company also may not make any payment in respect of the Notes (except
in Permitted Junior Securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance") if:
(1) a payment default on Designated Senior Debt occurs and is continuing
beyond any applicable grace period ; or
(2) any other default occurs and is continuing on any series of
Designated Senior Debt that permits holders of that series of Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice of
that default (a "Payment Blockage Notice") from the Company or the holders
of any Designated Senior Debt.
Payments on the Notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which that
default is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which
the nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until:
(1) 360 days have elapsed since the delivery of the immediately prior
Payment Blockage Notice; and
(2) all scheduled payments of principal, interest and premium and
Liquidated Damages, if any, on the Notes that have come due have been paid
in full in cash.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless the default shall have
been cured or waived for a period of not less than 90 days.
If the Trustee or any Holder of the Notes receives a payment in respect of
the Notes (except in Permitted Junior Securities or from the trust described
under "-- Legal Defeasance and Covenant Defeasance") when:
(1) the payment is prohibited by these subordination provisions; and
(2) the Trustee or the Holder has actual knowledge that the payment is
prohibited;
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the Trustee or the Holder, as the case may be, shall hold the payment in trust
for the benefit of the holders of Senior Debt. Upon the proper written request
of the holders of Senior Debt, the Trustee or the Holder, as the case may be,
shall deliver the amounts in trust to the holders of Senior Debt or their proper
representative.
The Company must promptly notify holders of Senior Debt if payment of the
Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of the Company, Holders of Notes
may recover less ratably than creditors of the Company who are holders of Senior
Debt. See "Risk Factors -- Subordination."
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each Holder of Notes will have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that Holder's Notes pursuant to a Change of
Control Offer on the terms set forth in the Indenture. In the Change of Control
Offer, the Company will offer a Change of Control Payment in cash equal to 101%
of the aggregate principal amount of Notes repurchased plus accrued and unpaid
interest and Liquidated Damages, if any, thereon, to the date of purchase.
Within ten days following any Change of Control, the Company will mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the Change of Control
Payment Date specified in the notice, which date shall be no earlier than 30
days and no later than 60 days from the date the notice is mailed, pursuant to
the procedures required by the Indenture and described in the notice. The
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent the laws
and regulations are applicable in connection with the repurchase of the Notes as
a result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the Change of Control provisions of
the Indenture, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
Change of Control provisions of the Indenture by virtue of such conflict.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered;
and
(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the
Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for those Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each new Note will be in a principal amount
of $1,000 or an integral multiple thereof.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, the
Company will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of Notes required by this covenant. However, if the
Company is required to make a Change of Control Offer, the Company cannot assure
you that it will have the financial resources to repay its Senior Debt or that
it will be able to obtain the consent of the holders of Senior Debt. In
addition, the exercise by the holders of Notes of their right to require the
Company to repurchase the Notes upon a Change of Control could cause a default
under the Senior Debt, even if the Change of Control itself does not, due to the
financial effect of the repurchase on the Company, which could cause an
acceleration of the Senior Debt and a foreclosure with respect to any collateral
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securing it in the event the Senior Debt was not paid. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The provisions described above that require the Company to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under the Change of
Control Offer.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the
properties or assets of the Company and its Restricted Subsidiaries taken
as a whole to any "person" (as that term is used in Section 13(d)(3) of the
Exchange Act) other than a Principal or a Related Party of a Principal;
(2) the adoption of a plan relating to the liquidation or dissolution of
the Company;
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person" (as
defined above), other than the Principals and their Related Parties,
becomes the Beneficial Owner, directly or indirectly, of more than 50% of
the Voting Stock of the Company, measured by voting power rather than
number of shares; or
(4) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who:
(1) was a member of the Board of Directors on the date of the Indenture;
or
(2) was nominated for election or elected to the Board of Directors with
the approval of a majority of the Continuing Directors who were members of
the Board at the time of the nomination or election.
"Principals" means Kirtland Capital Partners III L.P. and its Affiliates,
George S. Burr, Helen L. Burr, the Harold Hindman Trust -- 1969, James M.
McConnell, Joseph E. Amaral, Kenneth L. Andersen, John R. Barrett, Jonathan L.
Burr, the Jonathan L. Burr Trust -- 1965, Yahya Gharagozlou, Arthur D. Hindman,
William J. Milliken, Linton A. Moulding, Jane Elizabeth Moulding, Norman L.
Smith and any other employee stockholder of the Company as of the date of the
Indenture.
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or
immediate family member (in the case of an individual) of any Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of any one or
more Principals and/or the other Persons referred to in the immediately
preceding clause (1).
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of the Company and its
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of Notes to require the Company to repurchase any Notes as a result of a
sale, lease, transfer,
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conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
ASSET SALES
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of the Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) the fair market value is determined by the Company's Board of
Directors and evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee; and
(3) except in the case of an Asset Swap, at least 75% of the
consideration therefor received by the Company or its Restricted Subsidiary
is in the form of cash, Cash Equivalents or Productive Assets. For purposes
of this provision, each of the following shall be deemed to be cash:
(a) any liabilities (as shown on the Company's or that Restricted
Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the Notes or any Subsidiary
Guarantee) that are expressly assumed by the transferee of any such
assets; and
(b) any securities, notes or other obligations received by the
Company or any Restricted Subsidiary from the transferee that are within
60 days after the consummation of the Asset Sale converted by the
Company or its Restricted Subsidiary into cash (to the extent of the
cash received in that conversion).
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
including any cash received in an Asset Swap, the Company may apply the Net
Proceeds at its option:
(1) to repay Senior Debt and, if the Senior Debt repaid is revolving
credit Indebtedness, to correspondingly reduce commitments with respect
thereto;
(2) to acquire all or substantially all of the assets of, or a majority
of the Voting Stock of, another Permitted Business or to make a Permitted
Investment in a joint venture that is a Permitted Business;
(3) to purchase Notes in open market transactions; provided that the
Company shall be deemed to have applied Net Proceeds in satisfaction of the
requirements of this covenant pursuant to this clause (3) in an amount
equal to the lesser of:
(a) the purchase price in the open market transactions; and
(b) 100% of the principal amount of the Notes repurchased;
(4) to make a capital expenditure; or
(5) to acquire Productive Assets.
Pending the final application of any Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest Net Proceeds
in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will make
an Asset Sale Offer to all Holders of Notes and all holders of other
Indebtedness that is pari passu with the Notes containing provisions similar to
those set forth in the Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets to purchase the maximum principal amount of
Notes and other pari passu Indebtedness that may be purchased out of the Excess
Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of
principal amount plus accrued and unpaid interest and Liquidated Damages, if
any, to the date of purchase, and will be payable in cash. If any Excess
Proceeds remain after
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consummation of an Asset Sale Offer, the Company may use the Excess Proceeds for
any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes and other pari passu Indebtedness tendered into an
Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes and other pari passu Indebtedness to be purchased on a pro rata basis
based on the principal amount of Notes and other pari passu Indebtedness
tendered. Upon completion of each Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent the laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sales
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the Asset Sale provisions of the Indenture by virtue of these
conflicts.
The agreements governing the Company's outstanding Senior Debt currently
prohibit the Company from purchasing any Notes, and also provides that some
change of control or asset sale events with respect to the Company would
constitute a default under these agreements. Any future credit agreements or
other agreements relating to Senior Debt to which the Company becomes a party
may contain similar restrictions and provisions. In the event a Change of
Control or Asset Sale occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its senior lenders to
the purchase of Notes or could attempt to refinance the borrowings that contain
the prohibition. If the Company does not obtain this consent or repay the
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture, which would, in turn, constitute a default under
this Senior Debt. In these circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of Notes.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, the Trustee
will select Notes for redemption as follows:
(1) if the Notes are listed, in compliance with the requirements of the
principal national securities exchange on which the Notes are listed; or
(2) if the Notes are not so listed, on a pro rata basis, by lot or by
another method that the Trustee deems fair and appropriate.
No Notes of $1,000 or less may be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of redemption that
relates to that Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion of
the original Note will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any
of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in (a)
Equity Interests
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(other than Disqualified Stock) of the Company or (b) to the Company or a
Restricted Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company or
any direct or indirect parent of the Company;
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Subsidiary Guarantees, except (a) a
payment of interest or principal at the Stated Maturity thereof or (b) any
payment with respect to Indebtedness owed solely to the Company or a
Restricted Subsidiary of the Company; or
(4) make any Restricted Investment (all the payments and other actions
set forth in clauses (1) through (4) above being collectively referred to
as "Restricted Payments"),
The restrictions of the preceding paragraph will not apply if at the time
of and after giving effect to the Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing or
would occur as a consequence thereof; and
(2) the Company would, at the time of the Restricted Payment and after
giving pro forma effect thereto as if the Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness under the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock;" and
(3) the Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (2), (3), (4), (5), (6) and (7) of the next succeeding
paragraph), is less than the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the date of the Indenture to the end of the
Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of the Restricted Payment
(or, if the Consolidated Net Income for this period is a deficit, less
100% of the deficit), plus
(b) 100% of the aggregate net cash proceeds received by the Company
since the date of the Indenture as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock) or from the issue or sale of convertible
or exchangeable Disqualified Stock or convertible or exchangeable debt
securities of the Company that have been converted into or exchanged for
the Equity Interests (other than Equity Interests (or Disqualified Stock
or debt securities) sold to a Subsidiary of the Company), plus
(c) to the extent that any Restricted Investment that was made after
the date of the Indenture is sold for cash or otherwise liquidated or
repaid for cash, the cash proceeds with respect to the Restricted
Investment (less the cost of disposition, if any), plus
(d) 100% of any dividends received by the Company or a Restricted
Subsidiary after the date of the Indenture from an Unrestricted
Subsidiary of the Company, to the extent that the dividends were not
otherwise included in Consolidated Net Income of the Company for that
period, plus
(e) to the extent that any Unrestricted Subsidiary of the Company is
redesignated as a Restricted Subsidiary after the date of the Indenture,
the fair market value of the Company's Investment in that Subsidiary as
of the date of the redesignation.
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The preceding provisions will not prohibit, and these items will not be
considered Restricted Payments:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any
Restricted Subsidiary or of any Equity Interests of the Company in exchange
for, or out of the net cash proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary of the Company) of, Subordinated
Indebtedness or Equity Interests of the Company (other than Disqualified
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (3)(b) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company or any Guarantor with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of the
Company to the holders of its Equity Interests on a pro rata basis;
(5) so long as no Default has occurred and is continuing or would be
caused thereby, (a) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any
Restricted Subsidiary of the Company held by any current or former
employee, officer, director or consultant of the Company (or any of its
Restricted Subsidiaries) under any management equity subscription
agreement, stock option agreement or other employee or management plan or
agreement or employment benefit plan, and (b) any payment made that is
related to or in respect of any Subordinated Management Notes; provided
that the aggregate price paid for all repurchased, redeemed, acquired or
retired Equity Interests, together with the aggregate amount of payments
made that are related to or in respect of Subordinated Management Notes,
shall not exceed $1.0 million in any calendar year (provided that in any
calendar year this amount shall be increased by the amount available for
use, but not used, under this clause (5) in the immediately preceding
year);
(6) repurchases of Capital Stock deemed to occur upon the exercise and
of stock options if the Capital Stock represents a portion of the exercise
price thereof; and
(7) so long as no Default has occurred and is continuing or would be
caused thereby, other Restricted Payments in an aggregate amount not to
exceed $2.0 million.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by the Company or a Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined by the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds 5.0% of Total Assets. Not later than 30 days after the
date of making any Restricted Payment, the Company shall deliver to the Trustee
an Officers' Certificate stating that the Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this "Restricted
Payments" covenant were computed, together with a copy of any fairness opinion
or appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), and the
Company will not issue any Disqualified Stock and will not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) or
issue
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Disqualified Stock, and the Company's Restricted Subsidiaries may incur
Indebtedness or issue preferred stock, if the Fixed Charge Coverage Ratio for
the Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which the
additional Indebtedness is incurred or the Disqualified Stock or preferred stock
is issued would have been at least 2.0 to 1.0 if the incurrence or issuance
occurs on or before the third anniversary of the date of the Indenture and at
least 2.25 to 1.0 if the incurrence or issuance occurs at any time thereafter,
in each case determined on a pro forma basis (including a pro forma application
of the net proceeds therefrom), as if the additional Indebtedness had been
incurred or the preferred stock or Disqualified Stock had been issued, as the
case may be, at the beginning of the four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by the Company and any Restricted Subsidiary of
additional term or revolving credit Indebtedness and letters of credit
under Credit Facilities in an aggregate principal amount at any one time
outstanding under this clause (1) (with letters of credit being deemed to
have a principal amount equal to the face amount thereof) not to exceed
$80.0 million less the aggregate amount of all Net Proceeds of Asset Sales
applied by the Company or any of its Restricted Subsidiaries to repay any
Indebtedness under a Credit Facility and effect a corresponding commitment
reduction thereunder in the case of revolving credit Indebtedness pursuant
to the covenant described above under the caption "-- Repurchase at the
Option of Holders -- Asset Sales;"
(2) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes and the related Subsidiary Guarantees to be issued
on the date of the Indenture and the Exchange Notes and the related
Subsidiary Guarantees to be issued pursuant to the Registration Rights
Agreement;
(4) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case, incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or a Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause (4), not to exceed 5.0% of Total Assets at any time outstanding;
provided, that the aggregate amount of Indebtedness at any one time
outstanding pursuant to this clause (4), clause (12) and clause (14) of
this paragraph shall not exceed $15.0 million;
(5) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph of this covenant or clauses (2), (3),
(4), (5) or (14) of this paragraph;
(6) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; provided, however, that:
(a) if the Company or any Guarantor is the obligor on the
Indebtedness, the Indebtedness must be expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the
Notes, in the case of the Company, or the Subsidiary Guarantee, in the
case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Restricted Subsidiary thereof and (ii) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary thereof; shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be, that was not permitted
by this clause (6);
(7) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred solely (a) for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
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Indebtedness that is permitted by the terms of this Indenture to be
outstanding or (b) for the purpose of fixing or hedging the risks
associated with fluctuations in foreign currency exchange rates;
(8) the guarantee by the Company or any of its Restricted Subsidiaries
of Indebtedness of the Company or a Restricted Subsidiary of the Company
that was permitted to be incurred by another provision of this covenant;
(9) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment or accrual of
dividends on Disqualified Stock in the form of additional shares of the
same class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this
covenant; provided, in each case, that the amount thereof is included in
Fixed Charges of the Company as accrued;
(10) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt or issuance of preferred stock, provided, however, that
if any of the Indebtedness ceases to be Non-Recourse Debt of an
Unrestricted Subsidiary, this event shall be deemed to constitute an
incurrence of Indebtedness by a Restricted Subsidiary of the Company that
was not permitted by this clause (10);
(11) the issuance by the Company or any of its Restricted Subsidiaries
of Subordinated Management Notes not to exceed $1.0 million in any calendar
year (provided that in any calendar year such amount shall be increased by
the amount available for issuance, but not issued, under this clause (11)
in any preceding calendar year);
(12) the incurrence by any Foreign Subsidiary of the Company of
Indebtedness for working capital purposes not to exceed $5.0 million;
(13) the incurrence of Indebtedness (including letters of credit) in
respect of workers' compensation claims, self-insurance obligations,
warranties, performance, surety, bid or similar advance payment bonds and
completion guarantees provided by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with past
practices; and
(14) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness or the issuance of Disqualified Stock in an
aggregate principal amount (or accreted value or liquidation preference, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred or Disqualified Stock issued pursuant to this clause (14), not to
exceed $7.5 million.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (14) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company will be permitted to classify the item of Indebtedness on the date of
its incurrence in any manner that complies with this covenant. Indebtedness
under Credit Facilities outstanding on the date on which Notes are first issued
and authenticated under the Indenture shall be deemed to have been incurred on
such date in reliance on the exception provided by clause (1) of the definition
of Permitted Debt.
NO SENIOR SUBORDINATED DEBT
The Company will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of the Company and senior in any respect in right of
payment to the Notes. No Guarantor will incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to the Senior Debt of the Guarantor and senior in any respect
in right of payment to that Guarantor's Subsidiary Guarantee.
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LIENS
The Company will not and will not permit any of its Restricted Subsidiaries
to, create, incur, assume or otherwise cause or suffer to exist or become
effective any Lien of any kind securing Indebtedness that is pari passu or
subordinated in right of payment to the Notes (other than Permitted Liens) upon
any of their property or assets, now owned or hereafter acquired, unless all
payments due under the Indenture and the Notes are secured on an equal and
ratable basis with the obligations so secured until the time that those
obligations are no longer secured by a Lien.
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 permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
to the Company or any of its Restricted Subsidiaries, or with respect to
any other interest or participation in, or measured by, its profits, or pay
any indebtedness owed to the Company or any of its Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness and the Credit Agreement, each as in effect on
the date of the Indenture and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or refinancings
are no more restrictive, taken as a whole, with respect to such dividend
and other payment restrictions than those contained in such Existing
Indebtedness or the Credit Agreement, each as in effect on the date of the
Indenture;
(2) the Indenture, the Notes, the Exchange Notes and the Subsidiary
Guarantees;
(3) applicable law, regulation or order;
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect
at the time of the acquisition (except to the extent the Indebtedness was
incurred in connection with or in contemplation of the acquisition), 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
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, the Indebtedness was permitted by the terms of the Indenture
to be incurred;
(5) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing the Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness that limit the right of the debtor to
dispose of the assets subject to the Lien;
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(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale agreements,
stock sale agreements and other similar agreements;
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(12) Indebtedness incurred after the date of the Indenture in accordance
with the terms of the Indenture; provided, that the restrictions contained
in the agreements governing this new Indebtedness are, in the good faith
judgment of the Board of Directors of the Company, not materially less
favorable, taken as a whole, to the holders of the Notes than those
contained in the agreements governing Indebtedness outstanding on the date
of the Indenture;
(13) customary provisions in agreements with respect to Permitted Joint
Ventures; and
(14) any encumbrances or restrictions imposed by any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or obligations
referred to in clauses (1) through (13) above; provided that the
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good faith judgment of
the Board of Directors, no more restrictive, taken as a whole, with respect
to the dividend and other payment restrictions than those contained in the
dividend or other payment restrictions before the amendment, modification,
restatement, renewal, increase, supplement, refunding, replacement or
refinancing.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company may not, directly or indirectly: (1) consolidate or merge with
or into another Person (whether or not the Company is the surviving
corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the Company and its
Restricted Subsidiaries taken as a whole, in one or more related transactions,
to another Person; unless:
(1) either: (a) the Company is the surviving corporation; or (b) the
Person formed by or surviving any consolidation or merger (if other than
the Company) or to which a sale, assignment, transfer, conveyance or other
disposition was made is a corporation organized or existing under the laws
of the United States, any state thereof or the District of Columbia;
(2) the Person formed by or surviving any consolidation or merger (if
other than the Company) or the Person to which a sale, assignment,
transfer, conveyance or other disposition was made assumes all the
obligations of the Company under the Notes, the Indenture and the
Registration Rights Agreement pursuant to agreements reasonably
satisfactory to the Trustee;
(3) immediately after the transaction no Default or Event of Default
exists; and
(4) the Company or the Person formed by or surviving any consolidation
or merger (if other than the Company), or to which the sale, assignment,
transfer, conveyance or other disposition was made will, on the date of the
transaction after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, (a) have a Fixed Charge Coverage Ratio at least equal
to 1.75 to 1.0 and equal to or greater than the Fixed Charge Coverage Ratio
of the Company immediately before the transaction or (b) be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described above under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock."
In addition, the Company may not, directly or indirectly, lease all or
substantially all of its and its Restricted Subsidiaries' properties or assets,
in one or more related transactions, to any other Person. This "Merger,
Consolidation or Sale of Assets" covenant will not apply to a sale, assignment,
transfer, conveyance or other disposition of assets between or among the Company
and any of the Guarantors.
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TRANSACTIONS WITH AFFILIATES
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) the Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or its
Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that the Affiliate Transaction complies
with this covenant and that the Affiliate Transaction has been approved
by a majority of the disinterested members of the Board of Directors;
and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion issued by an accounting, appraisal or
investment banking firm of national standing that the Affiliate
Transaction complies with clause (1) of the first paragraph of this
covenant.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business and consistent
with the past practice of the Company or its Restricted Subsidiary;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) transactions with a Person that is an Affiliate of the Company
solely because the Company owns an Equity Interest in that Person;
(4) payment of reasonable directors fees;
(5) sales of Equity Interests (other than Disqualified Stock) to
Affiliates of the Company;
(6) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "-- Restricted Payments";
(7) the Advisory Services Agreement between the Company and Kirtland
Partners Ltd. as in effect on the date of the Indenture;
(8) providing indemnity to current or former officers, directors,
employees or consultants of the Company or any of its Subsidiaries as
determined in good faith by the Board of Directors of the Company;
(9) performance of obligations of the Company or any of its Restricted
Subsidiaries under the terms of any agreement to which the Company or the
Restricted Subsidiary is a party as of the date of the Indenture of which
is described above under the caption "Certain Relationships and Related
Transactions" as in effect on the date of the Indenture;
(10) the grant of stock options, restricted stock or similar rights to
acquire common stock of the Company to the Company's or its Subsidiaries'
employees, officers, directors and consultants pursuant to plans approved
by the Board of Directors of the Company;
(11) loans or advances to the Company's or its Subsidiaries' employees
or consultants otherwise permitted by the Indenture and not to exceed an
aggregate of $1 million at any one time;
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(12) the payment of all fees and expenses related to the
Recapitalization as described above under the caption "The
Recapitalization"; and
(13) transactions with customers, joint venture partners, clients,
suppliers, or purchasers or sellers of goods or services, in each case in
the ordinary course of business and consistent with past practice in
compliance with the terms of the Indenture and which are fair to the
Company or its Restricted Subsidiaries, in the reasonable determination of
the Board of Directors of the Company.
ADDITIONAL SUBSIDIARY GUARANTEES
If the Company or any of its Restricted Subsidiaries acquires or creates
another Domestic Subsidiary after the date of the Indenture, then that newly
acquired or created Domestic Subsidiary must become a Guarantor and execute a
supplemental indenture and deliver an Opinion of Counsel to the Trustee within
10 Business Days of the date on which it was acquired or created; provided that
any Domestic Subsidiary that has been properly designated as Unrestricted
Subsidiary in accordance with the Indenture shall not be required to become
Guarantor for so long as it continues to constitute an Unrestricted Subsidiary.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by the Company and its
Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and will either reduce the
amount available for Restricted Payments under the first paragraph of the
covenant described above under the caption "-- Restricted Payments" or reduce
the amount available for future Investments under one or more clauses of the
definition of Permitted Investments, as the Company shall determine. That
designation will only be permitted if the Investment would be permitted at that
time and if the Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted
Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a
Default.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to the extent as
would not be material to the Company and its Restricted Subsidiaries taken as a
whole.
PAYMENTS FOR CONSENT
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of 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
the consideration is offered to be paid and is paid to all Holders of the Notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to the consent, waiver or agreement.
REPORTS
Whether or not required by the Commission, so long as any Notes are
outstanding, the Company will furnish to the Holders of Notes, on or before the
fifth day following the date the report would be due under the Commission's
rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report on
the annual financial statements by the Company's certified independent
accountants; and
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(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports.
In addition, following the consummation of the exchange offer contemplated
by the Registration Rights Agreement, whether or not required by the Commission,
the Company will file a copy of all of the information and reports referred to
in clauses (1) and (2) above with the Commission for public availability within
the time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company and the Subsidiary Guarantors have agreed that, for so long as any Notes
remain outstanding, they will furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes, whether or not prohibited by
the subordination provisions of the Indenture;
(2) default in payment when due of the principal of, or premium, if any,
on the Notes, whether or not prohibited by the subordination provisions of
the Indenture;
(3) failure by the Company or any of its Subsidiaries to comply with
the provisions described under the captions "-- Repurchase at the Option of
Holders -- Change of Control" or "-- Certain Covenants -- Merger,
Consolidation or Sale of Assets;"
(4) failure by the Company or any of its Subsidiaries for 60 days after
written notice from the Trustee or Holders of at least 25% of the
outstanding principal balance of the Notes to comply with any of the other
agreements in the Indenture;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries) whether the Indebtedness or guarantee now
exists, or is created after the date of the Indenture, if that default:
(a) is caused by a failure to pay principal of, or interest or
premium, if any, on the Indebtedness before the expiration of the grace
period provided in the Indebtedness on the date of the default (a
"Payment Default"); or
(b) results in the acceleration of the Indebtedness before its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $10.0 million or
more;
(6) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $10.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days; and
(7) except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or
any Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Subsidiary Guarantee; and
(8) specified events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries.
In the case of an Event of Default arising from events of bankruptcy or
insolvency, with respect to the Company, any Restricted Subsidiary that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes will
become due and payable
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immediately without further action or notice. If any other Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately; provided, however, that so long as any Indebtedness
permitted to be incurred under the Indenture as part of the Credit Facilities is
outstanding, no acceleration shall be effective until the earlier of (1) five
business days after the giving of written notice to the Company and the
administrative agent under the Credit Facilities of the acceleration or (2)
acceleration of any Indebtedness under the Credit Facilities.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. 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 of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest or Liquidated
Damages) if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest or Liquidated Damages on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, the Company is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, AFFILIATES AND
STOCKHOLDERS
No director, officer, employee, Affiliate, incorporator or stockholder of
the Company or any Guarantor, solely by reason of this status, shall have any
liability for any obligations of the Company or the Guarantors under the Notes,
the Indenture, the Subsidiary Guarantees or for any 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 this liability. The waiver and release
are part of the consideration for issuance of the Notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes and all obligations
of the Guarantors discharged with respect to their Subsidiary Guarantees ("Legal
Defeasance") except for:
(1) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, or interest or premium and Liquidated Damages,
if any, on the Notes when the payments are due from the trust referred to
below;
(2) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee,
and the Company's and the Guarantor's obligations in connection therewith;
and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company and the Guarantors released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants shall not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient (through the payment of principal, interest and Liquidated
Damages, if any), to pay the principal of, or interest and premium and
Liquidated Damages, if any, on the outstanding Notes on the stated maturity
or on the applicable redemption date, as the case may be, and the Company
must specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that (a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the date
of the Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon the Opinion
of Counsel shall confirm that, the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a
result of the Legal 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 the Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of the
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 the Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
either: (a) on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit); or (b) insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(5) the Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(6) the Company must have delivered to the Trustee an Opinion of Counsel
to the effect that, assuming no intervening bankruptcy of the Company or
any Guarantor between the date of deposit and the 91st day following the
deposit and assuming that no Holder is an "insider" of the Company under
applicable bankruptcy law, after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent relating
to the Legal Defeasance or the Covenant Defeasance have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the Indenture
or the Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
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Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes (other
than provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any
Note;
(4) waive a Default or Event of Default in the payment of principal of,
or interest or premium, or Liquidated Damages, if any, on the Notes (except
a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the Notes;
(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of, or interest or premium or Liquidated Damages, if
any, on the Notes;
(7) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the caption
"-- Repurchase at the Option of Holders");
(8) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or the Indenture, except in accordance with the terms
of the Indenture; or
(9) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
Indenture relating to subordination that adversely affects the rights of the
Holders of the Notes will require the consent of the Holders of at least 66% in
aggregate principal amount of Notes then outstanding.
Notwithstanding the preceding, without the consent of any Holder of Notes,
the Company, the Guarantors and the Trustee may amend or supplement the
Indenture or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of the Company's obligations to
Holders of Notes in the case of a merger or consolidation or sale of all or
substantially all of the Company's assets;
(4) to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder; or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect as
to all Notes issued thereunder, when:
(1) either:
(a) all Notes that have been authenticated (except lost, stolen or
destroyed Notes that have been replaced or paid and Notes for whose
payment money has theretofore been deposited in trust and thereafter
repaid to the Company) have been delivered to the Trustee for
cancellation; or
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(b) all Notes that have not been delivered to the Trustee for
cancellation have become due and payable by reason of the making of a
notice of redemption or otherwise or will become due and payable within
one year and the Company or any Guarantor has irrevocably deposited or
caused to be deposited with the Trustee as trust funds in trust solely
for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in amounts as will be
sufficient without consideration of any reinvestment of interest, to pay
and discharge the entire indebtedness on the Notes not delivered to the
Trustee for cancellation for principal, premium and Liquidated Damages,
if any, and accrued interest to the date of maturity or redemption;
(2) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute a
default under, any other instrument to which the Company or any Guarantor
is a party or by which the Company or any Guarantor is bound;
(3) the Company or any Guarantor has paid or caused to be paid all sums
payable by it under the Indenture; and
(4) the Company has delivered irrevocable instructions to the Trustee
under the Indenture to apply the deposited money toward the payment of the
Notes at maturity or the redemption date, as the case may be.
In addition, the Company must deliver an Officers' Certificate and an
Opinion of Counsel to the Trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
CONCERNING THE TRUSTEE
If the Trustee becomes a creditor of the Company or any Guarantor, the
Indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate the conflict
within 90 days, apply to the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of Notes, unless the Holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all of these terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time the other
Person is merged with or into or became a Subsidiary of the specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, the other Person merging with or into, or becoming a
Subsidiary of, the specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by the
specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of the Person, whether through the ownership of voting
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securities, by agreement or otherwise; provided that beneficial ownership of 10%
or more of the Voting Stock of a Person shall be deemed to be control. For
purposes of this definition, the terms "controlling," "controlled by" and "under
common control with" shall have correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory in the ordinary course of business
consistent with past practices; provided that the sale, conveyance or other
disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "-- Repurchase at the Option of
Holders -- Change of Control" and/or the provisions described above under
the caption "-- Certain Covenants -- Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of the Company's Restricted
Subsidiaries or the sale of Equity Interests in any of its Restricted
Subsidiaries (other than the issuance of director qualifying shares or
similar required issuances).
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than $2.0 million;
(2) a transfer of assets between or among the Company and its Restricted
Subsidiaries,
(3) an issuance of Equity Interests by a Restricted Subsidiary to the
Company or to another Restricted Subsidiary;
(4) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents;
(6) a Restricted Payment or Permitted Investment that is permitted by
the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments"; and
(7) the licensing or sublicensing of intellectual property or other
general intangibles and licenses, leases or subleases of other property in
the ordinary course of business and which do not materially interfere with
the business of the Company and its Subsidiaries.
"Asset Swap" means an exchange of assets by the Company or a Restricted
Subsidiary of the Company for:
(1) one or more Permitted Businesses;
(2) a controlling equity interest in any Person whose assets consist
primarily of one or more Permitted Businesses;
(3) cash; and/or
(4) Productive Assets.
"Beneficial Owner" has the meaning assigned to the term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether the right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the Board of Directors of the general
partner of the partnership; and
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(3) with respect to any other Person, the board or committee of the
Person serving a similar function.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in support
thereof) having maturities of not more than one year from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of one year or less from the date of acquisition, bankers' acceptances with
maturities not exceeding one year and overnight bank deposits, in each
case, with any lender party to the Credit Agreement or with any domestic
commercial bank having capital and surplus in excess of $500.0 million and
a Thomson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Services and in each
case maturing within six months after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Commission" means the United States Securities and Exchange Commission.
"Consolidated Cash Flow" means, with respect to any specified Person for
any period, the Consolidated Net Income of that Person for that period plus:
(1) an amount equal to any extraordinary loss plus any net loss realized
by that Person or any of its Restricted Subsidiaries in connection with an
Asset Sale, to the extent those losses were deducted in computing
Consolidated Net Income; plus
(2) provision for taxes based on income or profits of that Person and
its Restricted Subsidiaries for that period, to the extent that the
provision for taxes was deducted in computing Consolidated Net Income; plus
(3) consolidated interest expense of that Person and its Restricted
Subsidiaries for that period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations), to the extent
that any such expense was deducted in computing Consolidated Net Income;
plus
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(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any
such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of that Person and its
Restricted Subsidiaries for that period to the extent that the
depreciation, amortization and other non-cash expenses were deducted in
computing Consolidated Net Income; minus
(5) non-cash items increasing Consolidated Net Income for that period,
other than the accrual of revenue in the ordinary course of business, in
each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash expenses
of, a Restricted Subsidiary of the Company shall be added to Consolidated Net
Income to compute Consolidated Cash Flow of the Company only to the extent that
a corresponding amount would be permitted at the date of determination to be
dividended to the Company by that Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of that Person and its Restricted
Subsidiaries for that period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Restricted
Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded;
(5) any nonrecurring fees, expenses and costs relating to the
Recapitalization incurred on or prior to date of this Indenture, including,
without limitation, any fees and expenses incurred in connection with the
Credit Agreement, any compensation expense incurred in connection with the
cancellation, retirement or acceleration of vesting of stock options or
restricted stock, modifications of existing employment agreements and
expenses related to early extinguishments of debt, shall be excluded; and
(6) the Net Income of any Unrestricted Subsidiary shall be excluded,
whether or not distributed to the specified Person or one of its
Subsidiaries.
"Credit Agreement" means that certain Credit Agreement, dated as of
September 29, 1999, by and among the Company, certain of its Subsidiaries and
National City Bank, as agent, providing for up to $50.0 million of revolving
credit borrowings and $30.0 million of term loan borrowings, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement), commercial paper facilities or indentures, in
each case with banks or other lenders (or trustees therefor) providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables),
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letters of credit or debt securities, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the Credit Agreement; and
(2) after payment in full of all Obligations under the Credit Agreement,
any other Senior Debt permitted under the Indenture the principal amount of
which is $15.0 million or more and that has been designated by the Company
as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, (1) any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase the Capital
Stock upon the occurrence of a change of control or an asset sale shall not
constitute Disqualified Stock if the terms of the Capital Stock provide that the
Company may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments"
and (2) shares of common stock of the Company beneficially owned by any member
of the Company's management or any immediate family member thereof shall not
constitute Disqualified Stock.
"Domestic Subsidiary" means any Subsidiary that guarantees or otherwise
provides direct credit support for any Indebtedness of the Company; provided
that a person organized and existing outside the United States shall not be
considered a Domestic Subsidiary solely by virtue of direct borrowing
obligations under Credit Facilities guaranteed by the Company.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date of the Indenture, until such amounts are repaid and commitments are
permanently reduced.
"Fixed Charges" means, with respect to any specified Person and its
Restricted Subsidiaries for any period, the sum, without duplication, of:
(1) the consolidated interest expense of that Person and its Restricted
Subsidiaries for such period, whether paid or accrued, including, without
limitation, amortization of original issue discount (other than original
issue discount solely attributable to the Notes in connection with the
issuance of the Warrants), non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and the net effect of all
payments made or received pursuant to Hedging Obligations except expenses
incurred with respect to fixing or hedging the risks associated with
fluctuations in foreign currency exchange rates, but excluding amortization
of debt issuance costs; plus
(2) the consolidated interest of that Person and its Restricted
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by that Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of that Person or one of its Restricted Subsidiaries,
whether or not the Guarantee or Lien is called upon; plus
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(4) the product of (a) all dividends, whether paid or accrued and
whether or not in cash, on any series of preferred stock of that Person or
any of its Restricted Subsidiaries, other than dividends on Equity
Interests payable solely in Equity Interests of the Company (other than
Disqualified Stock) or to the Company or a Restricted Subsidiary of the
Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined effective
federal, state and local statutory tax rate of that Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
and its Restricted Subsidiaries for any period, the ratio of the Consolidated
Cash Flow of that Person and its Restricted Subsidiaries for such period to the
Fixed Charges of that Person and its Restricted Subsidiaries for such period. In
the event that the specified Person or any of its Restricted Subsidiaries
incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness
(other than ordinary working capital borrowings) or issues, repurchases or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated and on or prior to the date
on which the event for which the calculation of the Fixed Charge Coverage Ratio
is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee,
repayment, repurchase or redemption of Indebtedness, or such issuance,
repurchase or redemption of preferred stock, and the use of the proceeds
therefrom as if the same had occurred at the beginning of the applicable
four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions and dispositions that have been made by the specified
Person or any of its Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to the reference period and on
or prior to the Calculation Date shall be given pro forma effect as if they
had occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated on a
pro forma basis in accordance with Regulation S-X under the Securities Act
(giving effect to any Pro Forma Cost Savings), but without giving effect to
clause (3) of the proviso set forth in the definition of Consolidated Net
Income;
(2) if since the beginning of the reference period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of that period)
shall have made any acquisitions and dispositions including through mergers
or consolidations and including any related financing transactions that
would have required adjustment pursuant to this definition, then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect thereto
(as described in paragraph (1) above) for the reference period as if the
acquisition or disposition had occurred at the beginning of the applicable
four-quarter period;
(3) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded; and
(4) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Subsidiaries following
the Calculation Date.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company that is
not a Domestic Subsidiary or that is engaged in trade or business outside of the
United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
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assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means each of:
(1) Instron Asia Limited; Instron Japan Company, Ltd.; Instron/Lawrence
Corporation; Instron Realty Trust; Instron Schenck Testing Systems Corp.;
and IRT-II Trust; and
(2) any other subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the Indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of that Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;
(2) other agreements or arrangements designed solely to protect that
Person against fluctuations in interest rates; and
(3) agreements entered into solely for the purpose of fixing or hedging
the risks associated with fluctuations in foreign currency exchange rates.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of that Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not the Indebtedness is assumed by the
specified Person) and, to the extent not otherwise included, the Guarantee by
the specified Person of any indebtedness of any other Person if and to the
extent such Indebtedness would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. The term "Indebtedness" shall
not include amounts owing to any insurance company in connection with the
financing of insurance premiums permitted by the insurance company in the
ordinary course of business.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"Investments" means, with respect to any Person, all direct or indirect
investments by that Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, that Person is
no longer a Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition
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equal to the fair market value of the Equity Interests of that Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments." The acquisition by the Company or any
Subsidiary of the Company of a Person that holds an Investment in a third Person
shall be deemed to be an Investment by the Company or that Subsidiary in the
third Person in an amount equal to the fair market value of the Investment held
by the acquired Person in the third Person in an amount determined as provided
in the final paragraph of the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments."
"Kirtland" means Kirtland Capital Partners III L.P. and its Affiliates.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Liquidated Damages" has the meaning set forth under the caption
"-- Registration Rights; Liquidated Damages."
"Net Income" means, with respect to any specified Person, the net income
(loss) of that Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain or loss, together with any related provision for taxes on
the gain or loss, realized in connection with: (a) any Asset Sale; or (b)
the disposition of any securities by that Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of that Person or
any of its Restricted Subsidiaries; and
(2) any extraordinary gain or loss, together with any related provision
for taxes on the extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of all costs relating to
that Asset Sale, including, without limitation, legal, accounting and investment
banking fees, and sales commissions, and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof, in each case, after
taking into account any available tax credits or deductions and any tax sharing
arrangements, and amounts required to be applied to the repayment of
Indebtedness, other than Senior Debt, secured by a Lien on the asset or assets
that were the subject of the Asset Sale and any reserve for adjustment in
respect of the sale price of the asset or assets or for any indemnification
obligations assumed in connection with the Asset Sale, established in accordance
with GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender, provided, however, that the Company or any of its
Restricted Subsidiaries may act as a guarantor with respect to any Non-
Recourse Debt, provided that such Guarantee (i) shall be deemed an
incurrence of Indebtedness not otherwise permitted by clause (10) of the
covenant described above under "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock" and (ii) is a Restricted
Investment that must be permitted by the covenant described above under
"-- Certain Covenants -- Restricted Payments";
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of
any other Indebtedness (other than the Notes) of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and
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(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"Notes" means the exchange notes offered by this prospectus,
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means the business conducted by the Company and its
Subsidiaries on the date of this offering memorandum and businesses reasonably
related thereto or supportive thereof.
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted Subsidiary of the
Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of the Investment:
(a) the Person becomes a Restricted Subsidiary of the Company or a
Permitted Joint Venture of the Company that is engaged in a Permitted
Business; or
(b) the 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 of the Company
or a Permitted Joint Venture of the Company that is engaged in a
Permitted Business;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales";
(5) any acquisition of assets to the extent acquired in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the
Company;
(6) Hedging Obligations;
(7) Investments existing on the date of the Indenture and any amendment,
modification, restatement, extension, renewal, refunding, replacement,
refinancing, in whole or in part, thereof;
(8) extensions of trade credit or advances to customers on commercially
reasonable terms, each in the ordinary course of business;
(9) loans or advances to employees, officers, directors or consultants
otherwise permitted by the Indenture and in the ordinary course of business
not to exceed an aggregate of $1.0 million at any one time; and
(10) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (10) that are at any time
outstanding not to exceed the greater of $10.0 million and 10.0% of Total
Assets as of the date of such Investment.
In the event that an item meets the criteria of more than one of the
categories of Permitted Investments described in clauses (1) through (10)
above, the Company may, in its sole discretion, classify or reclassify that
item in any manner that complies with the Indenture and that item will be
treated as having been made pursuant to only one of such clauses.
"Permitted Joint Venture" means, with respect to any Person:
(1) any corporation, association, or other business entity engaged in a
Permitted Business of which 50% of the Voting Stock is at the time of
determination owned or controlled, directly or indirectly, by that Person
or one or more of the Restricted Subsidiaries of that Person or a
combination thereof (collectively, a "Group"), or
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(2) any corporation, association or other business entity engaged in a
Permitted Business as to which the Group, at the time of initial
Investment, has a contractual right to acquire 50% of the Voting Stock,
provided that the Investment shall cease to be a Permitted Joint Venture if
the Group fails to acquire 50% of the Voting Stock within six months of the
initial Investment.
"Permitted Junior Securities" means:
(1) Equity Interests in the Company or any Guarantor; or
(2) debt securities that are subordinated to all Senior Debt and any
debt securities issued in exchange for Senior Debt to substantially the
same extent as, or to a greater extent than, the Notes and the Subsidiary
Guarantees are subordinated to Senior Debt under the Indenture.
"Permitted Liens" means:
(1) Liens in favor of the Company or the Guarantors;
(2) Liens on property of a Person existing at the time the Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided that the Liens were in existence prior
to the contemplation of the merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with
the Company or the Restricted Subsidiary;
(3) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that the
Liens were in existence prior to the contemplation of the acquisition;
(4) Liens existing on the date of the Indenture;
(5) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries;
(6) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(7) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made thereunder; and
(8) Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that
do not exceed $5.0 million at any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of the
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus all accrued interest thereon
and the amount of all expenses and premiums incurred in connection
therewith);
(2) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes, the
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(3) the Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
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"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Pro Forma Cost Savings" means the reduction in costs that occurred during
the four-quarter reference period or subsequent to the reference period and on
or prior to the Calculation Date that were (1) directly attributable to an
acquisition and calculated on a basis that is consistent with Article 11 of
Regulation S-X under the Securities Act as in effect on the date of the
Indenture or (2) that have actually been implemented as of the applicable
Calculation Date by the business that was the subject of any acquisition within
six months of the date of the acquisition, that are supportable and quantifiable
by the underlying accounting records of the business, and are described, as
provided below, in an Officer's Certificate, as if, in the case of each of
clause (1) and (2), all the reductions in costs had been effected as of the
beginning of the period. Pro Forma Cost Savings described in clause (2) above
shall be set forth in reasonable specificity in a certificate delivered to the
Trustee from the Company's Chief Financial Officer and, in the case of Pro Forma
Cost Savings in excess of $5.0 million per four-quarter period, this certificate
shall be accompanied by a supporting opinion from an accounting firm of national
standing.
"Productive Assets" means any long term assets that are used or useful in a
Permitted Business.
"Qualified Equity Offering" means a primary offering of Capital Stock, or
rights, warrants or options to acquire Capital Stock of the Company (other than
Disqualified Stock) to Persons who are not Affiliates of the Company for net
proceeds to the Company of at least $15.0 million.
"Recapitalization" means the transactions described under the caption "The
Recapitalization" or related thereto.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means:
(1) all Indebtedness of the Company or any Guarantor outstanding under
Credit Facilities and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of the Company or any Guarantor permitted to
be incurred under the terms of the Indenture, unless the instrument under
which the Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Notes or any
Subsidiary Guarantee; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or owing
by the Company;
(2) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation of the
Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as the Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing the Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any of the interest or principal prior to the date
originally scheduled for the payment thereof.
"Subordinated Management Notes" means notes evidencing subordinated
obligations of the Company or any of its Restricted Subsidiaries issued to
current or former employees, directors, officers or consultants of the
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Company or any of its Restricted Subsidiaries in lieu of cash payments for any
Equity Interest of the Company being repurchased from such persons that:
(1) provide that for so long as a Default under the Notes has occurred
and is continuing, no payment shall be made with respect to any Obligations
under such Subordinated Management Notes; and
(2) are subordinated in full to the prior payment in cash of all amounts
due in respect of the Notes.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is that Person or a Subsidiary of that Person or (b) the
only general partners of which are that Person or one or more Subsidiaries
of that Person (or any combination thereof).
"Total Assets" means the total assets of the Company and its Restricted
Subsidiaries on a consolidated basis determined in accordance with GAAP, as
shown on the most recently available consolidated balance sheet of the Company
and its Restricted Subsidiaries.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that the Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or its Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
that Person's financial condition or to cause that Person to achieve any
specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to the designation and an
Officers' Certificate certifying that the designation complied with the
preceding conditions and was permitted by the covenant described above under the
caption "-- Certain Covenants -- Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of the Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date and, if the Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock," the
Company shall be in default of that covenant. The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that the designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of the Unrestricted Subsidiary and the designation shall only be
permitted if (1) the Indebtedness is permitted under the covenant described
under the caption "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock," calculated on a pro forma basis as if the
designation had occurred at the beginning of the four-quarter reference period;
and (2) no Default or Event of Default would be in existence following the
designation.
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"Voting Stock" of any Person as of any date means the Capital Stock of that
Person that is at the time entitled to vote in the election of the Board of
Directors of that Person.
"Warrants" means the warrants to purchase 30,654 shares of the Company's
common stock issued with the Notes on September 29, 1999 as part of a units
offering.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between the date and the making of the
payment; by
(2) the then outstanding principal amount of the Indebtedness.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the Indenture
without charge by writing to Instron Corporation, 100 Royall Street, Canton,
Massachusetts 02021, Attention: Chief Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, Notes will be issued in registered, global form
in minimum denominations of $1,000 and integral multiples of $1,000 in excess
thereof. The Notes initially will be represented by one or more Notes in
registered, global form without interest coupons (the "Global Notes"). The
Global Notes will be deposited upon issuance with the Trustee as custodian for
The Depository Trust Company ("DTC"), in New York, New York, and registered in
the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Book-Entry Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of Notes in certificated
form.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC,
Euroclear and Cedel are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them. The Company takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
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DTC has also advised the Company that, pursuant to procedures established
by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchaser with portions of the
principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Notes).
Investors in the Global Notes who are Participants in DTC's system may hold
their interests therein directly through DTC. Investors in the Global Notes who
are not Participants may hold their interests therein indirectly through
organizations (including Euroclear and Cedel) which are Participants in those
systems. All interests in a Global Note, including those held through Euroclear
or Cedel, may be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or Cedel may also be subject to the procedures
and requirements of such systems. The laws of some states require that certain
Persons take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interests in a Global Note to
these Persons will be limited to that extent. Because DTC can act only on behalf
of Participants, which in turn act on behalf of Indirect Participants, the
ability of a Person having beneficial interests in a Global Note to pledge these
interests to Persons that do not participate in the DTC system, or otherwise
take actions in respect of these interests, may be affected by the lack of a
physical certificate evidencing these interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and interest and premium and
Liquidated Damages, if any, on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company, and the
Trustee will treat the Persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving
payments and for all other purposes. Consequently, neither the Company, the
Trustee, nor any agent of the Company or the Trustee has or will have any
responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes; or
(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date unless DTC has reason to believe it will not receive
payment on such payment date. Each relevant Participant is credited with an
amount proportionate to its beneficial ownership of an interest in the principal
amount of the relevant security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee, or the Company. None of the Company,
or the Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the Notes, and the Company and the Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee for all purposes.
Subject to compliance with any transfer restrictions applicable to the
Notes, cross-market transfers between the Participants in DTC, on the one hand,
and Euroclear or Cedel participants, on the other hand, will be effected through
DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case
may be, by its respective depositary; however, these cross-market transactions
will require delivery of instructions to Euroclear
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or Cedel, as the case may be, by the counterparty in such system in accordance
with the rules and procedures and within the established deadlines (Brussels
time) of such system. Euroclear or Cedel, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the Global Note in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedel participants may
not deliver instructions directly to the depositories for Euroclear or Cedel.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of the portion of the aggregate principal amount of the Notes as to
which the Participant or Participants has or have given such direction. However,
if there is an Event of Default under the Notes, DTC reserves the right to
exchange the Global Notes for Notes in certificated form, and to distribute such
Notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures
to facilitate transfers of interests in the Global Notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to continue
to perform these procedures, and may discontinue these procedures at any time.
None of the Company, the Trustee, or any of their respective agents will have
any responsibility for the performance by DTC, Euroclear or Cedel or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies the Company that it is unwilling or unable to
continue as depositary for the Global Notes and the Company fails to
appoint a successor depositary or (b) has ceased to be a clearing agency
registered under the Exchange Act;
(2) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of the Certificated Notes; or
(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the Notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the Trustee, as
applicable, by or on behalf of DTC in accordance with the Indenture. In all
cases, Certificated Notes delivered in exchange for any Global Note or
beneficial interests in Global Notes will be registered in the names, and issued
in any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures) and will bear the applicable
restrictive legend referred to in "Notice to Investors," unless that legend is
not required by applicable law.
EXCHANGE OF CERTIFICATED NOTES FOR GLOBAL NOTES
Certificated Notes may not be exchanged for beneficial interests in any
Global Note unless the transferor first delivers to the Trustee a written
certificate (in the form provided in the Indenture) to the effect that the
transfer will comply with the appropriate transfer restrictions applicable to
the Notes
SAME DAY SETTLEMENT AND PAYMENT
The Company will make, or cause to be made, payments in respect of the
Notes represented by the Global Notes (including principal, premium, if any,
interest and Liquidated Damages, if any) by wire transfer of immediately
available funds to the accounts specified by the Global Note Holder. The Company
will make all payments of principal, interest and premium and Liquidated
Damages, if any, with respect to Certificated Notes by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. The Notes represented by the Global Notes are expected to be
eligible to trade in the PORTAL market and to trade in DTC's Same-Day Funds
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Settlement System, and any permitted secondary market trading activity in such
Notes will, therefore, be required by DTC to be settled in immediately available
funds. The Company expects that secondary trading in any Certificated Securities
will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Security from a Participant
in DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. DTC has advised the Company that cash received in
Euroclear or Cedel as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material U.S. federal income tax
consequences of the ownership and disposition of units to you if you are initial
purchasers of the units who purchase the units at their issue price, which is
generally the first price at which a substantial amount of units is sold to
persons other than bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers. This
discussion is based on the Internal Revenue Code, U.S. Treasury Department
regulations promulgated thereunder, administrative pronouncements, judicial
decisions, and interpretations of the foregoing, changes to any of which
subsequent to the date of this offering memorandum may affect the tax
consequences described herein, possibly with retroactive effect.
The following discusses only units held as capital assets within the
meaning of Section 1221 of the Code. It does not discuss all of the tax
consequences that may be relevant to you in light of your particular
circumstances or if you are subject to special rules, including, without
limitation, certain financial institutions, insurance companies, tax-exempt
entities, dealers in securities or currencies, traders in securities electing to
mark to market, or if you have acquired units as part of a straddle, hedge,
conversion transaction or other integrated investment. You should consult your
tax advisors with regard to the application of U.S. federal tax laws to your
particular situation, including the information reporting and backup withholding
rules discussed below, as well as any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction.
As used herein, the term non-U.S. holder means a beneficial owner of a unit
that is not a U.S. holder for U.S. federal income tax purposes. A U.S. holder
is:
- a citizen or resident of the United States;
- a corporation or partnership created or organized in or under the laws of
the United States or any political subdivision thereof;
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust if (i) a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more
U.S. persons have the authority to control all substantial decisions of
the trust; or (ii) the trust was in existence on August 20, 1996, was
treated as a United States Person within the meaning of the Code (a "U.S.
Person") prior to that date, and elected to continue to be treated as a
United States Person.
ALLOCATION OF THE ISSUE PRICE BETWEEN THE NOTE AND THE WARRANT
Each unit is comprised of a note and a warrant. Consequently, the issue
price of a unit for U.S. federal income tax purposes must be allocated between
the note and the warrant based on their respective fair market values at the
time of issuance and a holder's basis in each of the note and the warrant will
be equal to the amount allocated to such note and such warrant. Based on our
estimate of the fair market value of a warrant, we intend to treat approximately
$962.5 of the issue price of a unit as allocable to the note (which amount we
will therefore treat as the issue price of the note for U.S. federal income tax
purposes) and approximately $37.5 as allocable to the warrant. We intend to file
or cause to be filed information returns with the IRS based on such allocation.
Our allocation of the issue price is binding on you for U.S. federal income
tax purposes unless you disclose the use of a different allocation on your U.S.
federal income tax return for the year in which the unit was acquired. However,
our allocation is not binding on the IRS, and there can be no assurance that the
IRS will not challenge such allocation. The remainder of this discussion assumes
that our allocation will be respected for tax purposes.
TAX CONSEQUENCES TO U.S. HOLDERS
ORIGINAL ISSUE DISCOUNT ON THE NOTES. A debt obligation that has an issue
price that is less than its stated redemption price at maturity ("SRPM") by more
than a de minimis amount will be treated as issued with original issue discount
("OID") for U.S. federal income tax purposes. The SRPM of a note is the sum of
all
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payments to be made on the note that are not "qualified stated interest"
payments. "Qualified stated interest" generally means stated interest that is
unconditionally payable at least annually at a single fixed rate (or at certain
qualifying variable rates). The semi-annual interest payments on the notes
should constitute qualified stated interest. Accordingly, the SRPM of the notes
should equal their principal amount.
The issue price of a note is less than its SRPM by more than a de minimis
amount if the difference between the SRPM of the note and its issue price is at
least 0.25 percent of the SRPM multiplied by the number of complete years to
maturity.
If the notes are issued with OID in excess of a de minimis amount, U.S.
holders must generally include OID in gross income (as interest) for U.S.
federal income tax purposes on an annual basis under a constant yield method
without regard to the holder's method of accounting for tax purposes. As a
result, U.S. holders generally will be required to include OID in income in
advance of the receipt of some or all of the related cash payments. The amount
of OID includible in income by a U.S. holder of a note is the sum of the "daily
portions" of OID with respect to the note for each day during the holder's
taxable year on which it held such note. The daily portion is determined by
allocating to each day in any "accrual period" a pro rata portion of the OID
allocable to that accrual period. The accrual period for a note may be of any
length and may vary in length over the term of the note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs on the first day or the final day of an accrual
period.
In general, the amount of OID allocable to an accrual period is an amount
equal to the excess (if any) of (a) the product of the note's "adjusted issue
price" at the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual period and
properly adjusted for the length of the accrual period) over (b) the sum of any
qualified stated interest allocable to the accrual period. The following rules
apply to determine OID allocable to an accrual period:
- if an interval between payments of qualified stated interest contains
more than one accrual period, the amount of qualified stated interest
payable at the end of the interval is allocated on a pro rata basis to
each accrual period in the interval and the adjusted issue price at
the beginning of each accrual period in the interval must be increased
by the amount of any qualified stated interest that has accrued prior
to the beginning of the first day of the accrual period but is not
payable until the end of the interval;
- if the accrual period is the final accrual period, the amount of OID
allocable to the final accrual period is the difference between the
amount payable at maturity (other than a payment of qualified stated
interest) and the adjusted issue price of the note at the beginning of
the final accrual period; and
- if all accrual periods are of equal length, except for an initial
short accrual period, the amount of OID allocable to the initial short
accrual period may be computed under any reasonable method.
The adjusted issue price of a note at the beginning of any accrual period
is equal to its issue price increased by the accrued OID for each prior accrual
period and reduced by any prior payments made on such note that were not
qualified stated interest payments. Under these rules, U.S. holders of notes
with OID will be required to include in income increasingly greater amounts of
OID in successive accrual periods.
OPTIONAL REDEMPTION OF THE NOTES. The notes are redeemable at our option in
whole or in part and subject to certain conditions. For purposes of computing
the notes' yield to maturity, we will be deemed to exercise our option to redeem
the notes if such deemed exercise could produce (utilizing the redemption price
on any date on which the option could be exercised as the SRPM) a lower yield on
the notes than the stated yield to maturity. Our option to redeem the notes
prior to their stated maturity date should not affect the computation of the
amount of OID on the notes.
SALE, EXCHANGE OR DISPOSITION OF THE NOTES. Upon the sale, exchange or
other disposition of a note, you generally will recognize capital gain or loss
equal to the difference between the amount of cash and the fair market value of
property received by you (except to the extent attributable to accrued interest,
which will be treated as interest) and your adjusted tax basis in the note
(i.e., its adjusted issue price). Such capital gain or loss
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generally will be long-term capital gain or loss if the U.S. holder has held the
note for more than one year at the time of the sale, exchange or other
disposition.
EXCHANGE NOTES. The exchange of the notes for exchange notes as described
herein will not constitute a "significant modification" of the notes for U.S.
federal income tax purposes and, accordingly, the exchange notes received will
be treated as a continuation of the original notes in the hands of the U.S.
holder. As a result, there will be no U.S. federal income tax consequences to a
U.S. holder on the exchange of a note for an exchange note.
WARRANTS. Although the matter is not free from doubt, and the form of the
warrants may be respected for United States federal income tax purposes, it is
possible that the warrants will be treated for United States federal income tax
purposes as warrant shares due to, among other things, their nominal exercise
price and lack of any meaningful contingency. Although it is unclear whether the
warrants will be treated as warrants or stock for United States federal income
tax purposes, the following discussion, except as otherwise indicated, assumes
that the warrants would be characterized as warrants.
A U.S. holder will generally not recognize any gain or loss upon exercise
of any warrants (except with respect to any cash received in lieu of a
fractional warrant share). A U.S. holder will have an initial tax basis in the
warrant shares received on exercise of the warrants equal to the sum of its tax
basis in the warrants and the aggregate cash exercise price, if any, paid in
respect of such exercise. Generally, the holding period of shares received upon
the exercise of warrants commences on the day after the warrants are exercised,
although it is possible that, in a cashless exercise of a warrant, the holding
period of such shares would include the holding period of the warrant.
If a warrant expires without being exercised, then a U.S. holder will
recognize a capital loss in an amount equal to its tax basis in the warrant.
Upon the sale or exchange of a warrant, a U.S. holder will generally recognize a
capital gain or loss equal to the difference, if any, between the amount
realized on such sale or exchange and the U.S. holder's tax basis in such
warrant. Such capital gain or loss will be long-term capital gain or loss if, at
the time of such sale or exchange, the warrant has been held for more than one
year.
Under Section 305 of the Internal Revenue Code, a U.S. holder of a warrant
may be deemed to have received a constructive distribution from Instron, which
may result in the inclusion of ordinary dividend income, in the event of certain
adjustments to the number of warrant shares to be issued on exercise of a
warrant.
Because the exercise price of the warrants may constitute a nominal amount,
the IRS may consider a warrant to be constructively exercised for United States
federal income tax purposes on the day on which the warrant first becomes
exercisable or possibly on the day of issuance. In that event, (i) no gain or
loss will be recognized to a U.S. holder upon either such deemed exercise or
actual exercise of the warrant; (ii) the adjusted tax basis of the warrant
shares deemed received will be equal to the adjusted tax basis of the warrant
until the warrant is actually exercised at which time the adjusted tax basis of
warrant shares would be increased by the exercise price paid; (iii) the holding
period of the warrant shares deemed received will begin on the day after the day
of constructive exercise; and (iv) the United States federal income tax
consequences of the ownership and disposition of the warrant shares deemed
received will be the same as if the warrant deemed exercised actually was
warrant shares.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Backup withholding of U.S.
federal income tax at a rate of 31% may apply to payments made in respect of a
note (including OID), payments of the proceeds from the sale of a note,
dividends received with respect to warrant shares and payments of the proceeds
from the sale of warrant shares, to a U.S. holder who is not an exempt recipient
and who fails to provide a correct taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend or interest income. Generally, individuals are not exempt recipients,
whereas corporations and certain other entities are exempt recipients. In
general, information reporting requirements will apply to certain payments made
in respect of the note or a warrant share of a U.S. holder, unless the holder is
an exempt recipient or otherwise establishes an exemption.
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Any amounts withheld from a payment to a U.S. holder under the backup
withholding rules generally will be allowed as a credit against that holder's
federal income tax liability and may entitle that holder to a refund, provided
that the required information is furnished in a timely manner to the IRS.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
PAYMENTS OF INTEREST ON THE NOTES. Subject to the discussion below
concerning backup withholding, payments of interest on the notes by us or our
paying agent to any non-U.S. holder will not be subject to U.S. federal
withholding tax, provided that:
- the interest is not effectively connected with the conduct by that holder
of a trade or business in the United States;
- the holder does not own, actually or constructively, 10% or more of the
total combined voting power of all classes of our stock entitled to vote;
- the holder is not a "controlled foreign corporation" with respect to
which we are a "related person" (in each case within the meaning of the
Code); and
- the certification requirement, as described below, has been fulfilled
with respect to the beneficial owner.
The certification requirement referred to above will be fulfilled if the
beneficial owner of a note certifies on IRS Form W-8, Form W-8 BEN or other
appropriate successor form, under penalties of perjury, that it is not a U.S.
Person and provides its name and address, and (i) that beneficial owner files
the Form W-8, Form W-8 BEN or other appropriate successor form with the
withholding agent or (ii), in the case of a note held by a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business and is holding the
note on behalf of the beneficial owner, that financial institution files with
the withholding agent a statement that it has received the Form W-8, Form W-8
BEN or other appropriate successor form from the non-U.S. holder and furnishes
the withholding agent with a copy thereof. With respect to notes held by a
foreign partnership, under current law, the Form W-8 may be provided by the
foreign partnership. However, unless a foreign partnership has entered into a
withholding agreement with the IRS, for interest paid with respect to a note
after December 31, 2000, the foreign partnership will generally be required (and
may be permitted earlier), in addition to providing an intermediary Form W-8
(Form W-8IMY), to attach an appropriate certification by each partner.
Prospective investors, including foreign partnerships and their partners, should
consult their tax advisors regarding possible additional reporting requirements.
The gross amount of payments of interest that do not qualify for the
exception from withholding described above and that are not effectively
connected with the conduct of a U.S. trade or business will be subject to U.S.
withholding tax at a rate of 30% unless a treaty applies to reduce or eliminate
withholding and the non-U.S. holder properly certifies to its entitlement to the
treaty benefits on IRS Form 1001, Form W-8BEN or other appropriate successor
form.
DIVIDENDS ON WARRANT SHARES. Dividends paid to a non-U.S. holder of warrant
shares generally will be subject to withholding tax at a rate of 30% or such
lower rate as may be specified by an applicable income tax treaty. Currently,
for purposes of determining whether tax is to be withheld at a rate of 30% or at
a reduced treaty rate, we ordinarily will presume that dividends paid on or
before December 31, 2000 to an address in a foreign country are paid to a
resident of such country absent knowledge that such presumption is not
warranted. After December 31, 2000, a non-U.S. holder will be required to
properly certify its entitlement to the treaty benefits on IRS Form W-8BEN or
other appropriate successor form.
EFFECTIVELY CONNECTED INTEREST OR DIVIDEND INCOME. Interest on a note or
dividends with respect to the warrant shares that are effectively connected with
the conduct of a trade or business in the United States by a non-U.S. holder,
although exempt from withholding tax, may be subject to the U.S. income tax at
graduated rates as if such interest or dividends were earned by a U.S. holder.
The non-U.S. holder will be exempt from withholding tax if it properly certifies
on IRS Form 4224, Form W-8ECI or other appropriate successor form that the
income is effectively connected with the conduct of a U.S. trade or business.
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SALE, EXCHANGE OR DISPOSITION OF THE NOTES, WARRANTS OR WARRANT
SHARES. Subject to the discussion below concerning backup withholding, a
non-U.S. holder of a note, warrant or warrant shares will not be subject to U.S.
federal income tax on gain realized on the sale, exchange or other disposition
of that note, warrant or warrant shares unless:
- that holder is an individual who is present in the United States for 183
days or more in the taxable year of disposition, and some other
conditions are met;
- that gain is effectively connected with the conduct by the holder of a
trade or business in the United States;
- the holder is subject to the special rules applicable to some former
citizens and residents of the United States; or
- in the case of the sale, exchange or other disposition of a warrant or
warrant share, the warrant or warrant share was a United States real
property interest as defined in Section 897(c)(1) of the Internal Revenue
Code ("USRPI") at any time during the five year period prior to the sale,
exchange or other disposition or at any time during the time that the
non-U.S. holder held such warrant or warrant share, whichever time was
shorter.
A warrant or warrant share would be a USRPI only if, during the time period
specified above, our company had been a United States real property holding
corporation as defined in Section 897(c)(2) of the Internal Revenue Code
("USRPHC"). We believe that our company is not, has not been and will not become
a USRPHC for U.S. federal income tax purposes. If, at the time of the
disposition of a warrant or warrant shares, the Common Stock is considered to be
regularly traded on an established securities market, these USRPI rules would
only apply to a non-U.S. holder who directly or constructively had owned more
than 5% of such series of common stock during the relevant time period.
EXCHANGE NOTES. The exchange of notes for exchange notes as described
herein will not constitute a "significant modification" of the notes for U.S.
federal income tax purposes and, accordingly, the exchange notes received will
be treated as a continuation of the original notes in the hands of the non-U.S.
holder. As a result, there will be no U.S. federal income tax consequences to a
non-U.S. holder on the exchange of a note for an exchange note.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Where required, we will
report annually to the IRS and to a non-U.S. holder the amount of any interest
or dividends paid to the non-U.S. holder and any tax withheld with respect to
that interest or dividends.
Under current U.S. federal income tax law, backup withholding at a rate of
31% will not apply to payments of interest to a non-U.S. holder by us or our
paying agent on a note if the certifications described above under "Non-U.S.
Holders--Payment of Interest" are received, provided that we or the paying
agent, as the case may be, does not have actual knowledge that the payee is a
U.S. Person. Backup withholding generally will not apply to dividends paid on or
before December 31, 2000 to a non-U.S. holder at an address outside the United
States, provided we or our paying agent does not have actual knowledge that the
payee is a U.S. Person. After December 31, 2000, however, a non-U.S. holder will
be subject to backup withholding unless the applicable certification
requirements are met.
Under current Treasury regulations, payments on the sale, exchange or other
disposition of a note, warrant or warrant share made to or through a foreign
office of a broker generally will not be subject to backup withholding or
information reporting. However, if that broker is for U.S. federal income tax
purposes a U.S. person, a controlled foreign corporation, a foreign person that
derives 50% or more of its gross income from the conduct of a U.S. trade or
business for a specified three-year period or (generally in the case of payments
made after December 31, 2000) a foreign partnership with some connections to the
United States, then information reporting will be required unless the broker has
in its records documentary evidence that the beneficial owner is not a U.S.
Person and some other conditions are met or the beneficial owner otherwise
establishes an exemption. Backup withholding may apply to any payment that the
broker is required to report if the broker has actual knowledge that the payee
is a U.S. Person. Payments to or through the U.S. office of a broker will be
subject to
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backup withholding and information reporting unless the beneficial owner
certifies, under penalties of perjury, that it is not a U.S. Person or otherwise
establishes an exemption.
New Treasury regulations which are generally effective for payments after
December 31, 2000 provide presumptions under which a non-U.S. holder will be
subject to backup withholding and information reporting unless the holder
certifies as to its non-U.S. status or otherwise establishes an exemption. In
addition, the new Treasury regulations change some procedural requirements
relating to establishing a holder's non-U.S. status.
Any amounts withheld from a payment to a non-U.S. holder under the backup
withholding rules generally will be allowed as a credit against that holder's
U.S. federal income tax liability and may entitle that holder to a refund,
provided that the required information is furnished in a timely manner to the
IRS.
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PLAN OF DISTRIBUTION
Except as described below, a broker-dealer may not participate in the
exchange offer in connection with a distribution of the exchange notes. Each
broker-dealer that receives exchange notes for its own account in accordance
with the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the exchange notes. 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 exchange notes received for its own account in
exchange for outstanding notes where those outstanding notes were acquired as a
result of market-making activities or other trading activities. We have agreed
that for a period of 90 days after the expiration date of the exchange offer, we
will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
in accordance with 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 exchange notes or a combination of those
methods or resale, at market prices prevailing at the time of resale, at prices
related to the prevailing market prices, or negotiated prices. Any resale may be
made directly to purchasers or through brokers or dealers who may receive
compensation in the form of commission or concessions from any broker-dealer
and/or to the purchasers of any exchange notes. Any broker or dealer that
participates in a distribution of the exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933, and any profit
on the resale of exchange notes and any commissions or concessions received by
those persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
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.
We have agreed to pay all expenses incident to the exchange offer other
than commissions or concessions of any brokers or dealers and expenses of
counsel for the holders of the exchange notes and will indemnify the holders of
the exchange notes, including any broker-dealers, against some liabilities,
including some liabilities under the Securities Act.
LEGAL MATTERS
The validity of the exchange notes will be passed upon for Instron by
Jones, Day, Reavis & Pogue, Cleveland, Ohio.
EXPERTS
The financial statements as of December 31, 1998 and 1997 and for each of
the three years in the period ended December 31, 1998 included in this
Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
We have filed with the Commission a registration statement on Form S-4
pursuant to the Securities Act and the rules and regulations promulgated under
the securities laws covering the exchange offer contemplated by this prospectus.
This prospectus does not contain all the information set forth in the
registration statement. For further information with respect to us and the
exchange offer, see the registration statement.
We are not currently subject to the periodic reporting and other
informational requirements of the Exchange Act. We have agreed that, whether or
not it is required to do so by the rules and regulations of the Commission, for
so long as any of the notes remain outstanding, we will furnish to the holders
of the notes and file with the Commission, copies of the financial and other
information that would be contained in the annual reports and quarterly reports
that we would be required to file with the Commission if we were subject to the
requirements of the Exchange Act. We will also make these reports available to
prospective purchasers of the exchange notes, and to securities analysts and
broker-dealers upon their request.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Statements of Operations for the nine months
ended October 2, 1999 and September 26, 1998........... F-2
Consolidated Balance Sheets as of October 2, 1999 and
December 31, 1998...................................... F-3
Consolidated Statements of Cash Flows for the nine months
ended October 2, 1999 and September 26, 1998........... F-4
Consolidated Statements of Comprehensive Income for the
nine months ended October 2, 1999 and September 26,
1998................................................... F-6
Notes to Consolidated Financial Statements................ F-7
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants......................... F-12
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996....................... F-13
Consolidated Balance Sheets as of December 31, 1998 and
1997................................................... F-14
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996....................... F-15
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1997 and 1998........... F-16
Notes to Consolidated Financial Statements................ F-17
FINANCIAL STATEMENT SCHEDULE:
Report of Independent Accountants......................... F-28
Consolidated Valuation Accounts for the years ended
December 31, 1998, 1997 and 1996....................... F-29
</TABLE>
F-1
<PAGE> 112
INSTRON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------
OCTOBER 2, SEPTEMBER 26,
1999 1998
------------ ---------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C>
REVENUE:
Sales..................................................... $125,431 $ 94,552
Service................................................... 25,522 20,409
-------- --------
Total revenue..................................... 150,953 114,961
-------- --------
Cost of revenue:
Sales..................................................... 75,117 55,145
Service................................................... 17,587 13,622
-------- --------
Total cost of revenue............................. 92,704 68,767
-------- --------
Gross profit...................................... 58,249 46,194
-------- --------
Operating expenses:
Selling and administrative................................ 41,558 32,342
Research and development.................................. 8,239 5,191
Special items charge...................................... -- 4,975
Recapitalization compensation expense..................... 12,606 --
-------- --------
Total operating expenses.......................... 62,403 42,508
-------- --------
Income (loss) from operations..................... (4,154) 3,686
-------- --------
Other (income) expense:
Interest (income) expense................................. 367 13
Foreign exchange losses................................... 26 273
Gain on sale of land...................................... -- (11,076)
-------- --------
Total other (income) expenses..................... 393 (10,790)
-------- --------
Income (loss) before income taxes........................... (4,547) 14,476
Provision (benefit) for income taxes........................ (190) 6,648
-------- --------
Net income (loss)........................................... $ (4,357) $ 7,828
======== ========
Weighted average number of basic common shares.............. 6,866 6,589
======== ========
Earnings (loss) per share -- basic.......................... $ (0.63) $ 1.19
======== ========
Weighted average number of diluted common shares............ 6,866 7,087
======== ========
Earnings (loss) per share -- diluted........................ $ (0.63) $ 1.10
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-2
<PAGE> 113
INSTRON CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 2, 1999 DECEMBER 31,1998
--------------- ----------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 9,118 $ 7,209
Accounts receivable (net of allowance for doubtful
accounts of $726 in 1999 and $800 in 1998)............. 60,683 65,766
Inventories............................................... 37,865 36,121
Accrued and deferred income taxes......................... 6,744 3,060
Prepaid expenses and other current assets................. 3,045 2,223
-------- --------
Total current assets.............................. 117,455 114,379
-------- --------
Property, plant and equipment, net.......................... 24,073 24,001
Goodwill.................................................... 11,258 12,384
Deferred income taxes....................................... 1,866 904
Other assets................................................ 5,345 6,586
Deferred financing costs.................................... 8,642 --
-------- --------
Total assets...................................... $168,639 $158,254
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short term borrowings..................................... $ 19,644 $ 6,416
Accounts payable.......................................... 13,007 15,807
Accrued liabilities....................................... 33,413 23,051
Accrued employee compensation and benefits................ 5,648 6,798
Advance payments received on contracts.................... 11,523 7,066
-------- --------
Total current liabilities......................... 83,235 59,138
Long-term debt:
Senior term loan.......................................... 30,000 --
13 1/4% Senior subordinated notes due 2009................ 60,000 --
Other long term debt...................................... -- 13,216
-------- --------
90,000 13,216
Pension and other long-term liabilities..................... 9,235 6,316
-------- --------
Total liabilities................................. 182,470 78,670
Commitments and Contingencies............................... -- --
Stockholders' equity (deficit):
Common stock, $1.00 par value, 10,000,000 shares
authorized; 0 and 7,051,968 shares issued,
respectively........................................... -- 7,052
Recapitalized common stock, $0.01 par value; 1,000,000
shares authorized; 557,431 and 0 shares issued,
respectively........................................... 557 --
Additional paid in capital................................ 50,179 8,727
Deferred compensation..................................... -- (2,662)
Retained earnings (accumulated deficit)................... (58,408) 72,496
Accumulated other comprehensive loss...................... (6,159) (4,699)
-------- --------
(13,831) 80,914
Less: Treasury stock...................................... -- 1,330
-------- --------
Total stockholders' equity (deficit).............. (13,831) 79,584
-------- --------
Total liabilities and stockholders' equity
(deficit)....................................... $168,639 $158,254
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-3
<PAGE> 114
INSTRON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
OCTOBER 2, SEPTEMBER 26,
1999 1998
---------- -------------
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ (4,357) $ 7,828
Adjustments to reconcile net income to net cash provided
by operating activities:
(Gain) on the sale of property, plant and equipment.... -- (6,868)
Depreciation and amortization.......................... 6,446 5,167
Non-cash recapitalization related costs................ 3,874 --
Provision for losses on accounts receivable............ 103 23
Deferred taxes......................................... (962) (138)
Changes in assets and liabilities, excluding the effects
from purchase of business:
Income tax receivable................................ (3,684) --
(Increase) decrease in accounts receivable........... 5,015 (477)
(Increase) decrease in inventories................... (1,739) (4,887)
(Increase) decrease in prepaid expenses and other
current assets...................................... (799) 1,504
Increase (decrease) in accounts payable and accrued
expenses............................................ 6,412 (7,904)
Increase in other long-term liabilities.............. 1,719 1,015
Other, net........................................... 4,194 96
-------- -------
Net cash provided (used) by operating activities..... 16,222 (4,641)
Cash flows from investing activities:
Proceeds from the sale of property, plant and equipment... 131 13,566
Capital expenditures...................................... (4,116) (5,182)
Purchase of business...................................... -- (12,628)
Capitalized software costs................................ (1,698) (787)
Other, net................................................ 274 4
-------- -------
Net cash used by investing activities.................. (5,409) (5,027)
-------- -------
Cash flows from financing activities:
Net borrowings (payments) of lines of credit and borrowing
arrangements prior to recapitalization................. (16,488) 9,070
Borrowings under new revolving line of credit............. 16,500 --
Issuance of senior subordinated notes..................... 60,000 --
Issuance of senior term loan.............................. 30,000 --
Net borrowings, Revolver line of credit................... -- --
Debt financing fees....................................... (6,391) --
Recapitalization related fees............................. (3,761) --
Issuance of recapitalized common stock.................... 54,173 --
Cash dividends paid....................................... (268) (794)
Proceeds from exercise of stock options................... 387 1,922
Purchase of treasury stock, common stock and options
outstanding............................................ (143,041) (616)
-------- -------
Net cash provided (used) in financing activities....... (8,889) 9,582
-------- -------
</TABLE>
F-4
<PAGE> 115
INSTRON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
OCTOBER 2, SEPTEMBER 26,
1999 1998
---------- -------------
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
<S> <C> <C>
Effect of exchange rate changes on cash..................... $ (15) $ (7)
-------- -------
Net increase (decrease) in cash and cash equivalents........ 1,909 (93)
Cash and cash equivalents at beginning of year.............. 7,209 2,566
-------- -------
Cash and cash equivalents at end of period.................. $ 9,118 $ 2,473
======== =======
Supplemental disclosures of cash flow information: Cash paid
during the year for:
Interest (net of amount capitalized)................... $ 778 $ 1,009
Income taxes........................................... 3,024 6,196
Conversion of common stock to preferred stock............... 325 --
Conversion of preferred stock to common stock............... 325 --
Issuance of common stock warrants........................... 2,250 --
Retirement of treasury stock................................ 1,330 --
Supplemental disclosures of non-cash investing and financing
activities:
Liabilities incurred or assumed in business
acquisitions........................................... $ 1,878
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-5
<PAGE> 116
INSTRON CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
OCTOBER 2, SEPTEMBER 26,
1999 1998
---------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)........................................... $(4,357) $7,828
Other comprehensive income (loss):
Foreign currency translation adjustments.................. (1,460) 628
------- ------
Comprehensive income (loss)............................ $(5,817) $8,456
======= ======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-6
<PAGE> 117
INSTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 2, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. Certain reclassifications were made to the
prior year amounts to conform with the 1999 presentation. For further
information, refer to the consolidated financial statements and footnotes
included in the Company's annual report on Form 10-K for the year ended December
31, 1998.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that effect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported periods. Actual results could differ from those
estimates.
The consolidated results for the third quarter and the first nine months of
1999 include the results of Satec, which was acquired in August 1998, the
results of IST due to Instron acquiring the remaining 49% of IST in the fourth
quarter of 1998 and the execution of the Recapitalization and Merger with
Kirtland Capital Partners III, L.P.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended October 2, 1999, are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1999.
2. EARNINGS PER SHARE
Basic earnings per share is computed by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed by dividing net income by the weighted average number of common shares,
plus the dilutive effect of any potential common shares outstanding using the
"treasury stock method." The dilutive potential common shares have been excluded
from the calculation of weighted average number of dilutive common shares
outstanding for the three months and nine months ended October 2, 1999, as their
inclusion would have an antidilutive effect on loss per share.
The following is a reconciliation of the basic and diluted EPS
calculations:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-------------------------------------
OCTOBER 2, 1999 SEPTEMBER 26, 1998
--------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Net income........................................... $(4,357) $7,828
======= ======
Weighted average number of basic common shares
outstanding................................... 6,866 6,589
Dilutive potential common shares (a)............ -- 498
------- ------
Weighted average of common and dilutive
shares........................................ 6,866 7,087
======= ======
Basic earnings per share............................. $ (0.63) $ 1.19
======= ======
Diluted earnings per share........................... $ (0.63) $ 1.10
======= ======
</TABLE>
F-7
<PAGE> 118
INSTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
OCTOBER 2, 1999
(UNAUDITED)
- ---------------
(a) As of October 2, 1999, the Company had options outstanding to purchase
50,860 shares of recapitalized common stock and warrants outstanding to
purchase 30,654 shares of recapitalized common stock. These potential common
shares have been excluded from the diluted earnings per share computation as
their inclusion would have an antidilutive effect on loss per share.
3. INVENTORIES
<TABLE>
<CAPTION>
OCTOBER 2, 1999 DECEMBER 31, 1998
--------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Raw Materials........................................ $13,573 $13,257
Work-in-process...................................... 16,154 16,560
Finished goods....................................... 8,138 6,304
------- -------
$37,865 $36,121
======= =======
</TABLE>
Inventories are valued at the lower of cost or market (net realizable
value). The last-in, first-out (LIFO) method of determining cost is principally
used for inventories in the United States and the Asian branches. The Company
uses the first-in, first-out (FIFO) method for all other inventories.
Inventories valued at LIFO amounted to $7,497,000 and $9,056,000 at October 2,
1999 and December 31, 1998, respectively. The excess of current cost over stated
LIFO value was $5,637,000 at October 2, 1999 and $5,205,000 at December 31,
1998.
4. SPECIAL ITEMS CHARGE
During the first quarter of 1998 the Company recorded a special items
charge to operations to undertake a consolidation of its European operations and
write-down the value of certain non-performing assets. A pre-tax charge of $5.0
million was taken in the quarter ended March 28, 1998 to cover these actions.
The special items charge includes termination benefits, the costs to exit a
manufacturing facility, other asset impairments and other related costs. The
Company closed down a manufacturing plant in Germany, relocated sales and
service support personnel to another location in Germany and moved the
manufacturing operation to the United Kingdom. During fiscal year 1998 and the
first nine months of 1999, the Company has paid $1.4 million for termination
benefits and related costs and $1.9 million for the costs of this action. In
addition, the Company wrote-off $1.0 million of non-performing assets in 1998
primarily relating to its interest in Lightspeed Simulation Systems. The
remaining balance of liability related to the special items charge at October 2,
1999 totaled approximately $.7 million and relates to the Company's obligation
under a long-term lease agreement in Germany, partially offset by estimated
income under a sub-lease arrangement.
5. SALE OF LAND
On March 27, 1998, the Company completed the sale of 42 acres of its
66-acre site off Route 128 in Canton, Massachusetts for $13.5 million. As a
result of this transaction, a non-operating pre-tax gain of $11.1 million was
recorded in the first quarter of 1998.
6. RECAPITALIZATION
On May 6, 1999, Instron Corporation (the "Company") entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Kirtland Capital
Partners III L.P. ("Kirtland") and ISN Acquisition Corporation, a corporation
newly formed by Kirtland ("MergerCo"), pursuant to which Kirtland and certain
affiliates, together with members of the Company's management and certain
members of the Company's Board of Directors who are also stockholders
(collectively, the "Rollover Stockholders"), have acquired the Company.
F-8
<PAGE> 119
INSTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
OCTOBER 2, 1999
(UNAUDITED)
On September 3, 1999, the Company's stockholders approved the Agreement and
Plan of Merger dated as of May 6, 1999, as amended. The Company completed its
merger by and among Instron Corporation, ISN Acquisition Corporation and
Kirtland Capital Partners III L.P. on September 29, 1999. The merger and related
transactions were treated as a Recapitalization (the "Recapitalization") for
financial reporting purposes. Accordingly, the historical basis of the Company's
assets and liabilities was not affected by these transactions.
Under the Merger Agreement, the MergerCo merged with and into the Company
with the Company continuing as the surviving corporation (the "Merger").
Pursuant to the Merger, each outstanding share of the Company's common stock
(except for shares held by the Company, its subsidiaries and MergerCo), have
been converted into the right to receive a cash payment of $22.00, without
interest. Certain shares of the Company's common stock held by the Rollover
Stockholders have been converted into shares of stock of the surviving
corporation.
As of October 2, 1999, the Company has incurred compensation expenses of
$12.6 million related to the Recapitalization. In addition, the Company incurred
costs of $12.4 million which relate to the Merger Agreement and the
Recapitalization. Of these costs, $3.8 million was attributable to the cost of
equity, $6.3 million, including the value of warrants issued, was attributable
to the placement of the 13 1/4% Senior Subordinated Notes and $2.3 million was
attributable to the Senior Credit Facility. The costs associated with the Senior
Subordinated Notes and Senior Credit Facility will be amortized over a period of
ten (10) years and five and one-half (5 1/2) years, respectively.
The following is a summary of financing fees related to the
Recapitalization:
<TABLE>
<CAPTION>
$60 MILLION $80 MILLION
13 1/4 SUBORDINATED SENIOR CREDIT
NOTES FACILITY EQUITY
------------------- ------------- ------
<S> <C> <C> <C>
Financing fees........................ $4,046 $2,347 $3,761
Value of warrants issued.............. 2,250 -- --
-------- -------- ------
Total costs........................... $6,296 $2,347 $3,761
Amortization period................... 10 years 5 1/2 years
</TABLE>
F-9
<PAGE> 120
INSTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
OCTOBER 2, 1999
(UNAUDITED)
The following is a summary of changes in stockholders' equity (deficit):
<TABLE>
<CAPTION>
RETAINED ACCUMULATED
RECAPITALIZED ADDITIONAL EARNINGS OTHER
PREFERRED COMMON COMMON PAID IN DEFERRED (ACCUMULATED COMPENSATION
SERIES B STOCK STOCK CAPITAL COMPENSATION DEFICIT) LOSS
--------- ------- ------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998.... $ 7,052 $ 8,728 $(2,662) $ 72,496 $(4,699)
Net income.................... 1,593
Other comprehensive income
(loss)...................... (1,813)
Comprehensive income (loss).....
Cash dividends declared ($.04
per share).................... (268)
13,132 shares issued under
employee stock option plans... 13 127
Compensation expense recognized
under the 1992 Stock Incentive
Plan.......................... 122
----- ------- ---- -------- ------- --------- -------
BALANCE AT APRIL 3, 1999........ 7,065 8,855 (2,540) 73,822 (6,512)
Net income.................... 1,863
Other comprehensive (loss).... (730)
Comprehensive income............
21,610 shares issued under
employee stock option plans... 22 225
Compensation expense recognized
under the 1992 Stock Incentive
Plan.......................... 122
----- ------- ---- -------- ------- --------- -------
BALANCE AT JULY 3, 1999......... 7,087 9,080 (2,419) 75,685 (7,242)
Net Income.................... (7,813)
Other comprehensive income
(loss)...................... 1,083
Comprehensive income (loss).....
Compensation expense recognized
under 1992 Stock Incentive
Plan.......................... 122
RECAPITALIZATION RELATED
TRANSACTIONS:
Retirement of treasury
stock....................... (108) (1,222)
Recognition of unearned
compensation................ 2,297
Conversion of common stock to
preferred stock............. $ 325 (325)
Repurchase of common stock.... (6,654) (10,108) (126,279)
Conversion of preferred stock
to recapitalized common
stock....................... (325) $ 65 260
Purchase of recapitalized
common stock................ 492 53,680
Issuance of detachable
warrants.................... 2,250
Fees related to
recapitalization............ (3,761)
----- ------- ---- -------- ------- --------- -------
BALANCE AT OCTOBER 2, 1999...... -- -- $557 $ 50,179 -- $ (58,408) $(6,159)
===== ======= ==== ======== ======= ========= =======
<CAPTION>
TOTAL
TREASURY EQUITY
STOCK (DEFICIT)
-------- ---------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1998.... $(1,330) $ 79,584
Net income.................... 1,593
Other comprehensive income
(loss)...................... (1,813)
---------
Comprehensive income (loss)..... (220)
Cash dividends declared ($.04
per share).................... (268)
13,132 shares issued under
employee stock option plans... 140
Compensation expense recognized
under the 1992 Stock Incentive
Plan.......................... 122
------- ---------
BALANCE AT APRIL 3, 1999........ (1,330) 79,358
Net income.................... 1,863
Other comprehensive (loss).... (730)
---------
Comprehensive income............ 1,133
21,610 shares issued under
employee stock option plans... 247
Compensation expense recognized
under the 1992 Stock Incentive
Plan.......................... 122
------- ---------
BALANCE AT JULY 3, 1999......... (1,330) 80,860
Net Income.................... (7,813)
Other comprehensive income
(loss)...................... 1,083
---------
Comprehensive income (loss)..... (6,730)
Compensation expense recognized
under 1992 Stock Incentive
Plan.......................... 122
RECAPITALIZATION RELATED
TRANSACTIONS:
Retirement of treasury
stock....................... 1,330
Recognition of unearned
compensation................ 2,297
Conversion of common stock to
preferred stock.............
Repurchase of common stock.... (143,041)
Conversion of preferred stock
to recapitalized common
stock.......................
Purchase of recapitalized
common stock................ 54,172
Issuance of detachable
warrants.................... 2,250
Fees related to
recapitalization............ (3,761)
------- ---------
BALANCE AT OCTOBER 2, 1999...... -- $ (13,831)
======= =========
</TABLE>
F-10
<PAGE> 121
INSTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
October 2, 1999
(Unaudited)
7. DEBT
In connection with the Merger, the Company entered into a Credit and
Security Agreement (the "Senior Credit Facility") consisting of a $30 million
term loan facility (the "Term Loan Facility") and a $50 million revolving credit
facility, (the "Revolving Credit Facility").
The Senior Credit Facility contains customary covenants that limit our
ability to take various actions and require that we meet and maintain certain
financial ratios and tests, including:
(a) a minimum consolidated net worth and minimum consolidated EBITDA;
(b) a maximum consolidated leverage ratio (total debt to EBITDA) and senior
leverage ratio (senior debt to EBITDA);
(c) a minimum consolidated interest coverage ratio (EBITA to interest
expense); and
(d) a minimum consolidated fixed charge coverage ratio (EBITDA to interest
expense plus other fixed charges).
In addition, the Company incurred $60 million of debt through the sale of
its 13 1/4% Senior Subordinated Notes and Warrants (the "Senior Subordinated
Notes"). The Warrants, when exercised, will entitle the holder thereof to
receive 0.5109 of a fully paid and non-assessable share of common stock, par
value $0.01 per share at an exercise price of $0.01 per share, subject to
adjustment. As of the date of closing, September 29, 1999, the holders of the
Warrants were entitled to purchase 30,654 fully paid and nonassessable shares of
common stock or approximately 5.0% of the Company's common stock on a fully
diluted basis. The Warrants are exercisable on or prior to September 15, 2009.
The value of the Warrants on the date of the Recapitalization was $2.3 million
and this value will be amortized to interest expense over 10 years.
Principal and interest under the Senior Credit Facility and interest
payments on the Senior Subordinated Notes represent significant liquidity
requirements for the Company. As of October 2, 1999, the Company had $31.9
million of available credit under the $50 million Revolving Credit Facility.
With respect to the $30 million borrowed under the Term Loan Facility, the
company is required to make scheduled repayments in twenty two (22) quarterly
installments of principal with interest thereon on the first day of each
January, April, July and October commencing January 1, 2000. The Senior
Subordinated Notes will mature in 2009, and bear interest at 13 1/4%. The
Revolving Credit Facility matures in April 2005; with all amounts then
outstanding becoming due.
F-11
<PAGE> 122
INSTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
October 2, 1999
(Unaudited)
8. GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION
Some of our wholly owned subsidiaries will not be guarantors of our senior
subordinated notes. Summarized below is selected financial information for the
guarantor subsidiaries and the non-guarantor subsidiaries as of October 2, 1999
and for the nine-month period then ended:
<TABLE>
<CAPTION>
COMBINED COMPANY COMBINED
AND GUARANTOR NON-GUARANTOR
SUBSIDIARIES SUBSIDIARIES TOTAL
---------------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance Sheet Data as of October 2,
1999:
Current Assets........................ $ 73,595 $43,860 $117,455
Total Assets.......................... 112,918 55,721 168,639
Total Liabilities..................... 152,455 30,015 182,470
Stockholders' Equity (deficit)........ (39,442) 25,611 (13,831)
Statement of Income Data for the nine
months ended October 2, 1999:
Total Revenue......................... 90,148 60,805 150,953
Other Data for the nine months ended
October 2, 1999:
EBITDA................................ (3,037) 5,303 2,266
</TABLE>
F-12
<PAGE> 123
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF INSTRON CORPORATION:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows present fairly, in all material respects, the financial position of
Instron Corporation and its subsidiaries (the "Company") at December 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
By: /s/ PRICEWATERHOUSECOOPERS LLP
------------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 1999
F-13
<PAGE> 124
INSTRON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1998 1997 1996
------------- ------------- -------------
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA
<S> <C> <C> <C>
REVENUE:
Sales............................................... $ 152,879 $ 129,679 $ 128,804
Service............................................. 30,150 25,981 24,309
---------- ---------- ----------
Total revenue............................... 183,029 155,660 153,113
---------- ---------- ----------
COST OF REVENUE:
Sales............................................... 91,410 74,126 72,556
Service............................................. 19,644 17,363 16,086
---------- ---------- ----------
Total cost of revenue....................... 111,054 91,489 88,642
---------- ---------- ----------
Gross profit..................................... 71,975 64,171 64,471
---------- ---------- ----------
OPERATING EXPENSES:
Selling and administrative.......................... 48,869 44,641 44,898
Research and development............................ 8,485 6,959 8,616
Special items charge................................ 4,975 0 1,812
---------- ---------- ----------
Total operating expenses.................... 62,329 51,600 55,326
Income from operations........................... 9,646 12,571 9,145
---------- ---------- ----------
OTHER (INCOME) EXPENSE:
Gain on sale of land................................ (11,076) 0 0
Interest expense.................................... 1,175 1,465 1,548
Interest income..................................... (943) (634) (477)
Foreign exchange losses............................. 157 185 689
---------- ---------- ----------
Total other expenses........................ (10,687) 1,016 1,760
---------- ---------- ----------
Income before income taxes............................ 20,333 11,555 7,385
Provision for income taxes............................ 8,874 4,391 2,803
---------- ---------- ----------
Net income............................................ $ 11,459 $ 7,164 $ 4,582
========== ========== ==========
Weighted average number of basic common shares........ 6,667,914 6,455,527 6,396,202
Earnings per share -- basic........................... $ 1.72 $ 1.11 $ .72
========== ========== ==========
Weighted average number of diluted common shares...... 7,066,257 6,791,801 6,524,467
Earnings per share -- diluted......................... $ 1.62 $ 1.05 $ .70
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-14
<PAGE> 125
INSTRON CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
IN THOUSANDS, EXCEPT PER
SHARE DATA
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,209 $ 2,566
Accounts receivable, net of allowance for doubtful
accounts of $800 in 1998 and $1,071 in 1997............ 65,766 48,226
Inventories............................................... 36,121 24,024
Deferred income taxes..................................... 3,060 3,314
Prepaid expenses and other current assets................. 2,223 3,767
-------- --------
Total current assets.............................. 114,379 81,897
Property, plant and equipment:
Land and buildings........................................ 21,254 21,796
Machinery and equipment................................... 45,217 39,627
Accumulated depreciation.................................. (42,470) (40,216)
-------- --------
Property, plant and equipment, net........................ 24,001 21,207
Goodwill.................................................. 12,384 6,423
Deferred income taxes..................................... 904 806
Other assets.............................................. 6,586 8,652
-------- --------
Total assets...................................... $158,254 $118,985
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings..................................... $ 6,416 $ 6,059
Accounts payable.......................................... 15,807 11,095
Accrued liabilities....................................... 22,958 14,083
Accrued employee compensation and benefits................ 6,798 6,220
Accrued income taxes...................................... 93 957
Advance payments received on contracts.................... 7,066 1,541
-------- --------
Total current liabilities......................... 59,138 39,955
Long-term debt.............................................. 13,216 7,600
Pension and other long-term liabilities..................... 6,316 5,176
-------- --------
Total liabilities................................. 78,670 52,731
-------- --------
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred stock, $1 par value; 1,000,000 shares
authorized; none issued................................ -- --
Common stock, $1 par value; 10,000,000 shares authorized;
7,051,968 and 6,823,698 shares issued, respectively.... 7,052 6,824
Additional paid in capital................................ 8,727 6,972
Deferred compensation..................................... (2,662) (3,235)
Retained earnings......................................... 72,496 62,097
Accumulated other comprehensive income (loss)............. (4,699) (5,690)
-------- --------
80,914 66,968
Less: Treasury stock at cost; 108,262 and 74,952 shares,
respectively........................................... 1,330 714
-------- --------
Total stockholders' equity........................ 79,584 66,254
-------- --------
Total liabilities and stockholders' equity........ $158,254 $118,985
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-15
<PAGE> 126
INSTRON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
IN THOUSANDS
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 11,459 $ 7,164 $ 4,582
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on the sale of property, plant and equipment,
net.................................................. (11,076) (88) (5)
Depreciation and amortization.......................... 7,106 6,494 6,873
Provision for losses on accounts receivable............ 73 27 358
Deferred income taxes.................................. (580) 306 299
Changes in assets and liabilities, excluding the
effects from purchase of businesses:
(Increase) decrease in accounts receivable........... (6,312) (1,335) 1,297
(Increase) decrease in inventories................... 165 2,563 (521)
(Increase) decrease in prepaid expenses and other
current assets.................................... 2,055 (2,028) 151
Increase (decrease) in accounts payable and accrued
expenses.......................................... 3,097 3,477 (3,894)
Other................................................ (711) 409 684
-------- -------- --------
Net cash provided by operating activities............ 5,276 16,989 9,824
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures........................................ (5,841) (4,176) (4,473)
Joint venture investment.................................... 0 0 (6,926)
Purchase of businesses, net of cash acquired................ (13,086) (2,010) 0
Proceeds from the sale of property, plant and equipment..... 13,684 376 224
Capitalized software costs.................................. (1,490) (637) (1,144)
Other....................................................... (31) 220 156
-------- -------- --------
Net cash used by investing activities................ (6,764) (6,227) (12,163)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under revolving credit and term loan
facility.................................................. 5,609 (9,730) 6,068
Net short-term borrowings................................... 199 (173) (2,785)
Cash dividends paid......................................... (1,060) (1,064) (1,024)
Proceeds from stock option exercises........................ 1,983 348 861
Treasury stock purchases.................................... (616) 0 0
-------- -------- --------
Net cash provided (used) by financing activities..... 6,115 (10,619) 3,120
-------- -------- --------
Effect of exchange rate changes on cash..................... 16 (118) 116
-------- -------- --------
Net increase in cash and cash equivalents................... 4,643 25 897
Cash and cash equivalents at beginning of year.............. 2,566 2,541 1,644
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 7,209 $ 2,566 $ 2,541
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest............................................... $ 1,430 $ 1,671 $ 1,730
Income taxes........................................... 9,145 3,041 2,286
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Fair value of assets acquired............................... $ 28,229 $ 2,649 $ 0
Cash paid................................................... 15,312 2,010 0
Liabilities incurred or assumed in business acquisitions.... 12,917 $ 639 $ 0
======== ======== ========
Note receivable on sale of business......................... $ 0 $ 3,000 $ 0
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE> 127
INSTRON CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED TOTAL
ADDITIONAL OTHER STOCK-
COMMON PAID IN DEFERRED RETAINED COMPREHENSIVE TREASURY HOLDERS'
STOCK CAPITAL COMPENSATION EARNINGS INCOME (LOSS) STOCK EQUITY
------ ---------- ------------ -------- ------------- -------- --------
IN THOUSANDS, EXCEPT SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995....... $6,415 $ 2,538 $ 0 $ 52,439 $(4,576) $ (714) $56,102
Net income....................... 4,582 4,582
Other comprehensive income
(loss)......................... 1,660 1,660
-------
Comprehensive income............... 6,242
Cash dividends declared ($.16 per
share)........................... (1,024) (1,024)
104,366 shares issued under
employee stock option plans...... 105 976 1,081
------ ------- ------- -------- ------- ------- -------
BALANCE AT DECEMBER 31, 1996....... 6,520 3,514 0 55,997 (2,916) (714) 62,401
Net income....................... 7,164 7,164
Other comprehensive income
(loss)......................... (2,774) (2,774)
-------
Comprehensive income............... 4,390
Cash dividends declared ($.16 per
share)........................... (1,064) (1,064)
33,511 shares issued under employee
stock option plans............... 34 314 348
Restricted stock grants issued
during the year.................. 270 3,144 (3,414) 0
Compensation expense recognized
under the 1992 Stock Incentive
Plan............................. 179 179
------ ------- ------- -------- ------- ------- -------
BALANCE AT DECEMBER 31, 1997....... 6,824 6,972 (3,235) 62,097 (5,690) (714) 66,254
Net income....................... 11,459 11,459
Other comprehensive income
(loss)......................... 991 991
-------
Comprehensive income............... 12,450
Cash dividends declared ($.16 per
share)........................... (1,060) (1,060)
228,270 shares issued, net, under
employee stock option plans...... 228 1,755 1,983
Purchase of 33,310 treasury
shares........................... (616) (616)
Compensation expense recognized
under the 1992 Stock Incentive
Plan............................. 573 573
------ ------- ------- -------- ------- ------- -------
BALANCE AT DECEMBER 31, 1998....... $7,052 $ 8,727 $(2,662) $ 72,496 $(4,699) $(1,330) $79,584
====== ======= ======= ======== ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE> 128
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of all domestic and foreign subsidiaries. Significant intercompany
transactions and balances are eliminated. Certain reclassifications were made to
prior years' amounts to conform with the 1998 presentation.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
certain estimates and assumptions that effect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reported periods. Actual results could differ
from those estimates.
FOREIGN CURRENCY TRANSLATION. Assets and liabilities of the Company's
principal foreign operations are translated at exchange rates prevailing at the
end of the period. Income statement items are translated using average quarterly
exchange rates. Translation adjustments are recorded directly in stockholders'
equity and are included in income only if the underlying foreign investment is
sold or liquidated.
FOREIGN EXCHANGE RISK MANAGEMENT. The Company regularly enters into
forward contracts primarily denominated in Japanese yen and certain European
currencies to hedge firm sales and purchase commitments. Forward currency
contracts have maturities of less than one year. These contracts are used to
reduce the Company's risk associated with exchange rate movements, as gains and
losses on these contracts are intended to offset exchange losses and gains on
underlying exposures. The Company does not engage in currency speculation. The
Company's policy is to defer gains and losses on these contracts until the
corresponding losses and gains are recognized on the items being hedged. Both
the contract gains and losses and the gains and losses on the items being hedged
are included in selling and administrative expenses. The unrealized losses were
not material in 1998 and 1997 as the fair value of these contracts were
approximately equal to the fair value of the underlying exposures.
At December 31, 1998, the face amount of outstanding forward currency
contracts to sell U.S. dollars for non U.S. currencies was $3.2 million,
Japanese yen for German deutschemarks was $1.9 million and French francs for
British pounds was $0.7 million. At December 31, 1998, the face amount of
outstanding forward currency contracts to buy German deutschemarks for U.S.
dollars was $2.4 million, German deutschemarks for Japanese yen $1.9 million,
Great British pounds for U.S. dollars was $0.9 million, British pounds for
French francs was $0.7 million and British pounds for German deutschemarks was
$0.4 million.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.
CONCENTRATION OF CREDIT RISK. Financial instruments which potentially
subject the Company to a concentration of credit risk principally consist of
cash, cash equivalents and trade receivables. The Company places its temporary
cash investments with major banks throughout the world, in high quality, liquid
instruments. The Company sells to a broad range of customers throughout the
world and performs ongoing credit evaluations to minimize the risk of loss. The
Company makes use of various devices such as letters of credit to protect its
interests, principally on sales to foreign customers. In addition, the Company
has certain receivables, payables, borrowings and other assets and liabilities
denominated in foreign currencies, which are not hedged and therefore are
subject to exchange rate fluctuations.
INVENTORIES. Inventories are valued at the lower of cost or market (net
realizable value). The last-in, first-out (LIFO) method of determining cost is
used for certain inventories in the United States and Asian branches. The
Company uses the first-in, first-out (FIFO) method for all other locations.
GOODWILL AND INTANGIBLE ASSETS. Intangible assets are stated at cost and
amortized using the straight-line method over the assets estimated useful lives
which range from 8 to 10 years. The Company evaluates the possible impairment of
long-lived assets, including intangible assets, whenever events or circumstances
indicate
F-18
<PAGE> 129
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
the carrying value of the assets may not be recoverable. Impairment of purchased
technology amounts and goodwill is measured on the basis of whether anticipated
future undiscounted operating cash flows expected from the acquired business
will recover the recorded respective, intangible asset balances over the
remaining amortization period. At December 31, 1998, no amounts have been
determined impaired. Amortization of goodwill and other intangibles was
$2,295,000, $1,974,000 and $2,254,000 in 1998, 1997 and 1996, respectively.
PROPERTY, PLANT AND EQUIPMENT. Depreciation is computed principally using
the straight-line method over the estimated useful lives of 10 to 25 years for
land improvements, 10 to 40 years for buildings and improvements and 3 to 15
years for machinery and equipment. Maintenance and repairs are expensed as
incurred. Depreciation expense was $4,239,000, $4,341,000 and $4,619,000 for the
years ended December 31, 1998, 1997 and 1996, respectively. Upon retirement or
disposition, the cost and related accumulated depreciation of the assets
disposed of are removed from the accounts, with any resulting gain or loss
included in operations. On March 27, 1998, the Company sold 42 acres of excess
land in Canton, Massachusetts for $13.5 million.
SOFTWARE DEVELOPMENT COSTS. Certain software development costs are
capitalized and then amortized over future periods. Amortization of capitalized
software costs is computed on a product-by-product basis over the estimated
economic life of the product, generally three years. Unamortized software costs
included in other assets were $2,272,000, $1,574,000 and $2,473,000 at December
31, 1998, 1997 and 1996, respectively. Software development costs of $1,490,000,
$637,000 and $1,144,000 were capitalized during 1998, 1997 and 1996,
respectively. The amounts amortized and charged to expense in 1998, 1997 and
1996 were $792,000, $725,000, and $1,350,000, respectively.
REVENUE RECOGNITION. Revenue from product sales are recognized at time of
shipment. Revenue from services are recognized as services are performed and
ratably over the contract period for service maintenance contracts.
INCOME TAXES. Deferred income taxes are provided using the liability
method, which estimates future tax effects of differences between financial
statement carrying amounts and the tax basis of existing assets and liabilities.
Tax credits are recorded as a reduction in income taxes.
Provisions are made for the U.S. income tax liability on earnings of
foreign subsidiaries, except for locations where the Company has designated
earnings to be permanently invested. Such earnings amounted to approximately
$22,803,000 at year-end 1998.
EARNINGS PER SHARE. Basic earnings per share is computed by dividing net
income by the weighted average number of common shares outstanding during the
period. Diluted earnings per share is computed by dividing net income by the
weighted average number of common shares plus the dilutive effect of common
share equivalents outstanding using the "treasury stock method."
The following is a reconciliation of the basic and diluted EPS
calculations:
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
IN THOUSANDS, EXCEPT PER SHARE DATA
<S> <C> <C> <C>
Net Income.............................................. $11,459 $7,164 $4,582
======= ====== ======
Weighted average number of common shares
outstanding -- basic............................. 6,668 6,456 6,396
Dilutive effect of stock options outstanding....... 398 336 128
------- ------ ------
Weighted average of common and dilutive
shares -- diluted................................ 7,066 6,792 6,524
======= ====== ======
BASIC EARNINGS PER SHARE........................... $ 1.72 $ 1.11 $ 0.72
======= ====== ======
DILUTED EARNINGS PER SHARE......................... $ 1.62 $ 1.05 0.70
======= ====== ======
</TABLE>
F-19
<PAGE> 130
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
At December 1998, 4,500 Options were not included in the calculation of
diluted earnings per share as they were antidilutive.
FAIR VALUE. The Company's financial instruments consist primarily of cash
and cash equivalents, trade receivables, trade payables and debt. The carrying
amounts of these instruments approximates fair value.
COMPREHENSIVE INCOME (LOSS). In June 1997, the Financial Accounting
Standards Board issued SFAS 130, "Reporting Comprehensive Income," which is
effective for periods beginning after December 15, 1997. The statement
establishes standards for reporting and displaying comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. The statement requires that all components
of comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. The Company has adopted
SFAS 130 in the accompanying financial statements.
PENSION PLAN. In February 1998, the Financial Accounting Standards Board
issued SFAS 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," which is effective for periods beginning after December 15, 1997. The
statement standardizes employer disclosure requirements about pension and other
postretirement benefit plans by requiring additional information on changes in
the benefit obligations and fair values of plan assets and eliminating certain
disclosures that are no longer useful. It does not change the measurement or
recognition of those plans. The Company has adopted SFAS 132 in the accompanying
financial statements.
2. INDUSTRY SEGMENT AND FOREIGN OPERATIONS
SFAS 131 establishes standards for reporting information about operating
segments in annual financial statements of public business enterprises. It also
establishes standards for related disclosures about products and service,
geographic areas, and major customers. The Company evaluated its business
activities that are regularly reviewed by the Chief Executive Officer for which
discrete financial information is available. As a results of this evaluation,
the Company determined that it has two operating segments: Materials Testing and
Structural Testing.
Instron's materials testing business manufactures and markets material
testing instruments (electromechanical, servohydraulic, hardness and impact),
software and accessories. The structural testing business manufactures and
markets systems for simulating real-life testing of components and products. The
economic characteristics, production processes, core technology, types and
classes of customers, method of distribution and regulatory environments are
similar for both of these operating segments which operate within the material
testing industry. As a result of these similarities, both segments have been
aggregated into one reporting segment for financial statement purposes.
F-20
<PAGE> 131
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table summarizes the Company's operations by significant
geographic location for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
IN THOUSANDS
<S> <C> <C> <C>
REVENUE, INCLUDING INTERAREA SALES
United States.................................... $102,860 $ 76,314 $ 70,924
Germany.......................................... 26,293 14,484 15,619
Other Europe..................................... 54,395 52,393 49,294
Asia/Latin America............................... 31,335 40,004 39,077
Other international.............................. 3,552 3,868 3,404
Eliminations..................................... (35,406) (31,403) (25,205)
-------- -------- --------
Total revenue............................ $183,029 $155,660 $153,113
======== ======== ========
IDENTIFIABLE ASSETS AT YEAR-END
United States.................................... $ 64,903 $ 38,384 $ 38,654
Germany.......................................... 22,983 6,771 8,180
Other Europe..................................... 38,546 35,903 37,091
Asia/Latin America............................... 18,232 18,645 19,149
Other international.............................. 1,965 2,072 2,499
Corporate........................................ 13,335 18,066 16,938
Eliminations..................................... (1,710) (856) (678)
-------- -------- --------
Total assets............................. $158,254 $118,985 $121,833
======== ======== ========
</TABLE>
Total assets in the United Kingdom in 1998, 1997 and 1996 were $24,227,000,
$24,883,000 and $24,475,000, respectively.
Sales between geographic areas in 1998, 1997 and 1996, respectively,
consisted primarily of $20,023,000, $13,091,000 and $11,337,000 from the United
States and $15,204,000, $18,168,000 and $13,706,000 from European operations.
Transfers between geographic areas are at manufacturing cost plus a markup
factor.
3. INVENTORIES
Inventories at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
IN THOUSANDS
<S> <C> <C>
Raw materials............................................... $13,257 $12,742
Work in process............................................. 16,560 5,156
Finished goods.............................................. 6,304 6,126
------- -------
Total inventory................................... $36,121 $24,024
======= =======
</TABLE>
Inventories valued at LIFO amounted to $9,056,000 and $9,395,000 at
December 31, 1998 and 1997, respectively. The excess of current cost over stated
LIFO value was $5,205,000 at December 31, 1998 and $5,247,000 at December 31,
1997.
4. BORROWING ARRANGEMENTS
The Company maintains a multicurrency revolving credit and term loan
facility that provides for borrowings of up to $35,000,000 through April 2000.
Borrowings outstanding as of April 2000 convert to a term loan payable in
sixteen equal quarterly installments. Interest on borrowings under the agreement
is based upon either base rates, money market rates, or other short-term
borrowing rates. Facility fees under this agreement are 1/4 of
F-21
<PAGE> 132
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1% per annum. The Company has met the various covenants in the agreement, the
most restrictive of which requires a minimum level of tangible net worth. At
December 31, 1998 and 1997, respectively, outstanding domestic borrowings of
$8,375,000 and $7,600,000 with a weighted average interest rate of 6.10% and
6.61%, and outstanding European borrowings of $4,841,000 in 1998 with a weighted
average interest rate of 4.75%, were classified as long-term debt. Long-term
debt maturing under the credit agreement in each of the five years subsequent to
December 31, 1998, assuming outstanding borrowings at December 31, 1998 are
unchanged at April 2000, is $2,478,000 in 2000, $3,304,000 in 2001, 2002 and
2003.
The Company's subsidiaries have other overdraft and borrowing facilities
allowing advances up to approximately $32,000,000. At December 31, 1998, the
outstanding portion of these facilities was $6,416,000, due currently. Bank
guarantees outstanding at December 31, 1998, for which the Company is
contingently liable, amounted to $10,976,000 and relate principally to
performance contracts.
5. OPERATING LEASE COMMITMENTS
Rental expense amounted to $3,998,000, $3,697,000 and $3,348,000 for the
years ended December 31, 1998, 1997 and 1996, respectively. As of December 31,
1998, minimum annual commitments under noncancellable operating leases with
terms of more than one year are:
<TABLE>
<CAPTION>
LATER
1999 2000 2001 2002 2003 YEARS
------ ------ ------ ------ ---- ------
IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
$3,842 $3,094 $2,483 $1,245 $601 $1,033
</TABLE>
6. INCOME TAXES
The significant components of the Company's deferred tax assets and
liabilities at December 31, are as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
IN THOUSANDS
<S> <C> <C>
Employee benefits........................................... $4,634 $3,986
Inventories................................................. 3,280 2,734
Accrued expenses............................................ 1,305 632
------ ------
Total deferred assets............................. 9,219 7,352
------ ------
Accrued expenses............................................ (246) (360)
Fixed assets................................................ (1,517) (1,400)
Capitalized software costs and intangibles.................. (3,002) (982)
------ ------
Total deferred liabilities........................ (4,765) (2,742)
------ ------
Valuation reserve........................................... (490) (490)
------ ------
Total net deferred assets......................... $3,964 $4,120
====== ======
</TABLE>
A valuation reserve has been established where, based upon available
evidence, it is more likely than not that some or all of the deferred tax assets
will not be realized. The valuation allowance relates primarily to foreign tax
benefits.
F-22
<PAGE> 133
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The components of income before income taxes consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
IN THOUSANDS
<S> <C> <C> <C>
Domestic............................................... $17,775 $ 5,664 $2,996
Foreign................................................ 2,558 5,891 4,389
------- ------- ------
Total........................................ $20,333 $11,555 $7,385
======= ======= ======
</TABLE>
Income tax provisions (credits) were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
IN THOUSANDS
<S> <C> <C> <C>
Currently payable:
Federal................................................ $6,441 $1,701 $ 609
Foreign................................................ 1,896 2,090 1,486
State.................................................. 381 172 314
------ ------ ------
8,718 3,963 2,409
------ ------ ------
Deferred, net:
Federal & State........................................ 139 518 215
Foreign................................................ 17 (90) 179
------ ------ ------
156 428 394
------ ------ ------
Total provision for income taxes............... $8,874 $4,391 $2,803
====== ====== ======
</TABLE>
The provisions for income taxes varied from the United States statutory
rate of 35% for 1998 and 34% for 1997 and 1996 principally because of the tax
effect of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
IN THOUSANDS
<S> <C> <C> <C>
Tax provision at United States statutory rate............ $7,117 $3,929 $2,511
Effect of earnings of foreign operations subject to
different tax rates.................................... 1,019 (2) 199
State taxes, net of federal income tax benefit........... 247 114 208
Benefit of Foreign Sales Corporation..................... (76) (68) (195)
Goodwill and amortization................................ -- 356 97
All other, net........................................... 567 62 (17)
------ ------ ------
Total tax provision............................ $8,874 $4,391 $2,803
====== ====== ======
</TABLE>
7. EMPLOYEE PENSION AND RETIREMENT PLANS
The Company maintains qualified noncontributory defined benefit pension
plans covering United States employees and employees of Instron's United Kingdom
subsidiary. The benefits are based on years of service and final average
compensation at the date of retirement. The Company's general policy is to fund
the pension plans to the extent such contributions are deductible under
standards established by the Internal Revenue Service in the U.S. and the Inland
Revenue in the U.K. Plan assets in the U.S. consist of mutual funds which invest
primarily in common stocks, corporate bonds, U.S. government notes and temporary
cash investments. In the U.K., plan assets are invested in funds whose assets
consist primarily of common stocks, bonds and other securities. Employees of the
Japan subsidiary receive lump sum payments as a multiple of annual salary at
retirement or termination, based on years of service. These Japanese benefits
are unfunded.
F-23
<PAGE> 134
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Net periodic pension costs include the following components:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------- ------------------------ ------------------------
U.S. U.K. JAPAN U.S. U.K. JAPAN U.S. U.K. JAPAN
------ ------ ----- ------- ------ ----- ------- ------ -----
IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service cost........................... $1,122 $1,749 $222 $ 961 $1,357 $231 $ 936 $1,158 $257
Interest cost.......................... 1,911 2,278 171 1,799 1,990 201 1,648 1,690 206
Expected return on plan assets......... (2,077) (2,971) 0 (1,914) (2,742) 0 (1,682) (2,576) 0
Amortization of transition asset
(liability).......................... (9) (76) 18 (9) (75) 19 (9) ( 72) 21
Amortization of prior service cost..... 44 (73) 0 44 (89) 0 44 (91) 0
Amortization of unrecognized (gain)
loss................................. 2 0 0 1 (59) 0 1 130 0
Settlement gain........................ 0 0 (118) 0 0 0 0 0 0
------ ------ ---- ------- ------ ---- ------- ------ ----
Net periodic pension cost.......... $ 993 $ 907 $293 $ 882 $ 382 $451 $ 938 $ 239 $484
====== ====== ==== ======= ====== ==== ======= ====== ====
</TABLE>
Assumptions used in the accounting for the Company's U.S., U.K., and Japan
plans at December 31 were:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------- -------------------------- --------------------------
U.S. U.K. JAPAN U.S. U.K. JAPAN U.S. U.K. JAPAN
------- ------- ------ ------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted average discount
rate......................... 6.75% 5.5% 4.0% 7.0% 6.5% 5.0% 7.5% 8.0% 6.0%
Rates of increase in
compensation levels........ 4.25 4.0 3.0 4.5 4.75 4.0 5.0 5.5 5.0
Expected long-term rate of
return on assets........... 9.0 7.25 0.0 9.0 8.75 0.0 9.0 9.5 0.0
</TABLE>
The following is a reconciliation of the Projected Benefit Obligation as of
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------- -------------------------- --------------------------
U.S. U.K. JAPAN U.S. U.K. JAPAN U.S. U.K. JAPAN
------- ------- ------ ------- ------- ------ ------- ------- ------
IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Projected benefit obligation
at prior year end............ $26,209 $33,222 $3,221 $23,246 $24,681 $3,404 $21,134 $20,167 $3,327
Service cost................. 1,122 1,749 222 961 1,357 231 936 1,159 257
Interest cost................ 1,911 2,278 171 1,799 1,990 201 1,648 1,690 206
Actuarial (gain) loss........ 1,170 1,160 (102) 989 7,019 (205) 201 287 4
Benefits paid................ (871) (1,437) 0 (786) (1,288) (10) (673) (1,246) (4)
Plan amendments.............. 0 262 0 0 287 0 0 94 0
Settlement................... 0 0 (872) 0 0 0 0 244 0
Foreign currency gain
(loss)..................... 0 180 400 0 (824) (400) 0 2,286 (386)
------- ------- ------ ------- ------- ------ ------- ------- ------
Projected Benefit Obligation
at year end................ $29,541 $37,414 $3,040 $26,209 $33,222 $3,221 $23,246 $24,681 $3,404
======= ======= ====== ======= ======= ====== ======= ======= ======
</TABLE>
The following is a reconciliation of the beginning and ending balances of
the fair value of Plan assets at December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------- -------------------------- --------------------------
U.S. U.K. JAPAN U.S. U.K. JAPAN U.S. U.K. JAPAN
------- ------- ------ ------- ------- ------ ------- ------- ------
IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fair value of plan assets at
prior year end............... $26,650 $33,522 $ 0 $24,865 $29,748 $ 0 $21,556 $24,466 $ 0
Actual return on plan
assets..................... 3,667 5,475 0 2,546 4,812 0 2,655 2,576 0
Employer contributions....... 24 1,334 551 25 1,288 10 1,327 1,195 4
Benefits paid................ (871) (1,437) (551) (786) (1,288) (10) (673) (1,246) (4)
Foreign currency gain
(loss)..................... 0 184 0 0 (1,038) 0 2,757 0
------- ------- ------ ------- ------- ------ ------- ------- ------
Fair value of plan assets at
year end................... $29,470 $39,078 $ 0 $26,650 $33,522 $ 0 $24,865 $29,748 $ 0
======= ======= ====== ======= ======= ====== ======= ======= ======
</TABLE>
F-24
<PAGE> 135
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The funded status of the Company's U.S., U.K. and Japan plans and amounts
recognized in the Consolidated Balance Sheet at December 31 were:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------- -------------------------- --------------------------
U.S. U.K. JAPAN U.S. U.K. JAPAN U.S. U.K. JAPAN
------- ------- ------ ------- ------- ------ ------- ------- ------
IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Projected benefit obligation
in excess of (less than) plan
assets....................... $ 71 $(1,664) $3,040 $ (441) $ (300) $3,221 $(1,619) $(5,067) $3,404
Unrecognized asset
(liability) at
transition................. 48 465 (243) 57 538 (229) 66 637 (278)
Unrecognized prior service
cost....................... (461) 737 (505) 1,066 0 (549) 1,498 0
Unrecognized gain (loss)..... 4,104 163 648 3,683 (1,177) 259 4,038 4,011 77
------- ------- ------ ------- ------- ------ ------- ------- ------
Pension liability included
assets in Consolidated
Balance Sheet.............. $ 3,762 $ (299) $3,445 $ 2,794 $ 127 $3,251 $ 1,936 $ 1,079 $3,203
======= ======= ====== ======= ======= ====== ======= ======= ======
</TABLE>
The expense of all pension plans for 1998, 1997 and 1996 was $2,193,000,
$1,715,000, and $1,661,000, respectively. The Company also sponsors a Savings
and Security Plan for all U.S. employees. The plan (in accordance with section
401(k) of the Internal Revenue Code) offers participating employees a program of
regular savings and investment, funded by their own contributions and those of
the Company. The amount charged to operating expense for this plan was $582,000,
$530,000 and $523,000 in 1998, 1997 and 1996, respectively.
8. STOCK OPTION PLANS
The Company accounts for stock-based compensation using the intrinsic value
method. Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee must pay to acquire the stock.
The Company has two stock options plans currently in effect under which
future grants may be issued: the 1992 Stock Incentive Plan and the 1979
Non-Qualified Plan. A total of 1,391,500 shares has been authorized by the
Company for grants of options or shares. Stock Options granted during 1998, 1997
and 1996 generally have a maximum term of eight years and vest equally over four
years.
A summary of the Company's stock option activity for the years ended
December 31 follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
OF OPTIONS EXERCISE PRICES
---------- ---------------
<S> <C> <C>
Outstanding at December 31, 1995............................ 881,450 $10.80
Granted, 1996............................................... 225,750 13.51
Exercised, 1996............................................. (112,726) 9.91
Terminated, 1996............................................ (15,750) 12.59
--------
Outstanding at December 31, 1996............................ 978,724 11.49
Granted, 1997............................................... 5,000 12.25
Exercised, 1997............................................. (37,385) 11.02
Terminated, 1997............................................ (13,000) 12.43
--------
Outstanding at December 31, 1997............................ 933,339 11.51
Granted, 1998............................................... 77,250 16.71
Exercised, 1998............................................. (260,848) 9.92
Terminated, 1998............................................ (24,937) 13.90
--------
Outstanding at December 31, 1998............................ 724,804 $12.55
========
</TABLE>
F-25
<PAGE> 136
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
At December 31, 1998, 1997 and 1996, respectively, there were 502,735,
656,902 and 526,045 options exercisable with a weighted average exercise price
of $11.84, $10.94 and $10.58. Exercise prices for options outstanding as of
December 31, 1998, ranged from $10.00 to $19.625. The weighted average remaining
contractual life of those options is 4.3 years.
The weighted average fair value at date of grant for options granted during
1998, 1997 and 1996 was $7.39, $5.04 and $5.79 per option, respectively. The
fair value of these options at date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions for 1998,
1997 and 1996, respectively: risk-free interest rates of 5.07%, 5.70% and 6.50%;
dividend yields of 0.97%, 1.31% and 1.19%; volatility factors of the expected
market price of the Company's common stock of .35, .31 and .30; and a weighted
average expected life of the options of 7.9, 8.0 and 7.8 years.
Had compensation cost for the Company's stock option plans been determined
based on the fair value at the grant date for awards in 1998, 1997 and 1996, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Net income -- pro forma................................. $10,871 $6,691 $4,105
Earnings per share -- basic............................. $ 1.63 $ 1.04 $ .64
Earnings per share -- diluted........................... $ 1.54 $ .99 $ .63
</TABLE>
The pro forma effect on net income for 1997 and 1996 is not representative
of the pro forma effect on net income in future years because it does not take
into consideration pro forma compensation expense related to grants made prior
to 1995.
On May 14, 1997 and October 29, 1997, respectively, the Company issued
250,000 and 20,500 shares of restricted stock to key employees, which resulted
in $3,414,000 of non-cash deferred compensation to be recognized as operating
expense over a seven year period. Vesting is accelerated upon change in control
or if certain performance criteria are met.
9. ACQUISITIONS
On August 4, 1998, the Company acquired substantially all the assets of
Satec Systems, Inc. of Grove City, Pennsylvania, for approximately $12.6 million
in cash. Satec is a manufacturer of a range of materials testing equipment sold
primarily in the United States with annual sales of approximately $18.0 million.
This acquisition has been accounted for under the purchase method of accounting
and, accordingly, the acquired assets and liabilities have been recorded at
their estimated fair values at the date of acquisition. In conjunction with this
acquisition the Company recorded $7.2 million of goodwill which is being
amortized over ten years. The operating results of Satec have been included in
the Company's consolidated results of operations from the date of acquisition.
On September 27, 1998, the Company acquired the remaining 49% interest in
Instron Schenck Testing Systems ("IST") from Carl Schenck A.G. of Darmstadt,
Germany for $2.7 million in cash. The book value of net assets acquired were
equal to the consideration paid. IST has become a world-class structures testing
business with sales of more than $55 million in 1998. This additional investment
has been accounted for under the purchase method of accounting and, accordingly,
the acquired assets and liabilities have been recorded at their estimated fair
values at the date of acquisition. The operations of IST for the fourth quarter
of 1998 have been consolidated into the Company's results of operations from the
date of acquisition. Prior to this acquisition the Company accounted for its 51%
interest in IST under the equity method of accounting.
10. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair
F-26
<PAGE> 137
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. The statement is effective for fiscal years beginning
after June 15, 1999. Management is currently evaluating the effects of this
change on its recording of derivatives and hedging activities. The Company will
adopt SFAS No. 133 for its fiscal year ending December 31, 2000.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, "Internal Use Software," which provides
guidance on the accounting for the costs of software developed or obtained for
internal use. SOP 98-1 is effective for fiscal years beginning after December
15, 1998. This statement does not have a material impact on the Company's
financial position or results of operations.
In June 1997, the Financial Accounting Standards Board issued SFAS 130,
"Reporting Comprehensive Income," which is effective for periods beginning after
December 15, 1997. The statement establishes standards for reporting and
displaying comprehensive income and its components (revenues, expenses, gains,
and losses) in a full set of general-purpose financial statements. The statement
requires that all components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. The Company has adopted SFAS 130 in the accompanying financial
statements.
In February 1998, the Financial Accounting Standards Board issued SFAS 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits," which
is effective for periods beginning after December 15, 1997. The statement
standardizes employer disclosure requirements about pension and other
postretirement benefit plans by requiring additional information on changes in
the benefit obligations and fair values of plan assets and eliminating certain
disclosures that are no longer useful. It does not change the measurement or
recognition of those plans. The Company has adopted SFAS 132 in the accompanying
financial statements.
11. SPECIAL ITEMS CHARGES
During the first quarter of 1998, the Company recorded a special items
charge to operations to undertake a consolidation of its European operations and
write-down the value of certain non-performing assets. A pre-tax charge of $5.0
million was taken in the quarter ended March 28, 1998 to cover these actions.
The special items charge includes termination benefits, the costs to exit a
manufacturing facility, other asset impairments and other related costs. The
Company has closed down a manufacturing plant in Germany, relocated sales and
service support personnel to another Instron location in Germany and has moved
the manufacturing operation to the United Kingdom. During 1998 the Company paid
$1.4 million for termination benefits and related costs and $1.6 million for the
costs to shutdown and exit a manufacturing facility in Germany. In addition, the
Company wrote-off $1.0 million of non-performing assets in 1998, primarily
relating to its interest in Lightspeed Simulation Systems. The balance of the
Special Items reserve relates primarily to the Company's obligation under a
long-term lease agreement in Germany, partially offset by estimated income under
a sub-lease arrangement.
In March 1996, the Company recognized a $1,812,000 special items charge to
implement a work force reduction and consolidate certain manufacturing
operations.
F-27
<PAGE> 138
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SUPPLEMENTARY FINANCIAL INFORMATION
QUARTERLY FINANCIAL DATA
(QUARTERLY DATA UNAUDITED)
<TABLE>
<CAPTION>
QUARTER QUARTER QUARTER QUARTER
1 2 3 4 YEAR
------- ------- ------- ------- --------
IN THOUSANDS, EXCEPT PER SHARE DATA
<S> <C> <C> <C> <C> <C>
1998:
Total revenue................................. $33,869 $37,761 $43,331 $68,068 $183,029
Gross profit.................................. 13,742 15,734 16,718 25,781 71,975
Income before income taxes.................... 8,159 2,914 3,403 5,857 20,333
Net income.................................... 3,911 1,807 2,110 3,631 11,459
Earnings per share -- basic*.................. 0.60 0.27 0.32 0.54 1.72
Earnings per share -- diluted................. 0.55 0.25 0.30 0.52 1.62
------- ------- ------- ------- --------
1997:
Total revenue................................. $36,023 $37,124 $35,996 $46,517 $155,660
Gross profit.................................. 14,706 15,127 15,008 19,330 64,171
Income before income taxes.................... 1,482 2,376 2,966 4,731 11,555
Net income.................................... 919 1,470 1,842 2,933 7,164
Earnings per share -- basic................... 0.14 0.23 0.29 0.45 1.11
Earnings per share -- diluted*................ 0.14 0.22 0.26 0.42 1.05
------- ------- ------- ------- --------
</TABLE>
* The sum of the quarterly earnings per share does not equal the amount
reported for the year, as per share amounts are calculated independently
and are based on the weighted average common shares outstanding for each
period.
F-28
<PAGE> 139
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENTS SCHEDULE
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF INSTRON CORPORATION:
Our audits of the consolidated financial statements referred to in our
report dated February 18, 1999 included in this Registration Statement on Form
S-4 also included an audit of the financial statements schedule Consolidated
Valuation Accounts which appears in this Registration Statement on Form S-4. In
our opinion, this financial statements schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
--------------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 1999
F-29
<PAGE> 140
INSTRON CORPORATION
CONSOLIDATED VALUATION ACCOUNTS
<TABLE>
<CAPTION>
(A) EFFECT OF
BALANCE AT ADDITION FOREIGN
BEGINNING CHARGED TO CURRENCY (B) BALANCE AT
DESCRIPTION OF YEAR OPERATIONS TRANSLATION DEDUCTIONS END OF YEAR
----------- ---------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1998 $1,071,000 $146,000 $(43,000) $374,000 $ 800,000
---------- -------- -------- -------- ----------
Year ended December 31, 1997 $1,107,000 $ 27,000 $(56,000) $ 7,000 $1,071,000
---------- -------- -------- -------- ----------
Year ended December 31, 1996 $1,040,000 $358,000 $ 27,000 $318,000 $1,107,000
</TABLE>
- ---------------
(A) Included in "Additions Charged to Operations" for the year ended December
31, 1998, is 73,000 for allowance for doubtful accounts recorded in
conjunction with the acquisitions of Satec and IST.
(B) Uncollected receivables written off, net of recoveries an deduction due to
the disposal of LMS in 1997.
F-30
<PAGE> 141
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
JANUARY , 2000
LOGO
$60,000,000
INSTRON CORPORATION
OFFER TO EXCHANGE ALL OUTSTANDING
13 1/4% SENIOR SUBORDINATED NOTES DUE 2009
FOR 13 1/4% SENIOR SUBORDINATED NOTES DUE 2009
------------------------------------------
PROSPECTUS
------------------------------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy these securities in any jurisdiction where
that would not be permitted or legal. Neither the delivery of this prospectus
nor any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of Instron have
not changed since the date hereof.
- --------------------------------------------------------------------------------
<PAGE> 142
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 67 of Chapter 156B of the Massachusetts General Laws provides that
indemnification of directors and officers of a Massachusetts corporation may be
provided to the extent specified or authorized by its articles of organization
or a by-law provision adopted by the stockholders.
Under Article 6(a) of the Restated Articles of Organization of the
Registrant, the Registrant shall, except as limited by law or as provided in
Article 6(a), indemnify any director or officer who was or is threatened to be
made party to, or is involved in, any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
Registrant, or is or was serving at the request of the Registrant as a director,
officer, employee or agent of another organization or who serves at the
Registrant's request in any capacity with respect to any employee benefit plan
(an "Indemnified Party"). Except as limited by law or as provided in Article
6(a), indemnification shall be provided whether the basis of such Proceeding is
alleged action in an official capacity as an Indemnified Party or in any other
capacity while serving as an Indemnified Party, against all expense, liability,
and loss (including attorneys' fees, judgments, fines, excise taxes or penalties
and amounts paid or to be paid in settlement with respect to the Proceeding)
actually and reasonably incurred or suffered by such person in connection
therewith. Any such indemnification shall be provided although the Indemnified
Party is no longer an officer, director, employee or agent of the Registrant or
of such other organization or no longer serves with respect to any such employee
benefit plan. No indemnification shall be provided under Article 6(a) for any
person with respect to any matter as to which he or she shall have been
adjudicated in any Proceeding not to have acted in good faith in the reasonable
belief that his or her action was in the best interest of the Registrant or to
the extent that such matter relates to service with respect to an employee
benefit plan, in the best interest of the participants or beneficiaries of such
employee benefit plan. If authorized by the board of directors or the
stockholders, the Registrant may pay indemnification in advance of final
disposition of a Proceeding upon receipt of an undertaking by such Indemnified
Party to repay such payment if he or she shall be adjudicated to be not entitled
to indemnification, which undertaking may be accepted without reference to the
financial ability of such Indemnified Party to make repayment.
Article 6(a) also permits the Registrant to indemnify any employees or
other agents of the Registrant to an extent greater than that required by law
only if and to the extent the board of directors may, in their discretion, so
determine. The indemnification and advancement of expenses provided under
Article 6(a) are not exclusive of any other rights to which any such indemnified
person may be entitled under any law. Nothing in Article 6(a) affects any rights
to indemnification to which corporate personnel other than the persons
designated in Article 6(a) may be entitled by contract, by vote of the board of
directors, or otherwise under law.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of May 6, 1999, among
Kirtland Capital Partners III L.P., ISN Acquisition
Corporation and Instron Corporation (incorporated herein by
reference to Appendix A of the Definitive Proxy Statement on
Schedule 14A of Instron Corporation, filed on July 22,
1999).
2.2 Amendment No. 1 to the Agreement and Plan of Merger, dated
as of August 5, 1999, among Kirtland Capital Partners III
L.P., ISN Acquisition Corporation and Instron Corporation
(incorporated herein by reference to Appendix B of the
Revised Letter to Shareholders, filed as Definitive
Additional Materials on Schedule 14A of Instron Corporation
on August 6, 1999).
*3.1(i) Restated Articles of Organization of Instron Corporation.
*3.1(ii) Amended and Restated By-Laws of Instron Corporation.
</TABLE>
II-1
<PAGE> 143
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*4.1 Indenture, dated as of September 29, 1999, between Instron
Corporation and Norwest Bank Minnesota, National Association
as Trustee.
*4.2 Debt Registration Rights Agreement, dated as of September
29, 1999, by and among Instron Corporation, the Subsidiary
Guarantors and Donaldson, Lufkin & Jenrette Securities
Corporation.
*4.3 Warrant Registration Rights Agreement, dated as of September
29, 1999, by and between Instron Corporation and Donaldson,
Lufkin & Jenrette Securities Corporation.
*4.4 Warrant Agreement, dated as of September 29, 1999, between
Instron Corporation and Norwest Bank Minnesota, National
Association as Warrant Agent.
*4.5 Form of Exchange Note (included in Exhibit 4.1).
*4.6 Form of Warrant (included in Exhibit 4.6).
+5.1 Opinion of Jones, Day, Reavis & Pogue regarding validity of
the exchange notes.
*10.1 Credit and Security Agreement, dated as of September 29,
1999, among Instron Corporation, Instron, Ltd., Instron
Schenck Testing Systems, GMBH and Instron Wolpert GMBH as
Borrowers and the Banks which are Signatories and National
City Bank as Administrative Agent.
10.2 Letter Agreement dated as of May 6, 1999 by and among
Kirtland and the Management Investors (incorporated herein
by reference to Exhibit (c)(2) to Schedule 13E-3 of Instron
Corporation, filed on May 26, 1999).
10.3 Letter Agreement dated as of May 6, 1999 by and among
Kirtland, Instron Corporation and the Other Investors
(incorporated herein by reference to Exhibit (c)(3) to
Schedule 13E-3 of Instron Corporation, filed on May 26,
1999).
10.4 Voting Agreement dated as of May 6, 1999 by and among
Kirtland, MergerCo, the Management Investors and certain of
their affiliates, and the Other Investors and certain of
their affiliates (incorporated herein by reference to
Exhibit (c)(4) to Schedule 13E-3 of Instron Corporation,
filed on May 26, 1999).
10.5 Form of Stockholders Agreement by and among Instron
Corporation and all of its stockholders (incorporated herein
by reference to Exhibit (c)(5) to Schedule 13E-3 of Instron
Corporation, filed on May 26, 1999).
10.6 Form of Amendment to Restricted Stock Award Agreement
(incorporated herein by reference to Exhibit (c)(6) to
Schedule 13E-3 of Instron Corporation, filed on May 26,
1999).
10.7 Form of Instron Corporation 1999 Stock Option Plan
(incorporated herein by reference to Exhibit (c)(7) to
Schedule 13E-3 of Instron Corporation, filed on May 26,
1999).
10.8 Form of Incentive Stock Option Agreement (incorporated
herein by reference to Exhibit (c)(8) to Schedule 13E-3 of
Instron Corporation, filed on May 26, 1999).
10.9 Form of Nonqualified Stock Option Agreement (incorporated
herein by reference to Exhibit (c)(9) to Schedule 13E-3 on
Instron Corporation, filed on May 26, 1999).
10.10 Form of Amendment to Instron Corporation 1992 Stock
Incentive Plan (incorporated herein by reference to Exhibit
(c)(10) to Schedule 13E-3 of Instron Corporation, filed on
May 26, 1999).
10.11 Form of Amendment to Nonqualified Stock Option Agreement
(incorporated herein by reference to Exhibit (c)(11) to
Schedule 13E-3 of Instron Corporation, filed on May 26,
1999).
10.12 Form of Amendment to Incentive Stock Option Agreement
(incorporated herein by reference to Exhibit (c)(12) to
Schedule 13E-3 of Instron Corporation, filed on May 26,
1999).
*12 Statement regarding computation of earnings to fixed
charges.
*21 Subsidiaries of Instron Corporation (incorporated herein by
reference to Exhibit 21 to the Annual Report on Form 10-K of
Instron Corporation, filed on April 9, 1999).
+23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit
5.1).
</TABLE>
II-2
<PAGE> 144
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*23.2 Consent of PricewaterhouseCoopers LLP.
*24 Powers of Attorney.
*25 Statement of Eligibility of Trustee under the Trust
Indenture Act of 1939 on Form T-1.
*27 Financial Data Schedule.
*99.1 Letter of Transmittal.
*99.2 Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* filed herewith.
+ to be filed by amendment.
ITEM 22. UNDERTAKINGS.
(1) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(x) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(y) 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;
(z) 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;
(b) 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 the time shall be deemed to
be the initial bona fide offering thereof;
(c) 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;
(d) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form; and
(e) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes 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) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20, 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
Securities Act and is, therefore, unenforceable. In the
II-3
<PAGE> 145
event that a claim for indemnification against such liabilities (other than the
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
Securities Act and will be governed by the final adjudication of such issue.
(4) The undersigned 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 date of the registration statement through the date of
responding to the request.
(5) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 146
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this resignation statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of
Massachusetts on December 28, 1999.
INSTRON CORPORATION
By: /s/ LINTON A. MOULDING
------------------------------------
Linton A. Moulding
Chief Financial Officer and Vice
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated as of December 28, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Director, President and Chief Executive
- ------------------------------------------ Officer (Principal Executive Officer)
James M. McConnell
/s/ LINTON A. MOULDING Chief Financial Officer and Vice President
- ------------------------------------------ (Principal Financial and Accounting
Linton A. Moulding Officer)
* Director
- ------------------------------------------
Raymond A. Lancaster
* Director
- ------------------------------------------
James M. McConnell
* Director
- ------------------------------------------
Thomas N. Littman
Director
- ------------------------------------------
John F. Turben
* Director
- ------------------------------------------
Dennis J. Moore
</TABLE>
* The undersigned by signing his name hereto, does sign and execute this
Registration Statement pursuant to the Powers of Attorney executed by the
above-named officers and directors of the company and which have been filed
with the Securities and exchange Commission on behalf of such officers and
directors.
<TABLE>
<S> <C>
By: /s/ LINTON A. MOULDING December 28, 1999
--------------------------------------
Linton A. Moulding, Attorney-in-Fact
for the Officers and Directors signing
in the capacities indicated
</TABLE>
II-5
<PAGE> 147
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this resignation statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of
Massachusetts on December 28, 1999.
INSTRON SCHENCK TESTING SYSTEMS CORP.
By: /s/ YAYHA GHARAGOZLOU
------------------------------------
Yayha Gharagozlou
Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated as of December 28, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ YAYHA GHARAGOZOLOU Director
- ------------------------------------------ (Principal Executive Officer and Principal
Yayha Gharagozolou Financial and Accounting Officer)
</TABLE>
II-6
<PAGE> 148
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this resignation statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of
Massachusetts on December 28, 1999.
INSTRON/LAWRENCE CORPORATION
By: /s/ LINTON A. MOULDING
------------------------------------
Linton A. Moulding
Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated as of December 28, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Director
- ------------------------------------------ (Principal Executive Officer)
James M. McConnell
/s/ LINTON A. MOULDING Director
- ------------------------------------------ (Principal Financial and Accounting
Linton A. Moulding Officer)
</TABLE>
* The undersigned by signing his name hereto, does sign and execute this
Registration Statement pursuant to the Powers of Attorney executed by the
above-named officers and directors of the company and which have been filed
with the Securities and exchange Commission on behalf of such officers and
directors.
<TABLE>
<S> <C>
By: /s/ LINTON A. MOULDING December 28, 1999
--------------------------------------
Linton A. Moulding, Attorney-in-Fact
for the Officers and Directors signing
in the capacities indicated
</TABLE>
II-7
<PAGE> 149
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this resignation statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of
Massachusetts on December 28, 1999.
INSTRON REALTY TRUST
By: /s/ LINTON A. MOULDING
------------------------------------
Linton A. Moulding
Trustee
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated as of December 28, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Trustee
- ------------------------------------------ (Principal Executive Officer)
James M. McConnell
/s/ LINTON A. MOULDING Trustee
- ------------------------------------------ (Principal Financial and Accounting
Linton A. Moulding Officer)
</TABLE>
* The undersigned by signing his name hereto, does sign and execute this
Registration Statement pursuant to the Power of Attorney executed by the
above-named Trustee of the registrant and which has been filed with the
Securities and exchange Commission on behalf of such Trustee.
<TABLE>
<S> <C>
By: /s/ LINTON A. MOULDING December 28, 1999
--------------------------------------
Linton A. Moulding, Attorney-in-Fact
for the Trustee signing in the
capacities indicated
</TABLE>
II-8
<PAGE> 150
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this resignation statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of
Massachusetts on December 28, 1999.
IRT-II TRUST
By: /s/ LINTON A. MOULDING
------------------------------------
Linton A. Moulding
Trustee
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated as of December 28, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Trustee
- ------------------------------------------ (Principal Executive Officer)
James M. McConnell
/s/ LINTON A. MOULDING Trustee
- ------------------------------------------ (Principal Financial and Accounting
Linton A. Moulding Officer)
</TABLE>
* The undersigned by signing his name hereto, does sign and execute this
Registration Statement pursuant to the Power of Attorney executed by the
above-named Trustee of the registrant and which has been filed with the
Securities and exchange Commission on behalf of such Trustee.
<TABLE>
<S> <C>
By: /s/ LINTON A. MOULDING December 28, 1999
--------------------------------------
Linton A. Moulding, Attorney-in-Fact
for the Trustee signing in the
capacities indicated
</TABLE>
II-9
<PAGE> 151
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this resignation statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of
Massachusetts on December 28, 1999.
INSTRON JAPAN COMPANY, LTD.
By: /s/ JAMES M. MCCONNELL
------------------------------------
James M. McConnell
Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated as of December 28, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ JAMES M. MCCONNELL Director
- ------------------------------------------ (Principal Executive Officer)
James M. McConnell
* Director
- ------------------------------------------ (Principal Financial and Accounting
Sjomua Izumi Officer)
* Director
- ------------------------------------------
Arthur D. Hindman
* Director
- ------------------------------------------
Yasuhisa Okamoto
</TABLE>
* The undersigned by signing his name hereto, does sign and execute this
Registration Statement pursuant to the Powers of Attorney executed by the
above-named officers and directors of the company and which have been filed
with the Securities and exchange Commission on behalf of such officers and
directors.
<TABLE>
<S> <C>
By: /s/ LINTON A. MOULDING December 28, 1999
--------------------------------------
Linton A. Moulding, Attorney-in-Fact
for the Officers and Directors signing
in the capacities indicated
</TABLE>
II-10
<PAGE> 152
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this resignation statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of
Massachusetts on December 28, 1999.
INSTRON ASIA LIMITED
By: /s/ ARTHUR D. HINDMAN
------------------------------------
Arthur D. Hindman
Director and President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated as of December 28, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Director and President (Principal Executive Officer)
- --------------------------------------------
Arthur D. Hindman
* Director (Principal Financial and Accounting Officer)
- --------------------------------------------
Robert C. Marini
</TABLE>
* The undersigned by signing his name hereto, does sign and execute this
Registration Statement pursuant to the Powers of Attorney executed by the
above-named officers and directors of the company and which have been filed
with the Securities and exchange Commission on behalf of such officers and
directors.
<TABLE>
<S> <C>
By: /s/ LINTON A. MOULDING December 28, 1999
--------------------------------------
Linton A. Moulding, Attorney-in-Fact
for the Officers and Directors signing
in the capacities indicated
</TABLE>
II-11
<PAGE> 153
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of May 6, 1999, among
Kirtland Capital Partners III L.P., ISN Acquisition
Corporation and Instron Corporation (incorporated herein by
reference to Appendix A of the Definitive Proxy Statement on
Schedule 14A of Instron Corporation, filed on July 22,
1999).
2.2 Amendment No. 1 to the Agreement and Plan of Merger, dated
as of August 5, 1999, among Kirtland Capital Partners III
L.P., ISN Acquisition Corporation and Instron Corporation
(incorporated herein by reference to Appendix B of the
Revised Letter to Shareholders, filed as Definitive
Additional Materials on Schedule 14A of Instron Corporation
on August 6, 1999).
*3.1(i) Restated Articles of Organization of Instron Corporation.
*3.1(ii) Amended and Restated By-Laws of Instron Corporation.
*4.1 Indenture, dated as of September 29, 1999, between Instron
Corporation and Norwest Bank Minnesota, National Association
as Trustee.
*4.2 Debt Registration Rights Agreement, dated as of September
29, 1999, by and among Instron Corporation, the Subsidiary
Guarantors and Donaldson, Lufkin & Jenrette Securities
Corporation.
*4.3 Warrant Registration Rights Agreement, dated as of September
29, 1999, by and between Instron Corporation and Donaldson,
Lufkin & Jenrette Securities Corporation.
*4.4 Warrant Agreement, dated as of September 29, 1999, between
Instron Corporation and Norwest Bank Minnesota, National
Association as Warrant Agent.
*4.5 Form of Exchange Note (included in Exhibit 4.1).
*4.6 Form of Warrant (included in Exhibit 4.4).
+5.1 Opinion of Jones, Day, Reavis & Pogue regarding validity of
the exchange notes.
*10.1 Credit and Security Agreement, dated as of September 29,
1999, among Instron Corporation, Instron, Ltd., Instron
Schenck Testing Systems, GMBH and Instron Wolpert GMBH as
Borrowers and the Banks which are Signatories and National
City Bank as Administrative Agent.
10.2 Letter Agreement dated as of May 6, 1999 by and among
Kirtland and the Management Investors (incorporated herein
by reference to Exhibit (c)(2) to Schedule 13E-3 of Instron
Corporation, filed on May 26, 1999).
10.3 Letter Agreement dated as of May 6, 1999 by and among
Kirtland, Instron Corporation and the Other Investors
(incorporated herein by reference to Exhibit (c)(3) to
Schedule 13E-3 of Instron Corporation, filed on May 26,
1999).
10.4 Voting Agreement dated as of May 6, 1999 by and among
Kirtland, MergerCo, the Management Investors and certain of
their affiliates, and the Other Investors and certain of
their affiliates (incorporated herein by reference to
Exhibit (c)(4) to Schedule 13E-3 of Instron Corporation,
filed on May 26, 1999).
10.5 Form of Stockholders Agreement by and among Instron
Corporation and all of its stockholders (incorporated herein
by reference to Exhibit (c)(5) to Schedule 13E-3 of Instron
Corporation, filed on May 26, 1999).
10.6 Form of Amendment to Restricted Stock Award Agreement
(incorporated herein by reference to Exhibit (c)(6) to
Schedule 13E-3 of Instron Corporation, filed on May 26,
1999).
10.7 Form of Instron Corporation 1999 Stock Option Plan
(incorporated herein by reference to Exhibit (c)(7) to
Schedule 13E-3 of Instron Corporation, filed on May 26,
1999).
10.8 Form of Incentive Stock Option Agreement (incorporated
herein by reference to Exhibit (c)(8) to Schedule 13E-3 of
Instron Corporation, filed on May 26, 1999).
</TABLE>
II-12
<PAGE> 154
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.9 Form of Nonqualified Stock Option Agreement (incorporated
herein by reference to Exhibit (c)(9) to Schedule 13E-3 on
Instron Corporation, filed on May 26, 1999).
10.10 Form of Amendment to Instron Corporation 1992 Stock
Incentive Plan (incorporated herein by reference to Exhibit
(c)(10) to Schedule 13E-3 of Instron Corporation, filed on
May 26, 1999).
10.11 Form of Amendment to Nonqualified Stock Option Agreement
(incorporated herein by reference to Exhibit (c)(11) to
Schedule 13E-3 of Instron Corporation, filed on May 26,
1999).
10.12 Form of Amendment to Incentive Stock Option Agreement
(incorporated herein by reference to Exhibit (c)(12) to
Schedule 13E-3 of Instron Corporation, filed on May 26,
1999).
*12 Statement regarding computation of earnings to fixed
charges.
*21 Subsidiaries of Instron Corporation (incorporated herein by
reference to Exhibit 21 to the Annual Report on Form 10-K of
Instron Corporation, filed on April 9, 1999).
+23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit
5.1).
*23.2 Consent of PricewaterhouseCoopers LLP.
*24 Powers of Attorney.
*25 Statement of Eligibility of Trustee under the Trust
Indenture Act of 1939 on Form T-1.
*27 Financial Data Schedule.
*99.1 Letter of Transmittal.
*99.2 Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* filed herewith.
+ to be filed by amendment.
II-13
<PAGE> 1
EXHIBIT 3.1(i)
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, James McConnell, President, and Jill E. Peebles, Clerk, of
Instron Corporation, located at 100 Royall Street, Canton, Massachusetts 02021,
do hereby certify that the following Restatement of the Articles of Organization
was duly adopted at a meeting held on September __, 1999 by a vote of the
directors/or 557,431 shares of Common Stock of 557,431 shares outstanding.
ARTICLE I
The name of the corporation is Instron Corporation.
ARTICLE II
The purpose of the corporation is to engage in the following
activities:
(a) To carry on a manufacturing, contracting, merchandising, and
research business, and in general, to carry on any business or other activity
that may be lawfully carried on by a corporation organized under Chapter 156B of
the Massachusetts General Laws.
(b) In general, to carry on any business or other activity that may
lawfully be carried on by a corporation organized under Chapter 156B of the
Massachusetts General Laws.
ARTICLE III
Total number of shares and par value of each class of stock
authorized by the corporation:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
TYPE NUMBER OF TYPE NUMBER OF PAR VALUE
SHARES SHARES
<S> <C> <C> <C> <C>
Common: None Common: 1,000,000 $.01
Preferred: None Preferred: None N/A
</TABLE>
ARTICLE IV
<PAGE> 2
The Common Stock of the corporation is described as follows
and has the following preferences, voting powers, qualifications, and special or
relative rights or privileges:
Common Stock. (1) Voting. The holders of shares of Common Stock shall
be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders for each share of Common Stock held of record by such holder as of
the record date for such meeting.
(2) Dividends; Liquidation. The holders of each share of Common Stock
shall be entitled to receive dividends as and when declared by the Board of
Directors out of any funds legally available for payments of such dividends.
Each share of Common Stock, of any class, shall rank equally with all other
shares of Common Stock, of any class, as to the payment of dividends and other
distributions upon liquidation or otherwise.
ARTICLE V
There are no restrictions imposed by the Articles of
Organization upon the transfer of shares of stock of any class.
ARTICLE VI
Article 6(a). Indemnification. (1) Directors. (A) Except as
limited by law or as provided in paragraph (B) and (C) of this Article, the
Corporation shall indemnify any Director or officer who was or is threatened to
be made party to, or is involved in, any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a Director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another organization or
who serves at the Corporation's request in any capacity with respect to any
employee benefit plan (an "Indemnified Party"). Except as limited by law or as
provided in paragraph (B) and (C) of this Article, indemnification shall be
provided whether the basis of such Proceeding is alleged action in an official
capacity as an Indemnified Party or in any other capacity while serving as an
Indemnified Party, against all expense, liability, and loss (including
attorneys' fees, judgments, fines, excise taxes or penalties and amounts paid or
to be paid in settlement with respect to the Proceeding) actually and reasonably
incurred or suffered by such person in connection therewith. Any such
indemnification shall be provided although the Indemnified Party is no longer an
officer, director, employee or agent of the Corporation or of such other
organization or no longer serves with respect to any such employee benefit plan.
(B) No indemnification shall be provided for any person with
respect to any matter as to which he or she shall have been adjudicated in any
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 that
such matter relates to service with respect to an employee benefit plan, in the
best interest of the participants or beneficiaries of such employee benefit
plan.
(C) If authorized by the Board of Directors or the
stockholders, the Corporation may pay indemnification in advance of final
disposition of a Proceeding upon receipt of an
<PAGE> 3
undertaking by such Indemnified Party to repay such payment if he or she shall
be adjudicated to be not entitled to indemnification, which undertaking may be
accepted without reference to the financial ability of such Indemnified Party to
make repayment.
(2) Employees and Agents. The Corporation may indemnify any employees
or other agents of the Corporation to an extent greater than that required by
law only if and to the extent the Board of Directors may, in their discretion,
so determine.
(3) Indemnification Not Exclusive. The indemnification and advancement
of expenses provided under this Article shall not be deemed exclusive of any
other rights to which any such indemnified person may be entitled under any law.
Nothing in this Article shall affect any rights to indemnification to which
corporate personnel other than the persons designated in this Article may be
entitled by contract, by vote of the Board of Directors, or otherwise under law.
Article 6(b). Stockholders' Meetings. Meetings of stockholders of this
Corporation may be held anywhere in the United States. The place of such
meetings shall be determined in the manner provided in the By-laws.
Article 6(c). Limitation of Liability of Directors. No Director of this
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director notwithstanding
any provision or law imposing such liability; provided however, that this
Article shall not eliminate or limit any liability of a Director (1) for any
breach of the Director's duty of loyalty to the Corporation or its stockholders,
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (3) under Section 61 or 62 of the
Massachusetts Business Corporation Law, or (4) with respect to any transaction
from which the Director derived an improper personal benefit. Nothing in this
Article 6(c) shall eliminate or limit the liability of a Director for any act or
omission occurring prior to the date upon which this Article 6(c) becomes
effective.
Article 6(d). Amendment of By-laws. The By-laws of the Corporation may provide
that the Board of Directors, as well as the stockholders, may make, amend or
repeal the By-laws in whole or in part to the extent permitted by law, subject
to the limitations contained in the By-laws.
Article 6(e). Acting as a Partner. This Corporation may be a partner in any
business enterprise that it would have the power to conduct by itself.
Article 6(f). Certain Voting Requirements. Any amendment of these Articles of
Organization, any sale, lease or exchange of all or substantially all of the
property and assets of the Corporation, including its goodwill, any agreement or
merger or consolidation in which the Corporation is a constituent corporation in
respect of which stockholder approval is required by the provision of Section 78
of the Massachusetts Business Corporation Law, or any voluntary dissolution of
the Corporation shall be authorized and approved by the stockholders of the
Corporation by the vote of at least a majority of each class of stock of the
Corporation outstanding and entitled to vote thereon; provided, that where the
provisions of Section 71 or
<PAGE> 4
Section 78 or the Massachusetts Business Corporation Law require the separate
vote of at least a majority of any class or series of stock of the Corporation,
the separate vote of at least a majority of such class or series shall also be
required for such authorization and approval.
Article 6(g). Business Combinations. Until such time as this Article 6(g) shall
be repealed or these Articles of Organization be amended to provide otherwise,
the Corporation elects not to be governed by the provisions of Chapter 110F of
the Massachusetts General Laws.
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.
ARTICLE VIII
(a) The street address of the principal office of the
corporation in Massachusetts is 100 Royall Street, Canton, Massachusetts 02021.
(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>
James A. McConnell, 8 Pine Hill Drive 8 Pine Hill Drive
President Needham, MA 02492 Needham, MA 02492
John R. Barrett, Treasurer 9 Town Line Road 9 Town Line Road
Burlington, MA 01803 Burlington, MA 01803
Jill E. Peebles, Clerk 180 Cannon Forge Drive 180 Cannon Forge Drive
Foxboro, MA 02035 Foxboro, MA 02035
Raymond A. Lancaster, 20 Greentree Road 20 Greentree Road
Director Chagrin Falls, OH 44022 Chagrin Falls, OH 44022
Thomas N. Littman, Director 6248 North Huntington Drive 6248 North Huntington Drive
Solon, OH 44139 Solon, OH 44139
James A. McConnell, 8 Pine Hill Drive 8 Pine Hill Drive
Director Needham, MA 02492 Needham, MA 02492
John F. Turben, Director 8966 Booth Road 8966 Booth Road
Kirtland Hills, OH 44060 Kirtland Hills, OH 44060
</TABLE>
(c) The fiscal year of the corporation shall end on the last
day of the month of December.
<PAGE> 5
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 Articles II, III, IV and
VI.
SIGNED UNDER THE PENALTIES OF PERJURY, THIS __ DAY OF
SEPTEMBER, 1999.
/s/ James A. McConnell
- ----------------------------------
James A. McConnell, President
/s/ Jill E. Peebles
- ----------------------------------
Jill E. Peebles, Clerk
<PAGE> 1
Exhibit 3.1 (ii)
AMENDED AND RESTATED BY-LAWS
OF
INSTRON CORPORATION
ARTICLE I
ARTICLES OF ORGANIZATION
The name and purposes of the Corporation shall be as set forth
in the Articles of Organization. These By-laws, the powers of the Corporation
and of its Directors and stockholders, or of any class of stockholders if there
is more than one class of stock, and all matters concerning the conduct and
regulation of the business and affairs of the Corporation, shall be subject to
the provisions in regard thereto, if any, as are set forth in the Articles of
Organization as in effect from time to time.
ARTICLE II
STOCKHOLDERS
2.1 Annual Meeting. The annual meeting of stockholders shall
be held at the hour, date and place as may be designated by the Board of
Directors, the Chairman of the Board, if one is elected, or the President, which
time, date and place may subsequently be changed at any time by the Board of
Directors, but in no case later than six months after the end of the fiscal
year. The purposes for which the annual meeting is to be held, in addition to
those prescribed by law, the Articles of Organization or these By-laws, may be
specified by the Board of Directors, the Chairman of the Board, if one is
elected, or the President.
2.2 Special Meetings. Special meetings of stockholders may be
called by the President, the Chairman of the Board, if one is elected, or the
Board of Directors, to be held at such date, time and place as may be stated in
the notice of the meeting. Special meetings shall be called by the Clerk, or in
the case of the death, absence, incapacity or refusal of the Clerk, by any other
officer, upon written application of one or more stockholders who hold at least
(i) 50% in interest of the capital stock entitled to vote at such meeting or
(ii) such lesser percentage, if any, as shall be determined to be the maximum
percentage that the Corporation is permitted by applicable law to establish for
the call of such a meeting. Application to a court pursuant to Section 34(a) of
Chapter 156B of the General Laws of the Commonwealth of Massachusetts requesting
the call of a special meeting of stockholders because none of the offices is
able and willing to call such a meeting may be made only by stockholders who
hold at least (i) 50% in interest of the capital stock entitled to vote at such
meeting or (ii) such lesser percentage, if any, as shall be determined to be the
maximum percentage which the Corporation is permitted by applicable law to
establish for the call of such meeting. In the case of a special meeting to be
called by the Clerk upon such written application of stockholders, if the Board
of Directors fails or declines to determine the place, date and time of any such
special meeting within seven business days of such application having been
delivered to the Clerk, the Clerk (or such other officer) shall at the time of
calling such special meeting also designate the place, date and time
<PAGE> 2
of such special meeting as well as the record date for determining the
stockholders having the right to notice of and to vote at such meeting.
2.3 Notice of Meetings. A written notice of the hour, date and
place of all meetings of stockholders (other than adjournments governed by
Section 2.9 of these By-laws) stating the purposes of the meeting shall be given
by the Clerk or an Assistant Clerk (or other person authorized by these By-laws
or by law) at least seven days before the meeting to each stockholder entitled
to vote thereat and to each stockholder who, under the Articles of Organization
or under these By-laws, is entitled to such notice, by leaving such notice with
him or her or at his or her residence or usual place of business, or by mailing
it, postage prepaid, and addressed to such stockholder at his address as it
appears in the records of the Corporation. Notice need not be given to a
stockholder if a written waiver of notice, executed before or after the meeting
by such stockholder or his or her attorney thereunto authorized, is filed with
the records of the meeting.
2.4 Quorum. The holders of a majority in interest of all stock
issued, outstanding and entitled to vote at a meeting shall constitute a quorum,
but if a quorum is not present, the stockholders present may, by majority vote,
adjourn the meeting from time to time and the meeting may be held as adjourned
without further notice.
2.5 Voting and Proxies. Stockholders shall have one vote for each
share of stock entitled to vote owned by them of record according to the books
of the Corporation and a proportionate vote for a fractional share, unless
otherwise provided by law or the Articles of Organization. Stockholders may vote
either in person or by written proxy dated not more than six months before the
meeting named therein. Proxies shall be filed with the Clerk of the meeting, or
of any adjournment thereof, before being voted. Except as otherwise limited
therein, proxies shall entitle the persons authorized thereby to vote at any
adjournment of such meeting but shall not be valid after final adjournment of
such meeting. A proxy coupled with an interest sufficient in law to support an
irrevocable proxy, including without limitation, an interest in the shares of
the Corporation generally, may be made irrevocable if it so provides, need not
specify the meeting to which it relates, and shall be valid and enforceable
until the interest terminates, or for such shorter period as may be specified in
the proxy. A proxy with respect to stock held in the name of two or more persons
shall be valid if executed by 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. A proxy purporting to be executed by or on behalf of a
stockholder shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger.
2.6 Action at Meeting. When a quorum is present, any matter before
the meeting shall be decided by vote of the holders of a majority of the shares
of stock voting on such matter, except where a larger vote is required by law,
the Articles of Organization or these By-laws. Any election by stockholders
shall be determined by a plurality of the votes cast, except where a larger vote
is required by law, the Articles of Organization or these By-laws. No ballot
shall be required for any election unless requested by a stockholder entitled to
vote in the election. The Corporation shall not directly or indirectly vote any
shares of its own stock.
2.7 Action by Written Consent. Any action to be taken by
stockholders may be taken without a meeting if all stockholders entitled to vote
on the matter consent to the action
-2-
<PAGE> 3
by a writing filed with the records of the meetings of stockholders. Such
consent shall be treated for all purposes as a vote at a meeting.
2.8 Rescheduling of Meetings; Adjournments. The Board of
Directors may postpone and reschedule any previously scheduled annual or special
meeting of stockholders, and any record date with respect thereto, regardless of
whether any notice or public disclosure with respect to any such meeting has
been sent or made pursuant to Section 2.8 or Section 3.14 hereof or otherwise.
When any meeting is convened, the presiding officer may
adjourn the meeting for a period of time not to exceed 30 days if (a) no quorum
is present for the transaction of business, (b) the Board of Directors
determines that adjournment is necessary or appropriate to enable the
stockholders to consider fully information that the Board of Directors
determines has not been made sufficiently or timely available to stockholders,
or (c) the Board of Directors determines that adjournment is otherwise in the
best interests of the Corporation. The presiding officer in such event shall
announce the adjournment and the date, time and place of reconvening and shall
cause notice thereof to be posted at the place of meeting designated in the
notice which was originally sent to the stockholders, and if such date is more
than 30 days after the original date of the meeting, the Clerk shall give notice
thereof in the manner provided in Section 2.3 hereof.
ARTICLE III
DIRECTORS
3.1 Powers. The business of the Corporation shall be managed
by a Board of Directors who may exercise all the powers of the Corporation
except as otherwise provided by law, the Articles of Organization or these
By-laws. In the event of a vacancy in the Board of Directors, the remaining
Directors, except as otherwise provided by law, may exercise the powers of the
full Board of Directors until the vacancy is filled.
3.2 Election and Qualification. A Board of Directors
consisting of at least three members, the number to be fixed from time to time
by resolution adopted by the affirmative vote of a majority of the entire Board
of Directors, shall be elected by the stockholders at the annual meeting in
accordance with the Articles of Organization. No Director need be a stockholder.
3.3 Vacancies. Any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from the enlargement of the Board of
Directors by the Board of Directors or stockholders, may be filled only by the
Board of Directors. Any Director elected to fill a vacancy shall hold office for
the entire unexpired term of the class to which he was elected whether or not
such term extends beyond the date or dates of, any annual meeting or meetings of
stockholders succeeding the date of his election.
3.4 Changing the Number of Directors. The number of members of
the Board of Directors may be increased at any meeting of the stockholders by
the vote of the holders of at least 50% of the shares of each class of stock
entitled to vote in the election of Directors and may be increased or decreased
by resolution adopted at any meeting of the Board of Directors.
-3-
<PAGE> 4
3.5 Tenure. Directors shall hold office until their successors
are chosen and qualified. Any Director may resign by delivering his written
resignation to the Corporation at its principal office or to the President,
Clerk or Secretary. Such resignation shall be effective upon receipt unless it
is specified to be effective at some other time or upon the happening of some
other event.
3.6 Removal. A Director may be removed from office with or
without cause (a) by vote of the holders of at least a majority of the shares of
each class of stock entitled to vote in the election of Directors, or (b) 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.
3.7 Meetings. Regular meetings of the Board of Directors may
be held without notice at such time, date and place as the Board of Directors
may from time to time determine. A regular meeting of the Board of Directors may
be held without notice at the same place as the annual meeting of stockholders,
or the special meeting held in lieu thereof, following such meeting of
stockholders.
Special meetings of the Board of Directors may be called,
orally or in writing, by the Chairman of the Board, if one is elected, the
President, the Treasurer or two or more Directors, designating the time, date
and place thereof.
3.8 Notice of Meetings. Notice of the time, date and place of
all special meetings of the Board of Directors shall be given to each Director
by the Clerk or Assistant Clerk, or in case of the death, absence, incapacity or
refusal of such persons, by the officer or one of the Directors calling the
meeting. Notice shall be given to each Director in person or by telephone or
facsimile sent to his business or home address at least twenty-four hours in
advance of the meeting, or by written notice mailed to his business or home
address at least forty-eight hours in advance of the meeting. Notice need not be
given to any Director if a written waiver of notice, executed by him before of
after the meeting, is filed with the records of the meeting, or to any Director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. A notice or waiver of notice of a meeting of the
Board of Directors need not specify the purposes of the meeting.
3.9 Quorum. At any meeting of the Board of Directors, a
majority of the Directors then in office shall constitute a quorum. Less than a
quorum may adjourn any meeting from time to time and the meeting may be held as
adjourned without further notice.
3.10 Action at Meeting. At any meeting of the Board of
Directors at which a quorum is present, a majority of the Directors present may
take any action on behalf of the Board of Directors, unless a larger number is
required by law, the Articles of Organization or these By-Laws.
3.11 Action by Consent. Any action by the Board of Directors
may be taken without a meeting if a written consent thereto is signed by all the
Directors and filed with the records of the meetings of the Board of Directors.
Such consent shall be treated for all purposes as a vote of the Board of
Directors at a meeting.
-4-
<PAGE> 5
3.12 Telephonic Meetings Permitted. Members of the Board of
Directors or any committee designated thereby may participate in a meeting of
such Board of Directors or of such committee, as the case may be, by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation by
such means shall constitute presence in person at such meeting.
3.13 Committees. The Board of Directors, by vote of a majority
of the Directors then in office, may elect from its number an Executive
Committee or other committees and may delegate thereto some or all of its powers
except those which by law, the Articles of Organization, or these By-laws may
not be delegated. Except as the Board of Directors may otherwise determine, any
such committee may make rules for the conduct of its business, but unless
otherwise provided by the Board of Directors or in such rules, its business
shall be conducted so far as possible in the same manner as is provided by these
By-laws for the Board of Directors. All members of such committees shall hold
such offices at the pleasure of the Board of Directors. The Board of Directors
may abolish any such committee at any time. Any committee to which the Board of
Directors delegates any of its powers or duties shall keep records of its
meetings and shall report its action to the Board of Directors. The Board of
Directors shall have the power to rescind any action of any committee, but no
such rescission shall have retroactive effect.
3.14 Compensation. The Board of Directors may establish the
compensation and expense reimbursement policies for Directors in exchange for
membership on the Board of Directors and on committees of the Board of
Directors, attendance at meetings of the Board of Directors or committees of the
Board of Directors, and for other services by Directors to the Corporation or
any of its subsidiaries.
ARTICLE IV
OFFICERS
4.1 Enumeration. The officers of the Corporation shall consist
of a President, a Treasurer, a Clerk, and such other officers, including a
Chairman of the Board of Directors or one or more Vice Presidents, Assistant
Treasurers, or Assistant Clerks, as the Board of Directors may determine.
4.2 Election. The President, Treasurer and Clerk shall be
elected annually by the Board of Directors at their first meeting following the
annual meeting of stockholders. Other officers may be chosen by the Board of
Directors at such meeting or at any other meeting.
4.3 Qualification. No officer need be a stockholder or
Director. Any two or more offices may be held by any person. The Clerk shall be
a resident of Massachusetts unless the Corporation has a resident agent
appointed for the purpose of service of process. Any officer may be required by
the Board of Directors to give bond for the faithful performance of his or her
duties in such amount and with such sureties as the Board of Directors may
determine.
4.4 Tenure. Except as otherwise provided by law, the Articles
of Organization or these By-laws, the President, Treasurer and Clerk shall hold
office until the next annual meeting of stockholders and until their respective
successors are chosen and qualified;
-5-
<PAGE> 6
and all other officers shall hold office until the next annual meeting of
stockholders and until their successors are chosen and qualified, or for such
shorter term as the Board of Directors may fix at the time such officers are
chosen. Any officer may resign by delivering his or her written resignation to
the Corporation at its principal office or to the President or Clerk, and such
resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
4.5 Removal. The Board of Directors may remove any officer
with or without cause by a vote of a majority of the entire number of Directors
then in office; provided, that an officer may be removed for cause only after
reasonable notice and opportunity to be heard by the Board of Directors.
4.6 Vacancies. Any vacancy in any office, however occurring,
may be filled for the unexpired portion of the term by the Board of Directors.
4.7 President and Vice President. The President shall be the
Chief Executive Officer of the Corporation unless otherwise designated by the
Board of Directors. If the Chairman or Vice Chairman is not elected or is
absent, and unless otherwise provided by the Board of Directors, the President
shall preside when present at all meetings of stockholders and of the Board of
Directors. Any Vice President shall have such powers and shall perform such
duties as the Board of Directors may from time to time designate.
4.8 Treasurer and Assistant Treasurers. The Treasurer shall,
subject to the direction of the Board of Directors, have general charge of the
financial affairs of the Corporation and shall cause to be kept accurate books
of account. He or she shall have custody of all funds, securities, and valuable
documents of the Corporation, except as the Board of Directors may otherwise
provide. Any Assistant Treasurer shall have such powers and perform such duties
as the Board of Directors may from time to time designate.
4.9 Clerk and Assistant Clerks. The Clerk shall keep a record
of the meetings of stockholders. In case a Clerk is not elected or is absent,
the Clerk or an Assistant Clerk shall keep a record of the meetings of the Board
of Directors. In the absence of the Clerk from any meeting of stockholders, an
Assistant Clerk if one be elected, otherwise a Temporary Clerk designated by the
person presiding at the meeting, shall perform the duties of the Clerk.
4.10 Chief Executive Officer. The Chief Executive Officer
shall have, subject to the direction of the Board of Directors, general
supervision and control of the business of the Corporation.
4.11 Chairman and Vice Chairman. The Chairman of the Board of
Directors shall preside when present at all meetings of stockholders and of the
Board of Directors and shall have such other powers and duties as the Board of
Directors may from time to time designate. The Vice Chairman of the Board of
Directors, if one is elected, shall in the Chairman's absence preside when
present at all meetings of stockholders and of the Board of Directors and shall
have such other duties as the Board of Directors may from time to time
designate.
4.12 Other Powers and Duties. Subject to these By-laws, each
officer of the Corporation shall have, in addition to the duties and powers
specifically set forth in these By-
-6-
<PAGE> 7
laws, such duties and powers as are customarily incident to such office, and
such duties and powers as may be designated from time to time by the Board of
Directors.
4.13 Compensation. The compensation of all officers and agents
of the Corporation who are also members of the Board of Directors shall be fixed
by the Board of Directors or by a committee of the Board of Directors. The Board
of Directors may fix, or delegate the power to fix, the compensation of the
other officers and agents of the Corporation to the Chief Executive Officer or
any other officer of the Corporation.
ARTICLE V
CAPITAL STOCK
5.1 Certificates of Stock. Each stockholder shall be entitled
to a certificate representing the capital stock of the Corporation in such form
as may from time to time be prescribed by the Board of Directors. Such
certificate shall be signed by the Chairman of the Board, if one is elected, the
President or a Vice President and by the Treasurer or an Assistant Treasurer.
Such signatures may be facsimiles if the certificate is signed by a transfer
agent, or by a registrar, other than a Director, officer or employee of the
Corporation. In case any officer who has signed or whose facsimile signature has
been placed on such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he or she were such officer at the time of its issue. Every certificate
for shares of stock which are subject to any restriction on transfer and every
certificate issued when the Corporation is authorized to issue more than one
class of series of stock shall contain such legend with respect thereto as is
required by law.
5.2 Transfers. Subject to the restrictions, if any, noted on
the stock certificates, shares of stock may be transferred on the books of the
Corporation by the surrender to the Corporation or its transfer agent of the
certificate therefor properly endorsed or accompanied by a written assignment
and power of attorney properly executed, with transfer stamps (if necessary)
affixed, and with such proof of authenticity of signature as the Corporation or
its transfer agent may reasonably require.
5.3 Record Holders. Except as may be otherwise required by
law, the Articles of Organization or these By-laws, the Corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect thereto, regardless of any transfer, pledge or other
disposition of such stock, until the shares have been transferred on the books
of the Corporation in accordance with the requirements of these By-laws. It
shall be the duty of each stockholder to notify the Corporation of his post
office address.
5.4 Record Date. The Board of Directors may fix in advance a
time of not more than 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 last day on which the consent or dissent of
stockholders may be effectively expressed for any purpose, as the record date
for determining the stockholders having the right to notice of and to vote at
such meeting and any adjournment thereof, or the right to receive such dividend
or distribution or the right to give such consent or dissent. In such case, only
stockholders of record on such record
-7-
<PAGE> 8
date shall have such right, notwithstanding any transfer of stock on the books
of the Corporation after the record date. Without fixing such record date the
Board of Directors may for any of such purposes close the transfer books for all
or any part of such period.
5.5 Replacement of Certificates. In case of the alleged loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
5.6 Pre-emptive Rights. Except as otherwise provided in the
Articles of Organization, no stockholder shall have any preemptive rights to
subscribe to stock of the Corporation.
5.7 Issuance of Stock. The Board of Directors may issue from
time to time the whole or any part of the capital stock of the Corporation now
or hereafter authorized, to such persons or organizations, for such
consideration, whether cash, property, services, for a debt, note or expenses,
and on such terms as the Board of Directors may determine, including, without
limitation, the granting of options, warrants, convertible or other rights to
persons or organizations, including Directors, officers or employees of the
Corporation or of a parent or subsidiary Corporation, to subscribe to said
capital stock, with or without a general or specific plan relating thereto.
ARTICLE VI
MISCELLANEOUS
6.1 Fiscal Year. Except as otherwise determined by the Board
of Directors, the fiscal year of the Corporation shall end on December 31.
6.2 Seal. The Corporation may have a seal that shall have the
name of the Corporation inscribed thereon and shall be in such form as may be
approved from time to time by the Board of Directors. The corporate seal, if
any, may be used by causing it or a facsimile thereof to be impressed or affixed
or in any other manner reproduced.
6.3 Execution of Instruments. All deeds, leases, transfers,
contracts, bonds, notes and other obligations authorized to be executed by an
officer of the Corporation in its behalf shall be signed by the President or the
Treasurer except as the Board of Directors may generally or in particular cases
otherwise determine.
6.4 Voting of Securities. Unless otherwise provided by the
Board of Directors, the President or Treasurer may waive notice of and act on
behalf of this Corporation, or appoint another person or persons to act as proxy
or attorney in fact for this Corporation with or without discretionary power
and/or power of substitution, at any meeting of stockholders or shareholders of
any other corporation or organization, any of whose securities are held by this
Corporation.
6.5 Resident Agent. The Board of Directors may appoint a
resident agent upon whom legal process may be served in any action or proceeding
against the Corporation. Said resident agent shall be either an individual who
is a resident of and has a business address
-8-
<PAGE> 9
in Massachusetts, or a Corporation under the laws of any other state of the
United States, which has qualified to do business in, and has an office in,
Massachusetts.
6.6 Corporate Records. The original, or attested copies of,
the Articles of Organization, By-laws, and records of all meetings of the
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 Massachusetts at the principal office of
the Corporation, or at an office of its transfer agent, Clerk or resident agent,
and shall be open at all reasonable times to the inspection of any stockholder
for any proper purpose, but not to secure a list of stockholders for the purpose
of selling said list 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.
6.7 Charitable Contributions. The Board of Directors may
authorize from time to time donations to be made by the Corporation,
irrespective of corporate benefit, in such amount as it may determine to be
reasonable for the public welfare or for community fund, hospital, charitable,
religious, educational, scientific, civic or similar purposes, and in time of
war or other national emergency in aid thereof.
6.8 Articles of Organization. All references in these By-laws
to the Articles of Organization shall be deemed to refer to the Articles of
Organization of the Corporation, as amended and in effect from time to time.
6.9 Control Share Acquisition. Until such time as this Section
6.9 shall be repealed or these By-laws shall otherwise be amended to provide
otherwise, in each case in accordance with Section 6.10 of these By-laws, the
provisions of Chapter 110D of the Massachusetts General Laws ("Chapter 110D")
shall not apply to "control share acquisitions" of the Corporation within the
meaning of Chapter 110D.
6.10 Amendments. These By-laws may be amended or repealed by
vote of the stockholders at any annual or special meeting or by the Board of
Directors at any regular or special meeting, provided that:
(a) The Board of Directors may not amend or repeal any
provisions of these By-laws which by law, the Articles of Organization
or these By-laws requires action by the stockholders; and
(b) Any amendment or repeal of these By-laws by the Board of
Directors and any by-law adopted by the Board of Directors may be
amended or repealed by the stockholders.
Notice stating the substance of such making, amendment or
repeal of the By-laws shall be provided to all stockholders entitled to vote on
amending these By-laws no later than the time of giving notice of the next
stockholders meeting.
The vote of the Board of Directors or the vote of the holders
of at least seventy-five percent of the outstanding shares of each class of
stock entitled to vote shall be required to amend or repeal Sections 4.2, 4.3,
4.4, 4.5 or 4.6 or Section 6.10 of these By-laws.
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<PAGE> 1
EXHIBIT 4.1
INSTRON CORPORATION
13-1/4% SENIOR SUBORDINATED NOTES DUE 2009
INDENTURE
Dated as of September 29, 1999
Norwest Bank Minnesota, National Association
Trustee
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310(a)(1)................................................................... 7.10
(a)(2)................................................................... 7.10
(a)(3)................................................................... N.A.
(a)(4)................................................................... N.A.
(a)(5)................................................................... 7.10
(b)...................................................................... 7.10
(c)...................................................................... N.A.
311(a)...................................................................... 7.11
(b)...................................................................... 7.11
(c)...................................................................... N.A.
312(a)...................................................................... 2.05
(b)...................................................................... 13.03
(c)...................................................................... 13.03
313(a)...................................................................... 7.06
(b)(2)................................................................... 7.07
(c)...................................................................... 7.06;13.02
(d)...................................................................... 7.06
314(a)...................................................................... 4.03;13.05
(c)(3)................................................................... N.A.
(e)...................................................................... 13.05
(f)...................................................................... N.A.
315(a)...................................................................... 7.01
(b)...................................................................... 7.05,12.02
(c)...................................................................... 7.01
(d)...................................................................... 7.01
(e)...................................................................... 6.11
316(a) (last sentence)...................................................... 2.09
(a)(1)(A)................................................................ 6.05
(a)(1)(B)................................................................ 6.04
(a)(2)................................................................... N.A.
(b)...................................................................... 6.07
(c)...................................................................... 2.12
317(a)(1)................................................................... 6.08
(a)(2)................................................................... 6.09
(b)...................................................................... 2.04
318(a)...................................................................... N.A.
(b)...................................................................... N.A.
(c)...................................................................... 13.01
</TABLE>
N.A. means not applicable.
* This Cross Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions................................................................................... 1
Section 1.02. Other Definitions............................................................................. 16
Section 1.03. Incorporation by Reference of Trust Indenture Act............................................. 16
Section 1.04. Rules of Construction......................................................................... 17
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating............................................................................... 17
Section 2.02. Execution and Authentication.................................................................. 18
Section 2.03. Registrar and Paying Agent.................................................................... 18
Section 2.04. Paying Agent to Hold Money in Trust........................................................... 19
Section 2.05. Holder Lists.................................................................................. 19
Section 2.06. Transfer and Exchange......................................................................... 19
Section 2.07. Replacement Notes............................................................................. 30
Section 2.08. Outstanding Notes............................................................................. 31
Section 2.09. Treasury Notes................................................................................ 31
Section 2.10. Temporary Notes............................................................................... 31
Section 2.11. Cancellation.................................................................................. 31
Section 2.12. Defaulted Interest............................................................................ 32
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee............................................................................ 32
Section 3.02. Selection of Notes to Be Redeemed............................................................. 32
Section 3.03. Notice of Redemption.......................................................................... 33
Section 3.04. Effect of Notice of Redemption................................................................ 33
Section 3.05. Deposit of Redemption Price................................................................... 33
Section 3.06. Notes Redeemed in Part........................................................................ 34
Section 3.07. Optional Redemption........................................................................... 34
Section 3.08. Mandatory Redemption.......................................................................... 34
Section 3.09. Offer to Purchase by Application of Excess Proceeds........................................... 34
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.............................................................................. 36
Section 4.02. Maintenance of Office or Agency............................................................... 36
Section 4.03. Reports....................................................................................... 37
Section 4.04. Compliance Certificate........................................................................ 37
Section 4.05. Taxes......................................................................................... 38
Section 4.06. Stay, Extension and Usury Laws................................................................ 38
Section 4.07. Restricted Payments........................................................................... 38
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries................................ 40
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.................................... 41
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
Section 4.10. Asset Sales................................................................................... 44
Section 4.11. Transactions with Affiliates.................................................................. 45
Section 4.12. Liens......................................................................................... 45
Section 4.13. Business Activities........................................................................... 46
Section 4.14. Corporate Existence........................................................................... 46
Section 4.15. Offer to Repurchase Upon Change of Control.................................................... 46
Section 4.16. No Senior Subordinated Debt................................................................... 47
Section 4.17. Payments for Consent.......................................................................... 47
Section 4.18. Additional Note Guarantees.................................................................... 47
Section 4.19. Designation of Restricted and Unrestricted Subsidiaries....................................... 48
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets...................................................... 48
Section 5.02. Successor Corporation Substituted............................................................. 48
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default............................................................................. 49
Section 6.02. Acceleration.................................................................................. 50
Section 6.03. Other Remedies................................................................................ 51
Section 6.04. Waiver of Past Defaults....................................................................... 51
Section 6.05. Control by Majority........................................................................... 51
Section 6.06. Limitation on Suits........................................................................... 51
Section 6.07. Rights of Holders of Notes to Receive Payment................................................. 52
Section 6.08. Collection Suit by Trustee.................................................................... 52
Section 6.09. Trustee May File Proofs of Claim.............................................................. 52
Section 6.10. Priorities.................................................................................... 52
Section 6.11. Undertaking for Costs......................................................................... 53
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee............................................................................. 53
Section 7.02. Rights of Trustee............................................................................. 54
Section 7.03. Individual Rights of Trustee.................................................................. 54
Section 7.04. Trustee's Disclaimer.......................................................................... 55
Section 7.05. Notice of Defaults............................................................................ 55
Section 7.06. Reports by Trustee to Holders of the Notes.................................................... 55
Section 7.07. Compensation and Indemnity.................................................................... 55
Section 7.08. Replacement of Trustee........................................................................ 56
Section 7.09. Successor Trustee by Merger, etc.............................................................. 57
Section 7.10. Eligibility; Disqualification................................................................. 57
Section 7.11. Preferential Collection of Claims Against Company............................................. 57
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...................................... 57
Section 8.02. Legal Defeasance and Discharge................................................................ 57
Section 8.03. Covenant Defeasance........................................................................... 58
Section 8.04. Conditions to Legal or Covenant Defeasance.................................................... 58
</TABLE>
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Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. 59
Section 8.06. Repayment to Company.......................................................................... 60
Section 8.07. Reinstatement................................................................................. 60
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes........................................................... 60
Section 9.02. With Consent of Holders of Notes.............................................................. 61
Section 9.03. Compliance with Trust Indenture Act........................................................... 62
Section 9.04. Revocation and Effect of Consents............................................................. 63
Section 9.05. Notation on or Exchange of Notes.............................................................. 63
Section 9.06. Trustee to Sign Amendments, etc............................................................... 63
ARTICLE 10.
SUBORDINATION
Section 10.01. Agreement to Subordinate................................................................... 63
Section 10.02. Liquidation; Dissolution; Bankruptcy....................................................... 63
Section 10.03. Default on Designated Senior Debt.......................................................... 64
Section 10.04. Acceleration of Securities................................................................. 64
Section 10.05. When Distribution Must Be Paid Over........................................................ 65
Section 10.06. Notice by Company.......................................................................... 65
Section 10.07. Subrogation................................................................................ 65
Section 10.08. Relative Rights............................................................................ 65
Section 10.09. Subordination May Not Be Impaired by Company............................................... 66
Section 10.10. Distribution or Notice to Representative................................................... 66
Section 10.11. Rights of Trustee and Paying Agent......................................................... 66
Section 10.12. Authorization to Effect Subordination...................................................... 66
Section 10.13. Amendments................................................................................. 67
ARTICLE 11.
NOTE GUARANTEES
Section 11.01. Guarantee.................................................................................. 67
Section 11.02. Subordination of Note Guarantee............................................................ 68
Section 11.03. Limitation on Guarantor Liability.......................................................... 68
Section 11.04. Execution and Delivery of Note Guarantee................................................... 68
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms......................................... 69
Section 11.06. Releases Following Sale of Assets.......................................................... 69
ARTICLE 12.
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge................................................................. 70
Section 12.02. Application of Trust Money................................................................. 71
ARTICLE 13.
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls............................................................... 71
Section 13.02. Notices.................................................................................... 71
Section 13.03. Communication by Holders of Notes with Other Holders of Notes.............................. 72
Section 13.04. Certificate and Opinion as to Conditions Precedent......................................... 72
Section 13.05. Statements Required in Certificate or Opinion.............................................. 73
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Section 13.06. Rules by Trustee and Agents................................................................ 73
Section 13.07. No Personal Liability of Directors, Officers, Employees and Stockholders................... 73
Section 13.08. Governing Law.............................................................................. 73
Section 13.09. No Adverse Interpretation of Other Agreements.............................................. 73
Section 13.10. Successors................................................................................. 74
Section 13.11. Severability............................................................................... 74
Section 13.12. Counterpart Originals...................................................................... 74
Section 13.13. Table of Contents, Headings, etc........................................................... 74
Section 13.14. Limitation on Trust Liability.............................................................. 74
</TABLE>
EXHIBITS
Exhibit A1 FORM OF NOTE
Exhibit A2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM OF NOTE GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
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INDENTURE dated as of September 29, 1999 among Instron Corporation, a
Massachusetts corporation (the "Company"), the Guarantors (as defined) and
Norwest Bank Minnesota, National Association, as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 13-1/4% Senior Subordinated Notes due 2009 (the "Senior Subordinated Notes")
and the new 13-1/4% Senior Subordinated Notes due 2009 (the "New Senior
Subordinated Notes" and, together with the Senior Subordinated Notes, the
"Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note substantially in the form of
Exhibit A/A-1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any assets acquired by such specified Person.
"Additional Notes" means up to $50.0 million aggregate principal amount
of Notes (other than the Initial Notes) issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the
Initial Notes.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For 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, shall mean
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; provided, however,
that beneficial ownership of 10% or more of the Voting Stock of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Sale" means: (a) the sale, lease, conveyance or other
disposition of any assets or rights, other than sales of inventory in the
ordinary course of business consistent with past practices; provided that the
sale, conveyance or other disposition of all or substantially all of the assets
of the Company and its Subsidiaries taken as a whole shall be governed by the
provisions of Section 4.15 hereof and/or the provisions described in Section
5.01 hereof and not by the provisions of Section 4.10 hereof; and (b) the
issuance of Equity Interests by any of the Company's Restricted Subsidiaries or
the sale of Equity Interests in any of its Restricted Subsidiaries (other than
the issuance of director qualifying shares or similar required
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issuances). Notwithstanding the preceding, the following items shall not be
deemed to be Asset Sales: (i) any single transaction or series of related
transactions that involves assets having a fair market value of less than $2.0
million; (ii) a transfer of assets between or among the Company and its
Restricted Subsidiaries, (iii) an issuance of Equity Interests by a Restricted
Subsidiary to the Company or to another Restricted Subsidiary; (iv) the sale or
lease of equipment, inventory, accounts receivable or other assets in the
ordinary course of business; (v) the sale or other disposition of cash or Cash
Equivalents; (vi) a Restricted Payment or Permitted Investment that is permitted
by Section 4.07 hereof; and (vii) the licensing or sublicensing of intellectual
property or other general intangibles and licenses, leases or subleases of other
property in the ordinary course of business and which do not materially
interfere with the business of the Company and its Subsidiaries.
"Asset Swap" means an exchange of assets by the Company or a Restricted
Subsidiary of the Company for (i) one or more Permitted Businesses, (ii) a
controlling equity interest in any Person whose assets consist primarily of one
or more Permitted Businesses, (iii) cash and/or (iv) Productive Assets.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to the term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether the right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"beneficially owns" and "beneficially owned" shall have a corresponding meaning.
"Board of Directors" means (i) with respect to a corporation, the board
of directors of the corporation; (ii) with respect to a partnership, the Board
of Directors of the general partner of the partnership; and (iii) with respect
to any other Person, the board or committee of the Person serving a similar
function.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than one year from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of one year
or less from the date of acquisition, bankers' acceptances with maturities not
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<PAGE> 9
exceeding one year and overnight bank deposits, in each case, with any lender
party to the Credit Agreement or with any domestic commercial bank having
capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating
of "B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above, (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating
Services and in each case maturing within six months after the date of
acquisition, and (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i) through (v) of
this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following: (i)
the direct or indirect sale, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the properties or assets of the
Company and its Restricted Subsidiaries taken as a whole to any "person" (as
that term is used in Section 13(d)(3) of the Exchange Act) other than a
Principal or a Related Party of a Principal; (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company; (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined herein),
other than the Principals and their Related Parties, becomes the Beneficial
Owner, directly or indirectly, of more than 50% of the Voting Stock of the
Company, measured by voting power rather than number of shares; or (iv) the
first day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors.
"Company" means Instron Corporation, and any and all successors
thereto.
"Consolidated Cash Flow" means, with respect to any specified Person
for any period, the Consolidated Net Income of that Person for that period plus
(i) an amount equal to any extraordinary loss plus any net loss realized by that
Person or any of its Restricted Subsidiaries in connection with an Asset Sale,
to the extent those losses were deducted in computing Consolidated Net Income,
plus (ii) provision for taxes based on income or profits of that Person and its
Restricted Subsidiaries for that period, to the extent that the provision for
taxes was deducted in computing Consolidated Net Income, plus (iii) consolidated
interest expense of that Person and its Restricted Subsidiaries for that period,
whether paid or accrued and whether or not capitalized (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net of the
effect of all payments made or received pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing Consolidated Net Income,
plus (iv) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of that Person and its Restricted Subsidiaries for that
period to the extent that the depreciation, amortization and other non-cash
expenses were deducted in computing Consolidated Net Income, minus (v) non-cash
items increasing Consolidated Net Income for that period, other than the accrual
of revenue in the ordinary course of business, in each case, on a consolidated
basis and determined in accordance with GAAP. Notwithstanding the preceding, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Restricted Subsidiary of the
Company shall be added to Consolidated Net Income to compute Consolidated Cash
Flow of the Company only to the extent that a corresponding amount would be
permitted at the date of determination to be dividended to the Company by that
Restricted
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Subsidiary without prior governmental approval (that has not been obtained), and
without direct or indirect restriction pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
stockholders.
"Consolidated Net Income" means, with respect to any specified Person
for any period, the aggregate of the Net Income of that Person and its
Restricted Subsidiaries for that period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss) of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the specified Person or a
Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, (v) any nonrecurring fees, expenses and
costs relating to the Recapitalization incurred on or prior to date of this
Indenture, including, without limitation, any fees and expenses incurred in
connection with the Credit Agreement, any compensation expense incurred in
connection with the cancellation, retirement or acceleration of vesting of stock
options or restricted stock, modifications of existing employment agreements and
expenses related to early extinguishments of debt, shall be excluded and (vi)
the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not
distributed to the specified Person or one of its Subsidiaries.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 13.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Agreement" means that certain Credit Agreement, dated as of the
date of this Indenture, by and among the Company, certain of its Subsidiaries
and National City Bank, as agent, providing for up to $50.0 million of revolving
credit borrowings and $30.0 million of term loan borrowings, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
"Credit Facilities" means, one or more debt facilities (including,
without limitation, the Credit Agreement), commercial paper facilities or
indentures, in each case with banks or other lenders (or trustees therefor)
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables), letters
of credit or debt securities, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
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<PAGE> 11
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof,
substantially in the form of Exhibit A1 hereto except that such Note shall not
bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Senior Debt" means (i) any Indebtedness outstanding under
the Credit Agreement and (ii) after payment in full of all Obligations under the
Credit Agreement, any other Senior Debt permitted hereunder the principal amount
of which is $15.0 million or more and that has been designated by the Company as
"Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, (i) any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase the Capital
Stock upon the occurrence of a change of control or an asset sale shall not
constitute Disqualified Stock if the terms of the Capital Stock provide that the
Company may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with Section 4.07
hereof and (ii) shares of common stock of the Company beneficially owned by any
member of the Company's management or any immediate family member thereof shall
not constitute Disqualified Stock.
"Domestic Subsidiary" means any Subsidiary that guarantees or otherwise
provides direct credit support for any Indebtedness of the Company; provided
that a person organized and existing outside the United States shall not be
considered a Domestic Subsidiary solely by virtue of direct borrowing
obligations under Credit Facilities guaranteed by the Company.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
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"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date of this Indenture, until such amounts are repaid and commitments are
permanently reduced.
"Fixed Charges" means, with respect to any specified Person and its
Restricted Subsidiaries for any period, the sum, without duplication, of (i) the
consolidated interest expense of that Person and its Restricted Subsidiaries for
such period, whether paid or accrued, including, without limitation,
amortization of original issue discount (other than original issue discount
solely attributable to the Notes in connection with the issuance of the
Warrants), non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
the net effect of all payments made or received pursuant to Hedging Obligations
except expenses incurred with respect to fixing or hedging the risks associated
with fluctuations in foreign currency exchange rates, but excluding amortization
of debt issuance costs, plus (ii) the consolidated interest of that Person and
its Restricted Subsidiaries that was capitalized during such period, plus (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
that Person or one of its Restricted Subsidiaries or secured by a Lien on assets
of that Person or one of its Restricted Subsidiaries, whether or not the
Guarantee or Lien is called upon, plus (iv) the product of (a) all dividends,
whether paid or accrued and whether or not in cash, on any series of preferred
stock of that Person or any of its Restricted Subsidiaries, other than dividends
on Equity Interests payable solely in Equity Interests of the Company (other
than Disqualified Stock) or to the Company or a Restricted Subsidiary of the
Company, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined effective federal, state and
local statutory tax rate of that Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means, with respect to any specified
Person and its Restricted Subsidiaries for any period, the ratio of the
Consolidated Cash Flow of that Person and its Restricted Subsidiaries for such
period to the Fixed Charges of that Person and its Restricted Subsidiaries for
such period. In the event that the specified Person or any of its Restricted
Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any
Indebtedness (other than ordinary working capital borrowings) or issues,
repurchases or redeems preferred stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated and on or
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or
such issuance, repurchase or redemption of preferred stock, and the use of the
proceeds therefrom as if the same had occurred at the beginning of the
applicable four-quarter reference period. In addition, for purposes of
calculating the Fixed Charge Coverage Ratio, (i) acquisitions and dispositions
that have been made by the specified Person or any of its Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to the
reference period and on or prior to the Calculation Date shall be given pro
forma effect as if they had occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated on a pro forma basis in accordance with Regulation S-X under the
Securities Act (giving effect to any Pro Forma Cost Savings), but without giving
effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income; (ii) if since the beginning of the reference period any
Person (that subsequently became a Restricted Subsidiary or was merged with or
into the Company or any Restricted Subsidiary since the beginning of that
period) shall have made any acquisitions and dispositions including through
mergers or consolidations and including any related financing transactions that
would have required adjustment pursuant to this definition, then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect thereto (as
described in (i) above) for the reference period as if the acquisition or
disposition had occurred at the beginning of the applicable
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four-quarter period; (iii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded; and
(iv) the Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the specified
Person or any of its Subsidiaries following the Calculation Date.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company
that is not a Domestic Subsidiary or that is engaged in trade or business
outside of the United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, substantially in the
form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantors" means each of (i) Instron Asia Limited; Instron Japan
Company, Ltd.; Instron/Lawrence Corporation; Instron Realty Trust; IRT-II Trust;
and Instron Schenck Testing Systems Corp.; and (ii) any other subsidiary that
executes a Subsidiary Guarantee in accordance with the provisions of this
Indenture; and their respective successors and assigns.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of that Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) other agreements
or arrangements designed solely to protect that Person against fluctuations in
interest rates and (iii) agreements entered into solely for the purpose of
fixing or hedging the risks associated with fluctuations in foreign currency
exchange rates.
"Holder" means a Person in whose name a Note is registered.
"immediate family" has the meaning assigned to the term in Rule
16a-1(e) under the Exchange Act.
"Indebtedness" means with respect to any specified Person, any
indebtedness of that Person, whether or not contingent, in respect of (i)
borrowed money, (ii) evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof), (iii) banker's acceptances, (iv) representing Capital Lease
Obligations, (v) the balance deferred and unpaid of the
7
<PAGE> 14
purchase price of any property, except any such balance that constitutes an
accrued expense or trade payable or (vi) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not the Indebtedness is assumed by the
specified Person) and, to the extent not otherwise included, the Guarantee by
the specified Person of any indebtedness of any other Person if and to the
extent such Indebtedness would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. The term "Indebtedness" shall
not include amounts owing to any insurance company in connection with the
financing of insurance premiums permitted by the insurance company in the
ordinary course of business. The amount of any Indebtedness outstanding as of
any date shall be (i) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount, and (ii) the principal amount
thereof, together with any interest thereon that is more than 30 days past due,
in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Notes" means the first $60.0 million aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means with respect to any Person, all direct or indirect
investments by that Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, that Person is
no longer a Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of that Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of
Section 4.07 hereof. The acquisition by the Company or any Subsidiary of the
Company of a Person that holds an Investment in a third Person shall be deemed
to be an Investment by the Company or that Subsidiary in the third Person in an
amount equal to the fair market value of the Investment held by the acquired
Person in the third Person in an amount determined as provided in the final
paragraph of Section 4.07 hereof.
"Kirtland" means Kirtland Capital Partners III L.P.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. 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 on
such payment for the intervening period.
8
<PAGE> 15
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any specified Person, the net
income (loss) of that Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain or loss, together with any related provision for taxes on the gain or loss,
realized in connection with (a) any Asset Sale or (b) the disposition of any
securities by that Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of that Person or any of its Restricted
Subsidiaries and (ii) any extraordinary gain or loss, together with any related
provision for taxes on the extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
all costs relating to that Asset Sale, including, without limitation, legal,
accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements, and amounts required to
be applied to the repayment of Indebtedness, other than Senior Debt, secured by
a Lien on the asset or assets that were the subject of the Asset Sale and any
reserve for adjustment in respect of the sale price of the asset or assets or
for any indemnification obligations assumed in connection with the Asset Sale,
established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (A) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (B) is directly or indirectly liable as a guarantor or
otherwise, or (C) constitutes the lender, provided, however, that the Company or
any of its Restricted Subsidiaries may act as a guarantor with respect to any
Non-Recourse Debt, provided that such Guarantee (1) shall be deemed an
incurrence of Indebtedness not otherwise permitted by clause (x) of Section 4.09
hereof and (2) is a Restricted Investment that must be permitted by Section 4.07
hereof; (ii) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of any
other Indebtedness (other than the Notes) of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity;
and (iii) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Guarantee" means the Guarantee by each Guarantor of the Company's
payment obligations under this Indenture and on the Notes, executed pursuant to
the provisions of this Indenture.
9
<PAGE> 16
"Notes" has the meaning assigned to it in the preamble to this
Indenture. The Initial Notes and the Additional Notes shall be treated as a
single class for all purposes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 13.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
13.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Business" means the business conducted by the Company and
its Subsidiaries on the date of this offering memorandum and businesses
reasonably related thereto or supportive thereof.
"Permitted Investments" means (i) any Investment in the Company or in a
Restricted Subsidiary of the Company, (ii) any Investment in Cash Equivalents,
(iii) any Investment by the Company or any Restricted Subsidiary of the Company
in a Person, if as a result of the Investment (a) the Person becomes a
Restricted Subsidiary of the Company or a Permitted Joint Venture of the Company
that is engaged in a Permitted Business or (b) the 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 of the Company or a Permitted Joint Venture of the Company that is
engaged in a Permitted Business, (iv) any Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with Section 4.10 hereof, (v) any acquisition of assets to the
extent acquired in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company, (vi) Hedging Obligations, (vii) Investments
existing on the date of this Indenture and any amendment, modification,
restatement, extension, renewal, refunding, replacement, refinancing, in whole
or in part, thereof, (viii) extensions of trade credit or advances to customers
on commercially reasonable terms, each in the ordinary course of business, (ix)
loans or advances to employees, officers, directors or consultants otherwise
permitted by this Indenture and in the ordinary course of business not to exceed
an aggregate of $1.0 million at any one time and (x) other Investments in any
Person having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (x)
that are at any time outstanding not to exceed the greater of $10.0 million and
10.0% of Total Assets as of the date of such Investment. In the event that an
item meets the criteria of more than one of the categories of Permitted
Investments described in clauses (i) through (x) above, the Company may, in its
sole discretion, classify or reclassify that item in any manner that complies
with this Indenture and that item shall be treated as having been made pursuant
to only one of such clauses.
10
<PAGE> 17
"Permitted Joint Venture" means, with respect to any Person (i) any
corporation, association, or other business entity engaged in a Permitted
Business of which 50% of the Voting Stock is at the time of determination owned
or controlled, directly or indirectly, by that Person or one or more of the
Restricted Subsidiaries of that Person or a combination thereof (collectively, a
"Group") or (ii) any corporation, association or other business entity engaged
in a Permitted Business as to which the Group, at the time of initial
Investment, has a contractual right to acquire 50% of the Voting Stock, provided
that the Investment shall cease to be a Permitted Joint Venture if the Group
fails to acquire 50% of the Voting Stock within six months of the initial
Investment.
"Permitted Junior Securities" means Equity Interests in the Company or
any Guarantor or debt securities that are subordinated to all Senior Debt (and
any debt securities issued in exchange for Senior Debt) to substantially the
same extent as, or to a greater extent than, the Notes and the Note Guarantees
are subordinated to Senior Debt pursuant to this Indenture.
"Permitted Liens" means (i) Liens in favor of the Company or the
Guarantors, (ii) Liens on property of a Person existing at the time the Person
is merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company, provided that the Liens were in existence prior to
the contemplation of the merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company or
the Restricted Subsidiary, (iii) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary of the Company,
provided that the Liens were in existence prior to the contemplation of the
acquisition, (iv) Liens existing on the date of this Indenture, (v) Liens on
assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries, (vi) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business, (vii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made thereunder and (viii) Liens incurred in the ordinary course of
business of the Company or any Restricted Subsidiary of the Company with respect
to obligations that do not exceed $5.0 million at any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that (i) the principal amount
(or accreted value, if applicable) of the Permitted Refinancing Indebtedness
does not exceed the principal amount (or accreted value, if applicable) of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus all accrued interest thereon and the amount of all expenses and premiums
incurred in connection therewith), (ii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, the Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded and (iii) the
Indebtedness is incurred either by the Company or by the Restricted Subsidiary
who is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Permitted Sale and Leaseback" means a sale and leaseback by the
Company or any of its Restricted Subsidiaries of all or a portion of the
manufacturing facility and property located in High Wycombe, United Kingdom
owned by the Company and its Restricted Subsidiaries as of the date of the
Indenture or added thereto since the date of the Indenture in the ordinary
course of business; provided that the Net Proceeds of such Permitted Sale and
Leaseback shall be applied pursuant to Section 4.10 hereof.
11
<PAGE> 18
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Principals" means Kirtland and its Affiliates, George S. Burr, Helen
L. Burr, the Harold Hindman Trust--1969, James M. McConnell, Joseph E. Amaral,
Kenneth L. Andersen, John R. Barrett, Jonathan L. Burr, the Jonathan L. Burr
Trust--1965, Yahya Gharagozlou, Arthur D. Hindman, William J. Milliken, Linton
A. Moulding, Jane Elizabeth Moulding, Norman L. Smith and any other employee
stockholder of the Company as of the date of the Indenture.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Pro Forma Cost Savings" means the reduction in costs that occurred
during the four-quarter reference period or subsequent to the reference period
and on or prior to the Calculation Date that were (i) directly attributable to
an acquisition and calculated on a basis that is consistent with Article 11 of
Regulation S-X under the Securities Act as in effect on the date of the
Indenture or (ii) that have actually been implemented as of the applicable
Calculation Date by the business that was the subject of any acquisition within
six months of the date of the acquisition, that are supportable and quantifiable
by the underlying accounting records of the business, and are described, as
provided below, in an Officers' Certificate, as if, in the case of each of
clause (i) and (ii), all the reductions in costs had been effected as of the
beginning of the period. Pro Forma Cost Savings described in clause (ii) above
shall be set forth in reasonable specificity in a certificate delivered to the
Trustee from the Company's Chief Financial Officer and, in the case of Pro Forma
Cost Savings in excess of $5.0 million per four-quarter period, this certificate
shall be accompanied by a supporting opinion from an accounting firm of national
standing.
"Productive Assets" means any long term assets that are used or useful
in a Permitted Business.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Equity Offering" means a primary offering of Capital Stock,
or rights, warrants or options to acquire Capital Stock of the Company (other
than Disqualified Stock) to Persons who are not Affiliates of the Company for
net proceeds to the Company of at least $15.0 million.
"Recapitalization" means that certain transaction where, pursuant to a
merger agreement, dated as of May 6, 1999, among the Company, Kirtland and ISN
Acquisition Corporation, as amended by amendment no. 1 thereto, dated as of
August 5, 1999, the parties thereto effected a recapitalization of the Company
on the date of this Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of September __, 1999, by and among the Company, the
Guarantors and the other parties named on the signature pages thereof, as such
agreement may be amended, modified or supplemented from time to time and, with
respect to any Additional Notes, one or more registration rights agreements
between the Company and the other parties thereto, as such agreement(s) may be
amended, modified or supplemented from time to time, relating to rights given by
the Company to the purchasers of Additional Notes to register such Additional
Notes under the Securities Act.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
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<PAGE> 19
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A2 hereto bearing the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its
nominee, issued in a denomination equal to the outstanding principal amount of
the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Party" means (i) any controlling stockholder, 80% (or more)
owned Subsidiary, or immediate family member (in the case of an individual) of
any Principal or (ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of any one or more Principals
and/or the other Persons referred to in the immediately preceding clause (i).
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Services department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) all Indebtedness of the Company or any
Guarantor outstanding under the Credit Facilities and all Hedging Obligations
with respect thereto, (ii) any other Indebtedness of the Company or any
Guarantor that is permitted to be incurred by the Company or any Guarantor
pursuant to
13
<PAGE> 20
this Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes or any Subsidiary Guarantee, and (iii) all Obligations with
respect to any of the foregoing. Notwithstanding anything to the contrary in the
foregoing, Senior Debt shall not include (a) any liability for federal, state,
local or other taxes owed or owing by the Company, (b) any Indebtedness of the
Company to any of its Subsidiaries or other Affiliates, (c) any trade payables
and (d) any Indebtedness that is incurred in violation of this Indenture. A
distribution may consist of cash, securities or other property, by set-off or
otherwise.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1 - 02 of Regulation S -
X, promulgated pursuant to the Securities Act, as such Regulation is in effect
on the date of this Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing the Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any of the interest or principal prior to the date
originally scheduled for the payment thereof.
"Subordinated Management Notes" means notes evidencing subordinated
obligations of the Company or any of its Restricted Subsidiaries issued to
current or former employees, directors, officers or consultants of the Company
or any of its Restricted Subsidiaries in lieu of cash payments for any Equity
Interest of the Company being repurchased from such persons that (i) provide
that for so long as a Default under the Notes has occurred and is continuing, no
payment shall be made with respect to any Obligations under such Subordinated
Management Notes and (ii) are subordinated in full to the prior payment in cash
of all amounts due in respect of the Notes.
"Subsidiary" means, with respect to any specified Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is that Person or a Subsidiary of that
Person or (b) the only general partners of which are that Person or one or more
Subsidiaries of that Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Total Assets" means the total assets of the Company and its Restricted
Subsidiaries on a consolidated basis determined in accordance with GAAP, as
shown on the most recently available consolidated balance sheet of the Company
and its Restricted Subsidiaries.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note substantially
in the form of Exhibit A1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of
14
<PAGE> 21
Interests in the Global Note" attached thereto, and that is deposited with or on
behalf of and registered in the name of the Depositary, representing a series of
Notes that do not bear the Private Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that the Subsidiary (i) has no
Indebtedness other than Non-Recourse Debt, (ii) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or its
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company, (iii) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (a) to subscribe for additional Equity Interests or (b) to
maintain or preserve that Person's financial condition or to cause that Person
to achieve any specified levels of operating results and (iv) has not guaranteed
or otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries. Any designation of a
Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to
the Trustee by filing with the Trustee a certified copy of the Board Resolution
giving effect to the designation and an Officers' Certificate certifying that
the designation complied with the preceding conditions and was permitted by
Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to
meet the preceding requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture
and any Indebtedness of the Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of the Company as of such date and, if the Indebtedness is
not permitted to be incurred as of such date under Section 4.09 hereof, the
Company shall be in default of that covenant. The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that the designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of the Unrestricted Subsidiary and the designation shall only be
permitted if (1) the Indebtedness is permitted under Section 4.09 hereof,
calculated on a pro forma basis as if the designation had occurred at the
beginning of the four-quarter reference period; and (2) no Default or Event of
Default would be in existence following the designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
that Person that is at the time entitled to vote in the election of the Board of
Directors of that Person.
"Warrants" means the warrants to purchase 30,654 shares of the
Company's common stock issued with the Notes on the date of the Indenture as
part of the units offering.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
the date and the making of the payment by (ii) the then outstanding principal
amount of the Indebtedness.
15
<PAGE> 22
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Affiliate Transaction"............................................................. 4.11
"Asset Sale Offer".................................................................. 3.09
"Authentication Order".............................................................. 2.02
"Bankruptcy Law".................................................................... 4.01
"Change of Control Offer"........................................................... 4.15
"Change of Control Payment.......................................................... 4.15
"Change of Control Payment Date".................................................... 4.15
"Covenant Defeasance"............................................................... 8.03
"Event of Default".................................................................. 6.01
"Excess Proceeds"................................................................... 4.10
"incur"............................................................................. 4.09
"Legal Defeasance".................................................................. 8.02
"Offer Amount"...................................................................... 3.09
"Offer Period"...................................................................... 3.09
"Paying Agent"...................................................................... 2.03
"Payment Blockage Notice" .......................................................... 10.03
"Payment Default" .................................................................. 6.01
"Permitted Debt".................................................................... 4.09
"Purchase Date"..................................................................... 3.09
"Registrar"......................................................................... 2.03
"Restricted Payments"............................................................... 4.07
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Note Guarantees means the Company and
the Guarantors, respectively, and any successor obligor upon the Notes and the
Note Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
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<PAGE> 23
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include
the singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or rules
adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibits A1 or A2 attached hereto (including the Global Note Legend
thereon and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A1 attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the
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<PAGE> 24
Depositary for the accounts of designated agents holding on behalf of Euroclear
or Cedel Bank, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The Restricted Period shall be terminated upon the receipt
by the Trustee of (i) a written certificate from the Depositary, together with
copies of certificates from Euroclear and Cedel Bank certifying that they have
received certification of non-United States beneficial ownership of 100% of the
aggregate principal amount of the Regulation S Temporary Global Note (except to
the extent of any beneficial owners thereof who acquired an interest therein
during the Restricted Period pursuant to another exemption from registration
under the Securities Act and who will take delivery of a beneficial ownership
interest in a 144A Global Note bearing a Private Placement Legend, all as
contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate
from the Company. Following the termination of the Restricted Period, beneficial
interests in the Regulation S Temporary Global Note shall be exchanged for
beneficial interests in Regulation S Permanent Global Notes pursuant to the
Applicable Procedures. Simultaneously with the authentication of Regulation S
Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary
Global Note. The aggregate principal amount of the Regulation S Temporary Global
Note and the Regulation S Permanent Global Notes may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee, as the case may be, in connection with transfers of
interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
One Officer shall sign the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by one
Officer (an "Authentication Order"), authenticate Notes for original issue up to
the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate 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 Holders or an
Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any
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<PAGE> 25
additional paying agent. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company shall notify the Trustee in writing of
the name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such. The Company or any of its Subsidiaries may act as
Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
Section 2.05. Holder 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
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
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 Holders of
Notes and the Company shall otherwise comply with TIA Section 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes shall be exchanged
by the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct
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<PAGE> 26
the Trustee. Global Notes also may be exchanged or replaced, in whole or in
part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion thereof,
pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in this
Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided, however, that prior to the expiration of the Restricted
Period, transfers of beneficial interests in the Temporary Regulation S
Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than the Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above,
the transferor of such beneficial interest must deliver to the
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary
to the Registrar containing information regarding the Person in whose
name such Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon consummation of an Exchange Offer by the Company
in accordance with Section 2.06(f) hereof, the requirements of this
Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt
by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Notes or otherwise applicable under
the Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
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<PAGE> 27
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Temporary Global
Note or the Regulation S Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3)
a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
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<PAGE> 28
Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest in
a Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in Exhibit B
hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
22
<PAGE> 29
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear
the Private Placement Legend and shall be subject to all restrictions
on transfer contained therein.
(ii) Beneficial Interests in Regulation S Temporary Global
Note to Definitive Notes. Notwithstanding Sections 2.06(c)(i)(A) and
(C) hereof, a beneficial interest in the Regulation S Temporary Global
Note may not be exchanged for a Definitive Note or transferred to a
Person who takes delivery thereof in the form of a Definitive Note
prior to (x) the expiration of the Restricted Period and (y) the
receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements of
the Securities Act other than Rule 903 or Rule 904.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the
case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating
in the distribution of the Exchange Notes or (3) a Person who
is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Definitive
Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take
23
<PAGE> 30
delivery thereof in the form of a Definitive Note
that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. Subject to Section 2.06(a), if any
holder of a beneficial interest in an Unrestricted Global Note proposes
to exchange such beneficial interest for a Definitive Note or to
transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of
the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee
shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and
the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note
in the appropriate principal amount. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section
2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section
2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Notes
to a Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with
24
<PAGE> 31
Rule 144 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, in the case of clause (C)
above, the Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
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<PAGE> 32
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the
Definitive Notes and increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B),
(ii)(D) or (iii) above at a time when an Unrestricted Global Note has
not yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the
Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of Definitive
Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
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<PAGE> 33
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof;
or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Notes to a
Person who shall take delivery thereof in the form of
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests, an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such
exchange or transfer is in compliance with the Securities Act
and that the restrictions on transfer contained herein and in
the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount
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<PAGE> 34
of the Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below,
each Global Note and each Definitive Note (and all Notes
issued in exchange therefor or substitution thereof) shall
bear the legend in substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY
ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT
HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7)
OR REGULATION D UNDER THE SECURITIES ACT (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
NOTE EXCEPT (A) TO INSTRON OR ANY OF OUR SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO
AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE
TO INSTRON THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO INSTRON) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND
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<PAGE> 35
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f)
to this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend
in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF INSTRON CORPORATION."
(iii) Regulation S Temporary Global Note Legend The Regulation
S Temporary Global Note shall bear a legend in substantially the
following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who shall take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who shall take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
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<PAGE> 36
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Company's order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15
and 9.05 hereof
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such registration
of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 hereof and ending
at the close of business on the day of selection, (B) to register the
transfer of or to exchange any Note so selected for redemption in whole
or in part, except the unredeemed portion of any Note being redeemed in
part or (C) to register the transfer of or to exchange a Note between a
record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other purposes, and
none of the Trustee, any Agent or the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the
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<PAGE> 37
Trustee, any Agent and any authenticating agent from any loss that any of them
may suffer if a Note is replaced. The Company may charge for its expenses in
replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
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<PAGE> 38
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
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<PAGE> 39
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) 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 upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) 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.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment
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<PAGE> 40
date, then any accrued and unpaid interest shall be paid to the Person in whose
name such Note was registered at the close of business on such record date. If
any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to September 15, 2004. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on September 15 of
the years indicated below:
<TABLE>
Year Percentage
---- ----------
<S> <C>
2004............................................................................. 106.625%
2005............................................................................. 104.417%
2006............................................................................. 102.208%
2007 and thereafter.............................................................. 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
at any time prior to September 15, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes with the
net proceeds of a Qualified Equity Offering at a redemption price equal to
113.250% of the aggregate principal amount thereof plus accrued and unpaid
Liquidated Damages thereon, if any; provided that at least 65% in aggregate
principal amount of the Notes originally issued remain outstanding immediately
after the occurrence of any such redemption and that such redemption occurs
within 45 days of the date of the closing of such Qualified Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
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<PAGE> 41
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may elect to have Notes purchased in integral multiples of $1,000
only;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, 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 such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, 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
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(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
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, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall 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 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal 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
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
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The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the SEC on Form 8-K if the Company were required to file such
reports, in each case, within the time periods specified in the SEC's rules and
regulations. In addition, following consummation of the Exchange Offer, whether
or not required by the rules and regulations of the SEC, the Company shall file
a copy of all such information and reports with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall at
all times comply with TIA Section 314(a).
(b) For so long as any Notes remain outstanding, the Company and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor
is so required under the TIA) shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year 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 each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (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 the Company is
taking or proposes 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 not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) 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
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certification of such financial statements, nothing has come to their attention
that would lead them to believe that the Company has violated any provisions of
Article 4 or Article 5 hereof or, if any such violation has occurred, specifying
the nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person 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 shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in (a) Equity
Interests (other than Disqualified Stock) of the Company or (b) to the Company
or a Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
Company or any direct or indirect parent of the Company; (iii) make any payment
on or with respect to, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Notes or the Note
Guarantees, except (a) a payment of interest or principal at the Stated Maturity
thereof or (b) any payment with respect to Indebtedness owed solely to the
Company or a Restricted Subsidiary of the Company; or (iv) make any Restricted
Investment (all the payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
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(b) the Company would, at the time of the Restricted Payment and after
giving pro forma effect thereto as if the Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness under the Fixed Charge Coverage
Ratio test set forth in Section 4.09 hereof; and
(c) the Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of this Indenture (excluding Restricted Payments permitted by
clauses (b), (c), (d), (e), (f) and (g) of the next succeeding paragraph), is
less than the sum, without duplication, of:
(i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of this Indenture to the end
of the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of the Restricted
Payment (or, if the Consolidated Net Income for this period is a
deficit, less 100% of the deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the
Company since the date of this Indenture as a contribution to its
common equity capital or from the issue or sale of Equity Interests of
the Company (other than Disqualified Stock) or from the issue or sale
of convertible or exchangeable Disqualified Stock or convertible or
exchangeable debt securities of the Company that have been converted
into or exchanged for the Equity Interests (other than Equity Interests
(or Disqualified Stock or debt securities) sold to a Subsidiary of the
Company), plus
(iii) to the extent that any Restricted Investment that was
made after the date of this Indenture is sold for cash or otherwise
liquidated or repaid for cash, the cash proceeds with respect to the
Restricted Investment (less the cost of disposition, if any), plus
(iv) 100% of any dividends received by the Company or a
Restricted Subsidiary after the date of this Indenture from an
Unrestricted Subsidiary of the Company, to the extent that the
dividends were not otherwise included in Consolidated Net Income of the
Company for that period, plus
(v) to the extent that any Unrestricted Subsidiary of the
Company is redesignated as a Restricted Subsidiary after the date of
this Indenture, the fair market value of the Company's Investment in
that Subsidiary as of the date of the redesignation.
The preceding provisions shall not prohibit, and these items shall not
be considered Restricted Payments:
(a) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(b) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any Restricted
Subsidiary or of any Equity Interests of the Company in exchange for, or out of
the net cash proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of, Subordinated Indebtedness or Equity
Interests of the Company (other than Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (3)(b) of the preceding paragraph;
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(c) the defeasance, redemption, repurchase or other acquisition of
Subordinated Indebtedness of the Company or any Guarantor with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(d) the payment of any dividend by a Restricted Subsidiary of the
Company to the holders of its Equity Interests on a pro rata basis;
(e) so long as no Default has occurred and is continuing or would be
caused thereby, (a) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Restricted
Subsidiary of the Company held by any current or former employee, officer,
director or consultant of the Company (or any of its Restricted Subsidiaries)
under any management equity subscription agreement, stock option agreement or
other employee or management plan or agreement or employment benefit plan, and
(b) any payment made that is related to or in respect of any Subordinated
Management Notes; provided that the aggregate price paid for all repurchased,
redeemed, acquired or retired Equity Interests, together with the aggregate
amount of payments made that are related to or in respect of Subordinated
Management Notes, shall not exceed $1.0 million in any calendar year (provided
that in any calendar year this amount shall be increased by the amount available
for use, but not used, under this clause (5) in the immediately preceding year);
(f) repurchases of Capital Stock deemed to occur upon the exercise and
of stock options if the Capital Stock represents a portion of the exercise price
thereof; and
(g) so long as no Default has occurred and is continuing or would be
caused thereby, other Restricted Payments in an aggregate amount not to exceed
$2.0 million.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued to or by the Company or a
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this Section 4.07 shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee. The Board of
Directors' determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds 5.0% of Total Assets. Not later than 30 days after the
date of making any Restricted Payment, the Company shall deliver to the Trustee
an Officers' Certificate stating that the Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section
4.07 were computed, together with a copy of any fairness opinion or appraisal
required by this Indenture.
Section 4.08. 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 permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to: (a)(i) pay dividends or make any other distributions
(A) on its Capital Stock to the Company or any of its Restricted Subsidiaries,
or (B) with respect to any other interest or participation in, or measured by,
its profits, or (ii) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries; (b) make loans or advances to the Company or any of its
Restricted Subsidiaries; or (c) transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries. However, the preceding
restrictions shall not apply to encumbrances or restrictions existing under or
by reason of: (i) Existing Indebtedness and the Credit Agreement, each as in
effect on the date of this Indenture and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive, taken as a whole, with respect
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to such dividend and other payment restrictions than those contained in such
Existing Indebtedness or the Credit Agreement, each as in effect on the date of
this Indenture; (ii) this Indenture, the Notes, the Exchange Notes and the Note
Guarantees; (iii) applicable law, regulation or order; (iv) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of the acquisition
(except to the extent the Indebtedness was incurred in connection with or in
contemplation of the acquisition), 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 or assets of the Person, so acquired, provided that,
in the case of Indebtedness, the Indebtedness was permitted by the terms of this
Indenture to be incurred; (v) customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices; (vi) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of the
nature described in clause (c) above; (vii) any agreement for the sale or other
disposition of a Restricted Subsidiary that restricts distributions by that
Restricted Subsidiary pending its sale or other disposition; (viii) Permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing the Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced; (ix) Liens securing Indebtedness that limit
the right of the debtor to dispose of the assets subject to the Lien; (x)
provisions with respect to the disposition or distribution of assets or property
in joint venture agreements, assets sale agreements, stock sale agreements and
other similar agreements; (xi) restrictions on cash or other deposits or net
worth imposed by customers under contracts entered into in the ordinary course
of business; (xii) Indebtedness incurred after the date of this Indenture in
accordance with the terms of this Indenture; provided, that the restrictions
contained in the agreements governing this new Indebtedness are, in the good
faith judgment of the Board of Directors of the Company, not materially less
favorable, taken as a whole, to the holders of the Notes than those contained in
the agreements governing Indebtedness outstanding on the date of this Indenture;
(xiii) customary provisions in agreements with respect to Permitted Joint
Ventures; and (xiv) any encumbrances or restrictions imposed by any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or obligations
referred to in clauses (i) through (xiii) above; provided that the amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are, in the good faith judgment of the Board of
Directors, no more restrictive, taken as a whole, with respect to the dividend
and other payment restrictions than those contained in the dividend or other
payment restrictions before the amendment, modification, restatement, renewal,
increase, supplement, refunding, replacement or refinancing.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) or
issue Disqualified Stock, and the Company's Restricted Subsidiaries may incur
Indebtedness or issue preferred stock, if the Fixed Charge Coverage Ratio for
the Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which the
additional Indebtedness is incurred or the Disqualified Stock or preferred stock
is issued would have been at least 2.0 to 1.0 if the incurrence or issuance
occurs on or before the third anniversary of the date of this Indenture and at
least 2.25 to 1.0 if the incurrence or issuance occurs at any time thereafter,
in each case determined on a pro forma basis (including a pro forma application
of the net proceeds therefrom), as if the additional Indebtedness had been
incurred or the preferred stock or Disqualified Stock had been issued, as the
case may be, at the beginning of the four-quarter period.
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The provisions of the first paragraph of this Section 4.09 shall not
prohibit the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company and any Restricted
Subsidiary of additional term or revolving credit Indebtedness and
letters of credit under Credit Facilities in an aggregate principal
amount at any one time outstanding under this clause (i) (with letters
of credit being deemed to have a principal amount equal to the face
amount thereof) not to exceed $80.0 million less the aggregate amount
of all Net Proceeds of Asset Sales applied by the Company or any of its
Restricted Subsidiaries to repay any Indebtedness under a Credit
Facility and effect a corresponding commitment reduction thereunder in
the case of revolving credit Indebtedness pursuant to Section 4.10
hereof;
(ii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
(iii) the incurrence by the Company and the Guarantors of
Indebtedness represented by the Notes and the related Note Guarantees
to be issued on the date of this Indenture and the Exchange Notes and
the related Note Guarantees to be issued pursuant to the Registration
Rights Agreement;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case,
incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in the business of the Company or a Restricted
Subsidiary, in an aggregate principal amount, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (iv), not to exceed 5.0%
of Total Assets at any time outstanding, provided that the aggregate
amount of Indebtedness at any one time outstanding pursuant to this
clause (iv), clause (xii) and clause (xiv) of this Section 4.09 shall
not exceed $15.0 Million;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted
by this Indenture to be incurred under the first paragraph of this
Section 4.09 or clauses (ii), (iii), (iv), (v) or (xiv) of this
paragraph;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company
and any of its Restricted Subsidiaries; provided, however, that:
(A) if the Company or any Guarantor is the obligor on
the Indebtedness, the Indebtedness must be expressly
subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes, in the case of the
Company, or the Subsidiary Guarantee, in the case of a
Guarantor; and
(B) (1) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by
a Person other than the Company or a Restricted Subsidiary
thereof and (2) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary thereof; shall be deemed, in each case,
to constitute an incurrence of such Indebtedness by the
Company or such Restricted Subsidiary, as the case may be,
that was not permitted by this clause (vi);
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(vii) the incurrence by the Company or any of its
Restricted Subsidiaries of Hedging Obligations that are
incurred solely (A) for the purpose of fixing or hedging
interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture
to be outstanding or (B) for the purpose of fixing or hedging
the risks associated with fluctuations in foreign currency
exchange rates;
(viii) the guarantee by the Company or any of its
Restricted Subsidiaries of Indebtedness of the Company or a
Restricted Subsidiary of the Company that was permitted to be
incurred by another provision of this Section 4.09;
(ix) the accrual of interest, the accretion or
amortization of original issue discount, the payment of
interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment or accrual
of dividends on Disqualified Stock in the form of additional
shares of the same class of Disqualified Stock shall not be
deemed to be an incurrence of Indebtedness or an issuance of
Disqualified Stock for purposes of this Section 4.09;
provided, in each case, that the amount thereof is included in
Fixed Charges of the Company as accrued;
(x) the incurrence by the Company's Unrestricted
Subsidiaries of Non-Recourse Debt or issuance of preferred
stock, provided, however, that if any of the Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted Subsidiary,
this event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Company that
was not permitted by this clause (x);
(xi) the issuance by the Company or any of its
Restricted Subsidiaries of Subordinated Management Notes not
to exceed $1.0 million in any calendar year (provided that in
any calendar year such amount shall be increased by the amount
available for issuance, but not issued, under this clause (xi)
in any preceding calendar year);
(xii) the incurrence by any Foreign Subsidiary of the
Company of Indebtedness for working capital purposes not to
exceed $5.0 million;
(xiii) the incurrence of Indebtedness (including
letters of credit) in respect of workers' compensation claims,
self-insurance obligations, warranties, performance, surety,
bid or similar advance payment bonds and completion guarantees
provided by the Company or any of its Restricted Subsidiaries
in the ordinary course of business and consistent with past
practices; and
(xiv) the incurrence by the Company or any of its
Restricted Subsidiaries of additional Indebtedness or the
issuance of Disqualified Stock in an aggregate principal
amount (or accreted value or liquidation preference, as
applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred or Disqualified Stock issued
pursuant to this clause (xiv), not to exceed $7.5 million.
For purposes of determining compliance with this Section 4.09, in the
event that an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (i) through (xiv)
above, or is entitled to be incurred pursuant to the first paragraph of this
Section 4.09, the Company shall be permitted to classify the item of
Indebtedness on the date of its incurrence in any manner that complies with this
Section 4.09. Indebtedness under Credit Facilities outstanding on the date on
which Notes are first issued and authenticated under this Indenture shall be
deemed to have been incurred on such date in reliance on the exception provided
by clause (i) of the definition of Permitted Debt.
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Section 4.10. 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 the
Restricted Subsidiary, as the case may be) receives consideration at the time of
the Asset Sale at least equal to the fair market value of the assets or Equity
Interests issued or sold or otherwise disposed of, (ii) the fair market value is
determined by the Company's Board of Directors and evidenced by a resolution of
the Board of Directors set forth in an Officers' Certificate delivered to the
Trustee and (iii) except in the case of an Asset Swap, at least 75% of the
consideration therefor received by the Company or its Restricted Subsidiary is
in the form of cash, Cash Equivalents or Productive Assets. For purposes of this
provision, each of the following shall be deemed to be cash: (A) any liabilities
(as shown on the Company's or that Restricted Subsidiary's most recent balance
sheet), of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes or
any Subsidiary Guarantee) that are expressly assumed by the transferee of any
such assets; and (B) any securities, notes or other obligations received by the
Company or any Restricted Subsidiary from the transferee that are within 60 days
after the consummation of the Asset Sale converted by the Company or its
Restricted Subsidiary into cash (to the extent of the cash received in that
conversion).
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, including any cash received in an Asset Swap, the Company may apply the
Net Proceeds at its option (i) to repay Senior Debt and, if the Senior Debt
repaid is revolving credit Indebtedness, to correspondingly reduce commitments
with respect thereto, (ii) to acquire all or substantially all of the assets of,
or a majority of the Voting Stock of, another Permitted Business or to make a
Permitted Investment in a joint venture that is a Permitted Business, (iii) to
purchase Notes in open market transactions, provided that the Company shall be
deemed to have applied Net Proceeds in satisfaction of the requirements of this
Section 4.10 pursuant to this clause (iii) in an amount equal to the lesser of
(A) the purchase price in the open market transactions and (B) 100% of the
principal amount of the Notes repurchased, (iv) to make a capital expenditure or
(v) to acquire Productive Assets. Pending the final application of any Net
Proceeds, the Company may temporarily reduce revolving credit borrowings or
otherwise invest Net Proceeds in any manner that is not prohibited by this
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph shall constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall
make an Asset Sale Offer pursuant to section 3.09 hereof to all Holders of Notes
and all holders of other Indebtedness that is pari passu with the Notes
containing provisions similar to those set forth in this Indenture with respect
to offers to purchase or redeem with the proceeds of sales of assets to purchase
the maximum principal amount of Notes and other pari passu Indebtedness that may
be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer
shall be equal to 100% of principal amount plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase, and shall be payable in
cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer,
the Company may use the Excess Proceeds for any purpose not otherwise prohibited
by this Indenture. If the aggregate principal amount of Notes and other pari
passu Indebtedness tendered into an Asset Sale Offer exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and other pari passu
Indebtedness to be purchased on a pro rata basis based on the principal amount
of Notes and other pari passu Indebtedness tendered. Upon completion of each
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent the laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sale
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the Asset Sale provisions of this Indenture by virtue of these
conflicts.
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Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless (i) the Affiliate
Transaction is on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or its Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (A) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that the
Affiliate Transaction complies with this Section 4.11 and that the Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (B) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion issued by an accounting, appraisal or investment
banking firm of national standing that the Affiliate Transaction complies with
clause (i) of the first paragraph of this Section 4.11.
The following items shall not be deemed to be Affiliate Transactions
and, therefore, shall not be subject to the provisions of the prior paragraph:
(i) any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business and consistent with
the past practice of the Company or its Restricted Subsidiary; (ii) transactions
between or among the Company and/or its Restricted Subsidiaries; (iii)
transactions with a Person that is an Affiliate of the Company solely because
the Company owns an Equity Interest in that Person; (iv) payment of reasonable
directors fees; (v) sales of Equity Interests (other than Disqualified Stock) to
Affiliates of the Company; (vi) Restricted Payments that are permitted by
Section 4.07 hereof; (vii) the Advisory Services Agreement between the Company
and Kirtland Partners Ltd. as in effect on the date of this Indenture; (viii)
providing indemnity to current or former officers, directors, employees or
consultants of the Company or any of its Subsidiaries as determined in good
faith by the Board of Directors of the Company; (ix) performance of obligations
of the Company or any of its Restricted Subsidiaries under any agreement to
which it is a party on the date of this Indenture that is described in the
Offering Memorandum, dated as of September 21, 1999, of the Company relating to
the Offering, each agreement as in effect on the date of this Indenture; (x) the
grant of stock options, restricted stock or similar rights to acquire common
stock of the Company to the Company's or its Subsidiaries' employees, officers,
directors and consultants pursuant to plans approved by the Board of Directors
of the Company; (xi) loans or advances to the Company's or its Subsidiaries'
employees or consultants otherwise permitted by this Indenture and not to exceed
an aggregate of $1 million at any one time; (xii) the payment of all fees and
expenses related to the Recapitalization; and (xiii) transactions with
customers, joint venture partners, clients, suppliers, or purchasers or sellers
of goods or services, in each case in the ordinary course of business and
consistent with past practice in compliance with the terms of this Indenture and
which are fair to the Company or its Restricted Subsidiaries, in the reasonable
determination of the Board of Directors of the Company.
Section 4.12. Liens.
The Company shall not and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind securing Indebtedness that is pari passu
or subordinated in right of payment to the Notes (other than Permitted Liens)
upon any of their property or assets, now owned or hereafter acquired, unless
all payments due under this Indenture and the Notes are secured on an equal and
ratable basis with the obligations so secured until the time that those
obligations are no longer secured by a Lien.
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Section 4.13. Business Activities.
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any business other than Permitted Businesses, except to the extent
as would not be material to the Company and its Restricted Subsidiaries taken as
a whole.
Section 4.14. Corporate 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
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its 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 Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall make
an offer (a "Change of Control Offer") to each Holder to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 10 days following any
Change of Control, the Company shall mail a notice to each Holder stating: (1)
that the Change of Control Offer is being made pursuant to this Section 4.15 and
that all Notes tendered will be accepted for payment; (2) the purchase price and
the purchase date, which shall be no earlier than 30 days and no later 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 Payment, all
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
electing to have any Notes purchased pursuant to a Change of Control Offer will
be required to surrender the Notes, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date; (6) that Holders will
be entitled to withdraw their election if the Paying Agent receives, not later
than the close of business on the second 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 Notes delivered
for purchase, and a statement that such Holder is withdrawing his election to
have the Notes purchased; and (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, which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof. The Company
shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Notes in
connection with a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the Change of Control provisions of
this Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
Change of Control provisions of this Indenture by virtue of such conflict.
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(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered payment in an amount equal to the purchase price for the Notes, and the
Trustee shall promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered by such Holder, if any; provided, that each
such new Note shall be in a principal amount of $1,000 or an integral multiple
thereof. The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
(c) Notwithstanding anything to the contrary in this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Section 4.15 and Section 3.09 hereof and all other provisions of this Indenture
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
(d) Prior to complying with any of the provisions of this Section 4.15,
but in any event within 90 days following a Change of Control, the Company shall
either repay all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this Section 4.15.
Section 4.16. No Senior Subordinated Debt.
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt of the Company and senior in any respect in
right of payment to the Notes. No Guarantor shall incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to the Senior Debt of the Guarantor and senior in any
respect in right of payment to that Guarantor's Subsidiary Guarantee.
Section 4.17. Payments for Consent.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of 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 the consideration is offered to be paid and is paid to all Holders of the
Notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to the consent, waiver or agreement.
Section 4.18. Additional Note Guarantees.
If the Company or any of its Restricted Subsidiaries acquires or
creates another Domestic Subsidiary after the date of this Indenture, then that
newly acquired or created Domestic Subsidiary must become a Guarantor and
execute a supplemental indenture and deliver an Opinion of Counsel to the
Trustee within 10 Business Days of the date on which it was acquired or created;
provided that any Domestic Subsidiary that has been properly designated as
Unrestricted Subsidiary in accordance with this Indenture shall not be required
to become Guarantor for so long as it continues to constitute an Unrestricted
Subsidiary. The form of such Note Guarantee is attached as Exhibit E hereto.
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Section 4.19. Designation of Restricted and Unrestricted Subsidiaries.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by the Company and its
Restricted Subsidiaries in the Subsidiary so designated shall be deemed to be an
Investment made as of the time of such designation and shall either reduce the
amount available for Restricted Payments under the first paragraph of Section
4.07 hereof, or reduce the amount available for future Investments under one or
more clauses of the definition of Permitted Investments, as the Company shall
determine. That designation shall only be permitted if the Investment would be
permitted at that time and if the Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. The Board of Directors may redesignate
any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation
would not cause a Default.
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not, directly or indirectly (i) consolidate or merge
with or into another Person (whether or not the Company is the surviving
corporation) or (ii) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the Company and its
Restricted Subsidiaries taken as a whole, in one or more related transactions,
to another Person; unless: (A) either (1) the Company is the surviving
corporation or (2) the Person formed by or surviving any consolidation or merger
(if other than the Company) or to which a sale, assignment, transfer, conveyance
or other disposition was made is a corporation organized or existing under the
laws of the United States, any state thereof or the District of Columbia, (B)
the Person formed by or surviving any consolidation or merger (if other than the
Company) or the Person to which a sale, assignment, transfer, conveyance or
other disposition was made assumes all the obligations of the Company under the
Notes, this Indenture and the Registration Rights Agreement pursuant to
agreements reasonably satisfactory to the Trustee, (C) immediately after the
transaction no Default or Event of Default exists and (D) the Company or the
Person formed by or surviving any consolidation or merger (if other than the
Company), or to which the sale, assignment, transfer, conveyance or other
disposition was made shall, on the date of the transaction after giving pro
forma effect thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, (1) have a
Fixed Charge Coverage Ratio at least equal to 1.75 to 1.0 and equal to or
greater than the Fixed Charge Coverage Ratio of the Company immediately before
the transaction or (2) be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio Test set forth in the
first paragraph of Section 4.09 hereof. In addition, the Company shall not,
directly or indirectly, lease all or substantially all of its and its Restricted
Subsidiaries' properties or assets, in one or more related transactions, to any
other Person. This Section 5.01 shall not apply to a sale, assignment, transfer,
conveyance or other disposition of assets between or among the Company and any
of the Guarantors.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of
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the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein; provided, however, that the
predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale, assignment,
transfer, conveyance or other disposition of all of the Company's assets that
meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes and such default continues for a
period of 30 days, whether or not prohibited by Article 10 hereof;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption or otherwise, whether or not prohibited by Article 10 hereof;
(c) the Company or any of its Subsidiaries fails to comply with any of
the provisions of Section 4.15 or 5.01 hereof;
(d) the Company or any of its Subsidiaries fails to observe or perform
any other covenant, representation, warranty or other agreement in this
Indenture or the Notes for 60 days after notice to the Company by the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes
(including Additional Notes, if any) then outstanding voting as a single class;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, which default (i) is caused by a
failure to pay principal of, or interest or premium, if any, on the Indebtedness
before the expiration of the grace period provided in the Indebtedness on the
date of the default, or (ii) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness
the maturity of which has been so accelerated, aggregates $10 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Significant Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary and such judgment or
judgments remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $10 million;
(g) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
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(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an involuntary
case;
(ii) appoints a custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
or
(i) except as permitted by this Indenture, any Note Guarantee is held
in any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under such
Guarantor's Note Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately;
provided, that so long as any Indebtedness permitted to be incurred under this
Indenture as part of the Credit Facilities shall be outstanding, such
acceleration shall not be effective until the earlier of (i) an acceleration of
any Indebtedness under the Credit Facilities or (ii) five Business Days after
receipt by the Company and the administrative agent under the Credit Facilities
of written notice of such acceleration of the Notes. Upon any such declaration,
the Notes shall become due and payable immediately. Notwithstanding the
foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01
hereof occurs with respect to the Company, any of its Significant Subsidiaries
or any group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, all outstanding Notes shall be due and payable
immediately without further action or notice. The Holders of a majority in
aggregate principal amount of the then outstanding Notes by written notice to
the Trustee may on behalf of all of the Holders rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest
or premium that has become due solely because of the acceleration) have been
cured or waived.
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Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
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 Holder of a Note 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. All remedies are
cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
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 or other
Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
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A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount 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 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to 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 the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder 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 Holders, to pay to the Trustee any amount due to
it 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. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee
and the costs and expenses of collection;
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Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and
interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal,
premium and Liquidated Damages, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. 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 a 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 does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
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 its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) 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 to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
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(ii) 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; and
(iii) 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 Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(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. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document 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.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
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 otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it
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must eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also 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 Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, 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 determines that withholding
the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA Section 313(a) (but if no event described
in TIA Section 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports
as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA Section 313(d).
The Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or
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duties hereunder, except to the extent any such loss, liability or expense may
be attributable to its negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel. The Company need not
pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the 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.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of a majority
in principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee 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. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
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 at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
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If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10, such Holder
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. Thereupon, 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. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal
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Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Notes, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.05
hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all its other obligations under such Notes and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 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 Article 2 and Section 4.02 hereof,
(c) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and the Company's obligations in connection therewith and (d) this Article
Eight. Subject to compliance with this Article Eight, the Company may exercise
its option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 418 hereof and clause (iv) of Section 5.01
hereof with respect to the outstanding Notes on and after the date the
conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on the outstanding Notes on the stated date for payment thereof or
on the applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming
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that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal 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 Legal Defeasance had not
occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming 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;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which shall be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 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 (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
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The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal 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 Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), 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 notification or publication, any
unclaimed balance of such money then remaining shall be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the Note
Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
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(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes by a successor to the Company pursuant
to Article 5 or Article 11 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance with
the limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Guarantor to execute a supplemental indenture and/or a
Note Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and
4.15 hereof), the Note Guarantees and the Notes with the consent of the Holders
of at least a majority in principal amount of the Notes (including Additional
Notes, if any) then outstanding voting as a single class (including consents
obtained in connection with a tender offer or exchange offer for, or purchase
of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, premium, if any, or interest on the Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture, the Note Guarantees or the
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Notes (including Additional Notes, if any) voting
as a single class (including consents obtained in connection with a tender offer
or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall
determine which Notes are considered to be "outstanding" for purposes of this
Section 9.02.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
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It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the 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 amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes (including Additional Notes,
if any) then outstanding voting as a single class may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected, an amendment or
waiver under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the Notes
except as provided above with respect to Sections 3.09, 4.10 and 4.15 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of,
or premium or interest, or Liquidated Damages, if any, on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes (including Additional
Notes, if any) and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or interest on the Notes;
(g) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions;
(h) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described in Section 3.09 hereof;
(i) release any Guarantor from any of its obligations under its Note
Guarantee or this Indenture, except in accordance with the terms of this
Indenture.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
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Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
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 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
13.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Notes is subordinated in right of payment, to
the extent and in the manner provided in this Article 10, to the prior payment
in full of all Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
Section 10.02. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities:
(i) holders of Senior Debt shall be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any
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such proceeding at the rate specified in the applicable Senior Debt)
before Holders of the Notes shall be entitled to receive any payment
with respect to the Notes (except that Holders may receive (A)
Permitted Junior Securities and (B) payments and other distributions
made from any defeasance trust created pursuant to Section 8.01
hereof); and
(ii) until all Obligations with respect to Senior Debt (as
provided in clause (i) above) are paid in full, any distribution to
which Holders would be entitled but for this Article 10 shall be made
to holders of Senior Debt (except that Holders of Notes may receive (A)
Permitted Junior Securities and (B) payments and other distributions
made from any defeasance trust created pursuant to Section 8.01
hereof), as their interests may appear.
Section 10.03. Default on Designated Senior Debt.
(a) The Company may not make any payment or distribution to the Trustee
or any Holder in respect of Obligations with respect to the Notes and may not
acquire from the Trustee or any Holder any Notes for cash or property (other
than (A) Permitted Junior Securities and (B) payments and other distributions
made from any defeasance trust created pursuant to Section 8.01 hereof) until
all principal and other Obligations with respect to the Senior Debt have been
paid in full if:
(i) a default in the payment of any principal or other
Obligations with respect to Designated Senior Debt occurs and is
continuing beyond any applicable grace period in the agreement,
indenture or other document governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on Designated
Senior Debt occurs and is continuing that then permits holders of the
Designated Senior Debt to accelerate its maturity and the Trustee
receives a notice of the default (a "Payment Blockage Notice") from a
Person who may give it pursuant to Section 10.11 hereof. If the Trustee
receives any such Payment Blockage Notice, no subsequent Payment
Blockage Notice shall be effective for purposes of this Section unless
and until (A) at least 360 days shall have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (B)
all scheduled payments of principal, premium, if any, and interest on
the Securities that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such
default shall have been waived for a period of not less than 180 days.
(b) The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(i) the date upon which the default is cured or waived, or
(ii) in the case of a default referred to in clause (ii) of
Section 10.03(a) hereof, 179 days pass after notice is received if the
maturity of such Designated Senior Debt has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 10.04. Acceleration of Securities.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
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Section 10.05. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when the Trustee or such Holder,
as applicable, has actual knowledge that such payment is prohibited by Section
10.03 hereof, such payment shall be held by the Trustee or such Holder, in trust
for the benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Debt as their interests may appear or their
Representative under this Indenture or other agreement (if any) pursuant to
which Senior Debt may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to Senior
Debt remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
Section 10.06. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article 10.
Section 10.07. Subrogation.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders of Notes shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of Notes have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders, a payment by the Company on the Notes.
Section 10.08. Relative Rights.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall:
(i) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(ii) affect the relative rights of Holders of Notes and
creditors of the Company other than their rights in relation to holders
of Senior Debt; or
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(iii) prevent the Trustee or any Holder of Notes from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Senior Debt to receive
distributions and payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
Section 10.09. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
Section 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
Section 10.11. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may do
the same with like rights.
Section 10.12. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representatives are hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Notes.
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Section 10.13. Amendments.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
ARTICLE 11.
NOTE GUARANTEES
Section 11.01. Guarantee
Subject to this Article 11, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes shall be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
shall be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same shall 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.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Note Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) 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 the Guarantors
for the purpose of this Note Guarantee. The Guarantors shall have the right to
seek
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contribution from any non-paying Guarantor so long as the exercise of such right
does not impair the rights of the Holders under the Guarantee.
Section 11.02. Subordination of Note Guarantee.
The Obligations of each Guarantor under its Note Guarantee pursuant to
this Article 10 shall be junior and subordinated to all existing and future
Senior debt of each Guarantor and pari passu in right of payment with any future
senior subordinated Indebtedness of each Guarantor. For the purposes of the
foregoing sentence, the Trustee and the Holders shall have the right to receive
and/or retain payments by any of the Guarantors only at such times as they may
receive and/or retain payments in respect of the Notes pursuant to this
Indenture, including Article 10 hereof.
Section 11.03. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Note Guarantee of
such Guarantor not constitute a fraudulent transfer or conveyance for purposes
of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to any
Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders
and the Guarantors hereby irrevocably agree that the obligations of such
Guarantor shall, after giving effect to such maximum amount and all other
contingent and fixed liabilities of such Guarantor that are relevant under such
laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under this Article 10, result
in the obligations of such Guarantor under its Note Guarantee not constituting a
fraudulent transfer or conveyance.
Section 11.04. Execution and Delivery of Note Guarantee.
To evidence its Note Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Note Guarantee substantially in
the form included in Exhibit E shall be endorsed by an Officer of such Guarantor
on each Note authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of such Guarantor by its President or one of its
Vice Presidents.
Each Guarantor hereby agrees that its Note Guarantee set forth in
Section 11.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Note Guarantee.
If an Officer whose signature is on this Indenture or on the Note
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Note Guarantee set forth
in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.24 hereof,
the Company shall cause such Subsidiaries to execute supplemental indentures to
this Indenture and Note Guarantees in accordance with Section 4.24 hereof and
this Article 11, to the extent applicable.
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Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.
Except as otherwise provided in Section 10.05, no Guarantor may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person whether or not affiliated with such Guarantor
unless:
(a) immediately after giving effect to such transaction, no Default or
Event of Default exists; and
(b) either (i) subject to Section 11.05 hereof, the Person formed by or
surviving any such consolidation or merger (if other than a Guarantor or the
Company) unconditionally assumes all the obligations of such Guarantor pursuant
to a supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, this Indenture and the Note Guarantee on the terms set
forth herein or therein; or (ii) the Net Proceeds of such sale or other
disposition are applied in accordance with the provisions of Section 4.10
hereof.
In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the Note
Guarantee endorsed upon the Notes and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the Guarantor,
such successor Person shall succeed to and be substituted for the Guarantor with
the same effect as if it had been named herein as a Guarantor. Such successor
Person thereupon may cause to be signed any or all of the Note Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee. All the Note
Guarantees so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Note Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Note
Guarantees had been issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
Section 11.06. Releases Following Sale of Assets.
In the event of a sale or other disposition of all or substantially all
of the assets of any Guarantor, by way of merger, consolidation or otherwise, or
a sale or other disposition of all to the capital stock of any Guarantor, in
each case to a Person that is not (either before or after giving effect to such
transactions) a Subsidiary of the Company, then such Guarantor (in the event of
a sale or other disposition, by way of merger, consolidation or otherwise, of
all of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Guarantor) shall be released and relieved of any
obligations under its Note Guarantee; provided (i) that the Net Proceeds of such
sale or other disposition are applied in accordance with the applicable
provisions of this Indenture, including without limitation Section 4.10 hereof,
or (ii) if the Company properly designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary. Upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that
such sale or other disposition was made by the Company in accordance with the
provisions of this Indenture, including without limitation Section 4.10 hereof,
the Trustee shall execute any documents reasonably required in order to evidence
the release of any Guarantor from its obligations under its Note Guarantee.
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Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 11.
ARTICLE 12.
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge.
This Indenture shall be discharged and shall cease to be of further
effect as to all Notes issued hereunder, when:
(1) either:
(a) all Notes that have been authenticated (except lost, stolen or
destroyed Notes that have been replaced or paid and Notes for
whose payment money has theretofore been deposited in trust
and thereafter repaid to the Company) have been delivered to
the Trustee for cancellation; or
(b) all Notes that have not been delivered to the Trustee for
cancellation have become due and payable by reason of the
making of a notice of redemption or otherwise or will become
due and payable within one year and the Company or any
Guarantor has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in trust solely for the
benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such
amounts as will be sufficient without consideration of any
reinvestment of interest, to pay and discharge the entire
indebtedness on the Notes not delivered to the Trustee for
cancellation for principal, premium and Liquidated Damages, if
any, and accrued interest to the date of maturity or
redemption;
(2) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit or shall occur as a result of such deposit and
such deposit shall not result in a breach or violation of, or
constitute a default under, any other instrument to which the Company
[or any Guarantor] is a party or by which the Company or any Guarantor
is bound;
(3) the Company or any Guarantor has paid or caused to be paid all sums
payable by it under this Indenture; and
(4) the Company has delivered irrevocable instructions to the Trustee under
this Indenture to apply the deposited money toward the payment of the
Notes at maturity or the redemption date, as the case may be.
In addition, the Company must deliver an Officers' Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.
Notwithstanding the satisfaction and discharge of this Indenture, if
money shall have been deposited with the Trustee pursuant to subclause (b) of
clause (1) of this Section, the provisions of Section 12.02 and Section 8.06
shall survive.
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Section 12.02. Application of Trust Money.
Subject to the provisions of Section 8.06, all money deposited with the
Trustee pursuant to Section 12.01 shall be held in trust and applied by it, in
accordance with the provisions of the Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Persons entitled thereto,
of the principal (and premium, if any) and interest for whose payment such money
has been deposited with the Trustee; but such money need not be segregated from
other funds except to the extent required by law.
If the Trustee or Paying Agent is unable to apply any money or
Government Securities in accordance with Section 12.01 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
Company's and any Guarantor's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 12.01; provided that if the Company has made any payment of principal
of, premium, if any, or interest on any Notes because of the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money or Government Securities held
by the Trustee or Paying Agent.
ARTICLE 13.
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the imposed duties shall control.
Section 13.02. Notices.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address:
If to the Company and/or any Guarantor:
Instron Corporation
100 Royall Street
Canton, MA 02021
Telecopier No.: (781) 828-5750
Attention: Linton A. Moulding
With a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Telecopier No.: (216) 579-0212
Attention: Christopher M. Kelly
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If to the Trustee:
Norwest Bank Minnesota, National Association
N9303-120
Sixth and Marquette
Minneapolis, MN 55479
Telecopier No.: (612) 667-9825
Attention: Corporate Trust Department
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 13.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
Section 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 13.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 13.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
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Section 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA
Section 314(e) and shall include:
(c) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(d) 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;
(e) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(f) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 13.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 13.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, Affiliate,
incorporator or stockholder of the Company or any Guarantor, solely by reason of
this status, shall have any liability for any obligations of the Company or the
Guarantors under the Notes, this Indenture, the Note Guarantees or for any 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 this liability.
The waiver and release are part of the consideration for issuance of the Notes.
Section 13.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
73
<PAGE> 80
Section 13.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors. All agreements of each Guarantor in this Indenture shall bind
its successors, except as otherwise provided in Section 11.05.
Section 13.11. Severability.
In case any provision in this Indenture or in 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.
Section 13.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 13.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table 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 of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
Section 13.14. Limitation on Trust Liability.
Each of Instron Realty Trust ("Trust") and IRT-II Trust ("Trust II") is
a voluntary association with transferable shares organized under the laws of the
Commonwealth of Massachusetts (more commonly referred to as a "Massachusetts
Business Trust") and all persons dealing with each of Trust and Trust II must
look solely to the property of each of Trust and Trust II for the enforcement of
any claims against either Trust or Trust II. Neither the trustees, officers,
agents nor shareholders of either Trust or Trust II assume any personal
liability for obligations entered into on its behalf. In no event shall the
Trustee seek or attempt to obtain any recovery or judgement against any trustee,
officer, director, employee or shareholder of either Trust or Trust II. The
Declaration of Trust, dated as of April 23, 1957, of Trust, and the Declaration
of Trust, dated as of October 19, 1998, of Trust II are on file with the
Secretary of the Commonwealth of Massachusetts. This Indenture has been executed
on behalf of each of Trust and Trust II by the trustees or officers in such
capacities and not individually.
[Signatures on following page]
74
<PAGE> 81
SIGNATURES
Dated as of September 29, 1999
INSTRON CORPORATION
By: /s/ John R. Barrett
---------------------------------------
Name: John R. Barrett
Title: Treasurer and Vice President of
Corporate Development
INSTRON SCHENCK TESTING SYSTEMS CORP.
By: /s/ John R. Barrett
---------------------------------------
Name: John R. Barrett
Title: Treasurer and Vice President of
Corporate Development
INSTRON/LAWRENCE CORPORATION
By: /s/ John R. Barrett
---------------------------------------
Name: John R. Barrett
Title: Treasurer and Vice President of
Corporate Development
INSTRON REALTY TRUST
By: /s/ Linton A. Moulding
---------------------------------------
Name: Linton A. Moulding
Title: Chief Financial Officer and Vice
President
IRT-II TRUST
By: /s/ Linton A. Moulding
---------------------------------------
Name: Linton A. Moulding
Title: Chief Financial Officer and Vice
President
75
<PAGE> 82
INSTRON JAPAN COMPANY, LTD.
By: /s/ John R. Barrett
---------------------------------------
Name: John R. Barrett
Title: Treasurer and Vice President of
Corporate Development
INSTRON ASIA LIMITED
By: /s/ John R. Barrett
---------------------------------------
Name: John R. Barrett
Title: Treasurer and Vice President of
Corporate Development
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By: /s/ Curtis Schwegman
---------------------------------------
Name: Curtis Schwegman
Title: Vice President
76
<PAGE> 83
EXHIBIT A1
[Face of Note]
CUSIP/CINS ________
13-1/4% Senior Subordinated Notes due 2009
No. __ $____________
INSTRON CORPORATION
promises to pay to _____________________________________________________________
or registered assigns,
the principal sum of ___________________________________________________________
Dollars on September 15, 2009.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Dated: September 29, 1999
INSTRON CORPORATION
By:
_______________________________________
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By: _______________________________
Authorized Signatory
A1-1
<PAGE> 84
[Back of Note]
13-1/4% Senior Subordinated Notes due 2009
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Instron Corporation, a Massachusetts corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
13-1/4% per annum from September 29, 1999 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages semi-annually in arrears on March 15 and September 15 of each year, or
if any such day is not a Business Day, on the next succeeding Business Day (each
an "Interest Payment Date"). Interest on the Notes shall accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be March 15, 2000. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest shall be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the March 1 or September
1 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes shall be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds shall
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank Minnesota,
National Association, the Trustee under the Indenture, shall act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of September 29, 1999 ("Indenture") by and among the Company, the Guarantors
listed on Schedule I thereto and the
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<PAGE> 85
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 (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all
such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts with
the express provisions of the Indenture, the provisions of the indenture shall
govern and be controlling. The Notes are obligations of the Company limited to
$150.0 million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this paragraph 5, the Company
shall not have the option to redeem the Notes pursuant to this paragraph 5 prior
to September 15, 2004. Thereafter, the Company shall have the option to redeem
the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on September 15 of
the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004............................................................................. 106.625%
2005............................................................................. 104.417%
2006............................................................................. 102.208%
2007 and thereafter.............................................................. 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this paragraph 5,
at any time prior to September 15, 2002, the Company on any one or more
occasions may redeem up to 35% of the aggregate principal amount of Notes with
the net proceeds of a Qualified Equity Offering at a redemption price equal to
113.250% of the aggregate principal amount thereof plus accrued and unpaid
Liquidated Damages thereon, if any; provided that at least 65% in aggregate
principal amount of the Notes originally issued remain outstanding immediately
after the occurrence of any such redemption and that such redemption occurs
within 45 days of the date of the closing of such Qualified Equity Offering.
(c) Any redemption pursuant to this paragraph 5 shall be made pursuant
to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
7. REPURCHASE AT OPTION HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 10 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within
five days of each date on which the aggregate amount of Excess Proceeds exceeds
$10 million, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") pursuant to Section 3.09 of the Indenture to
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<PAGE> 86
purchase the maximum principal amount of Notes (including any Additional Notes)
that may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date fixed for the
closing of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes (including any
Additional Notes) tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Holders of
Notes that are the subject of an offer to purchase shall receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes and Additional Notes, if any, voting as a single
class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes and
Additional Notes, if any, voting as a single class. Without the consent of any
Holder of a Note, the Indenture, the Note Guarantees or the Notes may be amended
or supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's or Guarantor's obligations to
Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act, [to
provide for the Issuance of Additional Notes in accordance with the limitations
set forth in the Indenture], or to allow any Guarantor to execute a supplemental
indenture to the Indenture and/or a Note Guarantee with respect to the Notes.
12. DEFAULTS AND REMEDIES. An Event of Default occurs if: (i) the
Company defaults in the payment when due of interest on, or Liquidated Damages
with respect to, the Notes and such default continues for a period of 30 days,
whether or not prohibited by Article 10 of the Indenture; (ii) the
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<PAGE> 87
Company defaults in the payment when due of principal of or premium, if any, on
the Notes when the same becomes due and payable at maturity, upon redemption or
otherwise, whether or not prohibited by Article 10 of the Indenture; (iii) the
Company or any of its Subsidiaries fails to comply with any of the provisions of
Section 4.15 or 5.01 of the Indenture; (iv) the Company or any of its
Subsidiaries fails to observe or perform any other covenant, representation,
warranty or other agreement in the Indenture or the Notes for 60 days after
notice to the Company by the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes (including Additional Notes, if any) then
outstanding voting as a single class; (v) a default occurs under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries), whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of, or interest or premium,
if any, on the Indebtedness before the expiration of the grace period provided
in the Indebtedness on the date of the default, or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness the maturity of which has been so
accelerated, aggregates $10 million or more; (vi) a final judgment or final
judgments for the payment of money are entered by a court or courts of competent
jurisdiction against the Company or any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary and such judgment or judgments remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $10 million; (vii)
the Company or any of its Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary pursuant to or
within the meaning of 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; or
(viii) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (a) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary in an involuntary case; (b) appoints a
custodian of the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
or for all or substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary; or (c) orders the liquidation of the
Company or any of its Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary; and the order
or decree remains unstayed and in effect for 60 consecutive days; or (ix) except
as permitted by this Indenture, any Note Guarantee is held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Guarantor, or any Person acting on behalf of any
Guarantor, shall deny or disaffirm its obligations under such Guarantor's Note
Guarantee. If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes shall become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. 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 of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes. The Company is required to deliver to the
Trustee annually a
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<PAGE> 88
statement regarding compliance with the Indenture, and the Company is required
upon becoming aware of any Default or Event of Default, to deliver to the
Trustee a statement specifying such Default or Event of Default.
13. 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 the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder 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.
15. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
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).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of September 29, 1999, between the Company and the parties
named on the signature pages thereof or, in the case of Additional Notes,
Holders of Restricted Global Notes and Restricted Definitive Notes shall have
the rights set forth in one or more registration rights agreements, if any,
between the Company and the other parties thereto, relating to rights given by
the Company to the purchasers of any Additional Notes (collectively, the
"Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Instron Corporation
100 Royall Street
Canton, MA 02021
Attention: Linton A. Moulding
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<PAGE> 89
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to: __________________________________
(Insert assignee's legal name)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: _______________
Your Signature: _____________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*: _________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
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<PAGE> 90
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box
below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$_______________
Date: _______________
Your Signature: _____________________________
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.: _____________________
Signature Guarantee*: _________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A1-8
<PAGE> 91
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase in of this Global Note Signature of
in Principal Amount Principal Amount following such authorized officer
of of decrease of Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
---------------- ---------------- ---------------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
* This schedule should be included only if the Note is issued in global form.
A1-9
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EXHIBIT A2
[Face of Regulation S Temporary Global Note]
CUSIP/CINS __________
13-1/4% Senior Subordinated Notes due 2009
No. ___ $__________
INSTRON CORPORATION
promises to pay to _____________________________________________________________
or registered assigns,
the principal sum of ___________________________________________________________
Dollars on September 29, 2009.
Interest Payment Dates: March 15, and September 15
Record Dates: March 1, and September 1
Dated: September 29, 1999
INSTRON CORPORATION
By: _________________________________________
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By: _______________________________
Authorized Signatory
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<PAGE> 93
[Back of Regulation S Temporary Global Note]
13-1/4% Senior Subordinated Notes due 2009
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF INSTRON CORPORATION.
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS
ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES
ACT (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
NOTE EXCEPT (A) TO INSTRON OR ANY OF OUR SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN
AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES
ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO INSTRON
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO INSTRON) OR (G) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
A2-2
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APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Instron Corporation, a Massachusetts corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
13-1/4% per annum from September 29, 1999 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages semi-annually on March 15 and September 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes shall accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be March 15, 2000. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest shall be computed
on the basis of a 360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Senior Subordinated Notes under the Indenture.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the March 1 or September
1 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes shall be payable as to principal, premium, interest and Liquidated
Damages at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds shall be
required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer
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instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank Minnesota,
National Association, the Trustee under the Indenture, shall act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of September 29, 1999 ("Indenture") by and among the Company, the Guarantors
listed on Schedule I thereto and 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 (15 U.S. Code Sections
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. The Notes are
obligations of the Company limited to $150.0 million in aggregate principal
amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this paragraph 5, the Company
shall not have the option to redeem the Notes pursuant to this paragraph 5 prior
to September 15, 2004. Thereafter, the Company shall have the option to redeem
the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on September 15, of
the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004............................................................................. 106.625%
2005............................................................................. 104.417%
2006............................................................................. 102.208%
2007 and thereafter.............................................................. 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this paragraph 5,
at any time prior to September 15, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes with the
net proceeds of a Qualified Equity Offering at a redemption price equal to
113.250% of the aggregate principal amount thereof plus accrued and unpaid
Liquidated Damages thereon, if any; provided that at least 65% in aggregate
principal amount of the Notes originally issued remain outstanding immediately
after the occurrence of any such redemption and that such redemption occurs
within 45 days of the date of the closing of such Qualified Equity Offering.
(c) Any redemption pursuant to this paragraph 5 shall be made pursuant
to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
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(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (the "Change of Control
Payment"). Within 10 days following any Change of Control, the Company shall
mail a notice to each Holder setting forth the procedures governing the Change
of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within
five days of each date on which the aggregate amount of Excess Proceeds exceeds
$10 million, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company (or such Subsidiary) may use such deficiency for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Holders of Notes that are the
subject of an offer to purchase shall receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Global Notes only (i) on or after the termination of the
40-day restricted period (as defined in Regulation S) and (ii) upon presentation
of certificates (accompanied by an Opinion of Counsel, if applicable) required
by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary
Global Note for one or more Global Notes, the Trustee shall cancel this
Regulation S Temporary Global Note.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount
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<PAGE> 97
of the then outstanding Notes, and any existing default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes. Without
the consent of any Holder of a Note, the Indenture or the Notes may be amended
or supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. An Event of Default occurs if: (i) the
Company defaults in the payment when due of interest on, or Liquidated Damages
with respect to, the Notes and such default continues for a period of 30 days,
whether or not prohibited by Article 10 of the Indenture; (ii) the Company
defaults in the payment when due of principal of or premium, if any, on the
Notes when the same becomes due and payable at maturity, upon redemption or
otherwise, whether or not prohibited by Article 10 of the Indenture; (iii) the
Company or any of its Subsidiaries fails to comply with any of the provisions of
Section 4.15 or 5.01 of the Indenture; (iv) the Company or any of its
Subsidiaries fails to observe or perform any other covenant, representation,
warranty or other agreement in the Indenture or the Notes for 60 days after
notice to the Company by the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes (including Additional Notes, if any) then
outstanding voting as a single class; (v) a default occurs under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries), whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of, or interest or premium,
if any, on the Indebtedness before the expiration of the grace period provided
in the Indebtedness on the date of the default, or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness the maturity of which has been so
accelerated, aggregates $10 million or more; (vi) a final judgment or final
judgments for the payment of money are entered by a court or courts of competent
jurisdiction against the Company or any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary and such judgment or judgments remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $10 million; (vii)
the Company or any of its Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary pursuant to or
within the meaning of 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; or
(viii) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (a) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary in an involuntary case; (b) appoints a
custodian of the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
or for all or substantially all of the property of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary; or (c) orders the liquidation of the
Company or any of its Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary; and the order
or decree remains unstayed and in effect for 60 consecutive days; or (ix) except
as permitted by this Indenture, any Note Guarantee is held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Guarantor, or any Person acting on behalf of any
Guarantor, shall deny or disaffirm its obligations under such Guarantor's Note
Guarantee. If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable.
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<PAGE> 98
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes shall become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. 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 of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. 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 the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company or any of the Guarantors, as such,
shall not have any liability for any obligations of the Company or such
Guarantor under the Notes, the Note Guarantees or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder 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.
15. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
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).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of September __, 1999, between the Company and the parties
named on the signature pages thereof or, in the case of Additional Notes,
Holders of Restricted Global Notes and Restricted Definitive Notes shall have
the rights set forth in one or more registration rights agreements, if any,
between the Company and the other parties thereto, relating to rights given by
the Company to the purchasers of any Additional Notes (collectively, the
"Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
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<PAGE> 99
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Instron Corporation
100 Royall Street
Canton, MA 02021
Attention: Linton A. Moulding
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<PAGE> 100
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to: __________________________________
(Insert assignee's legal name)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: _______________
Your Signature: _____________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*: _________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
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<PAGE> 101
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box
below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$_______________
Date: _______________
Your Signature: ________________________________
(Sign exactly as your name appears on the face
of this Note)
Tax Identification No.: ________________________
Signature Guarantee*: _________________________
* Participant in a recognized Signature Guarantee Medallion Program
(or other signature guarantor acceptable to the Trustee).
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<PAGE> 102
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary Global
Note for an interest in another Global Note, or of other Restricted Global Notes
for an interest in this Regulation S Temporary Global Note, have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase in of this Global Note Signature of
in Principal Amount Principal Amount following such authorized officer
of of decrease of Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
---------------- ---------------- ---------------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
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EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Instron Corporation
100 Royall Street
Canton, MA 02021
Norwest Bank Minnesota, National Association
N9303-120
Sixth and Marquette
Minneapolis, MN 55479
Re: 13-1/4% Senior Subordinated Notes Due 2009
Reference is hereby made to the Indenture, dated as of September 29,
1999 (the "Indenture"), among Instron Corporation, as issuer (the "Company"),
the Guarantors set forth on the signature pages thereto and Norwest Bank
Minnesota, National Association, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
___________________, (the "Transferor") owns and proposes to transfer
the Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST
IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST
IN THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A
DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act
and, accordingly, the Transferor hereby further certifies that (i) the Transfer
is not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the
transaction is not part of a
B-1
<PAGE> 104
plan or scheme to evade the registration requirements of the Securities Act and
(iv) if the proposed transfer is being made prior to the expiration of the
Restricted Period, the transfer is not being made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser). Upon
consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on Transfer enumerated in the Private Placement
Legend printed on the Regulation S Global Note, the Temporary Regulation S
Global Note and/or the Definitive Note and in the Indenture and the Securities
Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN THE DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE
SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being
effected in compliance with the transfer restrictions applicable to beneficial
interests in Restricted Global Notes and Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act and any applicable blue
sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in
compliance with the prospectus delivery requirements of the Securities
Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or
Rule 904, and the Transferor hereby further certifies that it has not
engaged in any general solicitation within the meaning of Regulation D
under the Securities Act and the Transfer complies with the transfer
restrictions applicable to beneficial interests in a Restricted Global
Note or Restricted Definitive Notes and the requirements of the
exemption claimed, which certification is supported by (1) a
certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount
of Notes at the time of transfer of less than $250,000, an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which
the Transferor has attached to this certification), to the effect that
such Transfer is in compliance with the Securities Act. Upon
consummation of the proposed transfer in accordance with the terms of
the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Definitive Notes and in the
Indenture and the Securities Act.
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST
IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer
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restrictions contained in the Indenture and any applicable blue sky securities
laws of any state of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
____________________________
[Insert Name of Transferor]
By:________________________
Name:
Title:
Dated: _______________________
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ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(c) a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _________), or
(ii) [ ] Regulation S Global Note (CUSIP _________),
or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _________), or
(ii) [ ] Regulation S Global Note (CUSIP _________),
or
(iii) [ ] Unrestricted Global Note (CUSIP _________);
or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
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EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Instron Corporation
100 Royall Street
Canton, MA 02021
Norwest Bank Minnesota, National Association
N9303-120
Sixth and Marquette
Minneapolis, MN 55479
Re: 13-1/4% Senior Subordinated Notes Due 2009
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of September 29,
1999 (the "Indenture"), among Instron Corporation, as issuer (the "Company"),
the Guarantors set forth on the signature pages thereto and Norwest Bank
Minnesota, National Association, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
__________________________, (the "Owner") owns and proposes to exchange
the Note[s] or interest in such Note[s] specified herein, in the principal
amount of $____________ in such Note[s] or interests (the "Exchange"). In
connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for
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EXHIBIT C
a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies
(i) the beneficial interest is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Notes and pursuant to
and in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] 144A Global Note, [ ] Regulation S Global Note, with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
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<PAGE> 109
EXHIBIT C
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
___________________________
[Insert Name of Transferor]
By: _______________________
Name:
Title:
Dated: ______________________
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<PAGE> 110
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Instron Corporation
100 Royall Street
Canton, MA 02021
Norwest Bank Minnesota, National Association
N9303-120
Sixth and Marquette
Minneapolis, MN 55479
Re: 13-1/4% Senior Subordinated Notes Due 2009
Reference is hereby made to the Indenture, dated as of September 29,
1999 (the "Indenture"), among Instron Corporation, as issuer (the "Company"),
the Guarantors set forth on the signature pages thereto and Norwest Bank
Minnesota, National Association, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold 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 the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) 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 and to the Company a signed letter
substantially in the form of this letter and, if such transfer is in respect of
a principal amount of Notes, at the time of transfer of less than $250,000, an
Opinion of Counsel in form reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act, (D) outside the
United States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.
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<PAGE> 111
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, 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.
4. 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 are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased
by us for our own 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.
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.
____________________________________
[Insert Name of Accredited Investor]
By: _______________________________
Name:
Title:
Dated: _______________________
D-2
<PAGE> 112
EXHIBIT E
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of September 29, 1999 (the "Indenture")
among Instron Corporation, the Guarantors listed on Schedule I thereto and
Norwest Bank Minnesota, National Association, as trustee (the "Trustee"), (a)
the due and punctual payment of the principal of, premium, if any, and interest
on the Notes (as defined in the Indenture), whether at maturity, by
acceleration, redemption or otherwise, the due and punctual payment of interest
on overdue principal 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 Holders or the Trustee all in accordance with the terms 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 Holders of Notes and to the Trustee pursuant to the Note
Guarantee and the Indenture are expressly set forth in Article 11 of the
Indenture and reference is hereby made to the Indenture for the precise terms of
the Note Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to
and shall be bound by such provisions, (b) authorizes and directs the Trustee,
on behalf of such Holder, to take such action as may be necessary or appropriate
to effectuate the subordination as provided in the Indenture and (c) appoints
the Trustee attorney-in-fact of such Holder for such purpose; provided, however,
that the Indebtedness evidenced by this Note Guarantee shall cease to be so
subordinated and subject in right of payment upon any defeasance of this Note in
accordance with the provisions of the Indenture.
INSTRON SCHENCK TESTING SYSTEMS CORP.
By: _________________________________
Name:
Title:
INSTRON/LAWRENCE CORPORATION
By: _________________________________
Name:
Title:
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<PAGE> 113
EXHIBIT E
INSTRON REALTY TRUST
By: ___________________________________
Name:
Title:
IRT-II TRUST
By: ___________________________________
Name:
Title:
INSTRON JAPAN COMPANY, LTD.
By: ___________________________________
Name:
Title:
INSTRON ASIA LIMITED
By: ___________________________________
Name:
Title:
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<PAGE> 114
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of Instron Corporation (or its permitted successor), a Massachusetts
corporation (the "Company"), the other Guarantors (as defined in the Indenture
referred to herein) and Norwest Bank Minnesota, National Association, as trustee
under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of September 29, 1999 providing
for the issuance of an aggregate principal amount of up to $150.0 million of
13-1/4% Senior Subordinated Notes due 2009 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as
follows:
(a) Along with all Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its successors and
assigns, the Notes or the obligations of the Company hereunder or
thereunder, that:
(i) the principal of and interest on the Notes will
be promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on the
overdue principal of and interest on the Notes, if any, if
lawful, and all other obligations of the Company to the Holders
or the Trustee hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms hereof and
thereof; and
(ii) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that
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. Failing
payment when due of any amount so
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<PAGE> 115
guaranteed or any performance so guaranteed for whatever
reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes
or the Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of
a guarantor.
(c) The following is hereby waived: diligence presentment,
demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever.
(d) This Note Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes and the
Indenture, and the Guaranteeing Subsidiary accepts all obligations of a
Guarantor under the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any Custodian,
Trustee, liquidator or other similar official acting in relation to
either the Company or the Guarantors, any amount paid by either to the
Trustee or such Holder, this Note Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article
6 of the Indenture for the purposes of this Note Guarantee,
notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and
(y) in the event of any declaration of acceleration of such obligations
as provided in Article 6 of the Indenture, such obligations (whether or
not due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Note Guarantee.
(h) The Guarantors shall 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 the Guarantee.
(i) Pursuant to Section 11.02 of the Indenture, after giving
effect to any maximum amount and any other contingent and fixed
liabilities that are relevant under any applicable Bankruptcy or
fraudulent conveyance laws, and after giving effect to any collections
from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such
other Guarantor under Article 11 of the Indenture, this new Note
Guarantee shall be limited to the maximum amount permissible such that
the obligations of such Guarantor under this Note Guarantee will not
constitute a fraudulent transfer or conveyance.
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the
Note Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
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<PAGE> 116
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) The Guaranteeing Subsidiary may not consolidate with or
merge with or into (whether or not such Guarantor is the surviving
Person) another corporation, Person or entity whether or not affiliated
with such Guarantor unless:
(i) subject to Sections 11.04 and 11.05 of the
Indenture, the Person formed by or surviving any such
consolidation or merger (if other than a Guarantor or the
Company) unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the
Notes, the Indenture and the Note Guarantee on the terms set
forth herein or therein; and
(ii) immediately after giving effect to such
transaction, no Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the Note Guarantee endorsed
upon the Notes and the due and punctual performance of all of the
covenants and conditions of the Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been
named herein as a Guarantor. Such successor corporation thereupon may
cause to be signed any or all of the Note Guarantees to be endorsed
upon all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee. All the
Note Guarantees so issued shall in all respects have the same legal
rank and benefit under the Indenture as the Note Guarantees theretofore
and thereafter issued in accordance with the terms of the Indenture as
though all of such Note Guarantees had been issued at the date of the
execution hereof.
(c) Except as set forth in Articles 4 and 5 and Section 11.05
of Article 10 of the Indenture, and notwithstanding clauses (a) and (b)
above, nothing contained in the Indenture or in any of the Notes shall
prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance
of the property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or otherwise,
or a sale or other disposition of all to the capital stock of any
Guarantor, in each case to a Person that is not (either before or after
giving effect to such transaction) a Restricted Subsidiary of the
Company, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of
the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be released and
relieved of any obligations under its Note Guarantee; provided that the
Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture, including
without limitation Section 4.10 of the Indenture. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion of
Counsel to the effect that such sale or other disposition was made by
the Company in accordance with the provisions of the Indenture,
including without limitation Section 4.10 of the Indenture, the Trustee
shall execute any documents reasonably
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<PAGE> 117
required in order to evidence the release of any Guarantor from its
obligations under its Note Guarantee.
(b) Any Guarantor not released from its obligations under its
Note Guarantee shall remain liable for the full amount of principal of
and interest on the Notes and for the other obligations of any
Guarantor under the Indenture as provided in Article 11 of the
Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the
Indenture or this Supplemental Indenture or for any 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. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the SEC that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
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<PAGE> 118
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: _______________, ____
[GUARANTEEING SUBSIDIARY]
By: _______________________________
Name:
Title:
[Instron Corporation]
By: _______________________________
Name:
Title:
[EXISTING GUARANTORS]
By: _______________________________
Name:
Title:
[TRUSTEE],
as Trustee
By: _______________________________
Authorized Signatory
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<PAGE> 119
SCHEDULE I
SCHEDULE OF GUARANTORS
The following schedule lists each Guarantor under the Indenture as of
the Issue Date:
Instron Schenck Testing Systems Corp.
Instron/Lawrence Corporation
Instron Realty Trust
IRT II Trust
Instron Japan Company, Ltd.
Instron Asia Limited
F-6
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
DATED AS OF SEPTEMBER 29, 1999
BY AND AMONG
INSTRON CORPORATION
THE SUBSIDIARY GUARANTORS SET FORTH HEREIN
AND
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of September 29, 1999, by and among Instron Corporation, a
Massachusetts corporation (the "COMPANY"), the Subsidiary Guarantors set forth
on the signature pages hereto (each, a "SUBSIDIARY GUARANTOR" and collectively,
the "SUBSIDIARY GUARANTORS"), and Donaldson, Lufkin & Jenrette Securities
Corporation (the "INITIAL PURCHASER"), who has agreed to purchase 60,000 Units
consisting of $60.0 million principal amount of the Company's 13-1/4% Senior
Subordinated Notes due 2009 (the "SENIOR SUBORDINATED NOTES") and warrants to
purchase 30,654 shares of the Company's common stock, par value $0.01 per share
pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
September 24, 1999, (the "PURCHASE AGREEMENT"), by and among the Company, the
Subsidiary Guarantors and the Initial Purchaser. In order to induce the Initial
Purchaser to purchase the Senior Subordinated Notes, the Company has agreed to
provide the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Initial
Purchaser set forth in Section 2 of the Purchase Agreement. Capitalized terms
used herein and not otherwise defined shall have the meaning assigned to them in
the Indenture, dated as of September 29, 1999, among the Company, the Subsidiary
Guarantors and Norwest Bank Minnesota, National Association, as Trustee,
relating to the Senior Subordinated Notes and the New Senior Subordinated Notes
(the "INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the New Senior Subordinated Notes to be issued in the Exchange
Offer, (b) the maintenance of such Exchange Offer Registration Statement
continuously effective and the keeping of the Exchange Offer open for a period
not less than the period required pursuant to Section 3(b) hereof and (c) the
delivery by the Company to the Registrar under the Indenture of New Senior
Subordinated Notes in the same aggregate principal
<PAGE> 3
amount as the aggregate principal amount of Senior Subordinated Notes tendered
by Holders thereof pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The exchange and issuance by the Company of a principal
amount of New Senior Subordinated Notes (which shall be registered pursuant to
the Exchange Offer Registration Statement) equal to the outstanding principal
amount of Senior Subordinated Notes that are tendered by such Holders in
connection with such exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Senior Subordinated Notes to certain "qualified
institutional buyers," as such term is defined in Rule 144A under the Act and
pursuant to Regulation S under the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
NEW SENIOR SUBORDINATED NOTES: The Company's 13-1/4% Senior
Subordinated Notes due 2009 to be issued pursuant to the Indenture: (i) in the
Exchange Offer or (ii) as contemplated by Section 4 hereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and
the Subsidiary Guarantors relating to (a) an offering of New Senior Subordinated
Notes pursuant to an Exchange Offer or (b) the registration for resale of
Transfer Restricted Securities pursuant to the Shelf Registration Statement, in
each case, (i) that is filed pursuant to the provisions of this Agreement and
(ii) including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
REGULATION S: Regulation S promulgated under the Act.
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<PAGE> 4
RULE 144: Rule 144 promulgated under the Act.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each (A) Senior Subordinated Note,
until the earliest to occur of (i) the date on which such Senior Subordinated
Note is exchanged in the Exchange Offer for a New Senior Subordinated Note which
is entitled to be resold to the public by the Holder thereof without complying
with the prospectus delivery requirements of the Act, (ii) the date on which
such Senior Subordinated Note has been disposed of in accordance with a Shelf
Registration Statement (and the purchasers thereof have been issued New Senior
Subordinated Notes), or (iii) the date on which such Senior Subordinated Note is
distributed to the public pursuant to Rule 144 under the Act and each (B) New
Senior Subordinated Note held by a Broker Dealer until the date on which such
New Senior Subordinated Note is disposed of by a Broker-Dealer pursuant to the
"Plan of Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Subsidiary Guarantors shall (i) cause the
Exchange Offer Registration Statement to be filed with the Commission as soon as
practicable after the Closing Date, but in no event later than 90 days after the
Closing Date (such 90th day being the "FILING Deadline"), (ii) use its best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 180 days after the
Closing Date (such 180th day being the "EFFECTIVENESS DEADLINE"), (iii) in
connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause it
to become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration and
qualification of the New Senior Subordinated Notes to be made under the Blue Sky
laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The Exchange
Offer shall be on the appropriate form permitting (i) registration of the New
Senior Subordinated Notes to be offered in exchange for the Senior Subordinated
Notes that are Transfer Restricted Securities and (ii) resales of New Senior
Subordinated Notes by Broker-Dealers that tendered into the Exchange Offer
Senior Subordinated
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<PAGE> 5
Notes that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Senior Subordinated
Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below.
(b) The Company and the Subsidiary Guarantors shall use their
respective best efforts to cause the Exchange Offer Registration Statement to be
effective continuously, and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 Business Days. The Company and the
Subsidiary Guarantors shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the New
Senior Subordinated Notes shall be included in the Exchange Offer Registration
Statement. The Company and the Subsidiary Guarantors shall use their respective
best efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 business days thereafter (such 30th day
being the "CONSUMMATION DEADLINE").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Senior Subordinated Notes
acquired directly from the Company or any Affiliate of the Company), may
exchange such Transfer Restricted Securities pursuant to the Exchange Offer.
Such "Plan of Distribution" section shall also contain all other information
with respect to such sales by such Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Transfer Restricted Securities held by any such Broker-Dealer, except to the
extent required by the Commission as a result of a change in policy, rules or
regulations after the date of this Agreement.
Because such Broker-Dealer may be deemed to be an "underwriter" within
the meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any New Senior
Subordinated Notes received by such Broker-Dealer in the Exchange Offer, the
Company and the Subsidiary Guarantors shall permit the use of the Prospectus
contained in the Exchange Offer Registration Statement by such Broker-Dealer to
satisfy such prospectus delivery requirement. To the extent necessary to ensure
that the prospectus contained in the Exchange Offer Registration Statement is
available for sales of New Senior Subordinated Notes by Broker-Dealers, the
Company and the Subsidiary Guarantors agree to use their respective reasonable
best efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Section 6(a) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of 180 days from
the Consummation Deadline or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Registration Statement have been
sold pursuant thereto. The Company and the Subsidiary Guarantors shall provide
sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than two business
days after such request, at any time during such period.
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<PAGE> 6
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and the Subsidiary Guarantors have complied
with the procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of
Transfer Restricted Securities shall notify the Company within 20 Business Days
following the Consummation Deadline that (A) such Holder was prohibited by law
or Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the New Senior Subordinated Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the Prospectus contained
in the Exchange Offer Registration Statement is not appropriate or available for
such resales by such Holder or (C) such Holder is a Broker-Dealer and holds
Senior Subordinated Notes acquired directly from the Company or any of its
Affiliates, then the Company and the Subsidiary Guarantors shall:
(x) cause to be filed, on or prior to 30 days after the
earlier of (i) the date on which the Company determines that the
Exchange Offer Registration Statement cannot be filed as a result of
clause (a)(i) above and (ii) the date on which the Company receives the
notice specified in clause (a)(ii) above (such earlier date, the
"FILING DEADLINE"), a shelf registration statement pursuant to Rule 415
under the Act (which may be an amendment to the Exchange Offer
Registration Statement) (in either case, the "SHELF REGISTRATION
STATEMENT"), relating to all Transfer Restricted Securities, and
(y) use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after
the Filing Deadline for the Shelf Registration Statement (such 90th day
the "EFFECTIVENESS DEADLINE").
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law (i.e., clause
(a)(i) above), then the filing of the Exchange Offer Registration Statement
shall be deemed to satisfy the requirements of clause (x) above; provided that,
in such event, the Company shall remain obligated to meet the Effectiveness
Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement
is available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and
the Subsidiary Guarantors shall use their respective best efforts to keep any
Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Sections 6(b) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of at least two
years (as extended pursuant to Section 6(c)(i)) following the Closing Date, or
such shorter period as will terminate when all Transfer Restricted Securities
covered by such Shelf Registration Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer
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<PAGE> 7
Restricted Securities may include any of its Transfer Restricted Securities in
any Shelf Registration Statement pursuant to this Agreement unless and until
such Holder furnishes to the Company in writing, within 20 days after receipt of
a request therefor, the information specified in Item 507 or 508 of Regulation
S-K, as applicable, of the Act for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No Holder of
Transfer Restricted Securities shall be entitled to liquidated damages pursuant
to Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within 5 days by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective within 5 days of filing such
post-effective amendment to such Registration Statement (each such event
referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the
Company and the Subsidiary Guarantors hereby jointly and severally agree to pay
to each Holder of Transfer Restricted Securities affected thereby liquidated
damages in an amount equal to $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities held by such Holder for each week or portion
thereof that the Registration Default continues for the first 90-day period
immediately following the occurrence of such Registration Default. The amount of
the liquidated damages shall increase by an additional $.05 per week per $1,000
in principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.50 per week per $1,000 in principal
amount of Transfer Restricted Securities; provided that the Company and the
Subsidiary Guarantors shall in no event be required to pay liquidated damages
for more than one Registration Default at any given time. Notwithstanding
anything to the contrary set forth herein, (1) upon filing of the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange
Offer Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (ii) above, (3) upon Consummation of the Exchange
Offer, in the case of (iii) above, or (4) upon the filing of a post-effective
amendment to the Registration Statement or an additional Registration Statement
that causes the Exchange Offer Registration Statement (and/or, if applicable,
the Shelf Registration Statement) to again be declared effective or made usable
in the case of (iv) above, the liquidated damages payable with respect to the
Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or
(iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
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<PAGE> 8
Company and the Subsidiary Guarantors to pay liquidated damages with respect to
securities shall survive until such time as such obligations with respect to
such securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Subsidiary Guarantors shall (x) comply with
all applicable provisions of Section 6(c) below, (y) use their respective best
efforts to effect such exchange and to permit the resale of New Senior
Subordinated Notes by Broker-Dealers that tendered in the Exchange Offer Senior
Subordinated Notes that such Broker-Dealer acquired for its own account as a
result of its market making activities or other trading activities (other than
Senior Subordinated Notes acquired directly from the Company or any of its
Affiliates) being sold in accordance with the intended method or methods of
distribution thereof, and (z) comply with all of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the Company
raises a substantial question as to whether the Exchange Offer is
permitted by applicable federal law, the Company and the Subsidiary
Guarantors hereby agree to seek a no-action letter or other favorable
decision from the Commission allowing the Company and the Subsidiary
Guarantors to Consummate an Exchange Offer for such Transfer Restricted
Securities. The Company and the Subsidiary Guarantors hereby agree to
pursue the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company and the Subsidiary Guarantors
hereby agree to take all such other reasonable actions as may be
requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A)
participating in telephonic conferences with the Commission, (B)
delivering to the Commission staff an analysis prepared by counsel to
the Company setting forth the legal bases, if any, upon which such
counsel has concluded that such an Exchange Offer should be permitted
and (C) diligently pursuing a resolution (which need not be favorable)
by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker Dealer) shall furnish, upon the
request of the Company, prior to the Consummation of the Exchange Offer,
a written representation to the Company and the Subsidiary Guarantors
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not
an Affiliate of the Company, (B) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any
person to participate in, a distribution of the New Senior Subordinated
Notes to be issued in the Exchange Offer and (C) it is acquiring the New
Senior Subordinated Notes in its ordinary course of business. As a
condition to its participation in the Exchange Offer each Holder using
the Exchange Offer to participate in a distribution of the New Senior
Subordinated Notes shall acknowledge and agree that, if the resales are
of New Senior Subordinated Notes obtained by such Holder in exchange for
Senior Subordinated Notes acquired directly from the Company or an
Affiliate thereof, it (1) could not, under
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<PAGE> 9
Commission policy as in effect on the date of this Agreement, rely on
the position of the Commission enunciated in Morgan Stanley and Co.,
Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including, if applicable, any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a
secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507
or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Subsidiary Guarantors shall provide a
supplemental letter to the Commission (A) stating that the Company and
the Subsidiary Guarantors are registering the Exchange Offer in reliance
on the position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including a
representation that neither the Company nor any Subsidiary Guarantor has
entered into any arrangement or understanding with any Person to
distribute the New Senior Subordinated Notes to be received in the
Exchange Offer and that, to the best of the Company's and each
Subsidiary Guarantor's information and belief, each Holder participating
in the Exchange Offer is acquiring the New Senior Subordinated Notes in
its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the New Senior
Subordinated Notes received in the Exchange Offer and (C) any other
undertaking or representation required by the Commission as set forth in
any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Subsidiary Guarantors shall:
(i) comply with all the provisions of Section 6(c) below and use
their respective best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in accordance with
the intended method or methods of distribution thereof (as indicated in
the information furnished to the Company pursuant to Section 4(b)
hereof), and pursuant thereto the Company and the Subsidiary Guarantors
will prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted
Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance
with the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of Senior
Subordinated Notes covered by any Shelf Registration Statement
contemplated by this Agreement, New Senior Subordinated Notes having an
aggregate principal amount equal to the aggregate principal amount of
Senior Subordinated Notes sold pursuant to the Shelf Registration
Statement and surrendered to the Company for cancellation; the Company
shall register
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<PAGE> 10
New Senior Subordinated Notes on the Shelf Registration Statement for
this purpose and issue the New Senior Subordinated Notes to the
purchaser(s) of securities subject to the Shelf Registration Statement
in the names as such purchaser(s) shall designate.
(iii) promptly prior to the filing of any document that is to be
incorporated by reference into a Shelf Registration Statement or related
Prospectus, provide copies of such document to each selling Holder in
connection with such sale, if any, make the Company's and the Subsidiary
Guarantors' representatives available for discussion of such document
and other customary due diligence matters, and include such information
in such document prior to the filing thereof as such selling Holders may
reasonably request;
(iv) make available, during reasonable business hours, for
inspection by each Holder and any attorney or accountant retained by
such Holders, all financial and other records, pertinent corporate
documents of the Company and the Subsidiary Guarantors as shall be
reasonably necessary to enable them to exercise any applicable due
diligence responsibilities and cause the Company's and the Subsidiary
Guarantors' officers, directors and employees to supply all information
reasonably requested by any such Holder, attorney or accountant in
connection with such Shelf Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness. Information that the Company and Subsidiary Guarantors
determine, in good faith, to be confidential and any information that it
notifies the Holders is confidential shall not be disclosed by the
Holders unless (i) the disclosure of such information is necessary to
avoid or correct a material misstatement or material omission in such
Registration Statement, (ii) the release of such information is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction, (iii) disclosure of such information is, in the opinion of
counsel for any Holder, necessary in connection with any action, claim,
suit or proceeding, directly or indirectly, involving or potentially
involving such Holder and arising out of, based upon, relating to, or
involving this agreement, or any transactions contemplated hereby or
arising hereunder, or (iv) the information has been made generally
available to the public. Each selling Holder and its representatives
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 as the basis for any market transaction in the securities of the
Company or for any other purpose other than customary due diligence
unless and until such information is generally available to the public.
Each selling Holder and its representatives will be required to further
agree that it will, upon learning that disclosure of such information is
sought in a court of competent jurisdiction, give notice to the Company
and the Subsidiary Guarantors and allow the Company and the Subsidiary
Guarantors to undertake appropriate action to prevent disclosure of the
information deemed confidential.
(v) if requested by any Holders in connection with such exchange or
sale, promptly include in any Shelf Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such Holders may reasonably request to
have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities; and make all required filings of such Prospectus supplement
or post-effective amendment as soon as
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<PAGE> 11
reasonably practicable after the Company is notified of the matters to
be included in such Prospectus supplement or post-effective amendment;
(vi) upon the request of the Holders of at least 50% in aggregate
principal amount of the then outstanding Transfer Restricted Securities,
enter into such agreements (including underwriting agreements) and make
such representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any applicable Shelf
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder in connection with any sale or resale
pursuant to any applicable Shelf Registration Statement. In such
connection, the Company and the Subsidiary Guarantors shall:
(A) upon request of the Holders of at least 50% in aggregate
principal amount of the then outstanding Transfer Restricted
Securities, furnish (or in the case of paragraphs (2) and (3), use
its best efforts to cause to be furnished) to each Holder, upon the
effectiveness of the Shelf Registration Statement:
(1) a certificate, dated such date, signed on behalf of the
Company and each Subsidiary Guarantor by (x) the President or
any Vice President and (y) a principal financial or accounting
officer of the Company and such Subsidiary Guarantor,
confirming, as of the date thereof, the matters set forth in
Sections 6(y), 9(a) and 9(b) of the Purchase Agreement and such
other similar matters as such Holders may reasonably request;
(2) an opinion, dated the date of effectiveness of the
Shelf Registration Statement, as the case may be, of counsel
for the Company and the Subsidiary Guarantors covering matters
similar to those set forth in Exhibits C and D to the of the
Purchase Agreement; and
(3) a customary comfort letter, dated the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 9(h) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance with
the matters covered in clause (A) above and with any customary
conditions contained in any agreement entered into by the Company and
the Subsidiary Guarantors pursuant to this clause (vi);
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company and the
Subsidiary Guarantors shall:
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(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain an untrue statement of material fact or omit to
state any material fact necessary to make the statements therein not
misleading or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Company and the Subsidiary Guarantors shall file promptly an
appropriate amendment to such Registration Statement curing such
defect, and, if Commission review is required, use their respective
best efforts to cause such amendment to be declared effective as soon
as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) advise each Holder promptly and, if requested by such Holder,
confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to any applicable Registration Statement or any
post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement in order
to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Company and the Subsidiary
Guarantors shall use their respective best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
11
<PAGE> 13
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(v) furnish to each selling Holder in connection with such sale,
if any, before filing with the Commission, copies of any Registration
Statement or any related Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial
filing of such Registration Statement), which documents will be subject
to the review and comment of such Holders in connection with such sale,
if any, for a period of at least five business days, and the Company
will not file any such Registration Statement or related Prospectus or
any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which such selling Holders shall reasonably object within five business
days after the receipt thereof. A selling Holder shall be deemed to have
reasonably objected to such filing if such Registration Statement,
amendment, related Prospectus or supplement, as applicable, as proposed
to be filed, contains an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading or fails to comply with the applicable requirements of the
Act;
(vi) furnish to each Holder who requests in connection with such
exchange or sale, without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each amendment
thereto, including all documents incorporated by reference therein and
all exhibits (including exhibits incorporated therein by reference);
(vii) deliver to each Holder without charge, as many copies of
the Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such Persons reasonably may request; the
Company and the Subsidiary Guarantors hereby consent to the use (in
accordance with law) of the Prospectus and any amendment or supplement
thereto by each selling Holder in connection with the offering and the
sale of the Transfer Restricted Securities covered by the Prospectus or
any amendment or supplement thereto;
(viii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the applicable Registration Statement; provided, however,
that neither the Company nor any Subsidiary Guarantor shall be required
to register or qualify as a foreign corporation where it is not now so
qualified or to take any action that
12
<PAGE> 14
would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(ix) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders to facilitate
the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities
in such denominations and such names as the selling Holders may request
at least two business days prior to such sale of Transfer Restricted
Securities;
(x) use their respective best efforts to cause the disposition
of the Transfer Restricted Securities covered by the Registration
Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (viii)
above;
(xi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Trustee
under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xii) otherwise use their respective best efforts to comply with
all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
(xiii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders to effect such changes to the 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 the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely
manner; and
(xiv) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each
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<PAGE> 15
case, a "SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition
of Transfer Restricted Securities pursuant to the applicable Registration
Statement until (i) such Holder has received copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder
is advised in writing by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus (in each case, the
"RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice hereby agrees
that it will either (i) destroy any Prospectuses, other than permanent file
copies, then in such Holder's possession which have been replaced by the Company
with more recently dated Prospectuses or (ii) deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
Holder's possession of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of the Suspension Notice. The
time period regarding the effectiveness of such Registration Statement set forth
in Section 3 or 4 hereof, as applicable, shall be extended by a number of days
equal to the number of days in the period from and including the date of
delivery of the Suspension Notice to the date of delivery of the Recommencement
Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Subsidiary Guarantors'
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses; (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the New Senior Subordinated Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company, the Subsidiary Guarantors
and, subject to Section 7(b) below, the Holders of Transfer Restricted
Securities; (v) all application and filing fees in connection with listing the
New Senior Subordinated Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Company and the
Subsidiary Guarantors (including the expenses of any special audit and comfort
letters required by or incident to such performance).
The Company will, in any event, bear its and the Subsidiary Guarantors'
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Subsidiary Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Subsidiary
Guarantors will reimburse the Initial Purchaser and the Holders of Transfer
Restricted Securities who are tendering Senior Subordinated Notes into in the
Exchange Offer and/or selling or reselling Senior Subordinated Notes or New
Senior Subordinated Notes pursuant to the "Plan of Distribution" contained in
the Exchange Offer Registration Statement or the Shelf Registration Statement,
as applicable, for the reasonable fees and disbursements of not more than one
counsel, who shall be Latham & Watkins, unless another
14
<PAGE> 16
firm shall be chosen by the Holders of a majority in principal amount of the
Transfer Restricted Securities for whose benefit such Registration Statement is
being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Subsidiary Guarantors agree, jointly and
severally, to indemnify and hold harmless each Holder, its directors, officers
and each Person, if any, who controls such Holder (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act), from and against any and all
losses, claims, damages, liabilities, judgments, (including without limitation,
any reasonable legal or other reasonable expenses incurred in connection with
investigating or defending any matter, including any action that could give rise
to any such losses, claims, damages, liabilities or judgments) caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, preliminary prospectus or Prospectus (or any amendment
or supplement thereto) provided by the Company to any Holder or any prospective
purchaser of New Senior Subordinated Notes or registered Senior Subordinated
Notes, or caused by any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by an untrue statement or omission or alleged untrue
statement or omission that is based upon information relating to any of the
Holders furnished in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted agrees, severally and not jointly,
to indemnify and hold harmless the Company and the Subsidiary Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company, or the Subsidiary Guarantors to the same extent as the foregoing
indemnity from the Company and the Subsidiary Guarantors set forth in section
(a) above, but only with reference to information relating to such Holder
furnished in writing to the Company by such Holder expressly for use in any
Registration Statement. In no event shall any Holder, its directors, officers or
any Person who controls such Holder be liable or responsible for any amount in
excess of the amount by which the total amount received by such Holder with
respect to its sale of Transfer Restricted Securities pursuant to a Registration
Statement exceeds (i) the amount paid by such Holder for such Transfer
Restricted Securities and (ii) the amount of any damages that such Holder, its
directors, officers or any Person who controls such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified
15
<PAGE> 17
party shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the indemnified party unless (i) the employment of
such counsel shall have been specifically authorized in writing by the
indemnifying party, (ii) the indemnifying party shall have failed to assume the
defense of such action or employ counsel reasonably satisfactory to the
indemnified party, (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party) or (iv) there exists an actual Conflict of
interest between original counsel and such indemnified party. In any such case,
the indemnifying party shall not, in connection with any one action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all indemnified parties and all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by a
majority of the Holders, in the case of the parties indemnified pursuant to
Section 8(a), and by the Company and Subsidiary Guarantors, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its prior written consent or (ii) effected
without its prior written consent if the settlement is entered into more than
twenty business days after the indemnifying party shall have received a request
from the indemnified party for reimbursement for the fees and expenses of
counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Subsidiary Guarantors, on the one hand, and the Holders, on the other hand, from
their sale of Transfer Restricted Securities or (ii) if the allocation provided
by clause 8(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company and the Subsidiary
Guarantors, on the one hand, and of the Holder, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims, damages,
16
<PAGE> 18
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and the Subsidiary Guarantors,
on the one hand, and of the Holder, on the other hand, 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 such Subsidiary Guarantor, on
the one hand, or by the Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and judgments referred to above shall
be deemed to include, subject to the limitations set forth in the second
paragraph of Section 8(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company, the Subsidiary Guarantors and each Holder agree that it
would not be just and equitable if contribution pursuant to this Section 8(d)
were determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any matter,
including any action that could have given rise to such losses, claims, damages,
liabilities or judgments. Notwithstanding the provisions of this Section 8, no
Holder, its directors, its officers or any Person, if any, who controls such
Holder shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the total received by such Holder with respect to the
sale of Transfer Restricted Securities pursuant to a Registration Statement
exceeds (i) the amount paid by such Holder for such Transfer Restricted
Securities and (ii) the amount of any damages which such Holder 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 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(c) are several in proportion to the respective principal amount of
Transfer Restricted Securities held by each Holder hereunder and not joint.
SECTION 9. RULE 144A AND RULE 144
The Company and each Subsidiary Guarantor agrees with each Holder, for
so long as any Transfer Restricted Securities remain outstanding and during any
period in which the Company or such Subsidiary Guarantor (i) is not subject to
Section 13 or 15(d) of the Exchange Act, to make available, upon request of any
Holder, to such Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities designated by such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is
subject to Section 13 or 15 (d) of the Exchange Act, to make all filings
required thereby in a timely manner in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144.
17
<PAGE> 19
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Subsidiary Guarantors acknowledge and
agree that any failure by the Company and/or the Subsidiary Guarantors to comply
with their respective obligations under Sections 3 and 4 hereof may result in
material irreparable injury to the Initial Purchaser or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Initial Purchaser or any Holder may obtain such relief as may be required to
specifically enforce the Company's and the Subsidiary Guarantors' obligations
under Sections 3 and 4 hereof. The Company and the Subsidiary Guarantors further
agree to waive the defense in any action for specific performance that a remedy
at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Subsidiary
Guarantor will, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Subsidiary Guarantor has previously entered into any
agreement granting any registration rights with respect to its securities to any
Person. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Company's and the Subsidiary Guarantors' securities under any agreement in
effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other
hand, and shall have the right to enforce such agreements directly to the extent
they may deem such enforcement necessary or advisable to protect its rights or
the rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telecopier, or air courier
guaranteeing overnight delivery:
18
<PAGE> 20
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the Indenture;
and
(ii) if to the Company or the Subsidiary Guarantors:
Instron Corporation
100 Royal Street
Canton, MA 02021-1089
Telecopier No.: (781) 828-5750
Attention: Chief Financial Officer
With a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Telecopier No.: (216) 579-0212
Attention: Christopher M. Kelly, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) 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; provided, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate 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.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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<PAGE> 21
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and 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. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(l) Limitation of Liability. Each of Instron Realty Trust ("Trust") and
IRT-II ("Trust II")is a voluntary association with transferable shares organized
under the laws of the Commonwealth of Massachusetts (more commonly known as a
"Massachusetts Business Trust") and all persons dealing with each of Trust and
Trust II must look solely to the property of each of Trust and Trust II for the
enforcement of any claims against each of Trust and Trust II. Neither the
trustees, officers, agents nor shareholders of either Trust or Trust II assume
any liability for obligations entered into on its behalf. In no event shall the
Initial Purchaser seek or attempt to obtain any recovery or judgment against any
trustee, officer, director, employee or shareholder of either Trust or Trust II.
The Declaration of Trust, dated as of April 23, 1957, of Trust and the
Declaration of Trust, dated October 19, 1998, of Trust II are on file with the
Secretary of The Commonwealth of Massachusetts. The Registration Rights
Agreement has been executed on behalf of each of Trust and Trust II by the
trustees or officers of each of Trust and Trust II in such capacities and not
individually.
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<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INSTRON CORPORATION
By: /s/ John R. Barrett
-------------------------------
Name: John R. Barrett
Title: Treasurer and Vice President of
Corporate Development
INSTRON SCHENCK TESTING SYSTEMS CORP.
By: /s/ John R. Barrett
-------------------------------
Name: John R. Barrett
Title: Treasurer and Vice President of
Corporate Development
INSTRON/LAWRENCE CORPORATION
By: /s/ John R. Barrett
-------------------------------
Name: John R. Barrett
Title: Treasurer and Vice President of
Corporate Development
INSTRON REALTY TRUST
By: /s/ Linton A. Moulding
-------------------------------
Name: Linton A. Moulding
Title: Chief Financial Officer and
Vice President
21
<PAGE> 23
IRT-II TRUST
By: /s/ Linton A. Moulding
-------------------------------
Name: Linton A. Moulding
Title: Chief Financial Officer and
Vice President
INSTRON JAPAN COMPANY LTD.
By: /s/ John R. Barrett
-------------------------------
Name: John R. Barrett
Title: Treasurer and Vice President of
Corporate Development
INSTRON ASIA LTD.
By: /s/ John R. Barrett
-------------------------------
Name: John R. Barrett
Title: Treasurer and Vice President of
Corporate Development
22
<PAGE> 24
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ William J.R. Wilson
-------------------------------
Name: William J.R. Wilson
Title: Vice President
23
<PAGE> 1
================================================================================
Exhibit 4.3
WARRANT REGISTRATION RIGHTS AGREEMENT
DATED AS OF SEPTEMBER 29, 1999
BY AND BETWEEN
INSTRON CORPORATION
AND
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
================================================================================
<PAGE> 2
This Warrant Registration Rights Agreement (the "AGREEMENT") is made
and entered into as of September 29, 1999, by and between Instron Corporation, a
Massachusetts corporation (the "COMPANY") and Donaldson, Lufkin & Jenrette
Securities Corporation (the "INITIAL PURCHASER"), who has agreed to purchase an
aggregate of 60,000 Units, each consisting of $1,000 in aggregate principal
amount of the Company's 13 1/4% Senior Subordinated Notes due 2009 (the "NOTES")
and warrants (the "WARRANTS") to initially purchase 30,654 shares of the
Company's Common Stock, pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement (the
"PURCHASE AGREEMENT"), dated as of September 24, 1999, by and among the Company,
the Subsidiary Guarantors set forth therein and the Initial Purchaser. In order
to induce the Initial Purchaser to purchase the Units, the Company has agreed to
provide the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Initial
Purchaser set forth in Section 3 of the Purchase Agreement. Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to them
in the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
CLOSING DATE: The date hereof.
COMMON STOCK: The common stock, par value $0.01 per share, of the
Company.
DEMAND EVENT: The earlier to occur of (a) 180 days after the date on
which an initial Public Equity Offering and (b) the date on which any class of
common stock of the Company is listed on a national securities exchange or
authorized for quotation on the Nasdaq National Market System, other than in
connection with the Public Equity Offering referred to in clause (a) of this
definition.
DEMAND REGISTRATION: As defined in Section 5 of this Agreement.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
HOLDERS: As defined in Section 2 hereof.
INITIATING HOLDERS: One or more Holders owning individually or in the
aggregate not less than the Requisite Securities.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
PIGGY-BACK REGISTRATION. As defined in Section 6 of this Agreement.
<PAGE> 3
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such prospectus.
PUBLIC EQUITY OFFERING: means an underwritten offering of Common Stock
pursuant to a registration statement that has been declared effective by the SEC
pursuant to the Act (other than a registration statement on Form S-8 or
otherwise relating to equity securities issuable under any employee benefit plan
of the Company).
REGISTRABLE SECURITIES: Any of (i) the Warrant Shares (whether or not
the related Warrants have been exercised) and (ii) any other securities issued
or issuable with respect to any Warrant Shares by way of stock dividends or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (a) a Registration Statement with respect to the offering of such
securities by the Holder thereof shall have been declared effective under the
Securities Act and such securities shall have been disposed of by such Holder
pursuant to such Registration Statement, (b) such securities have been sold to
the public pursuant to Rule 144(k) (or any similar provisions then in force, but
not Rule 144A) promulgated under the Securities Act, (c) such securities shall
have been otherwise transferred by the Holder thereof and new certificates for
such securities not bearing a legend restricting further transfer shall have
been delivered by the Company or its transfer agent and subsequent disposition
of such securities shall not require registration or qualification under the
Securities Act or any similar state law then in force or (d) such securities
shall have ceased to be outstanding.
REGISTRATION EXPENSES: All expenses incident to the Company's
performance of or compliance with this Agreement, including, without limitation,
all SEC and stock exchange or National Association of Securities Dealers, Inc.
registration and filing fees and expenses, fees and expenses of compliance with
securities or blue sky laws (including, without limitation, reasonable fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities), preparing, printing, filing,
duplicating and distributing the Registration Statement and the related
prospectus, the cost of printing stock certificates, the cost and charges of any
transfer agent, rating agency fees, printing expenses, messenger, telephone and
delivery expenses, reasonable fees and disbursements of counsel for the Company
and all independent certified public accountants, the fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (but not
including any underwriting discounts or commissions or transfer taxes, if any,
attributable to the sale of Registrable Securities by Selling Holders), and
reasonable fees and expenses of one counsel for the Holders.
REGISTRATION STATEMENT: Any registration statement of the Company
relating to the registration for resale of Registrable Securities that is filed
pursuant to the provisions of this Agreement and including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and all material incorporated by
reference therein.
REQUISITE SECURITIES: A number of Registrable Securities equal to not
less than 25% of the then Registrable Securities held in aggregate by all
Holders.
SEC: The Securities and Exchange Commission.
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SELLING HOLDER: A Holder who is selling Registrable Securities in
accordance with the provisions of this Agreement.
WARRANTS: The warrants of the Company issued and sold pursuant to the
Purchase Agreement and the Warrant Agreement, together with any warrants issued
in substitution or replacement therefor.
WARRANT AGREEMENT: The Warrant Agreement dated the Closing Date by and
between the Company and Norwest Bank Minnesota, National Association, as Warrant
Agent.
WARRANT SHARES: The Common Stock or other securities that any Holder
may acquire upon exercise of a Warrant, together with any other securities which
such Holder may acquire on account of any such securities, including, without
limitation, as the result of any dividend or other distribution on Common Stock
or any split-up of such Common Stock as provided for in the Warrant Agreement.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT.
Holders of Registrable Securities. A Person is deemed to be a Holder of
Registrable Securities (a "HOLDER") whenever such Person owns Registrable
Securities or has the right to acquire such Registrable Securities, whether or
not such acquisition has actually been effected.
SECTION 3. INTENTIONALLY OMMITED
SECTION 4. REGISTRATION PROCEDURES.
In connection with any Demand Registration or Piggy-Back Registration,
the Company shall (provided that it will not be required to take any action
pursuant to this Section 4 that would, in the written opinion of counsel for the
Company, violate applicable law):
(a) Use commercially reasonable best efforts to effect such
registration to permit the sale of the Registrable Securities being sold in
accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company will prepare and file with the SEC a Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof;
(b) Promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or related Prospectus,
provide copies of such document to each Selling Holder in connection with such
sale, if any, and make the Company's representatives reasonably available during
normal business hours for discussion of such document and other customary due
diligence matters, and include such information in such document prior to the
filing thereof as such Selling Holders may reasonably request;
(c) Make available, during reasonable business hours, for inspection by
each Holder and any attorney or accountant retained by such Holders, all
financial and other records, pertinent corporate documents of the Company as
shall be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such Holder,
attorney or accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and prior to
its effectiveness. Information that the Company determines, in good faith, to be
confidential and any
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<PAGE> 5
information that it notifies the Holders is confidential shall not be disclosed
by the Holders unless (i) the disclosure of such information is necessary to
avoid or correct a material misstatement or material omission in such
Registration Statement, (ii) the release of such information is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction, (iii)
disclosure of such information is, in the opinion of counsel for any Holder,
necessary in connection with any action, claim, suit or proceeding, directly or
indirectly, involving or potentially involving such Holder and arising out of,
based upon, relating to, or involving this agreement, or any transactions
contemplated hereby or arising hereunder, or (iv) the information has been made
generally available to the public. Each Selling Holder and its representatives
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 as the
basis for any market transaction in the securities of the Company or for any
other purpose other than customary due diligence unless and until such
information is generally available to the public. Each Selling Holder and its
representatives will be required to further agree that it will, upon learning
that disclosure of such information 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 information deemed confidential;
(d) If requested by any Holders in connection with such exchange or
sale, promptly include in any Registration Statement or Prospectus, pursuant to
a supplement or post-effective amendment if necessary, such information as such
Holders may reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Registrable Securities; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as reasonably practicable after
the Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(e) In connection with any Demand Registration and, to the extent the
participants other than Holders of Registrable Securities in a Piggy-Back
Registration receive any items set forth in this Section 4(e), in connection
with a Piggy-Back Registration, upon the request of the Holders of not less than
the Requisite Securities, enter into such agreements (including underwriting
agreements) and make such representations and warranties and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of the Registrable Securities pursuant to any applicable
Registration Statement contemplated by this Agreement as may be reasonably
requested by any Holder in connection with any sale or resale pursuant to any
applicable Registration Statement. In such connection, the Company shall:
(i) upon request of the Holders of not less than the Requisite
Securities, furnish (or in the case of paragraphs (B) and (C), use its
best efforts to cause to be furnished) to each Holder, upon the
effectiveness of the Registration Statement:
(A) a certificate, dated such date, signed on behalf
of the Company by (x) the President or any Vice President and
(y) a principal financial or accounting officer of the
Company, confirming, as of the date thereof, the matters set
forth in Sections 6(y), 9(a) and 9(b) of the Purchase
Agreement and such other similar matters as such Holders may
reasonably request;
(B) an opinion, dated the date of effectiveness of
the Registration Statement, as the case may be, of counsel for
the Company covering matters similar to those set forth in
Exhibits C and D to the of the Purchase Agreement; and
(C) a customary comfort letter, dated the date of
effectiveness of the Registration Statement, as the case may
be, from the Company's independent
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<PAGE> 6
accountants, in the customary form and covering matters of the
type customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the
matters set forth in the comfort letters delivered pursuant to
Section 9(h) of the Purchase Agreement; and
(ii) deliver such other documents and certificates as may be
reasonably requested by the Selling Holders to evidence compliance with
the matters covered in clause (i) above and with any customary
conditions contained in any agreement entered into by the Company
pursuant to this clause (e);
(f) Use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for the
period specified in Section 5 or 6 of this Agreement, as applicable. Upon the
occurrence of any event that would cause any such Registration Statement or the
Prospectus contained therein (i) to contain an untrue statement of material fact
or omit to state any material fact necessary to make the statements therein not
misleading or (ii) not to be effective and usable for resale of Registrable
Securities during the period required by this Agreement, the Company shall file
promptly an appropriate amendment to such Registration Statement curing such
defect, and, if SEC review is required, use their respective best efforts to
cause such amendment to be declared effective as soon as practicable;
(g) Prepare and file with the SEC such amendments and post-effective
amendments to the applicable Registration Statement as may be necessary to keep
such Registration Statement effective for the applicable period set forth in
Section 5 or 6 hereof, as the case may be; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424,
430A and 462, as applicable, under the Act in a timely manner; and comply with
the provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement to the
Prospectus;
(h) Advise each Holder promptly and, if requested by such Holder,
confirm such advice in writing, (i) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to any
applicable Registration Statement or any post-effective amendment thereto, when
the same has become effective, (ii) of any request by the SEC for amendments to
the Registration Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (iii) of the issuance by the SEC of any
stop order suspending the effectiveness of the Registration Statement under the
Act or of the suspension by any state securities commission of the qualification
of the Registrable Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (iv) of the
existence of any fact or the happening of any event that makes any statement of
a material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time the SEC
shall issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption from
qualification of the Registrable Securities under state securities or Blue Sky
laws, the shall use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
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<PAGE> 7
(i) Subject to Section 4(f), if any fact or event contemplated by
Section 4(h)(iv) above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related Prospectus or
any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Registrable
Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(j) Furnish to each Selling Holder in connection with such sale, if
any, before filing with the SEC, copies of any Registration Statement or any
related Prospectus included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents incorporated by
reference after the initial filing of such Registration Statement), which
documents will be subject to the review and comment of such Holders in
connection with such sale, if any, for a period of at least five business days,
and, in connection with any Demand Registration, the Company will not file any
such Registration Statement or related Prospectus or any amendment or supplement
to any such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which such Selling Holders shall reasonably object
within five business days after the receipt thereof. A Selling Holder shall be
deemed to have reasonably objected to such filing if such Registration
Statement, amendment, related Prospectus or supplement, as applicable, as
proposed to be filed, contains an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading
or fails to comply with the applicable requirements of the Act;
(k) Furnish to each Holder who requests in connection with such sale,
without charge, at least one copy of the Registration Statement, as first filed
with the SEC, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(l) Deliver to each Holder without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company hereby
consents to the use (in accordance with law) of the Prospectus and any amendment
or supplement thereto by each Selling Holder in connection with the offering and
the sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto;
(m) Prior to any public offering of Registrable Securities, cooperate
with the Selling Holders and their counsel in connection with the registration
and qualification of the Registrable Securities under the securities or Blue Sky
laws of such jurisdictions as the Selling Holders may request and do any and all
other acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided, however, that the Company shall not be
required to register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of process
in suits or to taxation, other than as to matters and transactions relating to
the Registration Statement, in any jurisdiction where it is not now so subject;
(n) In connection with any sale of Registrable Securities that will
result in such securities no longer being Registrable Securities, cooperate with
the Selling Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends; and to register such Registrable Securities in such
denominations and such names as the Selling Holders may request at least two
business days prior to such sale of Registrable Securities;
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<PAGE> 8
(o) Use their respective best efforts to cause the disposition of the
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the disposition
of such Registrable Securities, subject to the proviso contained in clause
(m)above;
(p) Provide a CUSIP number for all Registrable Securities not later
than the effective date of a Registration Statement covering such Registrable
Securities and provide the Warrant Agent under the Warrant Agreement with
printed certificates for the Registrable Securities that are in a form eligible
for deposit with the Depository Trust Company;
(q) Otherwise use its commercially reasonable best efforts to comply
with all applicable rules and regulations of the SEC, and make generally
available to its security holders with regard to any applicable Registration
Statement, as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a twelve-month
period beginning after the effective date of the Registration Statement (as such
term is defined in paragraph (c) of Rule 158 under the Act);
(r) Provide promptly to each Holder, upon request, each document filed
with the SEC pursuant to the requirements of Section 13 or Section 15(d) of the
Exchange Act;
(s) Use its commercially reasonable best efforts to cause the Warrant
Shares issuable upon exercise of the Warrants to be quoted or listed on any
exchange upon which the Company's Common Stock is then quoted or listed; and
(t) Use its commercially reasonable best efforts to take all other
steps reasonably necessary to effect the registration, offering and sale of the
Registrable Securities covered by the Registration Statement.
The Company may require each Selling Holder as to which any
registration is being effected to furnish to the Company such information
regarding the distribution of such Registrable Securities as is required by law
to be disclosed in the applicable Registration Statement, and the Company may
exclude from such registration the Registrable Securities of any Selling Holder
who unreasonably fails to furnish such information promptly after receiving such
request.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder or any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such Holder by name or otherwise is not required by the
Securities Act or any similar Federal statute then in force, the deletion of the
reference to such Holder in any amendment or supplement to the Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.
Each Holder agrees by acquisition of a Registrable Security that, upon
receipt of the notice referred to in Section 4(h)(iii) or any notice from the
Company of the existence of any fact of the kind described in Section 4(h)(iv)
hereof (in each case, a "SUSPENSION NOTICE"), such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the applicable
Registration Statement until (i) such Holder has received copies of the
supplemented or amended Prospectus
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<PAGE> 9
contemplated by Section 4(i) hereof, or (ii) such Holder is advised in writing
by the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Registrable Securities that was current at the time
of receipt of the Suspension Notice. The time period regarding the effectiveness
of such Registration Statement set forth in Section 5 or 6 hereof, as
applicable, shall be extended by a number of days equal to the number of days in
the period from and including the date of delivery of the Suspension Notice to
the date of delivery of the Recommencement Date.
Notwithstanding any of the foregoing provisions of this Section 4 and
subject to Section 6 hereof, in the case of any Piggy-Back Registration, the
Company shall be deemed to have complied with the requirements of this Section 4
in respect of the Holders of Registrable Securities if (i) the Company follows
the same registration procedures with respect to the Registrable Securities
subject to such Piggy-Back Registration as the Company follows with respect to
the other securities included in such registration (including any securities
offered by the Company) and (ii) only if there are participants in the
Piggy-Back Registration other than the Company or the Holders of the Registrable
Securities, the Company provides the Holders of such Registrable Securities with
the same rights with respect such registration procedures as are provided to the
other participants in such Piggy-Back Registration.
SECTION 5. DEMAND REGISTRATION.
(a) After the occurrence of a Demand Event, one or more Initiating
Holders owning individually or in the aggregate not less than the Requisite
Securities may request in writing that the Company effect the registration under
the Securities Act of all or part of such Initiating Holders' Registrable
Securities and shall specify the number of Registrable Securities proposed to be
sold and the intended method of disposition thereof (the "DEMAND REQUEST"). The
Company will give written notice of the Demand Request to all registered holders
of Registrable Securities within 10 days of receipt thereof. Within 120 days of
receipt of the Demand Request the Company will, subject to the terms of this
Agreement, file a Registration Statement and use its best efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request;
(ii) all other Registrable Securities, the Holders of which
shall have made a written request to the Company for registration
thereof within 20 days after the giving of such written notice by the
Company (which request shall specify the number of Registrable
Securities proposed to be sold and the intended method of disposition
of such Registrable Securities); and
(iii) all shares of securities that the Company or any other
stockholder may elect to register in connection with the offering of
Registrable Securities pursuant to this Section 5,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional securities so to be registered.
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(b) Registration under this Section 5 (the "DEMAND REGISTRATION") shall
be on such appropriate registration form of the SEC (i) as shall be selected by
the Company and (ii) as shall permit the disposition of such Registrable
Securities in accordance with the intended method or methods of disposition
specified in their request for such registration.
(c) The Company will pay all Registration Expenses in connection with
any registration requested pursuant to this Section 5. The Selling Holders shall
pay the underwriting discounts, commissions, and transfer taxes, if any, in
connection with the Registration Statement requested under this Section 5, which
costs shall be allocated pro rata among all Selling Holders on whose behalf
Registrable Securities of the Company are included in such registration on the
basis of the respective amounts of the Registrable Securities then being
registered on their behalf.
(d) The Holders shall be entitled to request one (1) registration
pursuant to this Section 5. A Registration Statement requested pursuant to this
Section 5 shall not be deemed to have been effected (i) unless a Registration
Statement with respect thereto has been declared effective by the SEC and (ii)
the Company has complied in a timely manner and in all material respects with
all of its obligations under this Agreement; provided, (i) if, after such
Registration Statement has become effective, the offering of Warrant Shares
pursuant to such Registration Statement is or becomes subject to any stop order,
injunction or other order or requirement of the SEC or other governmental or
administrative agency or court that prevents, restrains or otherwise limits the
sale of Warrant Shares under such Registration Statement for any reason, other
than by reason of some act or omission by any Holder participating in such
registration, and does not become effective within a reasonable period of time
thereafter, such period not to exceed 60 days from the date of such stop order,
injunction, or other governmental order or requirement or (ii) the Registration
Statement does not remain effective under the Securities Act until at least the
earlier of (A) an aggregate of 180 days after the effective date thereof or (B)
the consummation of the distribution by the Selling Holders of all of the
Registrable Securities covered thereby. For purposes of calculation the 180-day
period referred to in the preceding sentence, any period of time during which
such Registration Statement was not in effect shall be excluded. The Holders
shall be permitted to withdraw all or any part of the Registrable Securities
from a Demand Registration at any time prior to the effective date of such
Demand Registration.
(e) If a requested registration pursuant to this Section 5 involves an
underwritten offering, and the managing underwriter or underwriters shall advise
the Company in writing (with a copy to each Holder requesting registration)
that, in such managing underwriter's or underwriters' opinion, the number of
securities requested to be included in such registration (including securities
of the Company which are not Registrable Securities) is such as to adversely
affect the success of such offering, including the price at which such
securities can be sold, then the Company will include in such registration, to
the extent of the number which the Company is so advised can be sold in such
offering, (i) first, Registrable Securities requested to be included in such
registration by the Holders, pro rata among such holders requesting such
registration on the basis of the number of such securities requested to be
included by such Holders and (ii) second, securities held by other Persons,
including the Company. If more than 10% of the securities of the Holders have
been excluded from a Registration Statement pursuant to the provisions of this
Section 5(e), then such registration shall not count toward determining whether
the Company has satisfied its obligation to effect one Demand Registration
pursuant to this Section 5 with respect to such securities.
(f) If the Company receives a Demand Request during a "lock-up" or
"black out" period (the "LOCK UP PERIOD") imposed on the Company pursuant to or
in connection with any underwriting or purchase agreement relating to a Rule
144A offering or a registered public offering of Common Stock or securities
convertible into or exchangeable for Common Stock, the Company shall not be
required to
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notify holders of Registrable Securities pursuant to Section 5(a) hereof or file
a Registration Statement prior to the end of the Lock Up Period; provided, that
such Lock Up Period shall not exceed 90 days or, in the case of the Company's
initial Public Equity Offering, 180 days. The Company shall use all commercially
reasonable best efforts to cause the Registration Statement to become effective
no later than the later of (i) 180 days after receipt of the Demand Request or
(ii) 60 days after the end of the Lock Up Period. The Company shall notify the
holders of Registrable Securities within 10 days of the imposition of any Lock
Up Period on the Company.
SECTION 6. PIGGY-BACK REGISTRATION.
(a) If the Company proposes to file a Registration Statement under the
Securities Act with respect to an offering by the Company for its own account or
for the account of any of the holders of any class of its Common Stock (other
than (i) a Registration Statement on Form S-4 or S-8 (or any substitute form
that may be adopted by the SEC), (ii) a Registration Statement filed in
connection with an exchange offer or offering of securities solely to the
Company's existing security holders or (iii) a Registration Statement concerning
Common Stock offered to employees of the Company or its subsidiaries), then the
Company shall give written notice of such proposed filing to the Holders as soon
as practicable (but in no event fewer than 10 days before the anticipated filing
date), and such notice shall offer such Holders the opportunity to register such
number of Registrable Securities as each such Holder may request in writing
within 20 days after receipt of such written notice from the Company (which
request shall specify the Warrant Shares intended to be disposed of by such
Selling Holder) (a "PIGGY-BACK REGISTRATION"). Upon the written request of any
such Holder made within 20 days after the receipt of any such notice (which
request shall specify the number of Registrable Securities intended to be
disposed of by such Holder and the intended method of disposition thereof), the
Company will, subject to the terms of this Agreement, effect the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by the Holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, by inclusion of
such Registrable Securities in the registration statement that covers the
securities which the Company proposes to register, provided that, if at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason either not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to each Holder and,
thereupon, (i) in the case of a determination not to register shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 5, and (ii) in the case
of a determination to delay registering, shall be permitted to delay registering
any Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this Section 6 shall relieve
the Company of its obligation to effect any registration upon request under
Section 5, nor shall any such registration hereunder be deemed to have been
effected pursuant to Section 5. The Company shall use its best efforts to keep
such Piggy-Back Registration continuously effective under the Securities Act
until the earlier of (A) an aggregate of 90 days after the effective date
thereof or (B) the consummation of the distribution by the Holders of all of the
Registrable Securities covered thereby.
(b) The Company shall use its reasonable efforts to cause the managing
underwriter or underwriters of such proposed offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be included
in the same terms and conditions as any similar securities of the Company or any
other security holder included therein and to permit the sale or other
disposition of such
10
<PAGE> 12
Registrable Securities in accordance with the intended method of distribution
thereof. The Selling Holders shall enter into reasonable and customary
underwriting agreements in connection with any such underwritten registration.
Any Selling Holder shall have the right to withdraw its request for inclusion of
its Registrable Securities in any Registration Statement pursuant to these
provisions by giving written notice to the Company of its request to withdraw
prior to the effective date of such registration statement. The Company may
withdraw a Piggy-Back Registration at any time prior to the time it becomes
effective or the Company may elect to delay the registration; provided, however,
that the Company shall give prompt written notice thereof to participating
Holders.
(c) The Company will pay all Registration Expenses in connection with
registration of Registrable Securities requested pursuant to this Section 6 and
the Selling Holders shall pay the underwriting discounts, commissions, and
transfer taxes, if any, relating to the sale of such Selling Holders'
Registrable Securities pursuant to this Section 6, such costs being allocated
pro rata among all Selling Holders on whose behalf Registrable Securities of the
Company are included in such registration on the basis of the respective amounts
of Registrable Securities then being registered on their behalf.
(d) Priority in Piggy-Back Registrations. If a registration pursuant to
this Section 6 involves an underwritten offering of the securities so being
registered, whether or not for sale for the account of the Company, the Company
will, if requested by any Holder and subject to the provisions of this Section
6, use its reasonable efforts to arrange for such underwriters to include all
the Registrable Securities to be offered and sold by such Holder among the
securities to be distributed by such underwriters. Notwithstanding anything to
the contrary, if the managing underwriter of such underwritten offering shall,
in writing, inform the Holders requesting such registration and the holders of
any of the Company's other securities which shall have exercised registration
rights in respect of such underwritten offering of its belief that the number of
securities requested to be included in such registration (including securities
of the Company that are not Registrable Securities) is such as to adversely
affect the success of such offering, including the price at which such
securities can be sold in (or during the time of) such offering, then the
Company will be required to include in such registration statement only the
amount of securities that it is so advised should be included in such
registration. In such event, (x) in cases initially involving the registration
for sale of securities for the Company's own account, securities shall be
registered in such offering in the following order of priority: (i) first, the
securities that the Company proposes to register, and (ii) second, the
securities that have been requested to be included in such registration by
Holders and by Persons entitled to exercise "piggy-back" registration rights
pursuant to contractual commitments of the Company (pro rata on the amount of
securities sought to be registered by such Holders and Persons) and (y) in cases
not initially involving the registration for sale of securities for the
Company's own account, securities shall be registered in such offering as
follows: (i) first, the securities of any person whose exercise of a "demand"
registration right pursuant to a contractual commitment of the Company is the
basis for the registration (provided that if such person is a Holder, there
shall be no priority as among Holders and Registrable Securities sought to be
included by Holders shall be included pro rata based on the amount of securities
sought to be registered by such persons), (ii) second, the securities that have
been requested to be included in such registration by Holders and other persons
entitled to exercise "piggy-back" registration rights pursuant to contractual
commitments (pro rata based on the amount of securities sought to be registered
by such Holders and persons) and (iii) third, the securities which the Company
proposes to register.
SECTION 7. LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS UNDER
REGISTRATION COVENANTS.
The obligations of the Company described in Sections 5 and 6 of this
Agreement are subject to each of the following limitations, conditions and
qualifications:
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<PAGE> 13
(a) The Company shall not be required to file a Registration Statement
pursuant to a request for a Demand Registration if the Company has in effect a
shelf registration statement which is available to the Holders.
(b) Subject to the next sentence of this paragraph, the Company shall
be entitled to postpone, for a reasonable period of time, the filing of
effectiveness of, or suspend the rights of any Holder to make sales pursuant to,
any Registration Statement otherwise required to be prepared, filed and made and
kept effective by it under the registration covenants described in Section 5
hereof; provided, however, that the duration of such postponement or suspension
may not exceed 45 days with respect to the Demand Registration. Such
postponement or suspension may only be effected if (i) an event or circumstance
occurs and is continuing as a result of which such Registration Statement, any
related Prospectus or any document incorporated therein by reference as then
amended or supplemented or proposed to be filed would, in the Company's good
faith judgment, contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading and (ii)(A) the
Company determines in its good faith judgment that the disclosure of the event
at that time would have a material adverse effect on the business, operations or
prospects of the Company or (B) the disclosure otherwise relates to a material
business transaction or development that has not yet been publicly disclosed. If
the Company shall so postpone the filing or effectiveness of, or suspend the
rights of any Holders to make sales pursuant to, a Registration Statement it
shall, as promptly as possible, notify any Selling Holders of such
determination, and the Selling Holders shall (x) have the right, in the case of
a postponement of the filing or effectiveness of a Registration Statement, upon
the affirmation vote of the Selling Holders of not less than a majority of the
Registrable Securities to be included in such Registration Statement, to
withdraw the request for registration by giving written notice to the Company
within 10 days after receipt of such notice, or (y) in the case of a suspension
of the right to make sales, receive an extension of the registration period
equal to the number of days of the suspension. Any Demand Registration as to
which the withdrawal election referred to in the preceding sentence has been
effected shall not be counted for purposes of the Demand Registration referred
to in Section 5 hereof. The time period regarding the effectiveness of any
Registration Statement pursuant to Section 5 or 6 hereof, as applicable, shall
be extended by a number of days equal to the number of days in the suspension
period described in this Section 7(b).
(c) The Company shall not be required by this Agreement to include
securities in a Registration Statement relating to a Piggy-back Registration
above if (i) in the written opinion of counsel to the Company, addressed to the
Holders seeking registration and delivered to them, the Holders of such
securities seeking registration would be free to sell all such securities within
the succeeding three-month period, without registration, under Rule 144 under
the Securities Act, which opinion may be based in part upon the representation
by the Holders of such securities seeking registration, which registration shall
not be unreasonably withheld, that each such Holder is not an affiliate of the
Company within the meaning of the Securities Act, and (ii) all requirements
under the Securities Act for effecting such sales are satisfied at such time.
(d) The Company's obligations shall be subject to the obligations of
the Selling Holders to furnish all information and materials and not to take any
and all actions as may be required under Federal and state securities laws and
regulations to permit the Company to comply with all applicable requirements of
the SEC and to obtain any acceleration of the effective date of such
Registration Statement.
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<PAGE> 14
(e) The Company shall not be obligated to cause any special audit to be
undertaken in connection with any registration pursuant to this Agreement unless
such audit is requested by the underwriters with respect to such registration.
(f) Each Holder of Registrable Securities agrees, if an to the extent
reasonably requested by the managing underwriter or underwriters in a Public
Equity Offering, not to effect any public sale or distribution of Registrable
Securities, including a sale pursuant to Rule 144 (except as part of such Public
Equity Offering), during the 90-day period beginning on the closing date of any
such Public Equity Offering (which period shall be 180 days in the case of the
Company's initial Public Equity Offering), to the extent timely notified in
writing by the Company or such managing underwriter or underwriters. In the
event that the Company is not otherwise in compliance with the provisions of
this Agreement at the time the Holders receive any notice pursuant to this
Section 7(f), the Holders shall not be required to comply with this Section
7(f). In addition, the provisions of this Section 7(f) shall not apply to any
Holder of Registrable Securities if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; provided, that any
such Holder shall undertake not to effect any public sale or distribution of any
Registrable Securities commencing on the closing date of any such Public Equity
Offering unless it has provided 45 days' prior written notice of such sale or
distribution to the managing underwriter or underwriters.
SECTION 8. REGISTRATION EXPENSES.
The Company shall pay all Registration Expenses.
SECTION 9. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each Holder, its
directors, officers and each Person, if any, who controls such Holder (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any reasonable legal or other reasonable expenses
incurred in connection with investigating or defending any matter, including any
action that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, preliminary prospectus or
Prospectus (or any amendment or supplement thereto) provided by the Company to
any Holder or any prospective purchaser of Registrable Securities, or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by an untrue statement or omission or alleged untrue statement or
omission that is based upon information relating to any of the Holders furnished
in writing to the Company by any of the Holders.
(b) Each Holder of Registrable Securities agrees, severally and not
jointly, to indemnify and hold harmless the Company, and its directors and
officers, and each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Company to the same extent
as the foregoing indemnity from the Company set forth in section (a) above, but
only with reference to information relating to such Holder furnished in writing
to the Company by such Holder expressly for use in any Registration Statement.
In no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Registrable Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Registrable Securities and (ii) the amount
of any damages that such Holder, its directors, officers or any Person who
controls such Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission.
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<PAGE> 15
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 9(a) or 9(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 9(a) and 9(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 9(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party, (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party) or (iv) there exists an actual Conflict of
interest between original counsel and such indemnified party. In any such case,
the indemnifying party shall not, in connection with any one action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all indemnified parties and all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by a
majority of the Holders, in the case of the parties indemnified pursuant to
Section 9(a), and by the Company, in the case of parties indemnified pursuant to
Section 9(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its prior written consent or (ii) effected without its prior written
consent if the settlement is entered into more than twenty business days after
the indemnifying party shall have received a request from the indemnified party
for reimbursement for the fees and expenses of counsel (in any case where such
fees and expenses are at the expense of the indemnifying party) and, prior to
the date of such settlement, the indemnifying party shall have failed to comply
with such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
9is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by
14
<PAGE> 16
the Company, on the one hand, and the Holders, on the other hand, from their
sale of Registrable Securities or (ii) if the allocation provided by clause
9(d)(i) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 9d)(i) above but
also the relative fault of the Company, on the one hand, and of the Holder, on
the other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative fault of the Company, on the one
hand, and of the Holder, on the other hand, 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, on the one hand, or by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject
to the limitations set forth in the second paragraph of Section 9(a), any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 9(d) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Registrable
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Registrable Securities and (ii) the amount of any damages
which such Holder 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 Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to
this Section 9(c) are several in proportion to the respective principal amount
of Registrable Securities held by each Holder hereunder and not joint.
SECTION 10. RULE 144A AND RULE 144.
The Company agrees with each Holder, for so long as any Registrable
Securities remain outstanding and during any period in which the Company (i) is
not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon
request of any Holder, to such Holder or beneficial owner of Registrable
Securities in connection with any sale thereof and any prospective purchaser of
such Registrable Securities designated by such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Act in order to permit resales
of such Registrable Securities pursuant to Rule 144A, and (ii) is subject to
Section 13 or 15(d) of the Exchange Act, to make all filings required thereby in
a timely manner in order to permit resales of such Registrable Securities
pursuant to Rule 144.
15
<PAGE> 17
SECTION 11. MISCELLANEOUS.
(a) Remedies. The Company acknowledges and agrees that any failure by
the Company to comply with its obligations under Sections 5 and 6 hereof may
result in material irreparable injury to the Holders for which there is no
adequate remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of any such failure, the any Holder
may obtain such relief as may be required to specifically enforce the Company's
obligations under Sections 5 and 6 hereof. The Company further agrees to waive
the defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Company will not on or after the
date of this Agreement enter into or amend any agreement with respect to its
securities that conflicts with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
Except as disclosed in the Offering Memorandum, the Company has not previously
entered into any agreement granting any registration rights of its securities to
any Person, and the rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's securities under any other agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement 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 a majority of the outstanding Registrable
Securities (excluding Registrable Securities held by the Company or its
Affiliates). Notwithstanding the foregoing, a waiver or consent to departure
from the provisions hereof that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not affect directly or indirectly the
rights of other Holders whose Registrable Securities are not being sold pursuant
to a Registration Statement may be given by the Holders of at least a majority
of the Registrable Securities being sold.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchaser, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company:
Instron Corporation
c/o Kirtland Capital Partners
2550 SOM Center Road
Willoughby Hills, Ohio 44094
Attention: Thomas N. Littman
16
<PAGE> 18
With a copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Christopher M. Kelly, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Warrant Agent at the
address specified in the Warrant Agreement.
(f) 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; provided, that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Registrable Securities in violation
of the terms hereof or of the Purchase Agreement or the Warrant Agreement. If
any transferee of any Holder shall acquire Registrable Securities in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate 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.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and 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. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Registrable
Securities. This Agreement
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<PAGE> 19
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
[SIGNATURE PAGE FOLLOWS]
18
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
INSTRON CORPORATION
By: /s/ John R. Barrett
------------------------------------
Name: John R. Barrett
Title: Treasurer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ William Wilson
-------------------------------------
Name: William Wilson
Title: Vice President
<PAGE> 1
Exhibit 4.4
INSTRON CORPORATION
Warrants to Purchase
30,654 Shares of Common Stock
WARRANT AGREEMENT
Dated as of September 29, 1999
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Warrant Agent
<PAGE> 2
WARRANT AGREEMENT, dated as of September 29, 1999, between
Instron Corporation, a Massachusetts corporation (the "COMPANY"), and Norwest
Bank Minnesota, National Association, as warrant agent (the "WARRANT AGENT").
WHEREAS, the Company proposes to issue warrants (the
"WARRANTS") to initially purchase up to an aggregate of 30,654 shares of Common
Stock, par value $.01 per share (the "COMMON STOCK"), of the Company (the Common
Stock issuable on exercise of the Warrants being referred to herein as the
"WARRANT SHARES"), in connection with the offering (the "OFFERING") by the
Company of 60,000 Units (the "UNITS"), each consisting of $1,000 principal
amount at maturity of the Company's 13-1/4% Senior Subordinated Notes due 2009
(the "NOTES") and one Warrant, each Warrant initially representing the right to
purchase 0.5109 Warrant Shares.
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing so to act in connection
with the issuance of Warrant Certificates (as defined) and other matters as
provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following respective meanings:
"144A GLOBAL WARRANT" means a global Warrant substantially in
the form of Exhibit A hereto bearing the Global Warrant Legend and the Private
Placement Legend and deposited with or on behalf of, and registered in the name
of, the Depositary or its nominee.
"AFFILIATE" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For 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 shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such specified Person, whether
through the ownership of voting securities, by agreement or otherwise; provided
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"APPLICABLE PROCEDURES" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Warrant, the rules and
procedures of the Depositary, Euroclear and Cedel Bank that apply to such
transfer or exchange.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CEDEL BANK" means Cedel Bank, SA.
"CLOSING DATE" means the date hereof.
"COMMISSION" means the Securities and Exchange Commission.
<PAGE> 3
"DEPOSITARY" means, with respect to the Warrants issuable or
issued in whole or in part in global form, the Person specified in Section 3.3
hereof as the Depositary with respect to the Warrants, and any and all
successors thereto appointed as Depositary hereunder and having become such
pursuant to the applicable provision of the Indenture.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"GLOBAL WARRANTS" means, individually and collectively, each
of the Restricted Global Warrants and the Unrestricted Global Warrants,
substantially, in the form of Exhibit A hereto issued in accordance with Section
3.1(b) and 3.5 hereof.
"GLOBAL WARRANT LEGEND" means the legend set forth in Section
3.5(g)(ii), which is required to be placed on all Global Warrants issued under
this Warrant Agreement.
"HOLDER" means a person who owns Registrable Securities.
"INDENTURE" means the indenture, dated the date hereof, among
the Company, the Guarantors set forth therein and Norwest Bank Minnesota,
National Association, as trustee relating to the Notes.
"INDIRECT PARTICIPANT" means a Person who holds a beneficial
interest in a Global Warrant through a Participant.
"INITIAL PURCHASER" means Donaldson, Lufkin & Jenrette
Securities Corporation.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, which is not also a QIB.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. 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 on such payment for the intervening period.
"MANAGEMENT OPTIONS" means any options to purchase Common
Stock granted to members of the Company's management on the Closing Date no more
than 5.0% of the Company's outstanding Common Stock as of the Closing Date
pursuant to the Instron Corporation 1999 Stock Option Plan as set forth on
Exhibit H to the Letter Agreement, dated May 6, 1999, regarding the rollover of
shares by certain members of management of the Company.
"NON-U.S. PERSON" means a Person who is not a U.S. Person.
"OFFICER" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
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"OPINION OF COUNSEL" means an opinion from legal counsel who
is reasonably acceptable to the Warrant Agent in form and substance reasonably
acceptable to the Warrant Agent. The counsel may be an employee of or counsel to
the Company, any subsidiary of the Company or the Warrant Agent.
"PARTICIPANT" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof, including any
subdivision or ongoing business of any such entity or substantially all of the
assets of any such entity, subdivision or business.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in
Section 3.5(g)(i) to be placed on all Warrants issued under this Warrant
Agreement except where otherwise permitted by the provisions of this Warrant
Agreement.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"REGISTRABLE SECURITIES" shall mean the Warrants, the Warrant
Shares and any other securities issued or issuable with respect to the Warrants
or the Warrant Shares by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization; provided that a security ceases to be a Registrable Security
when it is no longer a Transfer Restricted Security. The Registrable Securities
are entitled to the benefits of the Warrant Registration Rights Agreement.
"REGULATION S" means Regulation S promulgated under the
Securities Act.
"REGULATION S GLOBAL WARRANT" means a global Warrant in the
form of Exhibit A hereto bearing the Global Warrant Legend, the Private
Placement Legend and the Regulation S Legend and deposited with or on behalf of
and registered in the name of the Depositary or its nominee.
"REGULATION S LEGEND" means the legend set forth in Section
3.5(g)(iv) to be placed on all Registrable Securities issued pursuant to
Regulation S.
"RESTRICTED DEFINITIVE WARRANT" means a Definitive Warrant
bearing the Private Placement Legend.
"RESTRICTED GLOBAL WARRANT" means a Global Warrant bearing the
Private Placement Legend.
"ROLLOVER OPTIONS" means any restricted stock awards and
options to purchase Common Stock granted to members of the Company's management
on or before the Closing Date pursuant to Section 2.2 of the Company Disclosure
Schedule delivered in connection with the Agreement and Plan of Merger, dated as
of May 6, 1999, among Kirtland Capital Partners III L.P., ISN Acquisition
Corporation and the Company.
"RULE 144" means Rule 144 promulgated under the Securities
Act.
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<PAGE> 5
"RULE 144A" means Rule 144A promulgated under the Securities
Act.
"RULE 903" means Rule 903 promulgated under the Securities
Act.
"RULE 904" means Rule 904 promulgated under the Securities
Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEPARATION DATE" means the earliest of (i) 180 days after the
closing of the Offering, (ii) the date on which a registration statement with
respect to a registered exchange offer for the Notes is declared effective under
the Securities Act, (iii) the date on which a shelf registration statement with
respect to the Notes is declared effective under the Securities Act, (iv) such
date as Donaldson, Lufkin & Jenrette Securities Corporation, in its sole
discretion, shall determine and (v) in the event the Company is required to make
an offer to purchase Notes pursuant to Section 4.10 or 4.15 of the Indenture,
the date the Company mails notice of such offer to the holders of the Notes.
"TRANSFER RESTRICTED SECURITIES" shall mean each Warrant and
Warrant Share until the earlier to occur of (i) the date on which such Warrant
or Warrant Share has been effectively registered under the Act and disposed of
in accordance with a Registration Statement covering it (and the purchasers
thereof have been issued a registered freely tradable security) and (ii) the
date on which such Warrant or Warrant Share is distributed to the public
pursuant to Rule 144 under the Act.
"TRUSTEE" means the trustee under the Indenture.
"UNRESTRICTED GLOBAL WARRANT" means a global Warrant
substantially in the form of Exhibit A attached hereto that bears the Global
Warrant Legend and that has the "Schedule of Exchanges of Interests in the
Global Warrant" attached thereto, and that is deposited with or on behalf of and
registered in the name of the Depositary, representing a series of Warrants that
do not bear the Private Placement Legend.
"UNRESTRICTED DEFINITIVE WARRANT" means one or more Definitive
Warrants that do not bear and are not required to bear the Private Placement
Legend.
"U.S. PERSON" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"WARRANT REGISTRATION RIGHTS AGREEMENT" means the registration
rights agreement, dated as of September 29, 1999, by and between the Company and
the Initial Purchaser relating to the Warrants and the Warrant Shares.
SECTION 2. APPOINTMENT OF WARRANT AGENT.
The Company hereby appoints the Warrant Agent to act as agent
for the Company in accordance with the instructions set forth hereinafter in
this Agreement and the Warrant Agent hereby accepts such appointment.
SECTION 3. ISSUANCE OF WARRANTS; WARRANT CERTIFICATES.
3.1. FORM AND DATING.
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(a) General.
The Warrants shall be substantially in the form of Exhibit A
hereto (the "WARRANT Certificates"). The Warrants may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Warrant shall
be dated the date of the countersignature.
The terms and provisions contained in the Warrants shall
constitute, and are hereby expressly made, a part of this Warrant Agreement. The
Company and the Warrant Agent, by their execution and delivery of this Warrant
Agreement, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Warrant conflicts with the express
provisions of this Warrant Agreement, the provisions of this Warrant Agreement
shall govern and be controlling.
(b) Global Warrants.
Warrants issued in global form shall be substantially in the
form of Exhibit A attached hereto (including the Global Warrant Legend thereon
and the "Schedule of Exchanges of Interests in the Global Warrant" attached
thereto). Warrants issued in definitive form shall be substantially in the form
of Exhibit A attached hereto (but without the Global Warrant Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Warrant" attached
thereto). Each Global Warrant shall represent such of the outstanding Warrants
as shall be specified therein and each shall provide that it shall represent the
number of outstanding Warrants from time to time endorsed thereon and that the
number of outstanding Warrants represented thereby may from time to time be
reduced or increased, as appropriate, to reflect exchanges and redemptions. Any
endorsement of a Global Warrant to reflect the amount of any increase or
decrease in the number of outstanding Warrants represented thereby shall be made
by the Warrant Agent in accordance with instructions given by the Holder thereof
as required by Section 3.5 hereof.
(c) Euroclear and Cedel Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall
be applicable to transfers of beneficial interests in the Regulation S Global
Warrant that are held by Participants through Euroclear or Cedel Bank.
3.2. EXECUTION.
An Officer shall sign the Warrants for the Company by manual
or facsimile signature.
If the Officer whose signature is on a Warrant no longer holds
that office at the time a Warrant is countersigned, the Warrant shall
nevertheless be valid.
A Warrant shall not be valid until countersigned by the manual
signature of the Warrant Agent. The signature shall be conclusive evidence that
the Warrant has been properly issued under this Warrant Agreement.
The Warrant Agent shall, upon a written order of the Company
signed by an Officer (a "WARRANT COUNTERSIGNATURE ORDER"), countersign Warrants
for original issue up to the number stated in the preamble hereto.
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The Warrant Agent may appoint an agent acceptable to the
Company to countersign Warrants. Such an agent may countersign Warrants whenever
the Warrant Agent may do so. Each reference in this Warrant Agreement to a
countersignature by the Warrant Agent includes a countersignature by such agent.
Such an agent has the same rights as the Warrant Agent to deal with the Company
or an Affiliate of the Company.
3.3. WARRANT REGISTRAR.
The Company shall maintain an office or agency where Warrants
may be presented for registration of transfer or for exchange ("WARRANT
REGISTRAR"). The Warrant Registrar shall keep a register of the Warrants and of
their transfer and exchange. The Company may appoint one or more co-Warrant
Registrars. The term "Warrant Registrar" includes any co-Warrant Registrar. The
Company may change any Warrant Registrar without notice to any holder. The
Company shall notify the Warrant Agent in writing of the name and address of any
agent not a party to this Warrant Agreement. If the Company fails to appoint or
maintain another entity as Warrant Registrar, the Warrant Agent shall act as
such. The Company or any of its subsidiaries may act as Warrant Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Warrants.
The Company initially appoints the Warrant Agent to act as the
Warrant Registrar with respect to the Global Warrants.
3.4. HOLDER LISTS.
The Warrant Agent shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders. If the Warrant Agent is not the Warrant Registrar, the
Company shall promptly furnish to the Warrant Agent at such times as the Warrant
Agent may request in writing, a list in such form and as of such date as the
Warrant Agent may reasonably require of the names and addresses of the Holders.
3.5. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Warrants.
A Global Warrant may not be transferred as a whole except by
the Depositary to a nominee of the Depositary, by a nominee of the Depositary to
the Depositary or to another nominee of the Depositary, or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Warrants will be exchanged by the Company for Definitive
Warrants if (i) the Company delivers to the Warrant Agent notice from the
Depositary that it is unwilling or unable to continue to act as Depositary or
that it is no longer a clearing agency registered under the Exchange Act and, in
either case, a successor Depositary is not appointed by the Company within 120
days after the date of such notice from the Depositary or (ii) the Company in
its sole discretion determines that the Global Warrants (in whole but not in
part) should be exchanged for Definitive Warrants and delivers a written notice
to such effect to the Warrant Agent. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Warrants shall be issued in
such names as the Depositary shall instruct the Warrant Agent. Global Warrants
also may be exchanged or replaced, in whole or in part, as provided in Sections
3.6 and 3.7 hereof. A Global Warrant may not be exchanged for another Warrant
other than as
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provided in this Section 3.5(a), however, beneficial interests in a Global
Warrant may be transferred and exchanged as provided in Section 3.5(b), (c) or
(f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Warrants.
The transfer and exchange of beneficial interests in the
Global Warrants shall be effected through the Depositary, in accordance with the
provisions of this Warrant Agreement and the Applicable Procedures. Beneficial
interests in the Restricted Global Warrants shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Warrants also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) Transfer of Beneficial Interests in the Same Global
Warrant. Beneficial interests in any Restricted Global Warrant may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Warrant in accordance
with the transfer restrictions set forth in the Private Placement
Legend. Beneficial interests in any Unrestricted Global Warrant may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Warrant. No written
orders or instructions shall be required to be delivered to the Warrant
Registrar to effect the transfers described in this Section 3.5(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Warrants. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 3.5(b)(i) above,
the transferor of such beneficial interest must deliver to the Warrant
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Warrant in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Warrant in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary
to the Warrant Registrar containing information regarding the Person in
whose name such Definitive Warrant shall be registered. Upon
effectiveness of the Registration Statement (as defined in the Warrant
Registration Rights Agreement) by the Company in accordance with
Section 3.5(f) hereof, the requirements of this Section 3.5(b)(ii)
shall be deemed to have been satisfied upon receipt by the Warrant
Registrar of a certification required by the Company in connection with
such Registration Statement delivered by the Holder of such beneficial
interests in the Restricted Global Warrants. Upon satisfaction of all
of the requirements for transfer or exchange of beneficial interests in
Global Warrants contained in this Agreement and the Warrants or
otherwise applicable under the Securities Act, the Warrant Agent shall
adjust the principal amount of the relevant Global Warrant(s) pursuant
to Section 3.5(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Warrant. A beneficial interest in any Restricted Global Warrant
may be transferred to a Person who takes delivery thereof in the form
of a beneficial interest in another Restricted Global Warrant if the
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<PAGE> 9
transfer complies with the requirements of Section 3.5(b)(ii) above and
the Warrant Registrar receives the following:
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Warrant, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Global Warrant,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2)
thereof.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Warrant for Beneficial Interests in the Unrestricted
Global Warrant. A beneficial interest in any Restricted Global Warrant
may be exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Warrant or transferred to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Warrant if the exchange or transfer complies with
the requirements of Section 3.5(b)(ii) above and:
(A) such transfer is effected pursuant to the
Registration Statement in accordance with the Warrant
Registration Rights Agreement; or
(B) the Warrant Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Warrant proposes to
exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Warrant, a
certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Warrant proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global
Warrant, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (B), if the
Warrant Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable to the
Warrant Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
If any such transfer is effected pursuant to subparagraph (B)
above at a time when an Unrestricted Global Warrant has not yet been issued, the
Company shall issue and, upon receipt of an Warrant Countersignature Order in
accordance with Section 3.2 hereof, the Warrant Agent shall countersign one or
more Unrestricted Global Warrants in the number equal to the number of
beneficial interests transferred pursuant to subparagraph (B) above.
(c) Transfer and Exchange of Beneficial Interests for
Definitive Warrants.
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(i) Beneficial Interests in Restricted Global Warrants to
Restricted Definitive Warrants. If any holder of a beneficial interest
in a Restricted Global Warrant proposes to exchange such beneficial
interest for a Restricted Definitive Warrant or to transfer such
beneficial interest to a Person who takes delivery thereof in the form
of a Restricted Definitive Warrant, then, upon receipt by the Warrant
Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Warrant proposes to exchange such beneficial
interest for a Restricted Definitive Warrant, a certificate
from such holder in the form of Exhibit C hereto, including
the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in Exhibit B
hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Warrant Agent shall cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the number of
Warrants represented by the Global Warrant to be reduced by the number of
Warrants to be represented by the Definitive Warrant pursuant to Section 3.5(h)
hereof, and the Company shall execute and the Warrant Agent shall countersign
and deliver to the Person designated in the instructions a Definitive Warrant in
the appropriate amount. Any Definitive Warrant issued in exchange for a
beneficial interest in a Restricted Global Warrant pursuant to this Section
3.5(c) shall be registered in such name or names as the holder of such
beneficial interest shall instruct the Warrant Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The Warrant
Agent shall deliver such Definitive Warrants to the Persons in whose
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names such Warrants are so registered. Any Definitive Warrant issued in exchange
for a beneficial interest in a Restricted Global Warrant pursuant to this
Section 3.5(c)(i) shall bear the Private Placement Legend and shall be subject
to all restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Warrants to
Unrestricted Definitive Warrants. A holder of a beneficial interest in
a Restricted Global Warrant may exchange such beneficial interest for
an Unrestricted Definitive Warrant or may transfer such beneficial
interest to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Warrant only if:
(A) such transfer is effected pursuant to the
Registration Statement in accordance with the Warrant
Registration Rights Agreement; or
(B) the Warrant Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Warrant proposes to
exchange such beneficial interest for a Definitive
Warrant that does not bear the Private Placement
Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in
item (1)(b) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Warrant proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
Definitive Warrant that does not bear the Private
Placement Legend, a certificate from such holder in
the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (B), if
the Warrant Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Warrant Registrar to the effect
that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities
Act.
(iii) Beneficial Interests in Unrestricted Global Warrants to
Unrestricted Definitive Warrants. If any holder of a beneficial
interest in an Unrestricted Global Warrant proposes to exchange such
beneficial interest for a Definitive Warrant or to transfer such
beneficial interest to a Person who takes delivery thereof in the form
of a Definitive Warrant, then, upon satisfaction of the conditions set
forth in Section 3.5(b)(ii) hereof, the Warrant Agent shall cause the
amount of the applicable Global Warrant to be reduced accordingly
pursuant to Section 3.5(h) hereof, and the Company shall execute and
the Warrant Agent shall countersign and deliver to the Person
designated in the instructions a Definitive Warrant in the appropriate
principal amount. Any Definitive Warrant issued in exchange for a
beneficial interest pursuant to this Section 3.5(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct
the Warrant Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Warrant Agent shall deliver
such Definitive Warrants to the Persons in whose names such Warrants
are so registered. Any Definitive Warrant issued in exchange for a
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beneficial interest pursuant to this Section 3.5(c)(iii) shall not bear
the Private Placement Legend.
(d) Transfer and Exchange of Definitive Warrants for
Beneficial Interests.
(i) Restricted Definitive Warrants to Beneficial Interests in
Restricted Global Warrants. If any Holder of a Restricted Definitive
Warrant proposes to exchange such Warrant for a beneficial interest in
a Restricted Global Warrant or to transfer such Restricted Definitive
Warrants to a Person who takes delivery thereof in the form of a
beneficial interest in a Restricted Global Warrant, then, upon receipt
by the Warrant Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive
Warrant proposes to exchange such Warrant for a beneficial
interest in a Restricted Global Warrant, a certificate from
such Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Warrant is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Warrant is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Warrant is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Warrant is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such Restricted Definitive Warrant is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Warrant is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Warrant Agent shall cancel the Restricted Definitive Warrant,
increase or cause to be increased the amount of, in the case of clause
(A) above, the appropriate Restricted Global Warrant, in the case of
clause (B) above, the 144A Global Warrant, in the case of clause (C)
above, the Regulation S Global Warrant.
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(ii) Restricted Definitive Warrants to Beneficial Interests in
Unrestricted Global Warrants. A Holder of a Restricted Definitive
Warrant may exchange such Warrant for a beneficial interest in an
Unrestricted Global Warrant or transfer such Restricted Definitive
Warrant to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Warrant only if:
(A) such transfer is effected pursuant to the
Registration Statement in accordance with the Registration
Rights Agreement; or
(B) the Warrant Registrar receives the following:
(1) if the Holder of such Definitive
Warrants proposes to exchange such Warrants for a
beneficial interest in the Unrestricted Global
Warrant, a certificate from such Holder in the form
of Exhibit C hereto, including the certifications in
item (1)(c) thereof; or
(2) if the Holder of such Definitive
Warrants proposes to transfer such Warrants to a
Person who shall take delivery thereof in the form of
a beneficial interest in the Unrestricted Global
Warrant, a certificate from such Holder in the form
of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Warrant Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Warrant Registrar to the effect
that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities
Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 3.5(d)(ii), the Warrant Agent shall cancel the Definitive
Warrants and increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Warrant.
(iii) Unrestricted Definitive Warrants to Beneficial Interests
in Unrestricted Global Warrants. A Holder of an Unrestricted Definitive
Warrant may exchange such Warrant for a beneficial interest in an
Unrestricted Global Warrant or transfer such Definitive Warrants to a
Person who takes delivery thereof in the form of a beneficial interest
in an Unrestricted Global Warrant at any time. Upon receipt of a
request for such an exchange or transfer, the Warrant Agent shall
cancel the applicable Unrestricted Definitive Warrant and increase or
cause to be increased the amount of one of the Unrestricted Global
Warrants.
If any such exchange or transfer from a Definitive Warrant to a
beneficial interest is effected pursuant to subparagraphs (ii)(B) or
(iii) above at a time when an Unrestricted Global Warrant has not yet
been issued, the Company shall issue and, upon receipt of an Warrant
Countersignature Order in accordance with Section 3.2 hereof, the
Warrant Agent shall countersign one or more Unrestricted Global
Warrants in the number equal to the number of beneficial interests of
Definitive Warrants so transferred.
(e) Transfer and Exchange of Definitive Warrants for Definitive
Warrants.
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Upon request by a Holder of Definitive Warrants and such
Holder's compliance with the provisions of this Section 3.5(e), the Warrant
Registrar shall register the transfer or exchange of Definitive Warrants. Prior
to such registration of transfer or exchange, the requesting Holder shall
present or surrender to the Warrant Registrar the Definitive Warrants duly
endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Warrant Registrar duly executed by such Holder or by its
attorney, duly authorized in writing. In addition, the requesting Holder shall
provide any additional certifications, documents and information, as applicable,
required pursuant to the following provisions of this Section 3.5(e).
(i) Restricted Definitive Warrants to Restricted Definitive
Warrants. Any Restricted Definitive Warrant may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Warrant if the Warrant Registrar receives
the following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof; or
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Warrants to Unrestricted Definitive
Warrants. Any Restricted Definitive Warrant may be exchanged by the
Holder thereof for an Unrestricted Definitive Warrant or transferred to
a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Warrant if:
(A) any such transfer is effected pursuant to the
Registration Statement in accordance with the Warrant
Registration Rights Agreement; or
(B) the Warrant Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Warrants proposes to exchange such
Warrants for an Unrestricted Definitive Warrant, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(d)
thereof; or
(2) if the Holder of such Restricted
Definitive Warrants proposes to transfer such
Warrants to a Person who shall take delivery thereof
in the form of an Unrestricted Definitive Warrant, a
certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (B), if
the Warrant Registrar so requests, an Opinion of Counsel in
form reasonably acceptable to the Company to the
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effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the
Securities Act.
(iii) Unrestricted Definitive Warrants to Unrestricted
Definitive Warrants. A Holder of Unrestricted Definitive Warrants may
transfer such Warrants to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Warrant. Upon receipt of a request
to register such a transfer, the Warrant Registrar shall register the
Unrestricted Definitive Warrants pursuant to the instructions from the
Holder thereof.
(f) Registration Statement.
Upon the effectiveness of the Registration Statement and sales
of Warrants in connection therewith in accordance with the Warrant Registration
Rights Agreement, the Company shall issue and, upon receipt of a Warrant
Countersignature Order in accordance with Section 3.2, the Warrant Agent shall
countersign (i) one or more Unrestricted Global Warrants in an amount equal to
the amount of the beneficial interests in the Restricted Global Warrants sold
under such Registration Statement and (ii) Definitive Warrants in an amount
equal to the amount of the beneficial interests of the Restricted Definitive
Warrants sold under such Registration Statement. Concurrently with the issuance
of such Warrants, the Warrant Agent shall cause the amount of the applicable
Restricted Global Warrants to be reduced accordingly, and the Company shall
execute and the Warrant Agent shall countersign and deliver to the Persons
designated by the Holders of Definitive Warrants so accepted Definitive Warrants
in the appropriate amount.
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(g) Legends.
The following legends shall appear on the face of all Global
Warrants and Definitive Warrants issued under this Warrant Agreement unless
specifically stated otherwise in the applicable provisions of this Warrant
Agreement.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below,
each Global Warrant and each Definitive Warrant (and all
Warrants issued in exchange therefor or substitution thereof)
shall bear the legend in substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"),
(B) IT HAS ACQUIRED THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1),
(2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO INSTRON OR ANY OF OUR SUBSIDIARIES, (B) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO
AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE TRANSFER OF THIS SECURITY (THE FORM OF WHICH CAN BE OBTAINED FROM
THE WARRANT AGENT) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000, AN OPINION OF
COUNSEL ACCEPTABLE TO INSTRON THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO INSTRON) OR (VII) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND
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<PAGE> 17
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S
UNDER THE SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS A PROVISION
REQUIRING THE WARRANT AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THIS
SECURITY IN VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Warrant
or Definitive Warrant issued pursuant to subparagraphs
(b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii),
(e)(iii) or (f) to this Section 3.5 (and all Warrants issued
in exchange therefor or substitution thereof) shall not bear
the Private Placement Legend.
(ii) Global Warrant Legend. Each Global Warrant shall bear a
legend in substantially the following form:
"THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS
DEFINED IN THE WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE
IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE
WARRANT AGENT MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 3.5 OF THE WARRANT AGREEMENT, (II) THIS GLOBAL
WARRANT MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
3.5(A) OF THE WARRANT AGREEMENT, (III) THIS GLOBAL WARRANT MAY BE
DELIVERED TO THE WARRANT AGENT FOR CANCELLATION PURSUANT TO SECTION 3.8
OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL WARRANT MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
(iii) Unit Legend. Each Warrant issued prior to the Separation
Date shall bear a legend in substantially the following form:
"THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE
INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF
WHICH CONSIST OF $1,000 PRINCIPAL AMOUNT AT MATURITY OF THE 13-1/4%
SENIOR SUBORDINATED NOTES DUE 2009 OF INSTRON CORPORATION (THE "NOTES")
AND ONE WARRANT (THE "WARRANTS") INITIALLY ENTITLING THE HOLDER THEREOF
TO PURCHASE 0.5109 OF A SHARE, PAR VALUE $0.01 PER SHARE, OF INSTRON
CORPORATION.
PRIOR TO THE EARLIEST TO OCCUR OF (I) 180 DAYS AFTER
THE CLOSING OF THE OFFERING OF THE UNITS, (II) THE DATE ON WHICH A
REGISTRATION STATEMENT WITH RESPECT TO A REGISTERED EXCHANGE OFFER FOR
THE NOTES IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (III) THE
DATE ON WHICH A SHELF REGISTRATION STATEMENT WITH RESPECT TO THE NOTES
IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (IV) SUCH DATE AS
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DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, IN ITS SOLE
DISCRETION, SHALL DETERMINE AND (V) IN THE EVENT THE COMPANY IS
REQUIRED TO PURCHASE NOTES PURSUANT TO SECTION 4.10 OR 4.15 OF THE
INDENTURE GOVERNING THE NOTES, THE DATE THE COMPANY MAILS NOTICE OF
SUCH OFFER TO THE HOLDERS OF THE NOTES, THE WARRANTS EVIDENCED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT
MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES.
(iv) Regulation S. Legend. Each Warrant that is a Registrable
Security and issued pursuant to Regulation S shall bear the following
legend on the fact thereof:
"THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON
ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND THE
WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
IN ORDER TO EXERCISE THIS WARRANT, THE HOLDER MUST FURNISH TO THE
COMPANY AND THE WARRANT AGENT EITHER (A) A WRITTEN CERTIFICATION THAT
IT IS NOT A U.S. PERSON AND THE WARRANT IS NOT BEING EXERCISED ON
BEHALF OF A U.S. PERSON OR (B) A WRITTEN OPINION OF COUNSEL TO THE
EFFECT THAT THE SECURITIES DELIVERED UPON EXERCISE OF THE WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OR THAT THE DELIVERY OF SUCH
SECURITIES IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. TERMS IN THIS LEGEND HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT."
(h) Cancellation and/or Adjustment of Global Warrants.
At such time as all beneficial interests in a particular
Global Warrant have been exercised or exchanged for Definitive Warrants or a
particular Global Warrant has been exercised, redeemed, repurchased or canceled
in whole and not in part, each such Global Warrant shall be returned to or
retained and canceled by the Warrant Agent in accordance with Section 3.8
hereof. At any time prior to such cancellation, if any beneficial interest in a
Global Warrant is exercised or exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Warrant or for Definitive Warrants, the amount of Warrants represented by such
Global Warrant shall be reduced accordingly and an endorsement shall be made on
such Global Warrant by the Warrant Agent or by the Depositary at the direction
of the Warrant Agent to reflect such reduction; and if the beneficial interest
is being exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Warrant, such other
Global Warrant shall be increased accordingly and an endorsement shall be made
on such Global Warrant by the Warrant Agent or by the Depositary at the
direction of the Warrant Agent to reflect such increase.
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(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Warrant Agent shall countersign Global
Warrants and Definitive Warrants upon the Company's order or at the
Warrant Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Warrant or to a holder of a Definitive
Warrant for any registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith .
(iii) All Global Warrants and Definitive Warrants issued upon
any registration of transfer or exchange of Global Warrants or
Definitive Warrants shall be the duly authorized, executed and issued
warrants for Common Stock of the Company, not subject to any preemptive
rights, and entitled to the same benefits under this Warrant Agreement,
as the Global Warrants or Definitive Warrants surrendered upon such
registration of transfer or exchange.
(iv) Prior to due presentment for the registration of a
transfer of any Warrant, the Warrant Agent, and the Company may deem
and treat the Person in whose name any Warrant is registered as the
absolute owner of such Warrant for all purposes and none of the Warrant
Agent, or the Company shall be affected by notice to the contrary.
(v) The Warrant Agent shall countersign Global Warrants and
Definitive Warrants in accordance with the provisions of Section 3.2
hereof.
(j) Facsimile Submissions to Warrant Agent.
All certifications, certificates and Opinions of Counsel
required to be submitted to the Warrant Registrar pursuant to this Section 3.5
to effect a registration of transfer or exchange may be submitted by facsimile.
Notwithstanding anything herein to the contrary, as to any
certificates and/or certifications delivered to the Warrant Registrar pursuant
to this Section 3.5, the Warrant Registrar's duties shall be limited to
confirming that any such certifications and certificates delivered to it are in
the form of Exhibits B and C attached hereto. The Warrant Registrar shall not be
responsible for confirming the truth or accuracy of representations made in any
such certifications or certificates. As to any Opinions of Counsel delivered
pursuant to this Section 3.5, the Warrant Registrar may rely upon, and be fully
protected in relying upon, such opinions.
3.6. REPLACEMENT WARRANTS.
If any mutilated Warrant is surrendered to the Warrant Agent
or the Company and the Warrant Agent receives evidence to its satisfaction of
the destruction, loss or theft of any Warrant, the Company shall issue and the
Warrant Agent, upon receipt of a Warrant Countersignature Order, shall
countersign a replacement Warrant if the Warrant Agent's requirements are met.
If required by the Warrant Agent or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Warrant Agent
and the Company to protect the Company, the Warrant Agent, any Agent and any
agent for purposes of the countersignature from any loss that any of them may
suffer if a Warrant is replaced. The Company may charge for its expenses in
replacing a Warrant.
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Every replacement Warrant is an additional warrant of the
Company and shall be entitled to all of the benefits of this Warrant Agreement
equally and proportionately with all other Warrants duly issued hereunder.
3.7. TEMPORARY WARRANTS.
Until certificates representing Warrants are ready for
delivery, the Company may prepare and the Warrant Agent, upon receipt of a
Warrant Countersignature Order, shall issue temporary Warrants. Temporary
Warrants shall be substantially in the form of certificated Warrants but may
have variations that the Company considers appropriate for temporary Warrants
and as shall be reasonably acceptable to the Warrant Agent. Without unreasonable
delay, the Company shall prepare and the Warrant Agent shall countersign
definitive Warrants in exchange for temporary Warrants.
Holders of temporary Warrants shall be entitled to all of the
benefits of this Warrant Agreement.
3.8. CANCELLATION.
Subject to Section 3.5(h) hereof, the Company at any time may
deliver Warrants to the Warrant Agent for cancellation. The Warrant Registrar
and Warrant Paying Agent shall forward to the Warrant Agent any Warrants
surrendered to them for registration of transfer, exchange or exercise. The
Warrant Agent and no one else shall cancel all Warrants surrendered for
registration of transfer, exchange, exercise, replacement or cancellation and
shall destroy canceled Warrants (subject to the record retention requirement of
the Exchange Act). Certification of the destruction of all canceled Warrants
shall be delivered to the Company. The Company may not issue new Warrants to
replace Warrants that have been exercised or that have been delivered to the
Warrant Agent for cancellation.
SECTION 4. SEPARATION OF WARRANTS; TERMS OF WARRANTS; EXERCISE OF WARRANTS.
(a) The Notes and Warrants will not be separately transferable
until the Separation Date. Subject to the terms of this Agreement, each Warrant
holder shall have the right, which may be exercised during the period commencing
at the opening of business on the Separation Date and until 5:00 p.m., New York
City time on September 15, 2009 (the "EXERCISE PERIOD"), to receive from the
Company the number of fully paid and nonassessable Warrant Shares which the
holder may at the time be entitled to receive on exercise of such Warrants and
payment of the exercise price (the "EXERCISE PRICE") (i) by tendering Notes
having an aggregate principal amount at maturity, plus accrued and unpaid
interest, if any, thereon to the date of exercise equal to the Exercise Price
then in effect for such Warrant Shares or (ii) by tendering Warrants as set
forth below or (iii) any combination of Notes and Warrants; provided that
holders shall be able to exercise their Warrants only if a registration
statement relating to the Warrant Shares is then in effect, or the exercise of
such Warrants is exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and such securities are qualified
for sale or exempt from qualification under the applicable securities laws of
the states in which the various holders of the Warrants or other persons to whom
it is proposed that the Warrant Shares be issued on exercise of the Warrants
reside. Each holder may exercise its right, during the Exercise Period, to
receive Warrant Shares on a net basis, such that, without the exchange of any
finds, the holder will receive such number of Warrant Shares equal to the
product of (A) the number of Warrant Shares for which such Warrant is
exercisable as of the date of exercise (if the Exercise Price were being paid in
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<PAGE> 21
cash) and (B) the Cashless Exercise Ratio. The Cashless Exercise Ratio shall
equal a fraction the numerator of which is the Market Value (as defined below)
per share of Common Stock minus the Exercise Price per share as of the date of
exercise and the denominator of which is the Market Value per share on the date
of exercise. Each Warrant not exercised prior to 5:00 p.m., New York City time,
on September 15, 2009 (the "EXPIRATION DATE") shall become void and all rights
thereunder and all rights in respect thereof under this agreement shall cease as
of such time. No adjustments as to dividends will be made upon exercise of the
Warrants.
The "MARKET VALUE" per share of Common Stock as of any date
shall equal (i) if Common Stock is primarily traded on a securities exchange,
the last sale price on such securities exchange on the trading day immediately
prior to the date of determination, or if no sale occurred on such day, the mean
between the closing "bid" and "asked" prices on such day, (ii) if the principal
market for Common Stock is in the over-the-counter market, the closing sale
price on the trading day immediately prior to the date of the determination, as
published by the National Association of Securities Dealers Automated quotation
System or similar organization, or if such price is not so published on such
day, the mean between the closing "bid" and "asked" prices, if available, on
such day, which prices may be obtained from any reputable pricing service,
broker or dealer, and (iii) if neither clause (i) nor clause (ii) is applicable,
the fair market value on the date of determination of Common Stock as determined
in good faith by the Board of Directors of the Company.
(b) In order to exercise all or any of the Warrants
represented by a Warrant Certificate, (i) in the case of Definitive Warrants,
the holder thereof must surrender for exercise the Warrant Certificate to the
Company at the office of the Warrant Agent at its New York corporate trust
office set forth in Section 6 hereof, (ii) in the case of a book-entry interest
in a Global Warrant, the exercising Participant whose name appears on a
securities position listing of the Depositary as the holder of such book-entry
interest must comply with the Depositary's procedures relating to the exercise
of such book-entry interest in such Global Warrant and (iii) in the case of both
Global Warrants and Definitive Warrants, the holder thereof or the Participant,
as applicable, must deliver to the Company at the office of the Warrant Agent
the form of election to purchase on the reverse thereof duly filled in and
signed, which signature shall be medallion guaranteed by an institution which is
a member of a Securities Transfer Association recognized signature guarantee
program, and upon payment to the Warrant Agent for the account of the Company of
the Exercise Price, which is set forth in the form of Warrant Certificate
attached hereto as Exhibit A, as adjusted as herein provided, for the number of
Warrant Shares in respect of which such Warrants are then exercised. Payment of
the aggregate Exercise Price shall be made (i) by tendering Notes in the manner
provided in Section 4(a) hereof, (ii) by tendering Warrants in the manner
provided in Section 4(a) hereof or (iii) a combination of (i) and (ii).
(c) Subject to the provisions of Section 5 hereof, upon
compliance with clause (b) above, the Warrant Agent shall deliver or cause to be
delivered with all reasonable dispatch, to or upon the written order of the
holder and in such name or names as the Warrant holder may designate, a
certificate or certificates for the number of whole Warrant Shares issuable upon
the exercise of such Warrants or other securities or property to which such
holder is entitled hereunder, together with cash as provided in Section 9
hereof; provided that if any consolidation, merger or lease or sale of assets is
proposed to be effected by the Company as described in Section 8(m) hereof, or a
tender offer or an exchange offer for shares of Common Stock shall be made, upon
such surrender of Warrants and payment of the Exercise Price as aforesaid, the
Warrant Agent shall, as soon as possible, but in any event not later than two
business days thereafter, deliver or cause to be delivered the full number of
Warrant Shares issuable upon the exercise of such Warrants in the manner
described in this sentence or other
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<PAGE> 22
securities or property to which such holder is entitled hereunder, together with
cash as provided in Section 9 hereof. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrants and payment of the Exercise Price.
(d) The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part. If less than all
the Warrants represented by a Warrant Certificate are exercised, such Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the number of Warrants which were not exercised shall be executed by the
Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as may
be directed in writing by the holder, and shall deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same.
(e) All Warrant Certificates surrendered upon exercise of
Warrants shall be cancelled by the Warrant Agent. Such cancelled Warrant
Certificates shall then be disposed of by the Warrant Agent in a manner
satisfactory to the Company. The Warrant Agent shall account promptly to the
Company with respect to Warrants exercised and concurrently pay to the Company
all monies received by the Warrant Agent for the purchase of the Warrant Shares
through the exercise of such Warrants.
(f) The Warrant Agent shall keep copies of this Agreement and
any notices given or received hereunder available for inspection by the holders
during normal business hours at its office. The Company shall supply the Warrant
Agent from time to time with such numbers of copies of this Agreement as the
Warrant Agent may request.
SECTION 5. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes attributable
to the initial issuance of Warrant Shares upon the exercise of Warrants;
provided that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any Warrant
Certificates or any certificates for Warrant Shares in a name other than that of
the registered holder of a Warrant Certificate surrendered upon the exercise of
a Warrant, and the Company shall not be required to issue or deliver such
Warrant Certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
SECTION 6. RESERVATION OF WARRANT SHARES.
(a) The Company will at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury, for
the purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon exercise of Warrants, the maximum number of shares of Common Stock which
may then be deliverable upon the exercise of all outstanding Warrants.
(b) The Company or, if appointed, the transfer agent for the
Common Stock (the "TRANSFER AGENT") and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and directed at all
times to reserve such number of authorized shares as shall be required for such
purpose.
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<PAGE> 23
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from
time to time from such Transfer Agent the stock certificates required to honor
outstanding Warrants upon exercise thereof in accordance with the terms of this
Agreement. The Company will supply such Transfer Agent with duly executed
certificates for such purposes and will provide or otherwise make available any
cash which may be payable as provided in Section 9 hereof. The Company will
furnish such Transfer Agent a copy of all notices of adjustments, and
certificates related thereto, transmitted to each holder pursuant to Section 11
hereof.
(c) Before taking any action which would cause an adjustment
pursuant to Section 8 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take any corporate action
which may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
(d) The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof.
SECTION 7. OBTAINING STOCK EXCHANGE LISTINGS.
The Company will from time to time take all action which may
be necessary so that the Warrant Shares, immediately upon their issuance upon
the exercise of Warrants, will be listed on the principal securities exchanges,
automated quotation systems or other markets within the United States of
America, if any, on which other shares of Common Stock are then listed, if any.
SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES ISSUABLE.
The Exercise Price and the number of Warrant Shares issuable
upon the exercise of each Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 8. For purposes of
this Section 8, "COMMON STOCK" means shares now or hereafter authorized of any
class of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount, provided, however,
that no adjustment shall be made for the issuance, on the date of this
Agreement, of the Management Options and the Rollover Options.
(a) Adjustment for Change in Capital Stock.
If the Company (i) pays a dividend or makes a distribution on
its Common Stock in shares of its Common Stock, (ii) subdivides its outstanding
shares of Common Stock into a greater number of shares, (iii) combines its
outstanding shares of Common Stock into a smaller number of shares, (iv) makes a
distribution on its Common Stock in shares of its capital stock other than
Common Stock or (v) issues by reclassification of its Common Stock any shares of
its capital stock, then the Exercise Price in effect immediately prior to such
action shall be proportionately adjusted so that the holder of any Warrant
thereafter exercised may receive the aggregate number and kind of shares of
22
<PAGE> 24
capital stock of the Company which he would have owned immediately following
such action if such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant upon exercise of it may receive
shares of two or more classes of capital stock of the Company, the Company shall
determine, in good faith, the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation, the exercise privilege and
the Exercise Price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section 8. Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to
all holders of its Common Stock entitling them for a period expiring within 45
days after the record date mentioned below to purchase shares of Common Stock at
a price per share less than the Fair Value (as defined herein) per share on that
record date, the Exercise Price shall be adjusted in accordance with the
formula:
O + N x P
---------
E' = E x M
-------------------------
O + N
where:
E'= the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock issued
pursuant to such rights, options or warrants.
P = the aggregate price per share of the additional shares.
M = the Fair Value per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
(c) Adjustment for Other Distributions.
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<PAGE> 25
If the Company distributes to all holders of its Common Stock
any of its assets or debt securities or any rights or warrants to purchase debt
securities, preferred stock, assets (including cash) or other securities of the
Company, the Exercise Price shall be adjusted in accordance with the formula:
M - F
E' = E x ----------------
M
where:
E'= the adjusted Exercise Price.
E = the current Exercise Price.
M = the Fair Value per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date
of the debt securities, preferred stock,
assets, securities, rights or warrants to be
distributed in respect of one share of
Common Stock as determined in good faith by
the Board of Directors of the Company (the
"Board of Directors").
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This Section 8(c) does not apply to cash dividends or cash
distributions paid out of consolidated current or retained earnings as shown on
the books of the Company prepared in accordance with generally accepted
accounting principles. Also, this Section 8(c) does not apply to rights, options
or warrants referred to in Section 8(b) hereof.
24
<PAGE> 26
(d) Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock for a
consideration per share less than the Fair Value per share on the date the
Company fixes the offering price of such additional shares, the Exercise Price
shall be adjusted in accordance with the formula:
P
-----
E' = E x O + M
-------------------
A
where:
E'= the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding
immediately prior to the issuance of such
additional shares.
P = the aggregate consideration received for
the issuance of such additional shares.
M = the Fair Value per share on the date of issuance of such
additional shares.
A = the number of shares outstanding
immediately after the issuance of such
additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections
(a), (b) and (c) of this Section 8,
(2) the exercise of Warrants, or the conversion or
exchange of other securities convertible or exchangeable for
Common Stock the issuance of which caused an adjustment to be
made under Section 8(e),
(3) Common Stock issued to the Company's employees
(or employees of its subsidiaries) under bona fide employee
benefit plans adopted by the Board of Directors and approved
by the holders of Common Stock when required by law, if such
Common Stock would otherwise be covered by this subsection (d)
(but only to the extent that the aggregate number of shares
excluded hereby and issued after the date of this Warrant
Agreement shall not exceed 5% of the Common Stock outstanding
at the time of the adoption of each such plan, exclusive of
anti-dilution adjustments thereunder),
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<PAGE> 27
(4) Common Stock issued to shareholders of any person
which merges into the Company, or with a subsidiary of the
Company, in proportion to their stock holdings of such person
immediately prior to such merger, upon such merger, provided
that if such person is an Affiliate of the Company, the Board
of Directors shall have obtained a fairness opinion from a
nationally recognized investment banking, appraisal or
valuation firm, which is not an Affiliate of the Company,
stating that the consideration received in such merger is fair
to the Company from a financial point of view, or
(5) the issuance of shares of Common Stock pursuant
to rights, options or warrants which were originally issued in
a Non-Affiliate Sale (as defined below) together with one or
more other securities as part of a unit at a price per unit.
(e) Adjustment for Convertible Securities Issue.
If the Company issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in subsections (a), (b) and (c) of this Section 8) for a consideration
per share of Common Stock initially deliverable upon conversion or exchange of
such securities less than the Fair Value per share on the date of issuance of
such securities, the Exercise Price shall be adjusted in accordance with this
formula:
P
-----
O + M
E' = E x ----------------
O + D
where:
E'= the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding
immediately prior to the issuance of such
securities.
P = the aggregate consideration received for the issuance of
such securities.
M = the Fair Value per share on the date of issuance of such
securities.
D = the maximum number of shares deliverable
upon conversion or in exchange for such
securities at the initial conversion or
exchange rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after
such issuance.
If all of the Common Stock deliverable upon conversion or
exchange of such securities have not been issued when such securities are no
longer outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
26
<PAGE> 28
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion or exchange of such securities.
This subsection (e) does not apply to convertible securities
issued to shareholders of any person which merges into the Company, or with a
subsidiary of the Company, in proportion to their stock holdings of such person
immediately prior to such merger, upon such merger, provided that if such person
is an Affiliate of the Company, the Board of Directors shall have obtained a
fairness opinion from a nationally recognized investment banking, appraisal or
valuation firm, which is not an Affiliate of the Company, stating that the
consideration received in such merger is fair to the Company from a financial
point of view.
(f) Consideration Received.
For purposes of any computation respecting consideration
received pursuant to subsections (d), and (e) of this Section 8, the following
shall apply:
(1) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such
cash, provided that in no case shall any deduction be made for
any commissions, discounts or other expenses incurred by the
Company for any underwriting of the issue or otherwise in
connection therewith;
(2) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the
fair market value thereof as determined in good faith by the
Board of Directors (irrespective of the accounting treatment
thereof), whose determination shall be conclusive, and
described in a Board resolution which shall be filed with the
Warrant Agent;
(3) in the case of the issuance of securities
convertible into or exchangeable for shares, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any,
to be received by the Company upon the conversion or exchange
thereof (the consideration in each case to be determined in
the same manner as provided in clauses (1) and (2) of this
subsection); and
(4) in the case of the issuance of shares of Common
Stock pursuant to rights, options or warrants which rights,
options or warrants were originally issued together with one
or more other securities as part of a unit at a price per
unit, the consideration shall be deemed to be the fair value
of such rights, options or warrants at the time of issuance
thereof as determined in good faith by the Board of Directors
whose determination shall be conclusive and described in a
Board resolution which shall be filed with the Warrant Agent
plus the additional minimum consideration, if any, to be
received by the Company upon the exercise, conversion or
exchange thereof (as determined in the same manner as provided
in clauses (1) and (2) of this subsection).
(g) Fair Value.
In Sections 8 (b), (c), (d) and (e) hereof, the "FAIR VALUE"
per security at any date of determination shall be (1) in connection with a sale
by the Company to a party that is not an Affiliate of the Company in an
arm's-length transaction (a "NON-AFFILIATE SALE"), the price per security at
which such
27
<PAGE> 29
security is sold and (2) in connection with any sale by the Company to an
Affiliate of the Company, (a) the last price per security at which such security
was sold in a Non-Affiliate Sale within the three-month period preceding such
date of determination or (b) if clause (a) is not applicable, the fair market
value of such security determined in good faith by (i) a majority of the Board
of Directors, including a majority of the Disinterested Directors, and approved
in a Board resolution delivered to the Warrant Agent or (ii) a nationally
recognized investment banking, appraisal or valuation firm, which is not an
Affiliate of the Company, in each case, taking into account, among all other
factors deemed relevant by the Board of Directors or such investment banking,
appraisal or valuation firm, the trading price and volume of such security on
any national securities exchange or automated quotation system on which such
security is traded. Notwithstanding the foregoing, any sale to Donaldson, Lufkin
& Jenrette Securities Corporation (or any successor thereto) pursuant to an
underwritten public offering registered under the Securities Act shall be deemed
to be and treated as a Non-Affiliate Sale.
For purposes of this Section 8(g), "DISINTERESTED DIRECTOR"
means, in connection with any issuance of securities that gives rise to a
determination of the Fair Value thereof, each member of the Board of Directors
who is not an officer, employee, director or other Affiliate of the party to
whom the Company is proposing to issue the securities giving rise to such
determination.
For purposes of this Section 8(g), "AFFILIATE" of any
specified Person means (A) any other Person directly or indirectly controlling
or controlled by or under direct or indirect common control with such specified
Person and (B) any director, officer or employee of such specified person. For
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, shall mean 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.
(h) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 8
shall be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be, it being understood that no such rounding shall be made under
subsection (p).
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to
Section 8(a), (b), (c), (d), (e) or (f) hereof, if Warrant holders are to
participate (without being required to exercise their Warrants) in the
transaction on a basis and with notice that the Board of Directors determines to
be fair and appropriate in light of the basis and notice on which holders of
Common Stock participate in the transaction. No adjustment need be made for (i)
rights to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest or (ii) a change in the par value or no par value of the
Common Stock. To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
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<PAGE> 30
(j) Notice of Adjustment.
Whenever the Exercise Price is adjusted, the Company shall
provide the notices required by Section 10 hereof.
(k) Notice of Certain Transactions.
If (i) the Company takes any action that would require an
adjustment in the Exercise Price pursuant to Section 8(a), (b), (c), (d), (e) or
(f) hereof and if the Company does not arrange for Warrant holders to
participate pursuant to Section 8(i) hereof, (ii) the Company takes any action
that would require a supplemental Warrant Agreement pursuant to Section 8(l)
hereof or (iii) there is a liquidation or dissolution of the Company, then the
Company shall mail to Warrant holders a notice stating the proposed record date
for a dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the notice at least 15 days
before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
(l) Reorganization of Company.
Immediately after the date hereof, if the Company consolidates
or merges with or into, or transfers or leases all or substantially all its
assets to, any person, upon consummation of such transaction the Warrants shall
automatically become exercisable for the kind and amount of securities, cash or
other assets which the holder of a Warrant would have owned immediately after
the consolidation, merger, transfer or lease if the holder had exercised the
Warrant immediately before the effective date of the transaction. Concurrently
with the consummation of such transaction, the corporation formed by or
surviving any such consolidation or merger if other than the Company, or the
person to which such sale or conveyance shall have been made, shall enter into
(i) a supplemental Warrant Agreement so providing and further providing for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section 8(l) and (ii) a supplement to the
Warrant Registration Rights Agreement providing for the assumption of the
Company's obligations thereunder. The successor Company shall mail to Warrant
holders a notice describing the supplemental Warrant Agreement and Warrant
Registration Rights Agreement. If the issuer of securities deliverable upon
exercise of Warrants under the supplemental Warrant Agreement is an affiliate of
the formed, surviving, transferee or lessee corporation, that issuer shall join
in the supplemental Warrant Agreement and Warrant Registration Rights Agreement.
If this Section 8(l) applies, Sections 8(a), (b), (c), (d), (e) and (f) hereof
do not apply.
(m) Company Determination Final.
Any determination that the Company or the Board of Directors
must make pursuant to Section 8(a), (c), (d), (e), (f), (g), (h) or (i) hereof
is conclusive.
(n) Warrant Agent's Disclaimer.
The Warrant Agent has no duty to determine when an adjustment
under this Section 8 should be made, how it should be made or what it should be.
The Warrant Agent has no duty to determine whether any provisions of a
supplemental Warrant Agreement under Section 8(l) hereof are correct. The
Warrant Agent makes no representation as to the validity or value of any
securities or assets
29
<PAGE> 31
issued upon exercise of Warrants. The Warrant Agent shall not be responsible for
the Company's failure to comply with this Section 8.
(o) When Issuance or Payment May Be Deferred.
In any case in which this Section 8 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the holder of any Warrant exercised after such record date
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise Price
and (ii) paying to such holder any amount in cash in lieu of a fractional share
pursuant to Section 10 hereof; provided that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional Warrant Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(p) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to this
Section 8, each Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted Exercise Price that number of shares of Common Stock (calculated to
the nearest hundredth) obtained from the following formula:
N' = N x E
---
E'
where:
N'= the adjusted number of Warrant Shares
issuable upon exercise of a Warrant by
payment of the adjusted Exercise Price.
N = the number or Warrant Shares previously
issuable upon exercise of a Warrant by
payment of the Exercise Price prior to
adjustment.
E'= the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(q) Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 9. FRACTIONAL INTERESTS.
The Company shall not be required to issue fractional Warrant
Shares on the exercise of Warrants. If more than one Warrant shall be presented
for exercise in full at the same time by the same holder, the number of full
Warrant Shares which shall be issuable upon the exercise thereof shall be
30
<PAGE> 32
computed on the basis of the aggregate number of Warrant Shares purchasable on
exercise of the Warrants so presented. If any fraction of a Warrant Share would,
except for the provisions of this Section 9, be issuable on the exercise of any
Warrants (or specified portion thereof), the Company shall pay an amount in cash
equal to the Fair Value per Warrant Share, as determined on the day immediately
preceding the date the Warrant is presented for exercise, multiplied by such
fraction, computed to the nearest whole U.S. cent.
SECTION 10. NOTICES TO WARRANT HOLDERS.
(a) Upon any adjustment of the Exercise Price pursuant to Section 8 hereof, the
Company shall promptly thereafter (i) cause to be filed with the Warrant Agent a
certificate of a firm of independent public accountants of recognized standing
selected by the Board of Directors of the Company (who may be the regular
auditors of the Company) setting forth the Exercise Price after such adjustment
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Warrant
Shares (or portion thereof) issuable after such adjustment in the Exercise
Price, upon exercise of a Warrant and payment of the adjusted Exercise Price,
which certificate shall be conclusive evidence of the correctness of the matters
set forth therein, and (ii) cause to be given to each of the registered holders
of Warrants at the address appearing on the Warrant register for each such
registered holder written notice of such adjustments by first-class mail,
postage prepaid. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 10.
(b) In case:
(i) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants;
(ii) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or
assets (other than dividends or cash distributions paid out of
consolidated current or retained earnings as shown on the books of the
Company prepared in accordance with generally accepted accounting
principles or dividends payable in shares of Common Stock or
distributions referred to in Section 10(a) hereof);
(iii) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the conveyance or transfer of the properties and assets
of the Company substantially as an entirety, or of any reclassification
or change of Common Stock issuable upon exercise of the Warrants (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock;
(iv) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(v) the Company proposes to take any action (other than
actions of the character described in Section 8(a) hereof) which would
require an adjustment of the Exercise Price pursuant to Section 8
hereof;
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<PAGE> 33
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of Warrants at his address
appearing on the Warrant register, at least 20 days (or 10 days in any case
specified in clauses (i) or (ii) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (x)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, (y) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (z) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 11 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
(c) Nothing contained in this Agreement or in any of the
Warrant Certificates shall be construed as conferring upon the holders of
Warrants the right to vote or to consent or to receive notice as stockholders in
respect of the meetings of stockholders or the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company.
SECTION 11. MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.
(a) Any corporation into which the Warrant Agent may be merged
or with which it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Warrant Agent shall be a party, or any
corporation succeeding to the business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a successor warrant agent
under the provisions of Section 13 hereof. In case at the time such successor to
the Warrant Agent shall succeed to the agency created by this Agreement, and in
case at that time any of the Warrant Certificates shall have been countersigned
but not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and in case at that time any of
the Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
(b) In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent whose name has been changed
may adopt the countersignature under its prior name, and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name, and in all such cases such Warrant Certificates shall have the
full force and effect provided in the Warrant Certificates and in this
Agreement.
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<PAGE> 34
SECTION 12. WARRANT AGENT.
The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which the Company and the holders of Warrants, by their acceptance thereof,
shall be bound:
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant Certificate in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant Certificate for
any action taken in reliance on any Warrant Certificate, certificate of shares,
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement. The Company shall indemnify
the Warrant Agent against any and all losses, liabilities or expenses incurred
by it arising out of or in connection with the acceptance or administration of
its duties under this Warrant Agreement, including the costs and expenses of
enforcing this Warrant Agreement against the Company and defending itself
against any claim (whether asserted by the Company or any Holder or any other
person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent any such loss, liability or
expense may be attributable to its negligence or bad faith. The Warrant Agent
shall notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Warrant Agent to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and the
Warrant Agent shall cooperate in the defense. The Warrant Agent may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the
33
<PAGE> 35
Warrant Agent to take such action as it may consider proper, whether with or
without any such security or indemnity. All rights of action under this
Agreement or under any of the Warrants may be enforced by the Warrant Agent
without the possession of any of the Warrant Certificates or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit or proceeding instituted by the Warrant Agent shall be brought in its name
as Warrant Agent and any recovery of judgment shall be for the ratable benefit
of the registered holders of the Warrants, as their respective rights or
interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer
or employee of it, may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Warrant Agent
under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for
the Company, and its duties shall be determined solely by the provisions hereof.
The Warrant Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own negligence or
bad faith.
(i) The Warrant Agent shall not at any time be under any duty
or responsibility to any holder of any Warrant Certificate to make or cause to
be made any adjustment of the Exercise Price or number of the Warrant Shares or
other securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. The Warrant Agent shall not
be accountable with respect to the validity or value or the kind or amount of
any Warrant Shares or of any securities or property which may at any time be
issued or delivered upon the exercise of any Warrant or with respect to whether
any such Warrant Shares or other securities will when issued be validly issued
and fully paid and nonassessable, and makes no representation with respect
thereto.
SECTION 13. CHANGE OF WARRANT AGENT.
If the Warrant Agent shall become incapable of acting as
Warrant Agent, the Company shall appoint a successor to such Warrant Agent. If
the Company shall fail to make such appointment within a period of 30 days after
it has been notified in writing of such incapacity by the Warrant Agent or by
the registered holder of a Warrant Certificate, then the registered holder of
any Warrant may apply to any court of competent jurisdiction for the appointment
of a successor to the Warrant Agent. Pending appointment of a successor to such
Warrant Agent, either by the Company or by such a court, the duties of the
Warrant Agent shall be carried out by the Company. The holders of a majority of
the unexercised Warrants shall be entitled at any time to remove the Warrant
Agent and appoint a successor to such Warrant Agent. Such successor to the
Warrant Agent need not be approved by the Company or the former Warrant Agent.
After appointment the successor to the Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Warrant Agent without further act or deed; provided that the former
Warrant Agent shall deliver and transfer to the successor to the Warrant Agent
any property at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
give any notice provided
34
<PAGE> 36
for in this Section 13, however, or any defect therein, shall not affect the
legality or validity of the appointment of a successor to the Warrant Agent.
SECTION 14. REPORTS.
(a) The Company agrees with each holder, for so long as any
Warrants or Warrant Shares remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Warrants or Warrant Shares in connection with any sale thereof and any
prospective purchaser of such Warrants or Warrant Shares designated by such
Holder or beneficial owner, the information required by Rule 144(A)(d)(4) under
the Act in order to permit resales of such Warrants or Warrant Shares pursuant
to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the Exchange Act, to
make all filings required thereby in a timely manner in order to permit resales
of such Warrants or Warrant Shares pursuant to Rule 144A.
(j) The Company shall provide the Warrant Agent with a
sufficient number of copies of all such reports that the Warrant Agent may be
required to deliver to the holders of the Warrants and the Warrant Shares under
this Section 14.
SECTION 15. NOTICES TO COMPANY AND WARRANT AGENT.
Any notice or demand authorized by this Agreement to be given
or made by the Warrant Agent or by the registered holder of any Warrant to or on
the Company shall be sufficiently given or made when received if deposited in
the mail, first class or registered, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent) as follows:
Instron Corporation
c/o Kirtland Capital Partners
2550 SOM Center Road, Suite 105
Willoughby Hills, Ohio 44094
Telecopier No.: (440) 585-9699
Attention: Thomas N. Littman
With a copy to:
Jones, Day, Reavis & Pogue
North Point, 901 Lakeside Avenue
Cleveland, Ohio 44114
Telecopier No.: (216) 579-0212
Attention: Christopher M. Kelly, Esq.
In case the Company shall fail to maintain such office or
agency or shall fail to give such notice of the location or of any change in the
location thereof, presentations may be made and notices and demands may be
served at the principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the
Company or by the registered holder(s) of any Warrant to the Warrant Agent shall
be sufficiently given when and if deposited in the
35
<PAGE> 37
mail, first-class or registered, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company) to the
Warrant Agent as follows:
Norwest Bank Minnesota, National Association
N9303-120
Sixth & Marquette
Minneapolis, MN 55479
Telecopier No.: (613) 667-9825
Attention: Corporate Trust Services
SECTION 16. SUPPLEMENTS AND AMENDMENTS.
The Company and the Warrant Agent may from time to time
supplement or amend this Agreement without the approval of any holders of
Warrants in order to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Warrant Agent may deem
necessary or desirable and which shall not in any way adversely affect the
interests of the holders of Warrants. Any amendment or supplement to this
Agreement that has an adverse effect on the interests of the holders of Warrants
shall require the written consent of the holders of a majority of the then
outstanding Warrants (excluding Warrants held by the Company or any of its
affiliates). The consent of each holder of Warrants affected shall be required
for any amendment pursuant to which the Exercise Price would be increased or the
number of Warrant Shares purchasable upon exercise of Warrants would be
decreased (other than pursuant to adjustments provided in this Agreement).
SECTION 17. SUCCESSORS.
All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
SECTION 18. TERMINATION.
This Agreement shall terminate at 5:00 p.m., New York City
time on September 15, 2009. Notwithstanding the foregoing, this Agreement will
terminate on any earlier date if all Warrants have been exercised. The
provisions of Section 12 shall survive such termination.
SECTION 19. GOVERNING LAW.
This Agreement and each Warrant Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of New York
and for all purposes shall be construed in accordance with the internal laws of
said State.
SECTION 20. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company, the Warrant Agent and the
registered holders of Warrants any legal or equitable right,
36
<PAGE> 38
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent and the registered
holders of Warrants.
SECTION 21. COUNTERPARTS.
This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
[Signature Page Follows]
37
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
INSTRON CORPORATION
By: /s/ John R. Barrett
-------------------------------------------
Name: John R. Barrett
Title: Treasurer and Vice President of
Corporate Development
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Warrant Agent
By: /s/ Curtis Schwegman
-------------------------------------------
Name: Curtis Schwegman
Title: Vice President
38
<PAGE> 40
EXHIBIT A
[Form of Warrant Certificate]
[Face]
Unit Legend. Each Warrant issued prior to the Separation Date
shall bear the Unit Legend on the face thereof on the face thereof:
Private Placement Legend: Each Warrant issued pursuant to an
exemption from the registration requirements of the Securities Act shall bear
the Private Placement Legend on the face thereof:
No. ___________ ___Warrants
CUSIP No. ________
Warrant Certificate
INSTRON CORPORATION
This Warrant Certificate certifies that Cede & Co., or its
registered assigns, is the registered holder of Warrants expiring September 15,
2009 (the "Warrants") to purchase Common Stock, par value $0.01 (the "Common
Stock"), of Instron Corporation, a Massachusetts corporation (the "Company").
Each Warrant entitles the registered holder upon exercise at any time from 9:00
a.m. on the Separation Date referred to below (the "Exercise Date") until 5:00
p.m. New York City Time on September 15, 2009 to receive from the Company 0.5109
fully paid and nonassessable shares of Common Stock (the "Warrant Shares") at
the initial exercise price (the "Exercise Price") of $0.01 per share payable
upon surrender of this Warrant Certificate and payment of the Exercise Price at
the office or agency of the Warrant Agent, but only subject to the conditions
set forth herein and in the Warrant Agreement referred to on the reverse hereof.
The Exercise Price and number of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events set
forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City
Time on September 15, 2009, and to the extent not exercised by such time such
Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the internal laws of the State of New York.
A-1
<PAGE> 41
IN WITNESS WHEREOF, Instron Corporation has caused this
Warrant Certificate to be signed below.
DATED: September 29, 1999
INSTRON CORPORATION
By:
----------------------------------------
Name:
Title:
Countersigned:
[-----------------------]
as Warrant Agent
By:
-------------------------------------
Authorized Signature
A-2
<PAGE> 42
[Reverse of Warrant Certificate]
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring at 5:00 p.m. New York City time on
September 15, 2009 entitling the holder on exercise to receive shares of Common
Stock, and are issued or to be issued pursuant to a Warrant Agreement dated as
of October 5, 1998 (the "Warrant Agreement"), duly executed and delivered by the
Company to Norwest Bank Minnesota, National Association, as warrant agent (the
"Warrant Agent"), which Warrant Agreement is hereby incorporated by reference in
and made a part of this instrument and is hereby referred to for a description
of the rights, limitation of rights, obligations, duties and immunities
thereunder of the Warrant Agent, the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.
Warrants may be exercised at any time on or after the
Separation Date and on or before 5:00 p.m. New York City time on September 15,
2009; provided that holders shall be able to exercise their Warrants only if a
registration statement relating to the Warrants Shares is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and such securities
are qualified for sale or exempt from qualification under the applicable
securities laws of the states in which the various holders of the Warrants or
other persons to whom it is proposed that the Warrant Shares be issued on
exercise of the Warrants reside. In order to exercise all or any of the Warrants
represented by this Warrant Certificate, the holder must deliver to the Warrant
Agent at its New York corporate trust office set forth in Section 19 of the
Warrant Agreement this Warrant Certificate and the form of election to purchase
on the reverse hereof duly filled in and signed, which signature shall be
medallion guaranteed by an institution which is a member of a Securities
Transfer Association recognized signature guarantee program, and upon payment to
the Warrant Agent for the account of the Company of the Exercise Price, as
adjusted as provided in the Warrant Agreement, for the number of Warrant Shares
in respect of which such Warrants are then exercised. No adjustment shall be
made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
The Company has agreed pursuant to a Warrant Registration
Rights Agreement dated as of September 29, 1999 (the "Warrant Registration
Rights Agreement") to file within 90 days after the issuance of the Warrants and
use all commercially reasonable best efforts to make effective on or before 180
days after such date a shelf registration statement on the appropriate form
under the Securities Act, and to use its reasonable best efforts to keep such
registration statement continuously effective under the Securities Act in order
to permit the resale of the Warrants and Warrant Shares by the holders thereof
for the period of time referred to in the immediately preceding sentence.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may
A-3
<PAGE> 43
be exchanged, in the manner and subject to the limitations provided in the
Warrant Agreement, but without payment of any service charge, for another
Warrant Certificate or Warrant Certificates of like tenor evidencing in the
aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-4
<PAGE> 44
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive _____________ shares
of Common Stock and herewith tenders payment for such shares to the order of
INSTRON CORPORATION, in the amount of [Notes] [Warrants] equal in [principal
amount] [fair market value] to $__________ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be registered in the
name of _______________, whose address is __________________ and that such
shares be delivered to ___________, whose address is
____________________________. If said number of shares is less than all of the
shares of Common Stock purchasable hereunder, the undersigned requests that a
new Warrant Certificate representing the remaining balance of such shares be
registered in the name of ______________________, whose address is
____________________, and that such Warrant Certificate be delivered to whose
address is____________________.
___________________________________________
Signature
Date:
___________________________________________
Signature Guaranteed
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Warrant Agent, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Warrant Agent in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-5
<PAGE> 45
SCHEDULE OF EXCHANGES OF INTERESTS OF GLOBAL WARRANTS
The following exchanges of a part of this Global Warrant have been made:
<TABLE>
<CAPTION>
Number of Warrants
Amount of decrease in this Global
in Number of Amount of increase in Warrant following Signature of
warrants in this Number of Warrants in such decrease or authorized officer
Date of Exchange Global Warrant this Global Warrant increase of Warrant Agent
- ---------------- ------------------ --------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
</TABLE>
A-6
<PAGE> 46
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Instron Corporation
c/o Kirtland Capital Partners
2550 SOM Center Road
Willoughby Hills, Ohio 44094
Norwest Bank Minnesota, National Association
N9303-120
Sixth & Marquette
Minneapolis, MN 55479
Re: Warrants
Reference is hereby made to the Warrant Agreement, dated as of
September 29, 1999 (the "WARRANT AGREEMENT"), between Instron Corporation, as
issuer (the "COMPANY"), and Norwest Bank Minnesota, National Association, as
warrant agent. Capitalized terms used but not defined herein shall have the
meanings given to them in the Warrant Agreement.
___________________, (the "TRANSFEROR") owns and proposes to
transfer the Warrant[s] or interest in such Warrant[s] specified in Annex A
hereto, in the principal amount at maturity of $___________ in such Warrant[s]
or interests (the "TRANSFER"), to ___________________________ (the
"TRANSFEREE"), as further specified in Annex A hereto. In connection with the
Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE 144A GLOBAL WARRANT OR A DEFINITIVE WARRANT PURSUANT TO RULE
144A. The Transfer is being effected pursuant to and in accordance with Rule
144A under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
beneficial interest or Definitive Warrant is being transferred to a Person that
the Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Warrant for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and such
Person and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and
such Transfer is in compliance with any applicable blue sky securities laws of
any state of the United States. Upon consummation of the proposed Transfer in
accordance with the terms of the Warrant Agreement, the transferred beneficial
interest or Definitive Warrant will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the 144A Global Warrant
and/or the Definitive Warrant and in the Warrant Agreement and the Securities
Act.
2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE REGULATION S GLOBAL WARRANT OR A DEFINITIVE WARRANT PURSUANT TO
REGULATION S. The Transfer is being effected pursuant to and in accordance with
Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor
hereby further certifies that (i) the Transfer is not being made to a person in
B-1
<PAGE> 47
the United States and (x) at the time the buy order was originated, the
Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Upon consummation of the proposed transfer in accordance with the
terms of the Warrant Agreement, the transferred beneficial interest or
Definitive Warrant will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Warrant and/or
the Definitive Warrant and in the Warrant Agreement and the Securities Act.
3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF
A BENEFICIAL INTEREST IN A DEFINITIVE WARRANT PURSUANT TO ANY PROVISION OF THE
SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being
effected in compliance with the transfer restrictions applicable to beneficial
interests in Restricted Global Warrants and Restricted Definitive Warrants and
pursuant to and in accordance with the Securities Act and any applicable blue
sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) / / such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) / / such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) / / such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with
the prospectus delivery requirements of the Securities Act;
or
(d) / / such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements
of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the
Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Warrant or
Restricted Definitive Warrants and the requirements of the exemption
claimed, which certification is supported by (1) a certificate executed
by the Transferee in the form of Exhibit D to the Warrant Agreement and
(2) if the Company requests, an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached
to this certification), to the effect that such Transfer is in compliance
with the Securities Act. Upon consummation of the proposed transfer in
accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will be subject to the
restrictions on transfer enumerated in the Private
B-2
<PAGE> 48
Placement Legend printed on the IAI Global Warrant and/or the Definitive
Warrants and in the Warrant Agreement and the Securities Act.
4. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN AN UNRESTRICTED GLOBAL WARRANT OR OF AN UNRESTRICTED DEFINITIVE
WARRANT.
(a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained
in the Warrant Agreement and any applicable blue sky securities laws of
any state of the United States and (ii) the restrictions on transfer
contained in the Warrant Agreement and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act.
Upon consummation of the proposed Transfer in accordance with the terms
of the Warrant Agreement, the transferred beneficial interest or
Definitive Warrant will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the
Restricted Global Warrants, on Restricted Definitive Warrants and in the
Warrant Agreement.
(b) / / CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904
under the Securities Act and in compliance with the transfer restrictions
contained in the Warrant Agreement and any applicable blue sky securities
laws of any state of the United States and (ii) the restrictions on
transfer contained in the Warrant Agreement and the Private Placement
Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Warrant Agreement, the transferred beneficial
interest or Definitive Warrant will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Warrants, on Restricted Definitive
Warrants and in the Warrant Agreement.
(c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act other
than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer
restrictions contained in the Warrant Agreement and any applicable blue
sky securities laws of any State of the United States and (ii) the
restrictions on transfer contained in the Warrant Agreement and the
Private Placement Legend are not required in order to maintain compliance
with the Securities Act. Upon consummation of the proposed Transfer in
accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will not be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Warrants or Restricted Definitive
Warrants and in the Warrant Agreement.
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<PAGE> 49
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
-------------------------------------------
[Insert Name of Transferor]
By:
-------------------------------------------
Name:
Title:
Dated:
-----------------------
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<PAGE> 50
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / a beneficial interest in the:
(i) / / 144A Global Warrant, or
(ii) / / Regulation S Global Warrant, or
(b) / / a Restricted Definitive Warrant.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Warrant, or
(ii) / / Regulation S Global Warrant, or
(iii)/ / Unrestricted Global Warrant; or
(b) / / a Restricted Definitive Warrant; or
(c) / / an Unrestricted Definitive Warrant,
in accordance with the terms of the Warrant Agreement.
B-5
<PAGE> 51
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Instron Corporation
c/o Kirtland Capital Partners
2550 SOM Center Road
Willoughby Hills, Ohio 44094
Norwest Bank Minnesota, National Association
N9303-120
Sixth & Marquette
Minneapolis, MN 55479
Re: Warrants
(CUSIP ____________)
Reference is hereby made to the Warrant Agreement, dated as of
September 29, 1999 (the "WARRANT AGREEMENT"), between Instron Corporation, as
issuer (the "COMPANY"), and Norwest Bank Minnesota, National Association, as
warrant agent. Capitalized terms used but not defined herein shall have the
meanings given to them in the Warrant Agreement.
__________________________, (the "OWNER") owns and proposes to
exchange the Warrant[s] or interest in such Warrant[s] specified herein, in the
amount of $____________ in such Warrant[s] or interests (the "EXCHANGE"). In
connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE WARRANTS OR BENEFICIAL
INTERESTS IN A RESTRICTED GLOBAL WARRANT FOR UNRESTRICTED DEFINITIVE WARRANTS OR
BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL WARRANT
(a) / / Check if Exchange is from beneficial interest in a Restricted
Global Warrant to beneficial interest in an Unrestricted Global Warrant.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Warrant for a beneficial interest in an Unrestricted
Global Warrant in an equal principal amount, the Owner hereby certifies
(i) the beneficial interest is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance with
the transfer restrictions applicable to the Global Warrants and pursuant
to and in accordance with the United States Securities Act of 1933, as
amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Warrant Agreement and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act and
(iv) the beneficial interest in an Unrestricted Global Warrant is being
acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
(b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL WARRANT TO UNRESTRICTED DEFINITIVE WARRANT. In connection with the
Exchange of the Owner's beneficial
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<PAGE> 52
interest in a Restricted Global Warrant for an Unrestricted Definitive
Warrant, the Owner hereby certifies (i) the Definitive Warrant is being
acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable
to the Restricted Global Warrants and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Warrant Agreement and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the
Definitive Warrant is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
(c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE WARRANT TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL WARRANT. In connection with
the Owner's Exchange of a Restricted Definitive Warrant for a beneficial
interest in an Unrestricted Global Warrant, the Owner hereby certifies
(i) the beneficial interest is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance with
the transfer restrictions applicable to Restricted Definitive Warrants
and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Warrant Agreement and the
Private Placement Legend are not required in order to maintain compliance
with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
(d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE WARRANT TO
UNRESTRICTED DEFINITIVE WARRANT. In connection with the Owner's Exchange
of a Restricted Definitive Warrant for an Unrestricted Definitive
Warrant, the Owner hereby certifies (i) the Unrestricted Definitive
Warrant is being acquired for the Owner's own account without transfer,
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to Restricted Definitive Warrants and pursuant to
and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Warrant Agreement and the Private Placement
Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Unrestricted Definitive Warrant is being
acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE WARRANTS OR BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL WARRANTS FOR RESTRICTED DEFINITIVE WARRANTS OR
BENEFICIAL INTERESTS IN RESTRICTED GLOBAL WARRANTS
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL WARRANT TO RESTRICTED DEFINITIVE WARRANT. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global
Warrant for a Restricted Definitive Warrant in a number equal to the
number of beneficial interests exchanged, the Owner hereby certifies that
the Restricted Definitive Warrant is being acquired for the Owner's own
account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Warrant Agreement, the Restricted
Definitive Warrant issued will continue to be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the
Restricted Definitive Warrant and in the Warrant Agreement and the
Securities Act.
(b) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE WARRANT TO BENEFICIAL
INTEREST IN A RESTRICTED GLOBAL WARRANT. In connection with the Exchange
of the Owner's Restricted Definitive Warrant for a beneficial interest in
the [CHECK ONE] / / 144A Global Warrant, / /
C-2
<PAGE> 53
Regulation S Global Warrant in a number equal to the number of beneficial
interests exchanged, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer
and (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Warrants and pursuant to
and in accordance with the Securities Act, and in compliance with any
applicable blue sky securities laws of any state of the United States.
Upon consummation of the proposed Exchange in accordance with the terms
of the Warrant Agreement, the beneficial interest issued will be subject
to the restrictions on transfer enumerated in the Private Placement
Legend printed on the relevant Restricted Global Warrant and in the
Warrant Agreement and the Securities Act.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
-------------------------------------------
[Insert Name of Transferor]
By:
---------------------------------------
Name:
Title:
Dated:
--------------------------
C-3
<PAGE> 54
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Instron Corporation
c/o Kirtland Capital Partners
2550 SOM Center Road
Willoughby Hills, Ohio 44094
Norwest Bank Minnesota, National Association
N9303-120
Sixth & Marquette
Minneapolis, MN 55479
Re: Warrants
Reference is hereby made to the Warrant Agreement, dated as of
September 29, 1999 (the "WARRANT AGREEMENT"), between Instron Corporation, as
issuer (the "COMPANY"), and Norwest Bank Minnesota, National Association, as
warrant agent. Capitalized terms used but not defined herein shall have the
meanings given to them in the Warrant Agreement.
In connection with our proposed purchase of $____________
amount of:
(a) / / a beneficial interest in a Global Warrant, or
(b) / / a Definitive Warrant,
we confirm that:
1. We understand that any subsequent transfer of the Warrants
or any interest therein is subject to certain restrictions and conditions set
forth in the Warrant Agreement and the undersigned agrees to be bound by, and
not to resell, pledge or otherwise transfer the Warrants or any interest therein
except in compliance with, such restrictions and conditions and the United
States Securities Act of 1933, as amended (the "SECURITIES ACT").
2. We understand that the offer and sale of the Warrants have
not been registered under the Securities Act, and that the Warrants and any
interest therein may not be offered or sold 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 the Warrants or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (C) 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 and to the
Company a signed letter substantially in the form of this letter and, if
requested by the Company, an Opinion of Counsel in form reasonably acceptable to
the Company to the effect that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the
D-1
<PAGE> 55
provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing the Definitive Warrant or beneficial
interest in a Global Warrant from us in a transaction meeting the requirements
of clauses (A) through (E) of this paragraph a notice advising such purchaser
that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Warrants
or beneficial interest therein, 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 Warrants purchased by
us will bear a legend to the foregoing effect.
4. 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 Warrants,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Warrants or beneficial interest
therein purchased by us for our own 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.
We agree not to engage in any hedging transactions with regard
to the Warrants unless such hedging transactions are in compliance with the
Securities Act.
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.
------------------------------------------
[Insert Name of Transferor]
By:
--------------------------------------
Name:
Title:
Dated:
----------------------------
D-2
<PAGE> 56
EXHIBIT E
FORM OF WARRANT REGISTRATION RIGHTS AGREEMENT
E-1
<PAGE> 1
Exhibit 10.1
CREDIT AND SECURITY AGREEMENT
(U.S. $80,000,000)
Dated as of September 29, 1999
among
INSTRON CORPORATION
INSTRON, LTD.
INSTRON SCHENCK TESTING SYSTEMS, GMBH
and
INSTRON WOLPERT GMBH
AS BORROWERS
and
THE BANKS WHICH ARE SIGNATORIES HERETO
and
NATIONAL CITY BANK
as Administrative Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS........................................................................1
1.1 CERTAIN DEFINED TERMS................................................................................1
1.2 COMPUTATION OF TIME PERIODS..........................................................................1
1.3 ACCOUNTING TERMS; CALCULATIONS.......................................................................1
1.4 ADDITION OF BORROWERS................................................................................2
1.5 AUTHORIZATION OF BORROWER REPRESENTATIVE.............................................................2
1.6 CONSTRUCTION OF TERMS GENERALLY......................................................................2
1.7 CURRENCY EQUIVALENTS.................................................................................3
1.8 LIABILITY OF BORROWERS...............................................................................4
SECTION 2 STATEMENT OF TERMS......................................................................................4
2.1 REVOLVING CREDIT FACILITY............................................................................4
(a) REVOLVING CREDIT LOANS......................................................................4
(b) REVOLVING CREDIT BORROWINGS.................................................................4
(c) REVOLVING CREDIT NOTES; LOAN ACCOUNT........................................................5
2.2 REQUESTS FOR REVOLVING CREDIT BORROWINGS.............................................................5
(a) CREDIT REQUESTS EXECUTED BY BORROWER REPRESENTATIVE.........................................5
(b) DEEMED CREDIT REQUESTS......................................................................7
2.3 FUNDING OF REVOLVING CREDIT LOANS....................................................................8
2.4 AVAILABILITY OF FUNDS................................................................................9
2.5 FAILURES TO FUND LOANS OR PARTICIPATING INTERESTS....................................................9
(a) CONTINUING OBLIGATION OF BORROWERS.........................................................10
(b) PAYMENT CONSTITUTING RATABLE PORTION.......................................................10
(c) TREATMENT OF BANK FAILING TO FUND..........................................................10
(D) CONTINUING OBLIGATION OF BANKS TO FUND.....................................................11
(e) DEFAULTING LENDER; OBLIGATIONS OF DESIGNATED SWING LINE LENDERS AND LETTER
OF CREDIT ISSUERS.....................................................................11
2.6 AFFILIATED FUNDING THROUGH, ON BEHALF OF, OR BY BANKS...............................................11
(a) SPC FUNDING ON BEHALF OF BANKS.............................................................11
(b) FUNDING BY BANKS, DESIGNATED SWING LINE LENDERS, AND DESIGNATED LETTER OF
CREDIT ISSUERS THROUGH OR ON BEHALF OF LENDING INSTALLATIONS..........................12
2.7 SWING LINE LOAN FACILITY............................................................................13
(a) SWING LINE LOANS...........................................................................13
(b) CONDITIONS TO SWING LINE LOANS.............................................................13
(c) SWING LINE BORROWINGS......................................................................14
(d) SWING LINE LOAN REQUESTS...................................................................14
(e) NOTICE OF REQUESTS; OUTSTANDINGS...........................................................15
(f) PROCEDURE FOR OBTAINING QUOTED MONEY MARKET RATE...........................................15
(g) SWING LINE NOTES; SWING LINE LOAN ACCOUNT..................................................16
(h) FUNDING OF SWING LINE LOANS................................................................16
(i) AVAILABILITY OF FUNDS......................................................................17
(j) REFUNDING SWING LINE LOANS; SETTLEMENT BY BANKS............................................17
(k) PARTICIPATING INTEREST.....................................................................18
2.8 TERM FACILITY.......................................................................................19
(a) TERM LOANS.................................................................................19
(b) TERM BORROWINGS............................................................................19
(c) TERM NOTES; LOAN ACCOUNT RECORD OF TERM LOANS..............................................19
(d) AMORTIZATION AND MATURITY OF TERM LOANS....................................................20
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
2.9 FUNDING OF TERM LOANS BY BANKS......................................................................20
(a) DISBURSEMENT OF TERM FUNDS RECEIVED........................................................21
(b) AVAILABILITY OF TERM LOAN FUNDS............................................................21
2.10 REPAYMENTS; PREPAYMENTS; REDUCTIONS OF COMMITMENTS.................................................21
(a) SCHEDULED REPAYMENTS; DENOMINATIONS OF REPAYMENTS..........................................21
(b) MANDATORY PREPAYMENT OF LOANS..............................................................21
(c) MANDATORY APPLICATION OF NET PROCEEDS AND EXCESS CASH FLOW; RESULTING
MANDATORY REDUCTION IN REVOLVING CREDIT COMMITMENTS AND TERM LOANS....................22
(d) PERMITTED PREPAYMENTS......................................................................23
(e) REDUCTION OF REVOLVING CREDIT COMMITMENTS..................................................24
2.11 RATE CONVERSION AND RATE CONTINUATION..............................................................24
2.12 LETTERS OF CREDIT..................................................................................27
(a) DESIGNATED LETTER OF CREDIT ISSUER AND DESIGNATED EUROPEAN ADMINISTRATIVE
AGENT.................................................................................27
(b) TERM; FORM; REQUESTS AND CONDITIONS OF LETTERS OF CREDIT...................................28
(c) EXISTING LETTERS OF CREDIT.................................................................29
(d) PARTICIPATION BY BANKS IN LETTERS OF CREDIT................................................29
(e) REIMBURSEMENT; INTEREST....................................................................30
(f) FAILURE TO REIMBURSE DRAWINGS..............................................................30
(g) OBLIGATIONS ABSOLUTE.......................................................................32
(h) LIABILITY OF DESIGNATED LETTER OF CREDIT ISSUER............................................32
(i) DESIGNATED LETTER OF CREDIT ISSUER INDEMNITY...............................................33
(j) EFFECT OF APPLICABLE LAW OR CUSTOM.........................................................33
(k) TERMINATION OF LETTER OF CREDIT COMMITMENT.................................................34
(l) GUARANTY OF OTHER LETTER OF CREDIT OBLIGOR'S LETTER OF CREDIT OBLIGATIONS..................34
2.13 INTEREST ON LOANS..................................................................................37
(a) INTEREST RATE..............................................................................37
(b) APPLICABLE MARGIN; TERMS OF ADJUSTMENT.....................................................38
2.14 DEFAULT INTEREST...................................................................................39
2.15 INTEREST RATE DETERMINATION........................................................................39
(a) ADMINISTRATIVE AGENT DETERMINATION; NOTICE.................................................39
(b) FAILURE OF BORROWERS TO ELECT..............................................................40
2.16 FEES...............................................................................................40
(a) UNDERWRITING, ARRANGEMENT AND STRUCTURING FEE..............................................40
(b) ANNUAL ADMINISTRATIVE AGENT'S FEE..........................................................40
(c) UNUSED COMMITMENT FEE......................................................................40
(d) LETTER OF CREDIT FEES......................................................................41
(e) APPLICABLE FEE PERCENTAGES.................................................................41
(f) PAYMENT OF FEES; NONREFUNDABLE.............................................................42
2.17 MANNER AND APPLICATION OF PAYMENTS; CONTROL ACCOUNT MAINTENANCE; COMPUTATIONS......................42
(a) MANNER OF PAYMENT..........................................................................42
(b) APPLICATION OF PAYMENTS....................................................................43
(c) ADMINISTRATIVE AGENT MAINTENANCE OF CONTROL ACCOUNT........................................43
(d) DESIGNATED EUROPEAN ADMINISTRATIVE AGENT MAINTENANCE OF DESIGNATED EUROPEAN
CONTROL ACCOUNT.......................................................................43
(e) CONTROL ACCOUNT CHARGES AND CREDITS; ADMINISTRATIVE AGENT REPORTS..........................44
(f) AUTHORIZATION TO CHARGE BANKING ACCOUNTS...................................................44
(g) COMPUTATIONS OF INTEREST AND FEES..........................................................45
(h) PAYMENT NOT ON BUSINESS DAY................................................................45
(i) FAILURE TO PAY IN ALTERNATE CURRENCY.......................................................45
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
(j) ALTERNATE CURRENCY AMOUNTS.................................................................45
(k) PRESUMPTION OF PAYMENT IN FULL BY THE BORROWERS............................................46
2.18 LIBOR RATE LOANS: UNASCERTAINABLE RATE; ILLEGALITY; INCREASED COSTS................................46
(a) UNASCERTAINABLE RATE; ILLEGALITY; INCREASED COSTS..........................................46
(b) CANCELLATION OF REQUESTS; CONVERSION OF OUTSTANDINGS.......................................48
2.19 PRO RATA TREATMENT OF BANKS........................................................................48
2.20 EUROPEAN ECONOMIC AND MONETARY UNION...............................................................48
(a) EFFECTIVENESS OF PROVISIONS................................................................48
(b) REDENOMINATION OF ALTERNATIVE CURRENCIES...................................................49
(c) PAYMENTS BY THE ADMINISTRATIVE AGENT GENERALLY.............................................49
(d) BASIS OF ACCRUAL...........................................................................49
(e) ROUNDING...................................................................................49
(f) OTHER CONSEQUENTIAL CHANGES................................................................50
SECTION 3 CONDITIONS OF LENDING..................................................................................50
3.1 CONDITIONS PRECEDENT TO INITIAL LOANS...............................................................50
3.2 CONDITIONS PRECEDENT TO ALL LOANS...................................................................50
(a) REPRESENTATION BRINGDOWN...................................................................50
(b) NO DEFAULT; COMPLIANCE WITH TERMS..........................................................50
(c) NO MATERIAL ADVERSE CHANGE.................................................................51
(d) CONFIRMATION OF BORROWING BASE.............................................................51
(e) OTHER DELIVERIES...........................................................................51
SECTION 4 SECURITY INTEREST IN COLLATERAL; COLLATERAL REQUIREMENTS...............................................51
4.1 GRANT OF SECURITY INTEREST..........................................................................51
(a) DOMESTIC BORROWER COLLATERAL...............................................................51
(b) U.K. COLLATERAL............................................................................52
(c) GERMAN COLLATERAL..........................................................................52
4.2 PERFECTION..........................................................................................53
4.3 CHANGES AFFECTING PERFECTION........................................................................53
4.4 INSPECTION; VERIFICATION............................................................................54
4.5 REINSTATEMENT.......................................................................................54
4.6 TERMINATION OF SECURITY INTEREST; RELEASE OF COLLATERAL.............................................54
SECTION 5 REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO COLLATERAL.......................................56
5.1 GENERAL REPRESENTATIONS AS TO COLLATERAL............................................................56
5.2 REPRESENTATIONS AND WARRANTIES REGARDING ACCOUNTS...................................................57
5.3 TREATMENT OF ACCOUNTS AND GENERAL INTANGIBLES.......................................................57
5.4 LIEN PRIORITY.......................................................................................57
5.5 LIEN WAIVERS, LANDLORD WAIVERS, WAREHOUSE RECEIPTS..................................................58
5.6 MAINTENANCE OF INSURANCE............................................................................58
SECTION 6 GENERAL REPRESENTATIONS AND WARRANTIES.................................................................58
6.1 EXISTENCE...........................................................................................59
6.2 AUTHORIZATION; ENFORCEABILITY.......................................................................59
6.3 NO VIOLATION........................................................................................59
6.4 LITIGATION; PROCEEDINGS.............................................................................60
6.5 TAXES...............................................................................................60
6.6 TITLE...............................................................................................60
6.7 CONSENTS; APPROVALS.................................................................................60
6.8 LAWFUL OPERATIONS...................................................................................61
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
6.9 ENVIRONMENTAL COMPLIANCE............................................................................61
6.10 ENVIRONMENTAL LAWS AND PERMITS.....................................................................62
6.11 ERISA..............................................................................................62
6.12 AGREEMENTS; ADVERSE OBLIGATIONS; LABOR DISPUTES....................................................62
6.13 FINANCIAL STATEMENTS; PROJECTIONS..................................................................63
(a) FINANCIAL STATEMENTS.......................................................................63
(b) FINANCIAL PROJECTIONS......................................................................63
6.14 INTELLECTUAL PROPERTY..............................................................................64
6.15 MERGER; OFFERING...................................................................................64
6.16 MERGER DOCUMENTS...................................................................................64
6.17 STRUCTURE; CAPITALIZATION..........................................................................64
6.18 VALUE; SOLVENCY....................................................................................65
6.19 INVESTMENT COMPANY ACT STATUS......................................................................65
6.20 REGULATION U/REGULATION X COMPLIANCE...............................................................65
6.21 YEAR 2000 COMPLIANCE...............................................................................65
6.22 FULL DISCLOSURE....................................................................................66
SECTION 7 COVENANTS OF THE BORROWERS.............................................................................66
7.1 REPORTING AND NOTICE COVENANTS......................................................................66
(a) QUARTERLY FINANCIAL STATEMENTS.............................................................66
(b) ANNUAL FINANCIAL STATEMENTS................................................................67
(c) OFFICER'S CERTIFICATE; MANAGEMENT DISCUSSION; STATEMENTS OF OPERATIONS.....................67
(d) ANNUAL BUSINESS PLAN.......................................................................68
(e) OTHER INFORMATION..........................................................................68
(f) NOTICES....................................................................................68
(g) NOTICE OF DEFAULT UNDER ERISA..............................................................69
(h) ENVIRONMENTAL REPORTING....................................................................69
(i) MULTIEMPLOYER PLAN WITHDRAWAL LIABILITY....................................................69
(j) SEC REPORTS AND REGISTRATION STATEMENTS....................................................69
(k) ANNUAL, QUARTERLY AND OTHER REPORTS TO SENIOR SUBORDINATED NOTEHOLDERS
PURSUANT TO SENIOR SUBORDINATED NOTE INDENTURE........................................69
(l) PRESS RELEASES.............................................................................70
7.2 AFFIRMATIVE COVENANTS...............................................................................70
(a) CORPORATE EXISTENCE........................................................................70
(b) FINANCIAL RECORDS..........................................................................70
(c) FINANCIAL EXAMINATION AND REVIEW...........................................................70
(d) COMPLIANCE WITH LAW........................................................................70
(e) COMPLIANCE WITH ENVIRONMENTAL LAWS.........................................................71
(f) PROPERTIES.................................................................................71
(g) USE OF PROCEEDS............................................................................71
(h) COMPLIANCE WITH TERMS OF ALL MATERIAL CONTRACTS............................................72
(i) TAXES......................................................................................72
(j) INSURANCE..................................................................................72
(k) LICENSE TO THIRD PARTIES AND SUBSIDIARIES..................................................72
(l) CERTAIN SUBSIDIARIES TO JOIN IN SUBSIDIARY GUARANTY AND STOCK PLEDGE.......................73
(m) MOST FAVORED COVENANT STATUS...............................................................74
(n) HEDGE AGREEMENTS...........................................................................74
7.3 NEGATIVE COVENANTS..................................................................................75
(a) CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS .........................................75
(b) CREDIT EXTENSIONS; PREPAYMENTS; PAYMENTS OF SUBORDINATED DEBT..............................78
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
(c) INDEBTEDNESS...............................................................................80
(d) LIENS......................................................................................82
(e) INVESTMENTS................................................................................84
(f) DISTRIBUTIONS; MANAGEMENT FEE..............................................................85
(g) CHANGE IN NATURE OF BUSINESS...............................................................86
(h) CHARTER AMENDMENTS.........................................................................86
(i) COMPLIANCE WITH ERISA......................................................................86
(j) REGULATION U COMPLIANCE....................................................................87
(k) ACCOUNTING CHANGES.........................................................................87
(l) ARM'S-LENGTH TRANSACTIONS..................................................................87
7.4 FINANCIAL COVENANTS.................................................................................87
(a) MINIMUM CONSOLIDATED NET WORTH.............................................................87
(b) MINIMUM CONSOLIDATED FIXED CHARGE COVERAGE RATIO...........................................88
(c) MINIMUM CONSOLIDATED EBIT TO CONSOLIDATED INTEREST EXPENSE RATIO...........................89
(d) CONSOLIDATED SENIOR FUNDED DEBT TO ADJUSTED EBITDA RATIO...................................89
(e) CONSOLIDATED TOTAL FUNDED DEBT TO ADJUSTED EBITDA RATIO....................................89
(f) MINIMUM CONSOLIDATED ADJUSTED EBITDA.......................................................90
(g) MAXIMUM CONSOLIDATED CAPITAL EXPENDITURES..................................................90
SECTION 8 EVENTS OF DEFAULT......................................................................................90
8.1 PAYMENT.............................................................................................90
8.2 REPRESENTATIONS AND WARRANTIES......................................................................91
8.3 REPORTING AND NOTICE PROVISIONS; VIOLATION OF CERTAIN AFFIRMATIVE COVENANTS.........................91
8.4 VIOLATION OF NEGATIVE COVENANTS AND FINANCIAL COVENANTS.............................................91
8.5 CROSS-DEFAULT.......................................................................................91
8.6 FALSE OR MISLEADING REPORTS.........................................................................91
8.7 DESTRUCTION OF COLLATERAL...........................................................................91
8.8 CHANGE OF CONTROL...................................................................................92
8.9 TERMINATION OF EXISTENCE............................................................................92
8.10 FAILURE OF ENFORCEABILITY OF THIS AGREEMENT, CREDIT DOCUMENT; SECURITY.............................92
8.11 ERISA..............................................................................................92
8.12 JUDGMENTS..........................................................................................92
8.13 FORFEITURE PROCEEDINGS.............................................................................93
8.14 FINANCIAL IMPAIRMENT...............................................................................93
SECTION 9 REMEDIES...............................................................................................93
9.1 ACCELERATION; TERMINATION...........................................................................93
9.2 AUTOMATIC ACCELERATION AND TERMINATION..............................................................93
9.3 GENERAL RIGHTS AND REMEDIES OF ADMINISTRATIVE AGENT AND THE BANKS...................................94
9.4 ADDITIONAL REMEDIES.................................................................................94
(a) POSSESSION OF COLLATERAL...................................................................94
(b) FORECLOSURE OF LIENS.......................................................................95
(c) DISPOSITION OF COLLATERAL..................................................................95
(d) APPLICATION OF COLLATERAL; APPLICATION OF LIQUIDATION PROCEEDS.............................95
9.5 APPOINTMENT OF ATTORNEY-IN-FACt.....................................................................96
9.6 SET-OFF.............................................................................................97
9.7 TERMINATION; EFFECT ON BORROWER OBLIGATIONS.........................................................97
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
<S> <C>
9.8 ACTIONS IN RESPECT OF THE LETTERS OF CREDIT UPON DEFAULT............................................98
9.9 LETTER OF CREDIT COLLATERAL ACCOUNT.................................................................98
(a) APPLICATION................................................................................98
(b) NO BORROWER OR THIRD PARTY CLAIMS..........................................................98
(c) NO LIENS OR TRANSFERS OF ACCOUNT...........................................................99
9.10 AUTHORITY TO EXECUTE TRANSFERS.....................................................................99
9.11 LIMITED LICENSE TO LIQUIDATE.......................................................................99
9.12 EQUALIZATION.......................................................................................99
9.13 REMEDIES CUMULATIVE...............................................................................100
SECTION 10 BORROWER GUARANTY....................................................................................100
10.1 DOMESTIC BORROWER CROSS-GUARANTY..................................................................100
10.2 MAXIMUM LIABILITY.................................................................................100
10.3 GUARANTY UNCONDITIONAL............................................................................100
10.4 DISCHARGE; REINSTATEMENT..........................................................................101
10.5 WAIVER............................................................................................101
10.6 STAY OF ACCELERATION..............................................................................102
10.7 SUBROGATION AND CONTRIBUTION RIGHTS...............................................................102
(a) GUARANTEED OBLIGATION AND CONTRIBUTION PAYMENTS...........................................102
(b) JOINDER; WAIVER...........................................................................103
SECTION 11 THE AGENTS...........................................................................................103
11.1 THE ADMINISTRATIVE AGENT..........................................................................103
11.2 DESIGNATED EUROPEAN ADMINISTRATIVE AGENTS.........................................................103
11.3 SYNDICATION AGENT.................................................................................104
11.4 NATURE OF APPOINTMENT.............................................................................104
11.5 AGENTS AS BANKS; OTHER TRANSACTIONS...............................................................104
11.6 INSTRUCTIONS FROM BANKS...........................................................................104
11.7 BANK'S DILIGENCE..................................................................................105
11.8 NO IMPLIED REPRESENTATIONS........................................................................105
11.9 SUB-AGENTS........................................................................................105
11.10 AGENTS' DILIGENCE................................................................................105
11.11 NOTICE OF DEFAULT................................................................................105
11.12 LIABILITY OF AGENTS..............................................................................106
11.13 INDEMNITY OF AGENTS..............................................................................106
11.14 RESIGNATION OF AGENT.............................................................................107
11.15 RESIGNATION OF DESIGNATED EUROPEAN ADMINISTRATIVE AGENTS.........................................107
SECTION 12 TRANSFERS AND ASSIGNMENTS............................................................................108
12.1 TRANSFER OF COMMITMENTS...........................................................................108
(a) PRIOR CONSENT.............................................................................108
(b) AGREEMENT; TRANSFER FEE...................................................................108
(c) NO PROHIBITED TRANSACTION.................................................................108
(d) NOTES.....................................................................................109
(e) PARTIES...................................................................................109
12.2 SALE OF PARTICIPATIONS............................................................................109
(a) BENEFITS OF PARTICIPANT...................................................................109
(b) RIGHTS RESERVED...........................................................................109
(c) NO DELEGATION.............................................................................110
(d) NO PROHIBITED TRANSACTION.................................................................110
12.3 CHANGE OF LENDING OFFICE; REPLACEMENT OF BANKS....................................................110
(a) CHANGE OF LENDING OFFICE..................................................................110
(b) REPLACEMENT OF BANKS......................................................................110
(c) EFFECT ON RIGHTS AND OBLIGATIONS..........................................................111
</TABLE>
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12.4 CONFIDENTIALITY...................................................................................111
SECTION 13 INDEMNITIES..........................................................................................112
13.1 INCREASED COSTS...................................................................................112
13.2 RISK-BASED CAPITAL................................................................................112
13.3 TAXES.............................................................................................113
(a) TAXES; WITHHOLDING........................................................................113
(b) STAMP TAXES...............................................................................114
(c) OTHER TAXES...............................................................................114
(d) REQUEST FOR REFUND........................................................................114
(e) EXEMPTION CERTIFICATE.....................................................................114
(f) FURNISHING OF CERTIFICATE.................................................................115
(g) FILINGS TO CLAIM U.K. WITHHOLDING EXEMPTION OR REDUCTION..................................115
(h) RELATED TAX EXEMPTION FILINGS.............................................................116
(i) U.K. TAX CREDITS..........................................................................116
(j) SURVIVAL OF PROVISION.....................................................................117
13.4 LOSSES............................................................................................117
13.5 INDEMNIFICATION FOR REQUESTS......................................................................117
13.6 GENERAL INDEMNITY.................................................................................118
13.7 ENVIRONMENTAL INDEMNITY...........................................................................118
13.8 CERTIFICATE FOR INDEMNIFICATION...................................................................118
13.9 DUTY TO MITIGATE; STANDARD TREATMENT; REIMBURSEMENT LIMITATION PERIOD.............................119
SECTION 14 GENERAL..............................................................................................119
14.1 AMENDMENTS AND WAIVERS............................................................................119
14.2 GENERAL APPOINTMENT AS ATTORNEY-IN-FACT...........................................................120
(a) ADMINISTRATIVE AGENT NOT LIABLE...........................................................120
(b) PERFORMANCE BY ADMINISTRATIVE AGENT OF THE BORROWERS' OBLIGATIONS.........................121
14.3 JUDGMENT CURRENCY.................................................................................121
(a) CONVERSION................................................................................121
(b) DISCHARGE.................................................................................121
(c) COSTS OF CONVERSION.......................................................................121
14.4 CUMULATIVE PROVISIONS.............................................................................121
14.5 EFFECTIVE AGREEMENT; BINDING EFFECT...............................................................122
14.6 COSTS AND EXPENSES................................................................................122
14.7 SURVIVAL OF PROVISIONS............................................................................122
14.8 CAPTIONS..........................................................................................123
14.9 SHARING OF INFORMATION............................................................................123
14.10 INTEREST RATE LIMITATION.........................................................................123
14.11 LIMITATION OF LIABILITY..........................................................................124
14.12 ILLEGALITY.......................................................................................124
14.13 NOTICES..........................................................................................124
14.14 GOVERNING LAW....................................................................................125
14.15 ENTIRE AGREEMENT.................................................................................125
14.16 JURY TRIAL WAIVER................................................................................125
14.17 JURISDICTION.....................................................................................125
14.18 VENUE; INCONVENIENT FORUM........................................................................126
14.19 EXECUTION IN COUNTERPARTS; EXECUTION BY FACSIMILE................................................126
</TABLE>
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EXHIBITS AND ANNEXES
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Exhibit A-1 (Form of Revolving Credit Note)
Exhibit A-2 (Form of Swing Line Note)
Exhibit A-3 (Form of Term Note)
Exhibit B-1 (Form of Credit Request)
Exhibit B-2 (Form of Swing Line Request)
Exhibit B-3 (Form of Letter of Credit Request)
Exhibit C (Form of Rate Conversion/Continuation Request)
Exhibit D-1 (Form of Stock Pledge -- Instron Corporation for Domestic Subsidiaries)
Exhibit D-2 (Form of Share Charge -- Instron Corporation for Instron, Holdings, Ltd.)
Exhibit D-3 (Form of Share Pledge -- Instron Corporation for Instron, GmbH)
Exhibit D-4 (Form of Third Party Charge of Shares -- Instron Holdings, Ltd. for Instron Ltd.)
Exhibit E-1 (Form of Collateral Assignment of Security Interest in Patents and Patent Applications)
Exhibit E-2 (Form of Collateral Assignment of Security Interest in Trademarks and Licenses)
Exhibit E-3 (Form of Collateral Assignment of Security Interest Copyrights)
Exhibit F-1 (Form of Mortgage--Massachusetts)
Exhibit F-2 (Form of Debenture --United Kingdom -- Instron, Ltd.)
Exhibit F-3 (Form of Security Transfer Agreement -- German)
Exhibit G (Form of Existing Lender Payout Letter)
Exhibit H (Form of Advertising Permission Letter)
Exhibit I (Form of Bank Assignment Agreement)
Exhibit J (Form of Landlord Waiver)
Exhibit K-1 (Form of Limited License Agreement -- Borrower)
Exhibit K-2 (Form of Limited License Agreement -- Third Party)
Exhibit L-1 (Form of Guaranty Agreement -- Domestic Subsidiaries)
Exhibit L-2 (Form of Security Agreement -- Domestic Subsidiaries)
Exhibit M (Form of Borrowing Base Certificate)
Annex I Commitments
Annex II Definitions
Annex III Conditions Precedent to Initial Loans
Annex IV Supplemental Schedule
Annex V Additional Borrower Addendum
Annex VI Interim Waiver of Certain Closing Conditions
</TABLE>
viii
<PAGE> 10
CREDIT AND SECURITY AGREEMENT
U.S. $80,000,000
Dated as of September 29, 1999
INSTRON CORPORATION, a Massachusetts corporation, INSTRON,
LTD., a corporation organized under the laws of the United Kingdom, and INSTRON
SCHENCK TESTING SYSTEMS, GMBH, a corporation organized under the laws of the
Federal Republic of Germany, and INSTRON WOLPERT GMBH, a corporation organized
under the laws of the Federal Republic of Germany, the BANKS listed on the
signature pages of this Agreement, and NATIONAL CITY BANK, a national banking
association, as Administrative Agent for the Banks under this Agreement, each
DESIGNATED EUROPEAN ADMINISTRATIVE AGENT designated pursuant to the terms
hereof, each DESIGNATED SWING LINE LENDER designated pursuant to the terms
hereof, and each DESIGNATED LETTER OF CREDIT ISSUER designated pursuant to the
terms hereof, hereby agree as follows:
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS.
1.1 CERTAIN DEFINED TERMS.
Certain capitalized terms used in this Agreement are defined
on Annex II attached hereto and incorporated herein by reference.
1.2 COMPUTATION OF TIME PERIODS.
In this Agreement, for the purpose of computing periods of
time from a specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each mean "to but
excluding."
1.3 ACCOUNTING TERMS; CALCULATIONS.
All accounting and financial terms not specifically defined
herein shall be construed in accordance with GAAP as in effect from time to
time. In all cases, such accounting and financial terms shall be applied on a
basis consistent with those applied in the preparation of Instron Corporation's
audited financial statements for its fiscal year ending December 31, 1998;
provided, however, (a) that all financial statements shall reflect Instron
Corporation's adoption of FAS 106 and (b) if any change in GAAP in itself
affects the calculation of any financial covenant in Section 7.4 of this
Agreement, the Borrower Representative may by written notice to the
Administrative Agent, or the Administrative Agent may, or upon request by the
Required Banks shall, by written notice to the Borrower Representative, require
that such covenant thereafter be calculated in accordance with GAAP as in effect
(and applied by Instron Corporation) immediately before such change in GAAP
occurs. If any such notice is given, the compliance certificates delivered
pursuant to Section 7.1(c) of this Agreement after such change occurs shall be
accompanied by reconciliations of the difference between the calculation set
forth therein and a calculation made in accordance with GAAP as in effect from
time to time after such change occurs. The financial statements to be furnished
to the Administrative Agent on behalf of the Banks pursuant hereto shall be made
and prepared in accordance with GAAP consistently applied throughout the periods
involved, except as set forth in the notes thereto or as otherwise disclosed in
writing by the Borrower to the Administrative Agent and, in each case, consented
to by the Administrative Agent; provided that, if at any time the computations
determining compliance with Section 7.4 utilize accounting principles different
from those
<PAGE> 11
utilized in the financial statements furnished to the Administrative Agent on
behalf of the Banks, such computations shall set forth in reasonable detail a
description of the differences and the effect thereof on such computations.
1.4 ADDITION OF BORROWERS.
By execution of an Additional Borrower Addendum by a signatory
thereof, and upon acceptance of such Additional Borrower Addendum by the
Administrative Agent and the Required Banks and, to the extent applicable, the
applicable Designated Swing Line Lender and Designated Letter of Credit Issuer,
each in its sole discretion, and such signatory's satisfaction of all conditions
and completion of all deliveries specified in such Additional Borrower Addendum,
this Agreement shall be deemed amended so that such signatory shall become for
all purposes a party to this Agreement as if an original signatory hereto and
shall be admitted as a Borrower hereunder. Except to the extent this Agreement
is expressly amended by the Additional Borrower Addendum in respect to such
signatory Borrower, this Agreement shall be binding for all purposes upon such
signatory Borrower as if an original signatory thereto.
1.5 AUTHORIZATION OF BORROWER REPRESENTATIVE.
For purposes of this Agreement including, without limitation,
Sections 1.3, 2.2, 2.10 and 2.11 of this Agreement, each of the Borrowers
hereby: (i) authorizes the Borrower Representative to make such requests, give
such notices or furnish such certificates to the Administrative Agent, the Banks
or any Designated Swing Line Lender or Designated Letter of Credit Issuers as
may be required or permitted by this Agreement for the benefit of such Borrower
and to give any consents on behalf of such Borrower required by Section 12.1(a)
of this Agreement in connection with assignments by Banks pursuant thereto and
(ii) authorizes the Administrative Agent to treat such requests, notices,
certificates or consents made, given or furnished by the Borrower Representative
as having been made, given or furnished by such Borrower for purposes of this
Agreement. Unless otherwise agreed to by the Administrative Agent, the Borrower
Representative shall be the only Person entitled to make, give or furnish such
requests, notices, certificates or requests directly to the Administrative
Agent, the Banks or any Designated Swing Line Lender or Designated Letter of
Credit Issuer for purposes of this Agreement. Each of the Borrowers agrees to be
bound by all such requests, notices, certificates and consents and other such
actions by the Borrower Representative and agrees that all notices to and
demands upon the Borrower Representative in respect of any Borrower shall
constitute effective notice to and demand upon such Borrower for all purposes
hereof. In each case, the Administrative Agent, the Banks, the Designated Swing
Line Lenders and the Designated Letter of Credit Issuers shall be entitled to
rely upon all such requests, notice, certificates and consents made, given or
furnished by the Borrower Representative pursuant to the provisions of this
Agreement or any other Loan Documents as being made or furnished on behalf of,
and with the effect of irrevocably binding, such Borrower.
1.6 CONSTRUCTION OF TERMS GENERALLY.
The definitions of terms in this Agreement shall apply equally
to the singular and plural forms of the terms defined. Whenever the context
requires, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include," "includes," and "including," shall be deemed
to be followed by the phrase "without limitation." The word "will" shall be
construed to have the same meaning as the word "shall." Unless the context
otherwise requires, (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument, or other document as from time to time amended,
supplemented or otherwise modified (subject to any restriction on such
amendments, supplements or modifications as may be set forth herein), (b) any
reference herein
2
<PAGE> 12
to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein," "hereof," and "hereunder," and words of similar
import, shall be construed to refer to this Agreement in its entirety and not
any particular provision hereof, (d) all references to sections, Annexes and
Exhibits shall be construed to refer to sections of, and Annexes and Exhibits
to, this Agreement, and (e) unless the context or the provisions of this
Agreement otherwise indicate, the words "assets" and "property" shall be
construed to have the same meaning and effect and to refer to any and all real
property, and tangible and intangible assets and properties, including cash,
securities, accounts and contract rights and interests in any of the foregoing.
1.7 CURRENCY EQUIVALENTS.
For purposes of this Agreement, except as otherwise specified
herein, (i) the equivalent in Dollars of any Alternate Currency shall be
determined by using the applicable Exchange Rate at which the Administrative
Agent offers to exchange Dollars for such Alternate Currency at its Payment
Office at 9:00 A.M. (local time at the Payment Office of the Administrative
Agent) two Business Days prior to the date on which such equivalent is to be
determined, (ii) the equivalent in any Alternate Currency of any other Alternate
Currency shall be determined by using the applicable Exchange Rate at which the
Administrative Agent offers to exchange such Alternate Currency for the
equivalent in Dollars of such other Alternate Currency at its Payment Office at
9:00 A.M. (local time at the Payment Office of the Administrative Agent) two
Business Days prior to the date on which such equivalent is to be determined,
and (iii) the equivalent in any Alternate Currency of Dollars shall be
determined by using the applicable Exchange Rate at which the Administrative
Agent offers to exchange such Alternate Currency for Dollars at its Payment
Office at 9:00 A.M. (local time at the Payment Office of the Administrative
Agent) two Business Days prior to the date on which such equivalent is to be
determined; provided, that (A) the equivalent in Dollars of each LIBOR Rate Loan
made in an Alternate Currency shall be recalculated hereunder on each date that
it shall be necessary (or the Administrative Agent shall elect) to determine the
unused portion of each Bank's Commitment, or the amount of any Loan outstanding
on such date; (B) for purposes of Sections 2.7(a), 2.12(e) and 2.10(b), the
equivalent in Dollars of any Swing Line Loan denominated in an Alternate
Currency shall be calculated by the applicable Designated European
Administrative Agent: (x) on the date of the making of such Swing Line Loan or
the Rate Continuation or Rate Conversion of such Swing Line Loan (y) on the
first Business Day of each calendar month thereafter and (z) in any other case
where the same is required or permitted to be calculated, on such other day as
the such Designated European Administrative Agent may, in its sole discretion,
consider appropriate; (C) the equivalent in Dollars of any unreimbursed drawing
in respect of any Letter of Credit denominated in an Alternate Currency shall be
determined at the time the drawing under such Letter of Credit was paid or
disbursed by the applicable Designated Letter of Credit Issuer or the applicable
Lending Installation thereof; (D) for purposes of Sections 2.1(a), 2.12(e) and
2.10(b), the equivalent in Dollars of any Revolving Credit Loan denominated in
an Alternate Currency or the face amount of any Letter of Credit denominated in
an Alternate Currency shall be calculated by the Administrative Agent (x) on the
date of the making of such Loan, the Rate Continuation or Rate Conversion of
such Loan, or the issuance of the respective Letter of Credit, as the case may
be, (y) on the first Business Day of each calendar month thereafter and (z) in
any other case where the same is required or permitted to be calculated, on such
other day as the Administrative Agent may, in its sole discretion, consider
appropriate; and (E) for purposes of Sections 2.16(c), 2.16(d)(i) and
2.16(d)(ii), the equivalent in Dollars of any Loan denominated in an Alternate
Currency or the face amount of any Letter of Credit denominated in an Alternate
Currency shall be calculated on the first day of each calendar month in the
quarterly period in which the respective payment is due pursuant to said
Sections.
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1.8 LIABILITY OF BORROWERS.
The parties intend that this Agreement shall in all
circumstances be interpreted to provide that each Foreign Borrower is liable
only for Loans made to such Borrower, interest on such Loans, such Foreign
Borrower's guaranty pursuant to Section 2.12(l)(ii) of reimbursement obligations
owing to the Designated Letter of Credit Issuer by its Foreign Subsidiaries, and
its Ratable Borrower Share of otherwise unallocated general fees, reimbursements
and charges hereunder and under any other Loan Document. The parties likewise
intend that this Agreement shall in all circumstances be interpreted to provide,
unless otherwise expressly stated to the contrary, that each Domestic Borrowers
and each Domestic Subsidiary which is a party to a Subsidiary Guaranty is liable
for all Obligations of all of the Borrowers.
SECTION 2 STATEMENT OF TERMS.
2.1 REVOLVING CREDIT FACILITY.
(a) REVOLVING CREDIT LOANS.
Subject to the terms and conditions set forth in this
Agreement, each Bank severally agrees to make, from time to time from
and after the Closing Date until the Business Day immediately preceding
the Revolving Credit Termination Date, Loans, denominated in Dollars or
Alternate Currency, to or for the account of each of the Borrowers on a
revolving credit basis (each a "Revolving Credit Loan"); provided,
however, that (i) the outstanding principal amount of Revolving Credit
Loans by or on behalf of such Bank to such Borrower, when taken
together with the outstanding principal amount of Revolving Credit
Loans made by or on behalf of such Bank to all other Borrowers, shall
not at any time exceed the lesser of: (x) an amount equal to such
Bank's Ratable Portion of the Borrowing Base at such time minus the sum
of the LC Exposure of such Bank at such time and the Swing Line
Exposure of such Bank at such time or (y) such Bank's Revolving Credit
Commitment in effect at such time minus the sum of the LC Exposure of
such Bank at such time and the Swing Line Exposure of such Bank at such
time, and (ii) in any event, no Revolving Credit Loans may be made in
an Alternate Currency if after giving effect thereto the Dollar
equivalent of the aggregate outstanding principal amount of all
Revolving Credit Loans denominated in all Alternate Currencies,
together with the Dollar equivalent of the aggregate Alternate Currency
LC Exposure and the aggregate Alternate Currency Swing Line Exposure of
all Banks, would exceed Thirty Million Dollars ($30,000,000) (the
"Alternate Currency Sublimit"). Within the limits set forth in this
Agreement, a Borrower may borrow, prepay and reborrow Revolving Credit
Loans made to such Borrower.
(b) REVOLVING CREDIT BORROWINGS.
Each Revolving Credit Borrowing to a Borrower shall
be: (i) if comprised of Alternate Base Rate Loans, in an amount of not
less than Five Hundred Thousand Dollars ($500,000), or an integral
multiple of Fifty Thousand Dollars ($50,000) in excess thereof, (ii) if
comprised of LIBOR Rate Loans denominated in Dollars, in an aggregate
amount of not less than One Million Dollars ($1,000,000) or an integral
multiple of One Hundred Thousand Dollars ($100,000) in excess thereof,
and (iii) if comprised of LIBOR Rate Loans denominated in an Alternate
Currency, in an aggregate amount of not less than the Alternate
Currency equivalent of One Million Dollars ($1,000,000) or an integral
multiple of the Alternate Currency equivalent of One Hundred Thousand
Dollars ($100,000) in excess thereof. Each Borrowing denominated in an
Alternate Currency may only be a LIBOR Rate Borrowing and not an
Alternate Base Rate Borrowing. Each
4
<PAGE> 14
Borrower shall be entitled to have more than one Revolving Credit
Borrowing outstanding at one time; provided, however, that no Borrower
shall be entitled to request a Revolving Credit Borrowing which,
together with all outstanding Revolving Credit Borrowings, Term
Borrowings and Swing Line Loans to all Borrowers, would result in an
aggregate of more than twenty-five (25) Borrowings (for purposes of
determining the number of outstanding Borrowings, outstanding Alternate
Base Rate Loans of all of the Domestic Borrowers shall be treated as a
separate Borrowing and all outstanding Swing Line Loans to each
Borrower shall be treated as a separate Borrowing by such Borrower)
outstanding at any one time to all of the Borrowers.
(c) REVOLVING CREDIT NOTES; LOAN ACCOUNT.
Each Bank's Revolving Credit Loans to a Borrower
shall be evidenced at all times by a Revolving Credit Note which shall
(i) be executed and delivered by the Borrower and payable to the order
of such Bank and (ii) be in a stated principal amount equal to the
Revolving Credit Commitment of such Bank and be payable to the order of
such Bank in an amount equal to the unpaid principal amount of such
Bank's Revolving Credit Loans evidenced thereby, (iii) mature on the
Revolving Credit Termination Date, (iv) bear interest as provided in
this Agreement, (v) be subject to mandatory prepayment as provided in
Section 2.10, and (vi) be entitled to the benefits of this Agreement
and the other Loan Documents. Whenever a Borrower obtains a Revolving
Credit Borrowing, each Bank shall endorse an appropriate entry in
respect of the Revolving Credit Loan of such Bank comprising such
Borrowing on such Bank's Revolving Credit Note or make an appropriate
entry in a loan account (the "Loan Account") maintained in such Bank's
books and records, or both, to evidence such Bank's Revolving Credit
Loans to such Borrower. The Loan Account shall also evidence: (i)
accrued interest on the Revolving Credit Loans of such Bank to each
Borrower, (ii) all other amounts due to the Bank in respect of such
Revolving Credit Loans, and (iii) all payments made by each Borrower in
respect of such Revolving Credit Loans. Each entry on a Bank's
Revolving Credit Note, books and records or Loan Account shall be prima
facie evidence of the data entered. Such entries by a Bank shall not be
a condition to any Borrower's obligation to repay the Obligations.
2.2 REQUESTS FOR REVOLVING CREDIT BORROWINGS.
Revolving Credit Loans comprising a Revolving Credit Borrowing
shall be made upon request of a Borrower in accordance with clause (a) below or
upon a request deemed to be made by a Borrower pursuant to clause (b) below.
(a) CREDIT REQUESTS EXECUTED BY BORROWER REPRESENTATIVE.
(i) Requests from a Borrower for Revolving Credit
Loans shall be given by the Borrower Representative to the
Administrative Agent or, to the extent that a Designated
European Administrative Agent has been designated for any
Borrower, the Designated European Administrative Agent
designated for such Borrower, as the case may be, not later
than 12:00 noon (local time at the Notice Office of the
Administrative Agent or such Designated European
Administrative Agent): (i) on the Business Day which is the
requested date of a proposed Revolving Credit Borrowing
comprised of Alternate Base Rate Loans, (ii) on the Business
Day which is two (2) Business Days before the requested date
of a proposed Revolving Credit Borrowing comprised of LIBOR
Rate Loans
5
<PAGE> 15
denominated in Dollars (provided that any Revolving Credit
Borrowing comprised of LIBOR Rate Loans being requested to be
advanced on the Closing Date shall not require such two (2)
Business Day prior notice), and (iii) on the Business Day
which is four (4) Business Days before the requested date of a
proposed Revolving Credit Borrowing comprised of LIBOR Rate
Loans denominated in an Alternate Currency. Each such request
(a "Credit Request") for a Revolving Credit Loan shall be a
written or telephonic notice (in the case of a telephonic
notice, promptly confirmed in writing if so requested by the
Administrative Agent or such Designated European
Administrative Agent, as the case may be). Each written Credit
Request or written confirmation thereof shall be substantially
in the form of Exhibit B-1 attached hereto, signed by the
Borrower Representative and transmitted by the Borrower
Representative to the Administrative Agent or such Designated
European Administrative Agent, as the case may be, by
telecopier. Each written and telephonic Credit Request and
each confirmation thereof shall specify: (A) the Borrower
which is to receive the proceeds of the Loans, (B) the
requested date of advance of the Loans comprising such
Borrowing, (C) the aggregate amount of such Loans, (D) whether
such Borrowing is to be comprised of Alternate Base Rate Loans
or LIBOR Rate Loans, (E) in the case of a proposed Borrowing
comprised of LIBOR Rate Loans, the initial Interest Period for
such LIBOR Rate Loans, and (F) in the case of a proposed
Borrowing comprised of LIBOR Rate Loans, the currency, if
other than Dollars, in which such LIBOR Rate Loans are being
requested. Each Credit Request by or on behalf of a Borrower
shall be irrevocable and binding on such Borrower and be
subject to the indemnification provisions of Section 13 of
this Agreement. The Administrative Agent and such Designated
European Administrative Agent may rely on such telephonic
Credit Request to the same extent that such Agents may rely on
a written Credit Request. The Borrower for which a Credit
Request was made shall bear all risks related to the giving of
such Credit Request by the Borrower Representative whether
given telephonically or by such other method of transmission
as the Borrower Representative shall elect.
(ii) In the case of a proposed Revolving Credit
Borrowing comprised of LIBOR Rate Loans denominated in an
Alternate Currency, the obligation of each Bank to make its
LIBOR Rate Loan in the requested Alternate Currency as part of
such Revolving Credit Borrowing is subject to:
(A) if such requested Alternate Currency is
an Alternate Currency described in clause (i) of the
definition of the term Alternate Currency,
confirmation to the Borrower Representative by the
Administrative Agent or the Designated European
Administrative Agent designated for the Borrower for
which the Credit Request is made, as the case may be,
not later than four (4) Business Days before the
requested date of such Revolving Credit Borrowing
that such Alternate Currency is readily and freely
transferable and convertible into Dollars, or
(B) if such requested Alternate Currency is
not an Alternate Currency described in clause (i) of
the definition of the term Alternate
6
<PAGE> 16
Currency, confirmation to the Notice Office of the
Administrative Agent or such Designated European
Administrative Agent, as the case may be, by each
Bank not later than four (4) Business Days before the
requested date of such Revolving Credit Borrowing
that such Alternate Currency is acceptable to such
Bank.
The Administrative Agent or such Designated European
Administrative Agent shall promptly notify the Borrower
Representative and each of the Banks in the event that: (x)
all of the Banks affirmatively confirm such Alternate Currency
is acceptable as required by clause (B) above and (y) one or
more of the Banks do not affirmatively confirm such Alternate
Currency is acceptable as required by clause (B) above. If the
Administrative Agent or such Designated European
Administrative Agent has not provided the affirmative
confirmation referred to in clause (A) above or has notified
the Borrower Representative that not all of the Banks have
affirmatively confirmed acceptability of the Alternate
Currency as required by clause (B), the Borrower
Representative may, by notice to the Administrative Agent at
the Notice Office thereof not later than three (3) Business
Days before the requested date of such Revolving Credit
Borrowing, withdraw the Credit Request relating to such
requested Revolving Credit Borrowing. If the Borrower
Representative withdraws such Credit Request, the Revolving
Credit Borrowing requested in such Credit Request shall not
occur and the Administrative Agent or such Designated European
Administrative Agent shall promptly notify each of the Banks
of such withdrawal. If the Borrower Representative does not
withdraw such Credit Request, the Administrative Agent or such
Designated European Administrative Agent, as the case may be,
shall promptly notify each of the Banks, and such Credit
Request shall be deemed to be a Credit Request which requests
a Revolving Credit Borrowing comprised of LIBOR Rate Loans
denominated in Dollars in an aggregate amount equal to the
Dollar equivalent, on the date the Administrative Agent or
such Designated European Administrative Agent notifies each of
the Banks, of the amount of the originally requested Revolving
Credit Borrowing denominated in the Alternate Currency. Such
notice of continued Credit Request by the Administrative Agent
or such Designated European Administrative Agent to each of
the Banks shall state such aggregate amount of such Revolving
Credit Borrowing in Dollars and such Bank's ratable portion of
such Revolving Credit Borrowing.
(b) DEEMED CREDIT REQUESTS.
A Borrower shall be deemed to have made a request for
a Borrowing (a "Deemed Credit Request"), which Deemed Credit Request
shall be deemed to be irrevocable, upon the occurrence of any of the
following
(i) LETTER OF CREDIT DRAWING. As specified in Section
2.12(f) of this Agreement, upon a failure of a Borrower to
reimburse any Designated letter of Credit Issuer with respect
to a drawing under a Letter of Credit, the applicable
Borrower, or, in the case of a Letter of Credit issued for the
account of a Letter of Credit Obligor that is not a Borrower,
the Borrower guarantying reimbursement of such Letter of
Credit Obligor pursuant to Section 2.12(l) of this Agreement,
shall be deemed to have made a Deemed Credit Request for a
Revolving Credit Borrowing comprised of Alternate Base Rate
Loans denominated in Dollars in an
7
<PAGE> 17
amount equal to the amount necessary to reimburse the
applicable Designated Letter of Credit Issuer for such
drawing.
(ii) SWING LINE LOAN REFUNDING. As specified in
Section 2.7(j) of this Agreement, upon a demand by a
Designated Swing Line Lender for a refunding of outstanding
Swing Line Loans advanced to a Borrower, such Borrower shall
be deemed to have made a Deemed Credit Request for a Revolving
Credit Borrowing comprised of LIBOR Rate Loans denominated in
Dollars in an amount equal to the amount necessary to refund
the applicable Designated Swing Line Lender for such
outstanding Swing Line Loans.
(iii) PAYMENT OF INTEREST AND OBLIGATIONS. Upon the
occurrence of any interest, fee or other payment Obligation of
a Borrower hereunder becoming due without payment, such
Borrower shall be deemed to have made a Deemed Credit Request
for a Revolving Credit Borrowing comprised of Alternate Base
Rate Loans in an amount equal to the amount necessary to pay
such interest, fee or payment Obligation.
Each Bank acknowledges and agrees that its obligation to participate in
and make Loans comprising a Borrowing pursuant to a Deemed Credit
Request is absolute and unconditional and shall not be affected by any
event or circumstance whatsoever, including the occurrence of any
Potential Default or Event of Default hereunder or the failure of any
condition precedent set forth in Section 3 of this Agreement to be
satisfied at the time of the making of such Deemed Credit Request, and
each Loan made by a Bank in satisfaction of its obligation shall be
made without any offset, abatement, withholding or reduction
whatsoever.
2.3 FUNDING OF REVOLVING CREDIT LOANS.
The Administrative Agent or the Designated European
Administrative Agent designated for the Borrower for which a Credit Request is
made, as the case may be, shall notify each Bank of a Credit Request or Deemed
Credit Request not later than 1:00 p.m. (local time at the Payment Office of the
Administrative Agent or such Designated European Administrative Agent, as the
case may be) on the date received by telecopier, telephone or similar form of
transmission. Each Bank shall, before 2:00 p.m. (local time at the Payment
Office of the Administrative Agent or such Designated European Administrative
Agent, as the case may be) on the date of each Revolving Credit Borrowing
requested for a Borrower, make available to the Administrative Agent or such
Designated European Administrative Agent, as the case may be, in Dollars or,
subject to Section 2.2(a)(ii), the applicable Alternate Currency, in immediately
available funds at the account of the Administrative Agent or such Designated
European Administrative Agent, as the case may be, maintained at the Payment
Office of the Administrative Agent or such Designated European Administrative
Agent, as the case may be, as shall have been notified by the Administrative
Agent or such Designated European Administrative Agent, as the case may be, to
the Banks prior to such date, such Bank's Ratable Portion of the Revolving
Credit Loans comprising such Revolving Credit Borrowing. On the date specified
for a Revolving Credit Borrowing in such Credit Request (or, in the case of a
Deemed Credit Request, on the earliest dated permitted after the receipt of
Credit Request hereunder), after receipt by the Administrative Agent or such
Designated European Administrative Agent, as the case may be, of the funds
representing a Bank's Ratable Portion of such Revolving Credit Borrowing and
subject to the terms of this Agreement and the fulfillment of the conditions set
forth in Section 3 of this Agreement, the Administrative Agent or such
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Designated European Administrative Agent shall promptly make such Revolving
Credit Loan of such Bank available to the Borrower specified in the Credit
Request or with respect to which the Deemed Credit Request is applicable, in
immediately available funds, by wire transfer or intrabank transfer to: (A) the
Operating Account of such Borrower or (B) such other account of such Borrower as
the Administrative Agent or such Designated European Administrative Agent, as
the case may be, and the Borrower Representative shall have agreed upon from
time to time for this purpose; provided, however, that, if a Borrowing shall not
occur on such date because any condition precedent herein specified shall not
have been met, the Administrative Agent or such Designated European
Administrative Agent, as the case may be, shall return the amounts so received
to the respective Banks.
2.4 AVAILABILITY OF FUNDS.
Subject to Section 2.2(a)(ii) of this Agreement, unless the
Administrative Agent or the applicable Designated European Administrative Agent
shall have received notice from a Bank prior to the date (or, in the case of
Alternate Base Rate Loans, prior to the time) of any Revolving Credit Borrowing
that such Bank will not make available to the Administrative Agent or such
Designated European Administrative Agent, such Bank's Ratable Portion of the
Revolving Credit Borrowing, the Administrative Agent or such Designated European
Administrative Agent may assume that such Bank has made its Ratable Portion of
the Revolving Credit Borrowing available to the Administrative Agent or such
Designated European Administrative Agent on the date of the Revolving Credit
Borrowing in accordance with Section 2.3 of this Agreement. In reliance upon
such assumption, the Administrative Agent or such Designated European
Administrative Agent may, but shall not be obligated to, make available on such
date to the Borrower, specified in the Credit Request or to which the Deemed
Credit Request is applicable, a corresponding portion of the Revolving Credit
Borrowing. Any disbursement by the Administrative Agent or such Designated
European Administrative Agent in reliance on such assumption shall be deemed to
be a Revolving Credit Loan by such Bank.
2.5 FAILURES TO FUND LOANS OR PARTICIPATING INTERESTS.
If, and to the extent that, any Bank fails to make available
to the Administrative Agent or the applicable Designated European Administrative
Agent, as the case may be, the amount of such Bank's Ratable Portion of any
Revolving Credit Borrowing pursuant to Section 2.3 hereof (or pursuant to
Section 2.7(j) or 2.12(f) hereof in connection with Deemed Credit Requests for
Revolving Credit Loan refunding of Swing Line Loans or payment of unpaid
reimbursement obligations hereunder) or Term Borrowing pursuant to Section
2.8(d) made available to a Borrower by the Administrative Agent or such
Designated European Administrative Agent pursuant to Section 2.4 hereof or fails
to make available to the Administrative Agent or such Designated European
Administrative Agent the amount of such Bank's participation purchase price
payable for its participating interest in outstanding Swing Line Loans to such
Borrower or unpaid reimbursement obligations owing by such Borrower (pursuant to
Section 2.7(k) or 2.12(f) hereof), such Bank shall pay such amount to the
Administrative Agent or such Designated European Administrative Agent, as the
case may be, for application pursuant to this Section immediately upon demand by
the Administrative Agent or such Designated European Administrative Agent
therefor. To the extent such Bank does not pay such amount to the Administrative
Agent or such Designated European Administrative Agent, as the case may be,
forthwith upon such demand by the Administrative Agent or such Designated
European Administrative Agent, the Administrative Agent or such Designated
European Administrative Agent, as the case may be, shall promptly request
payment thereof from such Borrower, and such Borrower shall immediately pay such
amount to the Administrative Agent or such Designated European Administrative
Agent for application pursuant to this Section. Such Bank and such Borrower
shall be severally liable to pay interest to
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<PAGE> 19
the Administrative Agent or such Designated European Administrative Agent, as
the case may be, for application pursuant to this Section on such amount for
each day from the date such amount should otherwise have been made available to
the Administrative Agent or such Designated European Administrative Agent until
the date any such amount is paid to the Administrative Agent or such Designated
European Administrative Agent, as the case may be, by such Bank or such
Borrower, as the case may be, at a per annum rate of interest equal to: (x) if
paid by such Bank, the Federal Funds Effective Rate in the case of the
Administrative Agent or Cost of Funds Rate in the case of such Designated
European Administrative Agent or (y) if paid by such Borrower, the interest rate
applicable to such Revolving Credit Borrowings or Term Borrowings.
(a) CONTINUING OBLIGATION OF BORROWERS.
Failure of any Bank to fund its Ratable Portion of
any Revolving Credit Borrowing or Term Borrowing or to pay the
participation purchase price for its participating interests hereunder
shall not relieve or excuse the performance by any Borrower of any of
such Borrower's duties or obligations hereunder.
(b) PAYMENT CONSTITUTING RATABLE PORTION.
If such Bank pays to the Administrative Agent or the
applicable Designated European Administrative Agent, as the case may
be, the Bank's Ratable Portion of such Revolving Credit Borrowing, Term
Borrowing or participation purchase price for its participating
interests hereunder prior to repayment of such amount by the applicable
Borrower, the amount so repaid shall constitute such Bank's Ratable
Portion of such Revolving Credit Borrowing, Term Borrowing or
participation purchase price for its participating interest. Such
payment shall be applied as if paid when otherwise required hereunder
and shall be applied as provided in Section 2.3, 2.7(j), 2.12(f),
2.7(k) or 2.12(f) hereof, as the case may be. In such circumstances,
such Borrower shall have no further obligation to make the payment
required by this Section.
(c) TREATMENT OF BANK FAILING TO FUND.
To the extent any Bank fails to make available to the
Administrative Agent or the applicable Designated European
Administrative Agent, as the case may be, such Bank's Ratable Portion
of Revolving Credit Borrowings or Term Borrowings hereunder or such
Bank's participation purchase price for its participating interests
hereunder, the Administrative Agent or such Designated European
Administrative Agent shall not be obligated to transfer to such Bank
any payments made by a Borrower to the Administrative Agent or such
Designated European Administrative Agent for the benefit of such Bank
until such Bank's cure of such failure. Until the earlier of such
Bank's cure of such failure or the termination of the Commitments of
the Banks and the Aggregate Swing Line Commitment of the Designated
Swing Line Lenders, all amounts repaid to the Administrative Agent or
such Designated European Administrative Agent, as the case may be, by a
Borrower which would otherwise be required to be applied to such Bank's
Ratable Portion of the Obligations shall be advanced to such Borrower,
the affected Designated Swing Line Lender or Designated Letter of
Credit Issuer, as applicable, by the Administrative Agent or such
Designated European Administrative Agent, as the case may be, on behalf
such Bank to cure, in full or in part, the failure by such Bank, but
shall nevertheless be deemed to have been paid to such Bank in
satisfaction of the Obligations to which such payment would otherwise
have been applied.
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(d) CONTINUING OBLIGATION OF BANKS TO FUND.
It is understood that: (i) a Bank shall not be
responsible for any failure by any other Bank to perform its obligation
to make any Loans hereunder or make payments of any participation
purchase price for its participating interest hereunder, (ii) the
Commitment of a Bank shall not be increased or decreased as a result of
any failure by any other Bank to perform its obligation to make any
Loans hereunder or pay any participation purchase price, (iii) failure
by any Bank to perform its obligation to make any Loans hereunder or
pay the participation purchase price for its participating interests
hereunder shall not excuse any other Bank from its obligation to make
any Loans hereunder or pay any participation purchase price for its
participating interests hereunder, and (iv) the obligations of each
Bank hereunder shall be individual and several, not joint and several.
(e) DEFAULTING LENDER; OBLIGATIONS OF DESIGNATED SWING
LINE LENDERS AND LETTER OF CREDIT ISSUERS.
In the circumstance that any Defaulting Lenders
exist, no Designated Swing Line Lender or Designated Letter of Credit
Issuer shall be required to make or issue, as the case may be, any
Swing Line Loan or Letter of Credit unless such Designated Swing Line
Lender or Designated Letter of Credit Issuer have entered into
arrangements with the applicable Borrowers satisfactory to such
Designated Swing Line Lender or Designated Letter of Credit Issuer and
the Borrower Representative which either (i) eliminate such Designated
Swing Line Lender's or Designated Letter of Credit Issuer's risk with
respect to the refunding of or participation in Swing Line Loans and
Letters of Credit by such Defaulting Lender, including creation of a
cash collateral account to assure payment of such Defaulting Lender's
Ratable Portion of outstanding Swing Line Obligations and Letter of
Credit Obligations or (ii) provide that the making of such Swing Line
Loan or the issuance of the Letter of Credit, taking into account the
potential failure of such Defaulting Lender to refund or purchase
participating interests therein, will not cause the Designated Swing
Line Lender or Designated Letter of Credit Issuer, as the case may be,
to incur aggregate credit exposure hereunder with respect to Revolving
Credit Loans made thereby and Swing Line Obligations and Letter of
Credit Obligations owing thereto to be in excess of its Revolving
Credit Commitment (such applicable Borrower agreeing not to thereafter
incur Revolving Credit Loans or Swing Line Obligations and Letter of
Credit Obligations hereunder which would cause such aggregate excess
exposure).
2.6 AFFILIATED FUNDING THROUGH, ON BEHALF OF, OR BY BANKS.
(a) SPC FUNDING ON BEHALF OF BANKS.
Notwithstanding anything to the contrary contained
herein, all or any part of a Loan that any Bank or Designated Swing
Line Lender (an "Obligated Bank") may be obligated to fund pursuant to
this Agreement may be funded on such Bank's behalf by a special purpose
funding vehicle (an "SPC"); provided, however, that, (a) if any SPC
fails to fund all or any part of such Loan, the Obligated Bank shall be
obligated to fund such Loan pursuant to the terms hereof, (b) in no
event shall any such funding by any SPC increase the costs or expenses
for which any Borrower is liable under this Agreement and (c) in no
event shall any such funding through any SPC subject any Borrower to
any Taxes or other Taxes without such Obligated Bank's being subject to
the exercise by the Borrowers of their rights under Section 12.3 of
this Agreement. The funding of a Loan by an SPC hereunder shall utilize
the Commitment of the Obligated Bank to the same
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extent, and as if, such Loan were funded by such Obligated Bank, and
for purposes of this Agreement, such Loan shall be deemed to have been
made by such Obligated Bank. Each party hereto hereby agrees that: (i)
no SPC shall be liable for any indemnity or payment under this
Agreement for which such Obligated Bank would otherwise be liable and
(ii) the SPC shall act only on behalf of and through the Obligated Bank
and shall have no rights hereunder or otherwise with respect to any
Borrower independent of those of such Obligated Bank hereunder.
Notwithstanding anything to the contrary contained in this Agreement,
any SPC may disclose on a confidential basis any non-public information
relating to its funding of Loans to any rating agency, commercial paper
dealer or provider of any surety or guarantee for such SPC's
obligations which has agreed in writing to be bound by the provisions
of Section 12.4 hereof. This Section 2.6 may not be amended without the
prior written consent of each Obligated Bank which has notified
Borrower Representative and the Administrative Agent that all or any
part of any of its Loans is being funded by an SPC at the time of such
amendment.
(b) FUNDING BY BANKS, DESIGNATED SWING LINE LENDERS, AND
DESIGNATED LETTER OF CREDIT ISSUERS THROUGH OR ON
BEHALF OF LENDING INSTALLATIONS.
Notwithstanding anything to the contrary contained
herein, all or any part of a Loan that any Obligated Bank may be
obligated to fund pursuant to this Agreement (i) may be funded by such
Bank on behalf of such Bank's Lending Installation or (ii) may be
funded on such Bank's behalf by such Bank by and through any such
Lending Installation; provided that, (a) if any Lending Installation
fails to fund all or any part of such Loan, the Obligated Bank shall be
obligated to fund such Loan pursuant to the terms hereof, (b) in no
event shall any such funding by any Lending Installation increase the
costs or expenses for which any Borrower is liable under this Agreement
and (c) in no event shall any such funding on behalf of or through any
such Lending Installation subject any Borrower to any Taxes or other
Taxes without such Obligated Bank's being subject to the exercise by
the Borrowers of their rights under Section 12.3 of this Agreement. The
funding of a Loan by a Lending Installation hereunder shall utilize the
Commitment of the Obligated Bank to the same extent, and as if, such
Loan were funded by such Obligated Bank, and for purposes of this
Agreement, such Loan shall be deemed to have been made directly by such
Obligated Bank. The funding of a Loan by such Lending Installation on
behalf of its Obligated Bank hereunder shall utilize the Commitment of
the Obligated Bank to the same extent, and as if, such Loan were funded
by such Obligated Bank for its own account, and for purposes of this
Agreement, such Loan shall be deemed to have been made by such
Obligated Bank for the account of the Obligated Bank. Any payments made
by any Borrower to the Obligated Bank or its Lending Installation shall
be applied in reduction of the Obligations owing by such Borrower to
the Obligated Bank and shall automatically reduce on dollars for dollar
any related account of the Lending Installation with respect to such
Obligations to the Obligated Bank. Each party hereto hereby agrees that
the Lending Installation shall have no rights hereunder or otherwise
with respect to any Borrower independent of those of such Obligated
Bank hereunder but shall by reason of its acceptance of its selection
as a Lending Installation, otherwise be deemed subject to the terms and
conditions hereof. This Section 2.6 may not be amended without the
prior written consent of each Obligated Bank which has notified
Borrower Representative and the Administrative Agent that all or any
part of any of its Loans is being funded on such Bank's behalf through
a Lending Installation at the time of such amendment.
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2.7 SWING LINE LOAN FACILITY.
(a) SWING LINE LOANS.
Subject to the terms and conditions set forth in this
Agreement, each Foreign Borrower having a Designated Swing Line Lender
designated for such Borrower hereunder may request such Designated
Swing Line Lender to make, and each such Designated Swing Line Lender
is irrevocably authorized by the Administrative Agent, the Designated
European Administrative Agent designated for such Borrower and the
Banks to make and severally agrees to make directly or through its
Lending Installation, from time to time from and after the Closing Date
until the Business Day immediately preceding the Swing Line Termination
Date, Loans denominated in Dollars or Alternate Currency to or for the
account of such Borrower on a revolving credit basis (each a "Swing
Line Loan"); provided, however, that the aggregate principal amount of
Swing Line Loans advanced by all Designated Swing Line Lenders
outstanding at any time shall not exceed the lesser of: (i) Five
Million Dollars ($5,000,000) or the Alternate Currency equivalent
thereof (the "Aggregate Swing Line Commitment") or (ii) the lesser of
the aggregate Revolving Credit Commitments of the Banks in effect at
such time or the Borrowing Base minus the sum of the aggregate
principal amount of the Revolving Credit Loans of the Banks outstanding
at such time and the aggregate LC Exposure of the Banks at such time.
Within the limits set forth herein, a Borrower may borrow, pay or
prepay and reborrow Swing Line Loans advanced to such Borrower.
(b) CONDITIONS TO SWING LINE LOANS.
(i) CONDITION PRECEDENT TO SWING LINE LOANS. The
Foreign Borrowers shall be entitled to request Swing Line
Loans only from and after the time during or upon expiration
of the Syndication Period to the extent that the
Administrative Agent has designated a Designated European
Administrative Agent which Designated European Administrative
Agent has been assigned a minimum of at least $5,000,000 of an
initial Bank's rights and obligations under this Agreement and
of the Revolving Credit Commitment of such initial Bank
hereunder.
(ii) CONDITIONS TO CESSATION OF ADVANCE OF SWING LINE
LOANS. If the conditions to borrowing Swing Line Loans
pursuant to Section 3.2 hereof cannot be satisfied with
respect to one or more of the Borrowers, the Borrower
Representative shall, and any Bank, Designated Swing Line
Lender or Lending Installation may, give immediate written
notice (a "Non-Compliance Notice") of such failure to the
Designated European Administrative Agent and each Designated
Swing Line Lender, as the case may be, and the Designated
European Administrative Agent shall promptly provide each Bank
and the Administrative Agent at the Notice Office of such Bank
and the Administrative Agent with a copy of such
Non-Compliance Notice. If the conditions for borrowing under
Section 3.2 hereof cannot be satisfied, the Required Banks may
by telephonic or written notice to the Designated European
Administrative Agent instruct the Designated European
Administrative Agent to direct the Designated Swing Line
Lenders to cease, and the Designated European Administrative
Agent shall by telephonic or written notice to the Designated
Swing Line Lenders promptly
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direct the Designated Swing Line Lenders to cease, and
thereupon the Designated Swing Line Lenders shall immediately
cease, making Swing Line Loans to the Borrowers for which such
Designated Swing Line Lender is designated until the
conditions to borrowing are satisfied or waived in accordance
with Section 14.1 hereof. Unless the Designated European
Administrative Agent so directs the Designated Swing Line
Lenders to cease making Swing Line Loans, each Designated
Swing Line Lender may, but is not obligated to, continue to
make (subject to the limitations of Section 2.7(a) hereof)
Swing Line Loans one (1) Business Day after the Non-Compliance
Notice is furnished to the Banks by the applicable Designated
European Administrative Agent.
(c) SWING LINE BORROWINGS.
The Swing Line Loans to a Borrower shall be comprised
of one or more Swing Line Borrowings from the Designated Swing Line
Lender designated for such Borrower as such Borrower may elect from
time to time. Each Swing Line Borrowing advanced to a Borrower by the
Designated Swing Line Lender designated for such Borrower shall be: (i)
if denominated in Dollars, in an aggregate amount of not less than Two
Hundred and Fifty Thousand Dollars ($250,000) or an integral multiple
of One Hundred Thousand Dollars ($100,000) in excess thereof, and (ii)
if denominated in an Alternate Currency, in an aggregate amount of not
less than the Alternate Currency equivalent of Two Hundred and Fifty
Thousand Dollars ($250,000) or an integral multiple of the Alternate
Currency equivalent of One Hundred Thousand Dollars ($100,000) in
excess thereof. Each Borrower shall be entitled to have more than one
Swing Line Borrowing outstanding at one time; provided, however, that
no Borrower shall be entitled to request a Swing Line Borrowing which
would result in an aggregate of more than ten (10) Swing Line
Borrowings from the applicable Designated Swing Line Lender for such
Borrower outstanding at any one time to such Borrower.
(d) SWING LINE LOAN REQUESTS.
Requests for Swing Line Loans for a Borrower shall be
given by the Borrower Representative to the Designated European
Administrative Agent designated for such Borrower not later than 2:00
p.m. (local time at the Notice Office of such Designated European
Administrative Agent): (i) on the Business Day which is the same
Business Day as the requested date of a proposed Swing Line Loan which
is to be a Money Market Rate Loan or (ii) on the Business Day which is
three (3) Business Days prior to or, to the extent acceptable the
applicable Designated Swing Line Lender, in its sole discretion, the
same Business Day as the requested date of a proposed Swing Line Loan
which is to be a LIBOR Rate Loan. Each such request (a "Swing Line
Request") for a Swing Line Loan shall be a written or telephonic notice
(in the case of a telephonic notice, promptly confirmed in writing if
so requested by the Designated European Administrative Agent). Each
written Swing Line Request or written confirmation thereof be shall be
substantially in the form of Exhibit B-2 attached hereto, signed by the
Borrower Representative and transmitted by the Borrower Representative
to the Designated European Administrative Agent by telecopier. Each
written and telephonic Swing Line Request and each confirmation thereof
shall specify: (i) the requested date of the proposed Swing Line Loan,
(ii) the aggregate amount of such Swing Line Loan, (iii) confirmation
that such Swing Line Loan is to be comprised of Swing Line Borrowing
denominated in Dollars or, if other than in Dollars, the Alternate
Currency in which such Swing Line Loan is to be denominated, (iv)
confirmation whether such Swing Line Loan is the be a Money Market Rate
Loan or a LIBOR Rate Loan and (v) if the Swing Line
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<PAGE> 24
Loan is to be a Money Market Rate Loan, confirmation of the maturity
date of the requested Swing Line Loan (which shall not be more than
thirty (30) days in the case of Money Market Rate Loans) and the
Borrower's acceptance of the fixed or floating Quoted Money Market Rate
quoted to the Borrower Representative by the Designated European
Administrative Agent pursuant to Section 2.7(f) of this Agreement. Each
Swing Line Request shall be irrevocable and binding on the Borrower for
which the request was made and be subject to the indemnification
provisions of Section 13 of this Agreement. The Borrower for which a
Swing Line Request was made shall bear all risks related to the giving
of such Swing Line Request by the Borrower Representative on behalf of
such Borrower whether given telephonically or by such other method of
transmission as the Borrower Representative shall elect.
(e) NOTICE OF REQUESTS; OUTSTANDINGS.
Each Designated European Administrative Agent shall
give the Designated Swing Line Lender and the Administrative Agent,
which Administrative Agent shall in turn give each Bank, prompt written
or telecopy notice of any Swing Line Request received from the Borrower
Representative pursuant to Section 2.7(d) and the amount of Swing Line
Loans funded by the Designated Swing Line Lender pursuant thereto. Such
Designated European Administrative Agent shall maintain the record of
such fundings of Swing Line Loans in the Control Account maintained by
such Designated European Administrative Agent pursuant to Section
2.17(d) hereof. Each Designated European Administrative Agent shall
provide to the Administrative Agent a quarterly (or monthly if
requested by the Administrative Agent) summary describing the Swing
Line Loans advanced during such period by the Designated Swing Line
Lender and then outstanding as well as an identification for the
relevant period of the daily aggregate principal of such Swing Line
Loans outstanding.
(f) PROCEDURE FOR OBTAINING QUOTED MONEY MARKET RATE.
Whenever the Borrower Representative proposes to
submit a Swing Line Request to the Designated European Administrative
Agent for a Swing Line Borrowing to a Borrower, requests for an
interest rate quote for such Swing Line Borrowing shall be given by the
Borrower Representative to such Designated European Administrative
Agent not later than 11:00 (local time at the Notice Office of such
Designated European Administrative Agent and Lending Installation
thereof) on the same Business Day as the Swing Line Request is required
to be given to such Designated European Administrative Agent pursuant
to Section 2.7(d) hereof. Each such request (a "Rate Quote Request")
for a quote shall be a written or telephonic notice requesting such
Designated European Administrative Agent to quote a fixed or floating
interest rate (the "Quoted Money Market Rate") which would be
applicable to the Money Market Rate Loan comprising such Swing Line
Borrowing if such Money Market Rate Loan were made on or prior to a
date specified in such Rate Quote Request and remained outstanding
until the maturity date specified in such Rate Quote Request. The
Designated European Administrative Agent will immediately so notify the
Designated Swing Line Lenders of such Rate Quote Request, and, if all
of such Designated Swing Line Lenders are agreeable to a particular
interest rate for the proposed maturity of such Money Market Rate
Loans, such Quoted Money Market Rate for such proposed Money Market
Rate Loan shall be quoted by the Designated European Administrative
Agent to the Borrower Representative on or before 1:00 p.m. (local time
at the Notice Office of such Designated European Administrative Agent)
on the day such Rate Quote Request is received by the Designated
European Administrative Agent. The parties contemplate that any Quoted
Money Market Rate will be a rate of interest which reflects a margin
corresponding to the Applicable Margin in
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<PAGE> 25
effect at the time of quotation of any Quoted Money Market Rate over
the then prevailing: (i) Federal Funds Effective Rate or Cost of Funds
Rate or (ii) any other then prevailing commercial paper, call money,
overnight repurchase or similar commonly quoted interest rate, in each
case, to be selected as the basis for the quote by such Designated
European Administrative Agent.
(g) SWING LINE NOTES; SWING LINE LOAN ACCOUNT.
The Swing Line Loans from each Designated Swing Line
Lender shall be evidenced at all times by a Swing Line Note which shall
(i) be executed and delivered by such Borrower for which the Designated
Swing Line Lender is designated and payable to the order of such
Designated Swing Line Lender, (ii) be in a stated principal amount
equal to the Designated Swing Line Lender Commitment and be payable in
the principal amount of the Swing Line Loans evidenced thereby, (iii)
as to any Swing Line Loans advanced, mature on the selected maturity
date applicable to such Swing Line Loan and in no event later than the
Swing Line Termination Date, (iv) bear interest as provided in Section
2.13(a)(iii) in respect of each Money Market Rate Loan evidenced
thereby, (v) be subject to mandatory prepayment as provided in Section
2.10, and (vi) be entitled to the benefits of this Agreement and the
other Loan Documents. Whenever a Borrower obtains a Swing Line Loan,
the Designated Swing Line Lender advancing such Swing Line Loan shall
endorse an appropriate entry on such Swing Line Note or make an
appropriate entry in a loan account (the "Swing Line Loan Account")
maintained in such Designated Swing Line Lender's books and records, or
both, to evidence such Swing Line Loans. The Swing Line Loan Account
shall also evidence: (A) accrued interest on the Swing Line Loan, (B)
all other amounts due to the Designated Swing Line Lender in respect of
the Swing Line Note and (C) all payments made by the Borrower to the
Designated Swing Line Lender for application to such Swing Line Loans.
Each entry on the Swing Line Note, Designated Swing Line Lender's books
and records or the or in the Swing Line Loan Account shall be prima
facie evidence of the data entered. Such entries shall not be a
condition to a Borrower's obligation to repay the Obligations in
respect of Swing Line Loans.
(h) FUNDING OF SWING LINE LOANS.
The Designated European Administrative Agent
designated for the Borrower for which a Credit Request is made shall
notify the Designated Swing Line Lender for such Borrower of a Swing
Line Credit Request not later than 1:00 p.m. (local time at the Notice
Office of such Designated Swing Line Lender) on the date received by
telecopier, telephone or similar form of transmission. Each Designated
Swing Line Lender shall, before 2:00 p.m. (local time at the Payment
Office of the Designated European Administrative Agent) on the date of
each Swing Line Loan requested for a Borrower, make available such
Swing Line Loan to such Designated European Administrative Agent, in
Dollars or, subject to the Alternate Currency Sublimit specified in
Section 2.1(a) hereof and the provisions of Section 2.2(a)(ii) hereof,
the applicable Alternate Currency, in immediately available funds at
the account of such Designated European Administrative Agent,
maintained at the Payment Office of such Designated European
Administrative Agent as shall have been notified by such Designated
European Administrative Agent to the Designated Swing Line Lenders
prior to such date. On the date specified for a Swing Line Loan in such
Swing Line Credit Request, after such Designated European
Administrative Agent's receipt of the funds representing such
Designated Swing Line Lender's Swing Line Loan and subject to the terms
of this Agreement and the fulfillment of the conditions set forth in
Section 3 of this Agreement, such Designated European Administrative
Agent shall promptly make such Swing Line
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Loan of such Designated Swing Line Lender available to the Borrower
specified in the Swing Line Credit Request, in immediately available
funds, by wire transfer or intrabank transfer to: (A) the Operating
Account of such Borrower or (B) such other account of such Borrower as
such Designated European Administrative Agent and the Borrower
Representative shall have agreed upon from time to time for this
purpose; provided, however, that, if a Borrowing shall not occur on
such date because any condition precedent herein specified shall not
have been met, such Designated European Administrative Agent shall
return the amounts so received to the respective Banks.
(i) AVAILABILITY OF FUNDS.
Subject to Section 2.2(a)(ii) of this Agreement,
unless the applicable Designated European Administrative Agent shall
have received notice from the Designated Swing Line Lender designated
for a Borrower for which a Swing Line Credit Request has been made
prior to the date (or, in the case of Money Market Rate Loans, prior to
the time) requested for such Swing Line Loans that such Designated
Swing Line Lender will not make available to such Designated European
Administrative Agent, the proceeds of such Designated Swing Line
Lender's Swing Line Loan, such Designated European Administrative Agent
may assume that such Designated Swing Line Lender has made its Swing
Line Loan proceeds available to such Designated European Administrative
Agent on the date of the Swing Line Borrowing in accordance with
Section 2.7(h) of this Agreement. In reliance upon such assumption,
such Designated European Administrative Agent may, but shall not be
obligated to, make available on such date to such Borrower specified in
the Credit Request, the amount of such requested Swing Line Loan. Any
disbursement by such Designated European Administrative Agent in
reliance on such assumption shall be deemed to be a Swing Line Loan by
such Designated Swing Line Lender.
(j) REFUNDING SWING LINE LOANS; SETTLEMENT BY BANKS.
Each Designated Swing Line Lender may from time to
time by written or telecopy notice given to the Designated European
Administrative Agent designated for such Designated Swing Line Lender
not later 11:00 a.m. (local time at the Notice Office of such
Designated European Administrative Agent), in any case on a date
selected by the Designated Swing Line Lender in its sole discretion,
notify such Designated European Administrative Agent of the aggregate
principal amount of the Swing Line Loans advanced by such Designated
Swing Line Lender outstanding as of the close of business on the
Business Day immediately preceding the date of the notice and direct
that such aggregate principal amount of Swing Line Loans be refunded by
the Banks. Upon receipt of such notice (a "Refunding Notice"), such
Designated European Administrative Agent shall, not later than 1:00
p.m. (local time at the Notice Office of such Designated European
Administrative Agent) on such date of notice from such Designated Swing
Line Lender, give notice to each Bank at the Lending Office of each
such Bank specifying its Ratable Portion of such outstanding Swing Line
Loans. Upon receipt of such notice, each Bank shall make available to
such Designated European Administrative Agent for the benefit of such
Designated Swing Line Lender, in immediately available funds, at the
account of such Designated European Administrative Agent maintained at
the Payment Office of such Designated European Administrative Agent,
not later than 3:00 p.m.(local time at the Payment Office of such
Designated European Administrative Agent) on the date of such notice,
its Ratable Portion of such aggregate amount of Swing Line Loans
outstanding and being refunded. If such Designated European
Administrative Agent's notice to the Banks is received after 1:00 p.m.
(local time at the Lending Office of such Bank), each Bank shall make
its Ratable Portion available to such Designated
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European Administrative Agent for the benefit of the Designated Swing
Line Lender not later than 11:00 a.m. (local time at the Payment Office
of such Designated European Administrative Agent) on the next
succeeding Business Day. Upon making such payment, each Bank shall be
deemed to have made a LIBOR Rate Loan having a one month interest
period to the Borrower whose Swing Line Loans are being refunded in the
amount of its Ratable Portion of any such Swing Line Loan. Promptly
upon the same day as receipt of such proceeds, the proceeds of such
Loans shall be applied directly by such Designated European
Administrative Agent to reimburse the Designated Swing Line Lender for
such outstanding Swing Line Loans. Each Bank's obligation to make such
refunding payment is absolute and unconditional and shall not be
affected by any event or circumstance whatsoever, including the
occurrence of any Potential Default or Event of Default hereunder or
the failure of any condition precedent set forth in Section 3 of this
Agreement to be satisfied, and each such payment shall be made without
any setoff, recoupment, counterclaim, abatement, withholding or
reduction whatsoever; except, however, that the Banks shall have no
obligation to make such payment if the Designated Swing Line Lender
made such Swing Line Loans being refunded after such Designated Swing
Line Lender was in receipt of telephonic or written notice from the
applicable Designated European Administrative Agent on behalf of the
Required Banks pursuant to Section 2.7(b) hereof directing such
Designated Swing Line Lender to cease making Swing Line Loans.
(k) PARTICIPATING INTEREST.
In the event that the obligation of the Banks to make
a Revolving Credit Loan pursuant to Subsection (i) to refund Swing Line
Loans of a Designated Swing Line Lender cannot be satisfied by the
Banks because any of the events specified in Section 8.14 shall have
occurred in respect to a Borrower or one or more of the Banks shall
determine that it is legally prohibited from making such a Revolving
Credit Loan, each Bank (other than the Designated Swing Line Lender) or
each such Bank so prohibited (other than the Designated Swing Line
Lender), as the case may be, shall be obligated to purchase on the date
the Revolving Credit Loan would have been made pursuant to Subsection
(i) hereof an undivided participating interest in the outstanding Swing
Line Loans in an amount equal to such Bank's Ratable Portion of the
Swing Line Loans. On the purchase date, each Bank or each such Bank so
prohibited shall pay to the applicable Designated European
Administrative Agent, for the benefit of such Designated Swing Line
Lender, in immediately available funds, at the account of such
Designated European Administrative Agent maintained at the Payment
Office of such Designated European Administrative Agent not later than
the time such Bank would have been obligated to fund a Loan pursuant to
Subsection (e) hereof, a participation purchase price in amount equal
to such Bank's Ratable Portion. The proceeds of purchases by the Banks
of such participating interests shall be applied directly by such
Designated European Administrative Agent to reimburse the Designated
Swing Line Lender for such outstanding Swing Line Loans. Upon receipt
of such participation purchase price, the Designated Swing Line Lender
shall, if requested by a Bank purchasing a participating interest,
issue a participation certificate, dated the date of the Designated
Swing Line Lender's receipt of such proceeds, and evidencing such
Bank's participating interest in such Swing Line Loans. Whenever, at
any time after a Designated Swing Line Lender has received from the
Designated European Administrative Agent designated therefor the
proceeds of any such participating interest by any other Bank, such
Designated Swing Line Lender receives any payment from or on behalf of
the Borrowers on account of the Swing Line Loans, such Designated Swing
Line Lender will promptly pay to such Designated European
Administrative Agent for distribution to such Bank its Ratable Portion
of such payments (appropriately adjusted, in the case of interest
payments, to
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reflect the period of time during which such Bank's participating
interest was outstanding); provided, however, in the event such payment
in respect of Swing Line Loans is required to be returned by the
Designated Swing Line Lender, such Bank will return to such Designated
European Administrative Agent for payment over the Designated Swing
Line Lender any portion of such payment previously distributed by such
Designated European Administrative Agent on behalf of the Designated
Swing Line Lender.
2.8 TERM FACILITY.
(a) TERM LOANS.
Subject to the terms and conditions of this
Agreement, each Bank having a Term Commitment hereunder severally
agrees to make, on a one time basis on the Closing Date hereof, a Loan,
denominated in Dollars, on a term basis (the "Term Loan") to Instron
Corporation, which Term Loan can be incurred only on the Closing Date
and only in the entire amount of the Term Commitment specified on Annex
I in respect to such Bank; provided, however, that the outstanding
principal amount of the Term Loan by each Bank shall not at any time
exceed such Bank's Term Commitment. The Term Loan of each Bank shall be
comprised of one or more Term Borrowings, as Instron Corporation may
elect from time to time by delivery to the Administrative Agent by the
Borrower Representative of a Rate Conversion/Continuation Request
pursuant to Section 2.11 of this Agreement; provided, however, that the
Term Loan of each Bank made on the Closing Date may, at the election of
the Borrower Representative which shall not require any prior notice,
consist of Alternate Base Rate Loans or LIBOR Rate Loans or some
combination thereof.
(b) TERM BORROWINGS.
Each Term Borrowing shall be: (i) if comprised of
Alternate Base Rate Loans, in an aggregate amount of not less than Five
Hundred Thousand Dollars ($500,000) or an integral multiple of Fifty
Thousand Dollars ($50,000) in excess thereof and (ii) if comprised of
LIBOR Rate Loans, in an aggregate amount of not less than One Million
Dollars ($1,000,000) or an integral multiple of One Hundred Thousand
Dollars ($100,000) in excess thereof. Instron Corporation shall be
entitled to have more than one Term Borrowing outstanding at one time;
provided, however, that the Borrowers shall not be entitled to request
any Term Borrowing which, together with all outstanding Revolving
Credit Borrowings and Swing Line Loans to all Borrowers and Term
Borrowings to Instron Corporation, would result in any Bank's having an
aggregate of more than twenty-five (25) Borrowings (for purposes of
determining the number of outstanding Borrowings, outstanding Alternate
Base Rate Loans to all of the Borrowers shall be treated as a separate
Borrowing and all outstanding Swing Line Loans to each Borrower shall
be treated as a separate Borrowing by such Borrower) outstanding at any
one time to all of the Borrowers.
(c) TERM NOTES; LOAN ACCOUNT RECORD OF TERM LOANS.
Each Bank's Term Loan to Instron Corporation shall be
evidenced at all times by and repayable in accordance with a Term Note,
as the case may be, each of which Term Notes shall: (i) be executed and
delivered by Instron Corporation and payable to the order of such Bank
and (ii) be in a stated principal amount equal to the Term Commitment,
as applicable, of such Bank and be payable to the order of such Bank in
an amount equal to the unpaid principal amount of such Bank's Term Loan
evidenced
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thereby, (iii) be payable in installments as provided therein and in
Section 2.8(d) hereof and mature on the Term Loan Maturity Date
applicable to such Term Loan, (iv) bear interest as provided in this
Agreement, (v) be subject to mandatory prepayment as provided in
Section 2.10 hereof, and (vi) be entitled to the benefits of this
Agreement and the other Loan Documents. Each Bank shall endorse an
appropriate entry in respect of disbursements and repayments of the
Term Loans of such Bank comprising such Borrowing on such Bank's Term
Note with respect to such Term Loan or make an appropriate entry in the
Loan Account maintained in such Bank's books and records, or both, to
evidence such Bank's Term Loan to Instron Corporation. The Loan Account
shall also evidence: (i) accrued interest on the Term Loans of such
Bank to Instron Corporation, (ii) all other amounts due to the Bank in
respect of such Term Loan, and (iii) all payments made by Instron
Corporation in respect of such Term Loan. Each entry on a Bank's Term
Note, books and records or Loan Account shall be prima facie evidence
of the data entered. Such entries by a Bank shall not be a condition to
Instron Corporation's obligation to repay the Obligations.
(d) AMORTIZATION AND MATURITY OF TERM LOANS.
(i) TERM LOAN AMORTIZATION. The Term Loan of each
Bank shall be repaid by Instron Corporation to the
Administrative Agent for the benefit of the Banks in twenty
two (22) quarterly installments of principal payable on the
first day of each January, April, July and October of each
calendar year as follows: (i) during the period commencing
with January 1, 2000 and continuing until and including
October 1, 2000, each installment shall be in a principal
amount equal to such Bank's Ratable Portion of Seven Hundred
and Fifty Thousand Dollars ($750,000), payable together with
interest thereon, (ii) during the period commencing with
January 1, 2001 and continuing until and including October 1,
2001, each installment shall be in a principal amount equal to
such Bank's Ratable Portion of One Million Dollars
($1,000,000), payable together with interest thereon, (iii)
during the period commencing with January 1, 2002 and
continuing until and including October 1, 2002, each
installment shall be in a principal amount equal to such
Bank's Ratable Portion of One Million Two Hundred and Fifty
Thousand Dollars ($1,250,000), payable together with interest
thereon, (iv) during the period commencing with January 1,
2003 and continuing until and including April 1, 2005, each
installment shall be in a principal amount equal to such
Bank's Ratable Portion of One Million Five Hundred Thousand
Dollars ($1,500,000), payable together with interest thereon
(with the final installment payable on April 1, 2005 also
including any other amount required to bring the principal of
the Term Loan of such Bank to zero) (with each of such
referenced repayment dates being a "Term Loan Repayment Date"
and such April 1, 2005 Term Loan Repayment Date being the
"Term Loan Maturity Date"). Amounts repaid with respect to a
Term Loan may not be reborrowed.
2.9 FUNDING OF TERM LOANS BY BANKS.
Each Bank shall, prior to 1:00 P.M. (local time at the Payment
Office of the Administrative Agent) on the Closing Date, make available to the
Administrative Agent, in immediately available funds at the account of the
Administrative Agent maintained at the Payment Office thereof as shall have been
notified by the Administrative Agent to the Banks prior to such date, the amount
of Term Loans specified in Annex I in respect of such Bank.
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(a) DISBURSEMENT OF TERM FUNDS RECEIVED.
Upon the Administrative Agent's receipt of funds on
the Closing Date representing a Bank's Term Loan, and subject to the
terms of this Agreement and the fulfillment of the conditions set forth
in Section 3 of this Agreement, the Administrative Agent shall make the
Term Loan of such Bank available to the Borrowers (by advancing such
funds to Instron Corporation) in immediately available funds, by wire
transfer or intrabank transfer: to the Operating Account of Instron
Corporation; provided, however, that, if the Term Loans shall not occur
on such date because any condition precedent herein specified shall not
have been met, the Administrative Agent shall return the amounts so
received to the respective Banks.
(b) AVAILABILITY OF TERM LOAN FUNDS.
Unless the Administrative Agent shall have received
notice from a Bank on the Closing Date that such Bank will not make
available to the Administrative Agent such Bank's Term Loan being
advanced to the Borrowers, the Administrative Agent may assume prior to
receipt of funds from such Bank that such Bank has made its Term Loans
available to the Administrative Agent on the Closing Date. In reliance
upon such assumption, the Administrative Agent may, but shall not be
obligated to, make available to the Borrowers funds in the amount of
such Bank's Term Loan. Any disbursement by the Administrative Agent in
reliance on such assumption shall be deemed to be the advance by such
Bank of its Term Loan.
2.10 REPAYMENTS; PREPAYMENTS; REDUCTIONS OF COMMITMENTS.
(a) SCHEDULED REPAYMENTS; DENOMINATIONS OF REPAYMENTS.
Each Borrower shall repay to the Administrative
Agent, or the applicable Designated European Administrative Agent, in
immediately available funds, for the account of the Banks the
outstanding principal amount of its aggregate Revolving Credit Loans on
the Revolving Credit Termination Date. Instron Corporation shall repay
to the Administrative Agent, in immediately available funds, for the
account of the applicable Banks, the Term Loans advanced by such Bank
in accordance with Section 2.8(d) hereof and the applicable Term Note.
Each of the Borrowers shall repay to the applicable Designated European
Administrative Agent for the benefit of the applicable Designated Swing
Line Lender the Swing Line Loans advanced to such Borrower in
accordance with Section 2.7(g) of this Agreement and the Swing Line
Note. Repayments of Revolving Credit Loans denominated in Dollars shall
be made in Dollars. Repayments of Revolving Credit Loans denominated in
an Alternate Currency shall be made in such Alternate Currency.
Repayments of Swing Line Loans denominated in Dollars shall be made in
Dollars. Repayments of Swing Line Loans denominated in an Alternate
Currency shall be made in such Alternate Currency. Reimbursements of
drawings on Letters of Credit whether denominated in Dollars or in an
Alternate Currency shall be made in Dollars.
(b) MANDATORY PREPAYMENT OF LOANS.
(i) PREPAYMENT OF EXCESS REVOLVING CREDIT LOANS. If,
on any Business Day, the aggregate Revolving Credit Loans then
outstanding exceed an amount equal to the aggregate Revolving
Credit Commitments of all of the Banks then applicable minus
the then aggregate LC Exposure and aggregate Swing Line
Exposure of all of the Banks, then the Borrowers shall on such
day prepay to the
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Administrative Agent or the applicable Designated European
Administrative Agent for the account of the Banks an amount at
least equal to such excess.
(ii) PREPAYMENT OF EXCESS REVOLVING CREDIT LOANS
DENOMINATED IN ALTERNATE CURRENCIES. If, on any Business Day,
the Dollar equivalent of the aggregate principal amount of
Revolving Credit Loans denominated in Alternate Currencies
then outstanding, together with the Dollar equivalent of the
then aggregate Alternate Currency LC Exposure and aggregate
Alternate Currency Swing Line Exposure of all Banks, exceeds
the Alternate Currency Sublimit, then the Borrowers shall on
such day prepay to the Administrative Agent or the applicable
Designated European Administrative Agent for the account of
the Banks an amount at least equal to such excess.
(iii) PREPAYMENT OF EXCESS SWING LINE LOANS. If, on
any Business Day, (x) the aggregate principal amount of Swing
Line Loans then outstanding exceeds the Aggregate Swing Line
Commitment of the Designated Swing Line Lenders then in
effect, or (y) the aggregate Swing Line Loans then outstanding
from a Designated Swing Line Lender to a Borrower exceeds the
Designated Swing Line Commitment of such Designated Swing Line
Lender, each affected Borrower shall on such day prepay to the
applicable Designated European Administrative Agent for the
account of such Designated Swing Line Lender such principal
amount of Swing Line Loans outstanding to such Borrower as
shall eliminate such excess.
(c) MANDATORY APPLICATION OF NET PROCEEDS AND EXCESS CASH FLOW;
RESULTING MANDATORY REDUCTION IN REVOLVING CREDIT COMMITMENTS
AND TERM LOANS.
(i) APPLICATION OF NET PROCEEDS. From and after the
Closing Date, each Borrower shall apply, subject to the extent
otherwise provided in Section 7.3(c), 100% of all of the Net
Proceeds relating to such Borrower or the Subsidiaries thereof
promptly upon receipt thereof to prepay its Term Loans and
Revolving Credit Loans outstanding at the time of such receipt
with such prepayments being applied:(A) first, to outstanding
Term Loans, in the inverse order of maturity, (B) second, to
outstanding Revolving Credit Loans and (C) third, to
outstanding Swing Line Loans; provided, however, that nothing
in this Subsection 2.10(c)(i) hereof or in the definition of
"Net Proceeds" shall constitute authorization not otherwise
permitted by this Agreement for any Borrower or any
Subsidiaries thereof to enter into any transaction that would
generate Net Proceeds.
(ii) EXCESS CASH FLOW RECAPTURE. Not later than ten
(10) days after the ninetieth (90th) day following each Fiscal
Year end of Instron Corporation, commencing with Fiscal Year
ending December 31, 2000, if the Consolidated Senior Funded
Debt to Adjusted EBITDA Ratio of Instron Corporation and its
consolidated Subsidiaries measured as of such Fiscal Year end
exceeds 2.00 to 1.00, Instron Corporation shall prepay the
Term Loans, and the Borrowers shall
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prepay the Revolving Credit Loans and Swing Line Loans
outstanding at the time in an aggregate amount equal to 50.00%
of the Consolidated Excess Cash Flow of Instron Corporation
and its consolidated Subsidiaries for such immediately
preceding Fiscal Year with such prepayments being applied: (A)
first, to outstanding Term Loans, in the inverse order of
maturity, (B) second, after no Term Loans are outstanding, to
outstanding Revolving Credit Loans and (C) last, to
outstanding Swing Line Loans; provided, however, that any
voluntary prepayments of outstanding Term Loans pursuant to
Section 2.10(d) hereof during any Fiscal Year shall be
credited against the prepayment of Loans otherwise required
under this clause (ii) with respect to Consolidated Excess
Cash Flow with respect to such Fiscal Year.
(iii) POSTPONEMENT OF PREPAYMENT; EFFECT OF
PREPAYMENT. Unless an Event of Default has occurred which is
continuing and has not been waived in accordance with Section
14.1 hereof, in the event that the making of any prepayment of
Term Loans, Revolving Credit Loans or Swing Line Loans
required by this Section 2.10(c) would result in an obligation
on the part of a Borrower to make a breakage payment in
respect thereof under Section 13.4 of this Agreement (unless
waived in accordance with Section 14.1 hereof), such Borrower
may upon notice by the Borrower Representative to the
Administrative Agent postpone making such prepayment for a
period of up to 30 days or such shorter period as will result
in no such breakage payment being payable. Each prepayment
required by this Section 2.10(c) shall constitute (A) with
respect to each prepayment of Revolving Credit Loans required
hereby, only a prepayment and not a permanent reduction in the
amount of the Revolving Credit Commitments of the Banks and
(B) with respect to each prepayment of Term Loans required
hereby, not only a prepayment but also a permanent reduction
in the amount of the applicable Term Commitments of the
Lenders hereunder. Amounts prepaid with respect to Term Loans
may not be reborrowed.
(d) PERMITTED PREPAYMENTS.
A Borrower may prepay all or any part of the Term
Loans or the Revolving Credit Loans for the account of the Banks by
having the Borrower Representative give notice to the Administrative
Agent or the applicable Designated European Administrative Agent, as
the case may be, stating the proposed date of prepayment, the Type of
Borrowing being prepaid and the aggregate principal amount of the
prepayment: (i) not later than 12:00 noon (local time at the Notice
Office of the Administrative Agent) on any Business Day, with respect
to Alternate Base Rate Loans, (ii) not later than 12:00 noon (local
time at the Notice Office of the Administrative Agent or the applicable
Designated European Administrative Agent) on the fourth Business Day
prior to such prepayment, with respect to LIBOR Rate Loans (whether
denominated in Dollars or an Alternate Currency). Thereafter, on the
date of such prepayment, such Borrower shall: (A) prepay the aggregate
outstanding principal amount of the Alternate Base Rate Loans in whole
or ratably in part as specified in such notice and (B) prepay the
outstanding aggregate principal amount of the LIBOR Rate Loans
comprising part of the same Borrowing in whole or ratably in part as
specified in such notice, together with prepayment of interest on the
principal amount of the LIBOR Rate Loans comprising such Borrowing so
prepaid accrued to the date of such prepayment; provided, however,
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that: (I) each partial prepayment of Alternate Base Rate Loan shall be
in the aggregate principal amount of not less than One Hundred Thousand
Dollars ($100,000), (II) each partial prepayment of LIBOR Rate Loans
denominated in an Alternate Currency shall be in an aggregate principal
amount of not less than the Dollar equivalent of Five Hundred Thousand
Dollars ($500,000), or an integral multiple of the Dollar equivalent of
Two Hundred and Fifty Thousand Dollars ($250,000) in excess thereof,
(III) each partial prepayment of LIBOR Rate Loans denominated in
Dollars shall be in an aggregate principal amount of not less than Five
Hundred Thousand Dollars ($500,000), or an integral multiple of Two
Hundred and Fifty Thousand Dollars ($250,000) in excess thereof, and
(IV) any prepayment of any LIBOR Rate Loans made on other than the last
day of an Interest Period shall obligate the Borrowers to reimburse the
Banks in respect thereof pursuant to Section 13.4 of this Agreement.
(e) REDUCTION OF REVOLVING CREDIT COMMITMENTS.
Upon three (3) Business Days prior written notice from the
Borrower Representative to the Administrative Agent or the applicable
Designated European Administrative Agent, as the case may be, the
Borrowers may request that the Banks permanently reduce, in whole or in
part, the aggregate Revolving Credit Commitments, whereupon the
aggregate Revolving Credit Commitments shall be so reduced. Each
reduction in the aggregate Revolving Credit Commitments hereunder shall
be made among the Banks ratably in accordance with their Revolving
Credit Commitments. Each reduction shall be subject to the following:
(i) each such reduction shall be in an aggregate principal amount of
not less than Five Million Dollars ($5,000,000) or a multiple of One
Million Dollars ($1,000,000) in excess thereof, and (ii) the Borrowers
shall not be permitted to reduce the aggregate Revolving Credit
Commitments unless, concurrently with any reduction, one or more of the
Borrowers shall make principal payments, ratable among the Banks, on
each Bank's then outstanding Revolving Credit Loans to such Borrower in
an amount which, when aggregated with such ratable payments to the
Banks by the other Borrowers, will result in the aggregate Revolving
Credit Loans of the Banks to the Borrowers outstanding after such
payments, when taken together with the aggregate LC Exposure and Swing
Line Exposure of the Banks to the Borrowers then outstanding, not
exceeding the aggregate Revolving Credit Commitments of the Banks as so
reduced. On the date of each reduction, each of the Borrowers shall pay
to the Administrative Agent for the account of the Banks its Ratable
Borrower Share of: (x) the commitment fees and interest accrued through
the date of such reduction in respect of the aggregate Revolving Credit
Commitment of the Banks so reduced and (y) any amounts required
pursuant to the provisions of Section 13.4 of this Agreement. Each
reduction in the Revolving Credit Commitments hereunder, if any, shall
be a permanent reduction and no amount in excess of such reduced
commitment may be borrowed or reborrowed.
2.11 RATE CONVERSION AND RATE CONTINUATION.
Each Borrower shall have the right to convert all or any
portion of the Revolving Credit Loans or Term Loans comprising any Borrowing or
any Swing Line Loan into, or continue all or any portion of the Revolving Credit
Loans or Term Loans comprising any Borrowing or any Swing Line Loan as, LIBOR
Rate Loans or Alternate Base Rate Loans, as the case may be, in the case of
Revolving Credit Loans or Term Loans, and a LIBOR Rate Loan or Money Market Rate
Loan, as the case may be, in the case of any Swing Line Loan, upon request
delivered by the Borrower Representative to the Administrative Agent or the
applicable Designated European Administrative Agent designated for such
Borrower, as the case may be, not later than 12:00 noon (local time at the
Notice Office of the Administrative Agent or such
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Designated European Administrative Agent) to the following extent: (a) on the
Business Day that a Borrower desires to convert all or a portion of the LIBOR
Rate Loans denominated in Dollars comprising a Revolving Credit Borrowing or a
Term Loan Borrowing into Alternate Base Rate Loans, (b) three (3) Business Days
prior to the Business Day on which a Borrower desires to convert any Alternate
Base Rate Loans comprising a Revolving Credit Borrowing or a Term Loan Borrowing
into LIBOR Rate Loans for a given permissible Interest Period, (c) three (3)
Business Days prior to the Business Day on which a Borrower desires to continue
any LIBOR Rate Loans comprising a Revolving Credit Borrowing or a Term Loan
Borrowing, as LIBOR Rate Loans for an additional Interest Period of the same
duration, (d) three (3) Business Days prior to the Business Day on which, or, to
the extent acceptable the applicable Designated Swing Line Lender, in its sole
discretion, the same Business Day as a Borrower desires to continue any LIBOR
Rate Loan comprising a Swing Line Loan, as a LIBOR Rate Loan for an additional
Interest Period of the same duration, (d) three (3) Business Days prior to the
Business Day on which a Borrower desires to convert any LIBOR Rate Loans having
a particular Interest Period comprising a Revolving Credit Borrowing or a Term
Loan Borrowing into LIBOR Rate Loans having a different permissible Interest
Period, (e) three (3) Business Days prior to the Business Day on which, or, to
the extent acceptable the applicable Designated Swing Line Lender, in its sole
discretion, the same Business Day as, a Borrower desires to convert any LIBOR
Rate Loan having a particular Interest Period comprising a Swing Line Loan into
LIBOR Rate Loan having a different permissible Interest Period, (f) three (3)
Business Days prior to the Business Day on which, or, to the extent acceptable
the applicable Designated Swing Line Lender, in its sole discretion, the same
Business Day as, a Borrower desires to convert any Money Market Rate Loan
comprising a Swing Line Loan into LIBOR Rate Loan for a given permissible
Interest Period, or (f) three (3) Business Days prior to the Business Day on
which, or, to the extent acceptable the applicable Designated Swing Line Lender,
in its sole discretion, the same Business Day as, a Borrower desires to convert
any LIBOR Rate Loan comprising a Swing Line Loan into Money Market Rate Loan;
provided, however, that each such Rate Conversion or Rate Continuation shall be
subject to the following:
(i) each Rate Conversion or Rate Continuation of
Loans comprising a Borrowing shall be made ratably among the
Banks based upon each Bank's Ratable Portion of such converted
or continued Borrowing;
(ii) if less than all of the outstanding principal
amount of Loans comprising a Revolving Credit Borrowing or a
Term Loan Borrowing are converted or continued, the aggregate
principal amount of such Loans comprising a Borrowing
converted or continued shall be: (A) in the case of LIBOR Rate
Loans, not less than Five Hundred Thousand Dollars ($500,000)
or, in the case of Alternate Currency Loans, the Alternate
Currency equivalent thereof, or an integral multiple of Two
Hundred and Fifty Thousand Dollars ($250,000) or, in the case
of Alternate Currency Loans, the Alternate Currency equivalent
thereof, in excess thereof, (B) in the case of Alternate Base
Rate Loans, not less than Five Hundred Thousand Dollars
($500,000), or an integral multiple of Fifty Thousand Dollars
($50,000) in excess thereof, and (C) in the case of Money
Market Rate Loans, not less than Two Hundred Fifty Thousand
Dollars ($250,000), or an integral multiple of One Hundred
Thousand Dollars ($100,000) in excess thereof;
(iii) each Rate Conversion or Rate Continuation shall
be effected as if each Bank were applying the proceeds of the
Loans resulting from such Rate Conversion or Rate Continuation
to the Loans being converted or continued, as the case may be,
and the accrued interest on any such Loans (or portion
thereof) being converted or continued
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shall be paid to the Administrative Agent on behalf of each
Bank by the Borrowers at the time of such Rate Conversion or
Rate Continuation;
(iv) LIBOR Rate Loans shall not be converted or
continued at a time other than the end of an Interest Period
applicable thereto unless the Borrowers shall pay, upon
demand, any amounts due to the Administrative Agent for the
benefit of the Banks pursuant to Section 13.4 of this
Agreement;
(v) Loans may not be converted into or continued as
LIBOR Rate Loans comprising a Revolving Credit Borrowing
unless the Interest Period applicable thereto expires on or
prior to the applicable Revolving Credit Termination Date;
(vi) Loans may not be converted into or continued as
LIBOR Rate Loans comprising a Term Borrowing unless the
Interest Period applicable thereto expires on or prior to the
Term Loan Maturity Date applicable to the Loans comprising
such Term Borrowing;
(vii) after and during the continuance of a Potential
Default, and after the occurrence of an Event of Default which
is continuing and has not been waived in accordance with
Section 14.1 hereof, Loans may not be converted into or
continued (at the expiration of the Interest Period applicable
thereto) as LIBOR Rate Loans;
(viii) with respect to LIBOR Rate Loans comprising a
Term Borrowing, no Interest Period can be selected which ends
after any Term Loan Repayment Date, unless, after giving
effect to such selection, the aggregate unpaid principal
amount of Alternate Base Rate Loans, together with the
aggregate unpaid principal amount of all Term Borrowings which
are comprised of LIBOR Rate Loans with Interest Periods ending
on or prior to such Term Loan Repayment Date shall be at least
equal to that portion of the aggregate principal amount of the
Term A Loan and the Term B Loan due and payable on and prior
to such Term Loan Repayment Date; and
(ix) Loans that cannot be converted into or continued
as LIBOR Rate Loans by reason of clause (v), (vi), (vii) or
(viii) of this Section shall be automatically converted at the
end of the Interest Period in effect for such LIBOR Rate Loans
into Alternate Base Rate Loans, except that LIBOR Rate Loans
denominated in an Alternate Currency that cannot be converted
or continued by reason of clause (v) or (vii) of this Section
shall become due and payable upon the last day of the
applicable Interest Period with respect thereto.
Each such request for a conversion or continuation (a "Rate
Conversion/Continuation Request") in respect of Loans comprising a Borrowing
shall be a written or telephonic notice (in the case of a telephonic notice,
promptly confirmed in writing if so requested by the Administrative Agent or the
applicable Designated European Administrative Agent). Each written Rate
Conversion/Continuation Request or written confirmation thereof shall be
substantially in the form of Exhibit C attached hereto, signed by the Borrower
Representative and transmitted by the Borrower Representative to the
Administrative Agent or such Designated European Administrative Agent, as
applicable, by telecopier. Each written and telephonic Rate
Conversion/Continuation Request and each confirmation thereof shall specify: (A)
the identity and amount of the Loans that the Borrower requests be converted or
continued, (B) the Type of
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Loans into which such Loans are to be converted or continued, (C) if such notice
requests a Rate Conversion, the date of the Rate Conversion (which shall be a
Business Day), (D) in the case of a Borrowing being converted into or continued
as a LIBOR Rate Borrowing, the currency in which such LIBOR Borrowing is
denominated, (E) in the case of Loans comprising a Borrowing being converted
into or continued as LIBOR Rate Loans, the Interest Period for such LIBOR Rate
Loans and (F) in the case of LIBOR Rate Loan comprising a Swing Line Loan being
converted into a Money Market Rate Loan, the Quoted Money Market Rate therefor
and the maturity date thereof determined as provide in Section 2.7(f) hereof.
The Administrative Agent and each Designated European Administrative Agent may
rely on such telephonic Rate Conversion/Continuation Request to the same extent
that the Administrative Agent and the applicable Designated European
Administrative Agent may rely on a written Rate Conversion/Continuation Request.
Each Rate Conversion/Continuation Request, whether telephonic or written, shall
be irrevocable and binding on the Borrower for which the request was made and
subject such Borrower to the indemnification provisions of Section 13 of this
Agreement. The Borrower for which a Rate Conversion/Continuation Request was
made shall bear all risks related to the giving of such Rate
Conversion/Continuation Request by the Borrower Representative on behalf of such
Borrower whether given telephonically or by such other method of transmission as
the Borrower Representative shall elect.
2.12 LETTERS OF CREDIT.
Subject to the terms and conditions set forth in this
Agreement, each Designated Letter of Credit Issuer designated for a Borrower and
the Subsidiaries thereof agrees, at any time and from time to time, from and
including the Closing Date but in no event after the thirtieth (30th) calendar
day immediately preceding the Revolving Credit Termination Date, directly or
through its Lending Installation to issue and deliver, or to extend the
expiration of, Letters of Credit, denominated in Dollars or any Alternate
Currency, for the account of such Borrower or such Subsidiaries (each such
Borrower and any such Subsidiaries being herein referred to as "Letter of Credit
Obligors"); provided, however, that, the aggregate LC Exposure of the Banks
shall not at any time exceed the lesser of: (x) Twenty Million Dollars
($20,000,000) or (y) an amount equal to the Borrowing Base at such time minus
the aggregate Revolving Credit Loans of the Banks to all of the Borrowers
outstanding at such time and the aggregate Swing Line Exposure of the Banks to
all of the Borrowers at such time or (z) the sum of the aggregate Revolving
Credit Commitments of the Banks at such time minus the sum of the aggregate
outstanding Revolving Credit Loans of the Banks to all of the Borrowers
outstanding at such time and the aggregate Swing Line Exposure of the Banks to
all of the Borrowers at such time.
(a) DESIGNATED LETTER OF CREDIT ISSUER AND DESIGNATED EUROPEAN
ADMINISTRATIVE AGENT.
Subject to the terms and conditions set
forth in this Agreement, the applicable Designated Letter of
Credit Issuer shall issue Letters of Credit for the account of
any of the Borrowers, provided, however, Letters of Credit
consisting of Demand Guarantees or Contract Guarantees will
only be issued to the extent that the Administrative Agent has
designated a Designated European Administrative Agent which
Designated European Administrative Agent has been assigned a
minimum of at least $5,000,000 of an initial Bank's rights and
obligations under this Agreement and of the Revolving Credit
Commitment of such initial Bank hereunder.
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(b) TERM; FORM; REQUESTS AND CONDITIONS OF LETTERS OF CREDIT.
Each Letter of Credit shall be issued in such form as the
applicable Designated Letter of Credit Issuer may reasonably require
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, and any
subsequent revisions thereof or (x) in the case of a Letter of Credit
constituting a Demand Guarantee, the Uniform Rules for Demand Guarantees
(1992 Revision), International Chamber of Commerce Publication No. 458,
and any subsequent revisions thereof or (y) in the case of a Letter of
Credit constituting a Contract Guarantee, the Uniform Rules for Contract
Guarantees (1978), International Chamber of Commerce Publication No. 325,
and any subsequent revisions thereof. Each Letter of Credit shall: (x)
permit drawings upon presentation of one or more sight drafts and such
other documents as specified by the Borrower Representative in the Credit
Request delivered pursuant to Section 2.12(b)(i) of this Agreement and
agreed to by such Designated Letter of Credit Issuer, which drawings shall
occur on or prior to the applicable expiration date of such Letter of
Credit, (y) by its terms expire not later than the earlier of one (1) year
after the date of issuance of such Letter of Credit or the fifteenth
(15th) Business Day prior to the Revolving Credit Termination Date and (z)
by its terms provide for payment of drawings in Dollars or an Alternate
Currency.
(i) Requests for Letters of Credit for the account of a
Borrower or any Subsidiaries thereof shall be given by the Borrower
Representative to the Designated Letter of Credit Issuer, to the
extent applicable, the Lending Installation thereof, and the
Administrative Agent and Designated European Administrative Agent
designated for such Borrower not later than 12:00 noon (local time
at the Notice Office of the Designated Letter of Credit Issuer and,
to the extent applicable, the Lending Installation thereof) three
(3) Business Days prior to the specified date for the issuance of
the requested Letter of Credit. Each such request (a "Letter of
Credit Request") for a Letter of Credit shall be a written or
telephonic notice (in the case of a telephonic notice, promptly
confirmed in writing if so requested by the Designated Letter of
Credit Issuer). Each written Letter of Credit Request or written
confirmation thereof shall be substantially in the form of Exhibit
B-3 attached hereto, signed by the Borrower Representative and
transmitted by the Borrower Representative to the Designated Letter
of Credit Issuer, such Lending Installation and the Administrative
Agent and such Designated European Administrative Agent by
telecopier. Each written and telephonic Letter of Credit Request and
each confirmation thereof shall specify with respect to each Letter
of Credit requested: (i) the account party for whose benefit the
Letter of Credit is being requested, (ii) the face amount thereof
and the currency in which the face amount will be denominated, (iii)
the beneficiary, (iv) the intended date of issuance and (v) the
terms of the Letter of Credit, and shall be promptly forwarded by
the Administrative Agent or the applicable Designated European
Administrative Agent to the applicable Designated Letter of Credit
Issuer. Concurrently with each Credit Request requesting a Letter of
Credit, the applicable Letter of Credit Obligor shall execute and
deliver to the Designated Letter of Credit Issuer in respect of such
requested Letter of Credit a reimbursement or similar agreement, in
the Designated Letter of Credit Issuer's then standard form of
application for and reimbursement agreement with respect to letters
of credit, Demand Guarantees and Contract Guarantees (such
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documents being hereinafter collectively referred to as a
"Reimbursement Agreement"); provided, however, that in the event of
any conflict between the provisions of any such Reimbursement
Agreement and this Agreement, the provisions of this Agreement shall
govern. The Designated Letter of Credit Issuer may rely on such
telephonic Letter of Credit Request to the same extent that the
Administrative Agent or the applicable Designated European
Administrative Agent may rely on a written Credit Request. The
Borrower for which a Letter of Credit request was made shall bear
all risks related to the giving of such Letter of Credit Request by
the Borrower Representative on behalf of such Borrower whether given
telephonically or by such other method of transmission as the
Borrowers shall elect.
(ii) Each Designated Letter of Credit Issuer shall, on the
date of each issuance of a Letter of Credit by it or through its
Lending Installation, give the Administrative Agent and such
Designated European Administrative Agent, if applicable, written
notice of the issuance of such Letter of Credit, accompanied by a
copy to the Administrative Agent of the Letter of Credit or Letters
of Credit issued by it. Each Designated Letter of Credit Issuer
shall provide to the Administrative Agent a quarterly (or monthly if
requested by any Bank) summary describing each Letter of Credit
issued by such Designated Letter of Credit Issuer and then
outstanding as well as an identification for the relevant period of
the daily aggregate Letter of Credit outstandings represented by
Letters of Credit issued by such Designated Letter of Credit Issuer.
(c) EXISTING LETTERS OF CREDIT.
The Supplemental Schedule contains a description of all
Existing Letters of Credit. With respect to Existing Letters of Credit
issued by a bank that is a Designated Letter of Credit Issuer on the
Effective Date as to which such Designated Letter of Credit Issuer makes a
written request to the Administrative Agent and the Designated European
Administrative Agent, if applicable, and the Borrower Representative on
the Closing Date requesting that such Existing Letter of Credit be treated
as a "Letter of Credit" hereunder, such Existing Letter of Credit shall
thereupon constitute a "Letter of Credit" (and no longer an "Existing
Letter of Credit") for all purposes hereof, and shall be deemed to have
been issued, for purposes of Section 3.4(a), on the Closing Date. From and
after the Closing Date, the terms of this Agreement shall apply to such
Existing Letters of Credit, superseding any other agreement otherwise
applicable to them to the extent inconsistent with the terms hereof.
Absent such election by such Designated Letter of Credit Bank, Existing
Letters of Credit shall not constitute "Letters of Credit" hereunder for
any purpose including Sections 2.12(d) and 4.1 hereof.
(d) PARTICIPATION BY BANKS IN LETTERS OF CREDIT.
By its issuance of a Letter of Credit and without further
action on its part, each Designated Letter of Credit Issuer hereby grants
to each Bank, and each Bank hereby acquires from such Designated Letter of
Credit Issuer, a participation in such Letter of Credit equal to such
Bank's Ratable Portion of the Letter of Credit's face amount, effective on
the date of the issuance of such Letter of Credit. In consideration, each
Bank hereby absolutely and unconditionally agrees to pay to the
Administrative Agent or the applicable Designated European Administrative
Agent, as the case may be,
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for the account of each Designated Letter of Credit Issuer such Bank's
Ratable Portion of each disbursement made by such Designated Letter of
Credit Issuer in respect of such Letter of Credit and not reimbursed by
the applicable Letter of Credit Obligor or Borrower guarantying such
reimbursement obligation as hereinafter provided for any reason including
the illegality of such reimbursement or as to which any reimbursement
payment is required to be refunded to a Borrower or applicable Letter of
Credit Obligor for any reason. Each Bank acknowledges and agrees that its
obligation to acquire risk participations pursuant to this Section 2.12(d)
is absolute and unconditional and shall not be affected by any event or
circumstance whatsoever, including the occurrence of any Potential Default
or Event of Default hereunder or the failure of any condition precedent
set forth in Section 3 of this Agreement to be satisfied and each payment
in satisfaction thereof shall be made without any offset, abatement,
withholding or reduction whatsoever; provided, however, that the foregoing
shall not be construed to excuse any Designated Letter of Credit Issuer
from liability to any Bank to the extent of any direct damages (as opposed
to consequential damages, claims in respect of which are hereby waived by
each of the Banks to the fullest extent permitted by applicable Law)
suffered by such Bank that are caused by such Designated Letter of Credit
Issuer's gross negligence or willful misconduct.
(e) REIMBURSEMENT; INTEREST.
Each Borrower agrees that (x) whenever there is a drawing on a
Letter of Credit issued by a Designated Letter of Credit Issuer for the
account of such Borrower, the Borrower shall pay, and (y) whenever there
is a drawing on a Letter of Credit issued by a Designated Letter of Credit
Issuer for the account of another Letter of Credit Obligor whose
reimbursement obligation such Borrower is guarantying pursuant to Section
2.12(l) of this Agreement, the Borrower shall cause such Letter of Credit
Obligor to pay, to the Administrative Agent or the Designated European
Administrative Agent, as the case may be, on the date of such drawing an
amount equal to such drawing, such payment to be made in immediately
available funds and in Dollars (and in the amount which is the Dollar
equivalent of the payment or disbursement made by such Designated Letter
of Credit Issuer under such Letter of Credit in an Alternate Currency).
The Administrative Agent or the Designated European Administrative Agent,
as the case may be, shall promptly remit any such payment to such
Designated Letter of Credit Issuer. If there is a drawing on a Letter of
Credit, then, unless the Letter of Credit Obligor (or the Borrower
guarantying the reimbursement obligation of such Letter of Credit Obligor)
shall reimburse such amount in full on the date of such drawing, the
unpaid amount thereof shall bear interest for the account of the
applicable Designated Letter of Credit Issuer for each day from and
including the date of such drawing until the earlier of the date of
reimbursement by the applicable Letter of Credit Obligor (or the Borrower
guarantying the reimbursement obligation of such Letter of Credit Obligor)
or the date on which such drawing is reimbursed by Revolving Credit Loans,
at the rate per annum that would apply to such amount if such amount were
a Revolving Credit Borrowing comprised of Alternate Base Rate Loans.
(f) FAILURE TO REIMBURSE DRAWINGS.
In the event that the applicable Letter of Credit Obligor (or
the Borrower guarantying the reimbursement obligation of such Letter of
Credit Obligor) fails to make a timely reimbursement, together with any
interest thereon, to the Administrative Agent or the Designated European
Administrative Agent, as the case may be, on the date of any drawing on a
Letter of Credit, such failure shall constitute a Deemed Credit Request
requesting an Alternate Base Rate Loan to be made to such Letter of Credit
Obligor if
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such Letter of Credit Obligor is a Borrower or, if such Letter of Credit
Obligor is not a Borrower, to the Borrower which is guarantying the
reimbursement obligation of such Letter of Credit Obligor, in an aggregate
amount equal to the amount reimbursable to the applicable Designated
Letter of Credit Issuer plus any interest thereon (the Administrative
Agent having determined in the case of any payment by a Designated Letter
of Credit Issuer made in an Alternate Currency the equivalent thereof in
Dollars). The Administrative Agent or such Designated European
Administrative Agent, as the case may be, shall disburse all such loan
proceeds directly to the Designated Letter of Credit Issuer to satisfy the
aforesaid reimbursement liability. The obligations of the Banks to the
Administrative Agent and such Designated European Administrative Agent
under this Section 2.12 are in addition to and not in limitation of the
obligations of the Banks under Section 11 of this Agreement. In the event
that the obligation of the Banks to make a Revolving Credit Loan pursuant
to this Section 2.12(f) cannot be satisfied by the Banks because any of
the events specified in Section 8.14 shall have occurred with respect to
the Borrower for whose account the Letter of Credit has been issued (or
which is guarantying the reimbursement obligations of the Letter of Credit
Obligor for whose account the Letter of Credit was issued) or one or more
of the Banks shall determine that such Banks are legally prohibited from
making such a Revolving Credit Loan, each Bank (other than the applicable
Designated Letter of Credit Issuer) or each such Bank so prohibited (other
than the applicable Designated Letter of Credit Issuer), as the case may
be, shall be obligated to purchase on the date the Revolving Credit Loan
would have been made pursuant to this Section (e) an undivided
participating interest in the outstanding unpaid reimbursement obligation
owing to such Designated Letter of Credit Issuer in an amount equal to the
Revolving Credit Loan that such Bank would otherwise have been obligated
to fund. On the purchase date, each Bank or each such Bank so prohibited
shall pay to the Administrative Agent or such Designated European
Administrative Agent, as the case may be, for the benefit of the
Designated Letter of Credit Issuer, in immediately available funds, at the
account of the Administrative Agent or Designated European Administrative
Agent, as the case may be, maintained at the Payment Office of the
Administrative Agent or Designated European Administrative Agent, as the
case may be, not later than the time such Bank would have been obligated
to fund such Revolving Credit Loan pursuant to this Section (e), a
participation purchase price in amount equal to such Revolving Credit
Loan. The proceeds of purchases by the Banks of such participating
interests shall be applied directly by the Administrative Agent or such
Designated European Administrative Agent, as the case may be, to reimburse
the Designated Letter of Credit Issuer for such unpaid reimbursed
obligation. Upon receipt of such participation purchase price, the
Designated Letter of Credit Issuer shall, if requested by a Bank
purchasing a participating interest, issue a participation certificate,
dated the date of the Designated Letter of Credit Issuer's receipt of such
proceeds, and evidencing such Bank's participating interest in such unpaid
reimbursement obligation. Whenever, at any time after a Designated Letter
of Credit Issuer has received from the Administrative Agent the proceeds
of any such participating interest by any other Bank, such Designated
Letter of Credit Issuer receives any payment from or on behalf of
applicable Borrower on account of such unpaid reimbursed obligation, such
Designated Letter of Credit will promptly pay to the Administrative Agent
or such Designated European Administrative Agent, as the case may be, for
distribution to such Bank its Ratable Portion of such payments
(appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Bank's participating interest was
outstanding); provided, however, in the event such payment in respect of
unpaid reimbursement obligations is required to be returned by the
Designated Letter of Credit Issuer, such Bank will return to the
Administrative Agent or such Designated European Administrative Agent for
payment over the Designated Letter of Credit Issuer any portion of such
payment previously distributed by the Administrative Agent or such
Designated European Administrative Agent on behalf of the Designated
Letter of Credit Issuer.
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(g) OBLIGATIONS ABSOLUTE.
The obligation of each Borrower for whose account a Letter of
Credit was issued to reimburse, and to cause each other Letter of Credit
Obligor whose reimbursement obligation such Borrower is guarantying
pursuant to Section 2.12(l) of this Agreement to reimburse, the Designated
Letter of Credit Issuer shall be absolute and unconditional and shall be
performed under all circumstances including, without limitation: (i) any
lack of validity or enforceability of any Letter of Credit, (ii) the
existence of any claim, offset, defense or other right that such Borrower
or any other Letter of Credit Obligor may have against the beneficiary of
any Letter of Credit or any successor in interest thereto, (iii) the
existence of any claim, offset, defense or other right that any Bank or
the Administrative Agent or Designated European Administrative Agent may
have against any Borrower or other Letter of Credit Obligor or against the
beneficiary of any Letter of Credit or against any successor in interest
thereto, (iv) the existence of any fraud or misrepresentation in the
presentment of any draft or other item drawn and paid under any Letter of
Credit by any person other than the Designated Letter of Credit Issuer,
(v) any payment of any draft or other item by a Designated Letter of
Credit Issuer which does not strictly comply with the terms of any Letter
of Credit issued by such Designated Letter of Credit Issuer, so long as,
in each case, such payment shall not have constituted gross negligence or
willful misconduct on the part of such Designated Letter of Credit Issuer,
(vi) any improper use which may be made of the Letter of Credit or any
improper acts or omissions of any beneficiary or transferee of the Letter
of Credit in connection therewith, (vii) any statement or any other
documents presented under any Letter of Credit proving to be insufficient,
forged, fraudulent or invalid in any respect or any statement therein
being untrue or inaccurate in any respect whatsoever, (viii) the
insolvency of any Person issuing any documents in connection with the
Letter of Credit, (ix) any irregularity in the transaction with respect to
which a Letter of Credit is issued, including any fraud by the beneficiary
or any transferee of such Letter of Credit, (x) any errors, omissions,
interruptions or delays in transmission or delivery of any messages, (xi)
any act, error, neglect or default, omission, insolvency or failure of
business of any of the correspondents of the Designated Letter of Credit
Issuer, or (xii) any other circumstances arising from causes beyond the
control of the Designated Letter of Credit Issuer.
(h) LIABILITY OF DESIGNATED LETTER OF CREDIT ISSUER.
It is expressly understood and agreed that the absolute and
unconditional obligation of a Borrower hereunder to reimburse, and to
cause the other Letter of Credit Obligors whose reimbursement obligation
such Borrower is responsible to reimburse, disbursements in respect of
Letters of Credit issued by a Designated Letter of Credit Issuer shall not
be construed to excuse such Designated Letter of Credit Issuer from
liability to such Borrower or any Letter of Credit Obligor to the extent
of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrowers to the extent
permitted by applicable Law) suffered by such Borrower or any other Letter
of Credit Obligor of the foregoing that are caused by the gross negligence
or willful misconduct of such Designated Letter of Credit Issuer in
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties agree that each
Designated Letter of Credit Issuer may accept documents that appear on
their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary,
and may make payment upon presentation of documents that appear on their
face to be in substantial compliance with the terms of such Letter of
Credit; provided, however, that each Designated Letter of Credit Issuer
shall have the right in its sole
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discretion to decline to accept such documents and to decline to make such
payment if such documents are not in strict compliance with the terms of
such Letter of Credit. In making any payment under any Letter of Credit,
the Designated Letter of Credit Issuer's (i) exclusive reliance as to any
and all matters set forth therein on documents, signatures and
endorsements presented to it under such Letter of Credit which on their
face appear to be in order, whether not the amount due to the beneficiary
thereunder equals the amount of such draft, whether any document presented
pursuant to such Letter of Credit proves to be in order, and whether any
other statement or any other document or any signature or endorsement with
respect thereto presented pursuant to such Letter of Credit proves to be
forged or invalid or any statement therein proves to be inaccurate or
untrue in any respect whatsoever and (ii) making payment upon presentation
of documents not complying in any immaterial respect with the terms of the
Letter of Credit shall, in each case, not be deemed to constitute willful
misconduct or gross negligence of the Designated Letter of Credit Issuer.
Any action, inaction or omission on the part of the Designated Letter of
Credit Issuer or any of its correspondents, under or in connection with
any Letter of Credit issued by the Designated Letter of Credit Issuer or
any renewal or extension thereof or the related instruments or documents,
if taken in good faith and in conformity with applicable Laws and
regulations governing Letters of Credit generally and the terms of this
Section 2.12(h), shall be binding upon the Borrowers and the other
applicable Letter of Credit Obligors and shall not place the Designated
Letter of Credit Issuer or any of its correspondents under any liability
to the Borrowers or any other Letter of Credit Obligors. The Designated
Letter of Credit Issuer's rights, powers, privileges and immunities
specified in or arising under this Agreement are in addition to any
heretofore or at any time hereafter otherwise created or arising rights,
powers, privileges and immunities, whether by statute or rule of Law or
contract.
(i) DESIGNATED LETTER OF CREDIT ISSUER INDEMNITY.
Each Borrower for whose account a Letter of Credit is issued
or which is guarantying the reimbursement obligation of another Letter of
Credit Obligor for whose account a Letter of Credit has been issued shall
indemnify the Designated Letter of Credit Issuer issuing such Letter of
Credit from and against: (i) any loss or liability (other than any caused
by the Designated Letter of Credit Issuer's gross negligence or willful
misconduct as determined by the final judgment of a court of competent
jurisdiction) incurred by the Designated Letter of Credit Issuer in
respect of this Agreement and the Letters of Credit issued by the
Designated Letter of Credit Issuer for the account of such Borrower or
such Letter of Credit Obligor and (ii) any out-of-pocket expenses incurred
by such Designated Letter of Credit Issuer in defending itself or
otherwise related to this Agreement or any such Letter of Credit issued by
such Designated Letter of Credit Issuer (other than any caused by the
Designated Letter of Credit Issuer's gross negligence or willful
misconduct as determined by the final judgment of a court of competent
jurisdiction) including, without limitation, reasonable fees and expenses
of legal counsel incurred by such Designated Letter of Credit Issuer in
the defense of any claim against it or in the prosecution of its rights
and remedies.
(j) EFFECT OF APPLICABLE LAW OR CUSTOM.
All Letters of Credit issued hereunder, all reimbursement
obligations hereunder and all reimbursement obligations under any
Reimbursement Agreement will, except to the extent otherwise expressly
provided in this Agreement, the Reimbursement Agreements or such Letters
of Credit, be governed by the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, and any subsequent revisions thereof, or (x) in the case of a Letter
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of Credit constituting a Demand Guarantee, the Uniform Rules for Demand
Guarantees (1992 Revision), International Chamber of Commerce Publication
No. 458, and any subsequent revisions thereof or (y) in the case of a
Letter of Credit constituting a Contract Guarantee, the Uniform Rules for
Contract Guarantees (1978), International Chamber of Commerce Publication
No. 325, and any subsequent revisions thereof.
(k) TERMINATION OF LETTER OF CREDIT COMMITMENT.
In the event that: (i) any restriction is imposed on any
Designated Letter of Credit Issuer (including, without limitation, any
legal lending or acceptance limits imposed by the United States of America
or any political subdivision thereof or of any foreign government or
central bank) which in the judgment of such Designated Letter of Credit
Issuer would prevent such Designated Letter of Credit Issuer from issuing
Letters of Credit or maintaining its commitment to issue Letters of Credit
or (ii) there shall have occurred, at any time during the term of this
Agreement: (A) any outbreak of hostilities or other national or
international crisis or change in economic conditions if the effect of
such outbreak, crisis or change would make the issuance of Letters of
Credit impracticable, (B) the enactment, publication, decree or other
promulgation of any statute, regulation, rule or order of any court or
other governmental authority which would materially and adversely affect
the ability of the Borrowers to perform their obligations under this
Agreement or the ability of any Letter of Credit Obligor to perform its
obligations under this Agreement or any Reimbursement Agreement, or (C)
the taking of any action by any government or agency in respect of its
monetary or fiscal affairs which would have a material adverse effect on
the issuance of Letters of Credit, then such Designated Letter of Credit
Issuer, in the case of the occurrence of any event described hereinabove,
shall give written notice of the occurrence of such event to the Borrower
Representative and the Administrative Agent and Designated European
Administrative Agent, if applicable, whereupon the commitment of such
Designated Letter of Credit Issuer to issue or extend any Letter of Credit
shall be suspended on the effective date of such notice and shall continue
to be suspended until the effect of such event shall cease to exist.
(l) GUARANTY OF OTHER LETTER OF CREDIT OBLIGOR'S LETTER OF CREDIT
OBLIGATIONS.
(i) Each Domestic Borrower hereby unconditionally guarantees,
jointly and severally, for the benefit of the Administrative Agent,
each Designated European Administrative Agent, to the extent
applicable, the Banks and each Designated Letter of Credit Issuer,
the full and punctual payment of the obligations of each Letter of
Credit Obligor under each Letter of Credit Document to which such
Letter of Credit Obligor is now or hereafter becomes a party. Upon
failure by any such Letter of Credit Obligor to pay punctually any
such amount, each Domestic Borrower shall be jointly and severally
obligated to forthwith on demand by the Administrative Agent pay the
amount not so paid at the place and in the currency and otherwise in
the manner specified in this Agreement or any applicable Letter of
Credit Document. As a separate, additional and continuing
obligation, each Domestic Borrower unconditionally and irrevocably
undertakes and agrees, for the benefit of the Administrative Agent
or the Designated European Administrative Agent, if applicable, and
the Banks, that, should any of the foregoing amounts not be
recoverable from the Domestic Borrowers for any reason whatsoever
(including, without limitation, by reason of any provision of
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any Loan Document or any other agreement or instrument executed in
connection therewith being or becoming void, unenforceable, or
otherwise invalid under any applicable law) then, notwithstanding
any notice or knowledge thereof by any Bank, the Administrative
Agent or the Designated European Administrative Agent, if
applicable, any of their respective Affiliates, or any other Person,
at any time, each Domestic Borrower as sole, original and
independent obligor, upon demand by the Administrative Agent or such
Designated European Administrative Agent, will make payment to the
Administrative Agent or such Designated European Administrative
Agent, for the account of the Banks and the Administrative Agent or
such Designated European Administrative Agent, of all such
obligations not so recoverable by way of full indemnity, in such
currency and otherwise in such manner as is provided in the Loan
Documents.
(ii) Each Foreign Borrower hereby unconditionally guarantees,
severally, for the benefit of the Administrative Agent, each
Designated European Administrative Agent, if applicable, the
Banks and each Designated Letter of Credit Issuer applicable
thereto, the full and punctual payment of the obligations of each
Letter of Credit Obligor that is a Subsidiary of such Foreign
Borrower under each Letter of Credit Document to which such
Letter of Credit Obligor is now or hereafter becomes a party.
Upon failure by any such Letter of Credit Obligor to pay
punctually any such amount, such Foreign Borrower shall forthwith
on demand by the Administrative Agent or such applicable
Designated European Administrative Agent pay the amount not so
paid at the place and in the currency and otherwise in the manner
specified in this Agreement or any applicable Letter of Credit
Document. As a separate, additional and continuing obligation,
each such Foreign Borrower unconditionally and irrevocably
undertakes and agrees, for the benefit of the Administrative
Agent, such applicable Designated European Administrative Agent
and the Banks, that, should any of the foregoing amounts not be
recoverable from such Foreign Borrower for any reason whatsoever
(including, without limitation, by reason of any provision of any
Loan Document or any other agreement or instrument executed in
connection therewith being or becoming void, unenforceable, or
otherwise invalid under any applicable law) then, notwithstanding
any notice or knowledge thereof by any Bank, the Administrative
Agent, such applicable Designated European Administrative Agent
any of their respective Affiliates, or any other Person, at any
time, such Foreign Borrower as sole, original and independent
obligor, upon demand by the Administrative Agent or such
applicable Designated European Administrative Agent, will make
payment to the Administrative Agent or such applicable Designated
European Administrative Agent, for the account of the Banks, the
Administrative Agent or such or such Designated European
Administrative Agent, as the case may be, of all such obligations
not so recoverable by way of full indemnity, in such currency and
otherwise in such manner as is provided in the Loan Documents.
(iii) The obligations of each Borrower under this Section
2.12(l) shall be unconditional and absolute and, without limiting
the generality of the
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foregoing shall not be released, discharged or otherwise affected by
the occurrence, one or more times, of any of the following:
(A) any extension, renewal, settlement, compromise,
waiver or release in respect to any obligation of any Letter
of Credit Obligor under any Letter of Credit Document, by
operation of law or otherwise;
(B) any modification or amendment of or supplement to
this Agreement, any Note or any other Loan Document;
(C) any release, non-perfection or invalidity of any
direct or indirect security for any obligation of any of the
Borrowers under this Agreement, any Note or any other Loan
Document or of any other Letter of Credit Obligor under any
Letter of Credit Document;
(D) any change in the corporate existence, structure or
ownership of any Letter of Credit Obligor or any insolvency,
bankruptcy, reorganization or other similar proceeding
affecting any Letter of Credit Obligor or its assets or any
resulting release or discharge of any obligation of any Letter
of Credit Obligor contained in any Letter of Credit Document;
(E) the existence of any claim, set-off or other rights
which a Borrower may have at any time against any Letter of
Credit Obligor, the Administrative Agent or applicable
Designated European Administrative Agent, any Bank or any
other person, whether in connection herewith or any unrelated
transactions;
(F) any invalidity or unenforceability relating to or
against any other Letter of Credit Obligor for any reason or
any Letter of Credit Document, or any provision of applicable
law or regulation purporting to prohibit the payment by any
other Letter of Credit Obligor of any Obligations in respect
of any Letter of Credit; or
(G) any other act or omission to act or delay of any
kind by any other Letter of Credit Obligor, the Administrative
Agent or applicable Designated European Administrative Agent,
any Bank or any other person or any other circumstance
whatsoever which might, but for the provisions of this
section, constitute a legal or equitable discharge of any
Borrower's obligations under this section.
(iv) Each Borrower's obligations under this Section 2.12(l)
shall remain in full force and effect until the Commitments shall
have terminated and the principal of and interest on the Notes and
all other amounts payable by such Borrower under the Loan Documents
and by any other Letter of Credit Obligor under the Letter of Credit
Documents shall have been paid in full. If at any time any payment
of any of the Obligations of any Letter of Credit Obligor in respect
of any Letter of Credit Documents is rescinded or must be otherwise
restored or
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returned upon the insolvency, bankruptcy or reorganization of such
Letter of Credit Obligor, the applicable Borrower's obligations
under this section with respect to such payment shall be reinstated
at such time as though such payment had been due but not made at
such time.
(v) Each of the Borrowers irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be
taken by any person against any Letter of Credit Obligor or any
other person, or against any collateral or guaranty of any other
person.
(vi) Until the indefeasible payment in full of all of the
Obligations and the termination of the Commitments of the Banks
hereunder, none of the Borrowers shall have any rights, by operation
of law or otherwise, upon making any payment under this section, to
be subrogated to the rights of the payee against any Letter of
Credit Obligor with respect to such payment or otherwise to be
reimbursed, indemnified or exonerated by any Letter of Credit
Obligor in respect thereof.
(vii) In the event that acceleration of the time for payment
of any amount payable by any Letter of Credit Obligor under any
Letter of Credit Document is stayed upon insolvency, bankruptcy or
reorganization of such Letter of Credit Obligor, all such amounts
otherwise subject to acceleration under the terms of any applicable
Letter of Credit Document shall nonetheless be payable by the
applicable Borrower or Borrowers under this Section 2.12(l)
forthwith on demand by the Administrative Agent.
2.13 INTEREST ON LOANS.
(a) INTEREST RATE.
Each Borrower shall pay interest on the unpaid principal
amount of each Revolving Credit Loan or Term Loan made by the Banks to
such Borrower and each Swing Line Loan made by a Designated Swing Line
Lender to such Borrower from the date of such Loan until the principal
amount thereof shall have been paid in full as follows:
(i) ALTERNATE BASE RATE LOANS. During such periods as any
Alternate Base Rate Loans comprising a Revolving Credit Borrowing or
Term Loan Borrowing are outstanding, such Borrower shall pay
interest on such Alternate Base Rate Loans at a rate per annum equal
to the sum of the Alternate Base Rate plus the Applicable Margin
which is then in effect and applicable to Borrowings comprised of
Alternate Base Rate Loans, payable quarterly, in arrears, on the
first day of each January, April, July and October of each calendar
year and on the date such Alternate Base Rate Loans comprising such
Borrowing shall be converted or paid in full (whether at maturity,
by reason of acceleration or otherwise) and, after maturity, on
demand.
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(ii) LIBOR RATE LOANS. During such periods as any LIBOR Rate
Loans comprising a Revolving Credit Borrowing or Term Loan Borrowing
are outstanding or any LIBOR Rate Loan comprising a Swing Line
Borrowing is outstanding, such Borrower shall pay interest on such
LIBOR Rate Loans at a rate per annum equal to the sum of the London
Interbank Offered Rate plus the Applicable Margin which is then in
effect and applicable to Borrowings comprised of LIBOR Rate Loans as
of the most recently preceding Margin Adjustment Date occurring
prior to the date of the making of such LIBOR Rate Loans, or the
conversion or continuation of such LIBOR Rate Loans in accordance
with Section 2.11, payable: (A) on the last day of each Interest
Period and (B) if such Interest Period has a duration of more than
three months, three months after the first day of such Interest
Period and (C) on the date such LIBOR Rate Loans comprising such
Borrowing shall be converted to Base Rate Loans, or paid in full
(whether at maturity, by reason of acceleration or otherwise) and
(D) after maturity, on demand.
(iii) QUOTED MONEY MARKET RATE LOANS. During such periods as
any Money Market Rate Loan comprising a Swing Line Borrowing is
outstanding, such Borrower to which such Swing Line Loan is
outstanding shall pay interest on such Money Market Rate Loan at a
rate per annum equal to the Quoted Money Market Rate applicable to
such Money Market Loan, payable upon prepayment (on the amount
prepaid), at maturity (whether by acceleration or otherwise), and,
after maturity, on demand.
(b) APPLICABLE MARGIN; TERMS OF ADJUSTMENT.
(i) COMMENCEMENT; CONDITIONS. So long as no Event of Default
shall have occurred which is continuing and has not been waived in
accordance with Section 14.1 hereof, the Applicable Margin shall be
calculated as herein specified as of the Closing Date and as of the
first day of the calendar month of each Fiscal Year commencing on
April 1, 2000 (each such date, a "Margin Adjustment Date"), if at
least three (3) Business Days prior to such Margin Adjustment Date,
the Administrative Agent shall have received: (A) the financial
statements required by Section 7.1(a) for the Fiscal Quarter ending
immediately prior to such Margin Adjustment Date or, where the
Fiscal Quarter ending prior to such Margin Adjustment Date is a
Fiscal Year end, the financial statements required by Section 7.1(b)
for such Fiscal Year ending immediately prior to such Margin
Adjustment Date (each such Fiscal Quarter end and Fiscal Year end, a
"Margin Determination Date") and (B) in each case, a certificate
complying with Section 7.1(c) certifying Consolidated Total Funded
Debt to Adjusted EBITDA Ratio of Instron Corporation and its
consolidated Subsidiaries for the applicable Testing Period ending
as of such Margin Determination Date.
(ii) CALCULATION AND DURATION OF ADJUSTMENT. On each Margin
Adjustment Date, the Applicable Margin shall be the Applicable
Margin set forth in the definition of "Applicable Margin" for
Alternate Base Rate Loans or the LIBOR Rate Loans, as the case
may be, comprising Revolving Credit Borrowings
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which corresponds to the Borrowers' Consolidated Total Funded Debt
to Adjusted EBITDA Ratio as measured for the applicable Testing
Period ending as of the Margin Determination Date applicable to such
Margin Adjustment Date. The Applicable Margin effective as of a
particular Margin Adjustment Date shall remain effective only until
the next succeeding Margin Adjustment Date at which time the
Applicable Margin shall be recalculated pursuant to this Subsection
(b); provided, however, that:
(A) if (x) an Event of Default shall have occurred which
is continuing and has not been waived in accordance with Section
14.1 hereof or (y) even if such Event of Default has been so waived
by the Banks, if the Borrowers shall not have delivered as of any
Margin Adjustment Date the financial statements required to have
been delivered previously thereto under Section 7.1(a) and 7.1(b) of
this Agreement, then, at the election of the Required Banks, the
Applicable Margin shall be: (a) with respect to Revolving Credit
Borrowings comprised of Alternate Base Rate Loans, the Alternate
Base Rate plus one and one half percent (1.50%) per annum, and (b)
with respect to Revolving Credit Borrowings comprised of LIBOR Rate
Loans, the London Interbank Offered Rate plus three percent (3.00%)
per annum, and
(B) if an Event of Default shall have occurred which is
continuing and has not been waived in accordance with Section 14.1
hereof, the interest rate shall be, upon the election of the
Required Banks, the default interest rate applicable pursuant to
Section 2.14 of this Agreement.
2.14 DEFAULT INTEREST.
If any principal, interest or fees due under this Agreement shall
not be paid when due or if any Note or any amounts due under any Note shall not
be paid at maturity, whether such maturity occurs by reason of lapse of time or
by operation of any provision of acceleration of maturity therein contained, or
if there shall otherwise occur an Event of Default which is continuing and has
not been waived in accordance with Section 14.1 hereof, then, at the election of
the Required Banks, (a) the principal of each outstanding Loan and, to the
extent permitted by law, the unpaid interest thereon shall bear interest,
payable on demand, at a rate per annum equal at all times to two percent (2%)
per annum in excess of the interest rate otherwise then payable (including, if
imposed, the interest rate reflecting the increased Applicable Margin set forth
in Section 2.13(b)(ii)) pursuant to the terms of this Agreement and (b) the
Applicable Fee Percentage shall be two percent (2%) in excess of the Applicable
Fee Percentage per annum otherwise applicable pursuant to the proviso to Section
2.16(e) of this Agreement.
2.15 INTEREST RATE DETERMINATION.
(a) ADMINISTRATIVE AGENT DETERMINATION; NOTICE.
The Administrative Agent or the applicable Designated European
Administrative Agent, as the case may be, shall determine the London
Interbank Offered Rate in accordance with the definition of "London
Interbank Offered Rate" set forth in Annex II of this Agreement. The
Administrative Agent or such applicable Designated European Administrative
Agent shall give prompt notice to each of the Banks and the Borrower
Representative of the applicable interest rate determined by the
Administrative
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Agent or the applicable Designated European Administrative Agent, as the
case may be, for purposes of Sections 2.11 and 2.13 of this Agreement.
(b) FAILURE OF BORROWERS TO ELECT.
If no Interest Period is specified in any Credit Request or
any Rate Conversion/Continuation Request for any LIBOR Rate Loans, the
Borrowers shall be deemed to have selected an Interest Period with a
duration of one month. If the Borrower Representative shall not have given
notice in accordance with Section 2.11 of this Agreement to continue any
LIBOR Rate Loans into a subsequent Interest Period (and shall not have
otherwise delivered a Rate Conversion/Continuation Request in accordance
with Section 2.11 of this Agreement to convert such Loans), then, at the
end of the Interest Period applicable to such LIBOR Rate Loans (unless
such LIBOR Rate Loans are repaid pursuant to the terms hereof), the
Borrowers shall be deemed to have selected an Interest Period with a
duration of one month, except that LIBOR Rate Loans denominated in an
Alternate Currency shall, at the end of the Interest Period applicable
thereto, become due and payable.
2.16 FEES.
The following fees shall be payable as set forth below:
(a) UNDERWRITING, ARRANGEMENT AND STRUCTURING FEE
Each Borrower agrees to pay to the Administrative Agent on the
Closing Date for its sole account such Borrower's Ratable Borrower Share
of a one time fee for underwriting, arranging and structuring the
financing transaction contemplated by this Agreement in the amount
specified in the Agent Fee Letter.
(b) ANNUAL ADMINISTRATIVE AGENT'S FEE.
Each Borrower agrees to pay to the Administrative Agent for
its sole account such Borrower's Ratable Borrower Share of an annual
Administrative Agent fee as set forth in the Agent Fee Letter.
(c) UNUSED COMMITMENT FEE.
Each Borrower agrees to pay to the Administrative Agent for
the ratable benefit of the Banks, allocable to the Banks in accordance
with each Bank's Ratable Portion thereof, such Borrower's Ratable Borrower
Share of an unused commitment fee on the average daily unused portion of
the aggregate Revolving Credit Commitments (taking into consideration the
daily outstanding LC Exposure of the Banks as usage for purposes of
calculating such daily unused portion) of the Banks from the Closing Date
until the Revolving Credit Termination Date at a rate per annum equal to
the Applicable Fee Percentage then in effect, payable quarterly in arrears
on the first day of each January, April, July and October, commencing
January 1, 2000, and on the Revolving Credit Termination Date.
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(d) LETTER OF CREDIT FEES.
The Borrowers shall pay the following fees with respect to
Letters of Credit:
(i) ANNUAL STANDBY LETTER OF CREDIT FEE. Each Borrower agrees
to pay to the Administrative Agent for the ratable benefit of the
Banks, quarterly in advance on the Closing Date and on the first
Business Day of each calendar quarter thereafter, a risk
participation fee equal to: (A) in the case of Letters of Credit
other than Contract Guarantees or Demand Guarantees, (x) the
Applicable Fee Percentage then in effect multiplied by (y) the
aggregate face amount of all Letters of Credit then outstanding for
the account of such Borrower or such other Letter of Credit Obligor
being guaranteed by such Borrower and (B) in the case of Contract
Guarantees or Demand Guarantees, (x) 50% of the Applicable Fee
Percentage then in effect multiplied by (y) the aggregate face
amount of all such Letters of Credit then outstanding for the
account of such Borrower or such other Letter of Credit Obligor
being guaranteed by such Borrower (unless, in either case, such
amount attributable to such Letter of Credit Obligor has been
directly paid to the Designated Letter of Credit Issuer pursuant to
the applicable reimbursement agreement).
(ii) LETTER OF CREDIT FACING FEE. Each Borrower agrees to pay
to the Administrative Agent, for the sole account of the Designated
Letter of Credit Issuer designated for such Borrower, a facing fee
for all Letters of Credit issued by such Designated Letter of Credit
Issuer for the account of such Borrower or such other Letter of
Credit Obligor being guaranteed by such Borrower (unless such amount
attributable to such Letter of Credit Obligor has been directly paid
to the Designated Letter of Credit Issuer pursuant to the applicable
reimbursement agreement) equal to one-eighth of one percent (0.125%)
per annum of the average daily maximum amount available to be drawn
under all Letters of Credit issued by such Designated Letter of
Credit Issuer while outstanding, payable quarterly in arrears on the
first day of each calendar quarter.
(iii) OTHER FEES RELATING TO LETTERS OF CREDIT. Each Borrower
agrees to pay to the Designated Letter of Credit Issuer designated
for such Borrower, for its sole account, upon issuance by such
Designated Letter of Credit Issuer of any Letters of Credit for the
account of such Borrower or such other Letter of Credit Obligor
being guaranteed by such Borrower (unless such amount attributable
to such Letter of Credit Obligor has been directly paid to the
Designated Letter of Credit Issuer pursuant to the applicable
reimbursement agreement), any standard amendment and modification
fees, issuance fees, draw fees and any other standard fees and
charges charged by such Designated Letter of Credit Issuer in
connection with Letters of Credit.
(e) APPLICABLE FEE PERCENTAGES.
So long as no Event of Default shall have occurred which is
continuing and has not been waived in accordance with Section 14.1 hereof,
each Applicable Fee
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Percentage shall be calculated as herein specified as of the Closing Date
and as of the first day of the calendar month of each Fiscal Year
commencing on April 1, 2000 (each such date, a "Fee Percentage Adjustment
Date"), if at least three (3) Business Days prior to such Fee Percentage
Adjustment Date, the Administrative Agent shall have received: (A) the
financial statements required by Section 7.1(a) for the Fiscal Quarter
ending immediately prior to such Fee Percentage Adjustment Date or, where
the Fiscal Quarter ending prior to such Fee Percentage Adjustment Date is
a Fiscal Year end, the financial statements required by Section 7.1(b) for
such Fiscal Year ending immediately prior to such Fee Percentage
Adjustment Date (each such Fiscal Quarter end and Fiscal Year end, a "Fee
Percentage Determination Date") and (B) a certificate complying with
Section 7.1(c) certifying the Consolidated Total Funded Debt to EBITDA
Ratio of Instron Corporation and its consolidated Subsidiaries as of such
Fee Percentage Determination Date. On each Fee Percentage Adjustment Date,
each Applicable Fee Percentage shall be the percentage set forth in the
definition of "Applicable Fee Percentage" which corresponds to the
Borrowers' Consolidated Total Funded Debt to EBITDA Ratio as of the Fee
Percentage Determination Date applicable to such Fee Percentage Adjustment
Date. The Applicable Fee Percentage effective as of a particular Fee
Percentage Adjustment Date shall remain effective only until the next
succeeding Fee Percentage Adjustment Date, at which time the Applicable
Fee Percentage shall be recalculated pursuant to this Section 2.16(e);
provided, however, that, if an Event of Default shall have occurred which
is continuing and has not been waived in accordance with Section 14.1
hereof, or if the Borrowers shall not have delivered as of such Fee
Percentage Adjustment Date the financial statements in accordance with
Sections 7.1(a) and 7.1(b) of this Agreement, then, upon the election of
the Required Banks, the Applicable Fee Percentage shall be the highest per
annum percentage appearing in the tables incorporated into the
definitions.
(f) PAYMENT OF FEES; NONREFUNDABLE.
All fees set forth in this Section 2.16 shall be paid in
Dollars on the date due, in immediately available funds, to the
Administrative Agent for distribution, if and as appropriate, to the
Banks, the Designated Swing Line Lenders or the Designated Letter of
Credit Issuers. Once paid, to the extent permitted by applicable Law, none
of such fees shall be refundable under any circumstances.
2.17 MANNER AND APPLICATION OF PAYMENTS; CONTROL ACCOUNT MAINTENANCE;
COMPUTATIONS.
(a) MANNER OF PAYMENT.
Each of the Borrowers shall make all payments to be made under
this Agreement by such Borrower with respect to the Obligations hereunder,
not later than 12:00 noon (local time at the Payment Office of the
Administrative Agent or the applicable Designated European Administrative
Agent) on the day on which such payment shall become due in immediately
available funds and without setoff, counterclaim, defense or deduction of
any kind, to the Administrative Agent's or the applicable Designated
European Administrative Agent's account maintained at the Payment Office
of the Administrative Agent or the applicable Designated European
Administrative Agent, as the case may be, for distribution by the
Administrative Agent or the applicable Designated European Administrative
Agent to the Banks and application thereof by the Banks to such Borrowers'
Loan Account.
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(b) APPLICATION OF PAYMENTS.
After receipt of any payment by the Administrative Agent or
the applicable Designated European Administrative Agent, as the case may
be, the Administrative Agent or the applicable Designated European
Administrative Agent will cause to be distributed on the day of such
receipt like funds relating to such payment (other than amounts payable
pursuant to Section 2.16(a) and (b) of this Agreement solely to the
Administrative Agent and amounts payable pursuant to Section 2.16(d)(ii)
and 2.16(d)(iii) of this Agreement solely to a Designated Letter of Credit
Issuer) ratably to each of the Banks for the account of its respective
Lending Office. At the time of a Borrowers' making payment hereunder, the
Borrower Representative shall specify to the Administrative Agent or the
applicable Designated European Administrative Agent, as the case may be,
the Obligations of such Borrower to which such payment is to be applied.
If the Borrower Representative does not specify an application or if an
Event of Default has occurred which is continuing and has not been waived
in accordance with Section 14.1 hereof, the Administrative Agent or such
applicable Designated European Administrative Agent shall, subject to
Section 2.19 and 9.4(d)(iv) of this Agreement, distribute such payment to
the Banks for application to such Loans (or participations therein) as the
Administrative Agent or such applicable Designated European Administrative
Agent, in its sole discretion, elects or as the Required Banks shall have
directed; provided, however, the Administrative Agent or such applicable
Designated European Administrative Agent will use reasonable efforts to
avoid an application of a payment which causes early prepayment of a LIBOR
Rate Borrowing prior to expiration of its applicable Interest Period.
(c) ADMINISTRATIVE AGENT MAINTENANCE OF CONTROL ACCOUNT.
The Administrative Agent shall maintain on its books and
records a control account (the "Control Account") in respect of each
Borrower which shall reflect: (i) with respect to Revolving Credit
Borrowings: (w) the outstanding Revolving Credit Loans to each Borrower,
(x) the Ratable Portion of each Bank in the outstanding Revolving Credit
Borrowings to each Borrower, (y) the Ratable Portion of each Bank in all
payments made in respect of such Revolving Credit Loans and (z) accrued
interest on the Revolving Credit Loans to each Borrower, (ii) with respect
to outstanding Term Loans, (x) the outstanding principal amount to such
Borrower by each of the Banks, (y) all payments made to each Bank in
respect of such Term Loans to such Borrower and (z) accrued interest on
such Term Loan owing by such Borrower, (iii) with respect to Swing Line
Loans: (x) the outstanding Swing Line Loans to each Borrower by each
Designated Swing Line Lender, (y) the Swing Line Exposure of each Bank
and, to the extent applicable, the participating interests thereof in
outstanding Swing Line Loans and (z) to the extent applicable, the
participating interest of each Bank in all payments made and all accrued
interest on Swing Line Loans in which such Bank has a participating
interest, (iv) all Letter of Credit drawings and (v) all other Obligations
of any Borrower that have become payable hereunder. Each entry by the
Administrative Agent in the Control Account shall be, absent manifest
error, prima facie evidence of the data entered. Such entries by the
Administrative Agent shall not be a condition to any Borrower's obligation
to repay the Obligations.
(d) DESIGNATED EUROPEAN ADMINISTRATIVE AGENT MAINTENANCE OF
DESIGNATED EUROPEAN CONTROL ACCOUNT.
Each Designated European Administrative Agent shall maintain
on its books and records a control account (the "Designated European
Control Account") in
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respect of each Borrower for which such Designated European Administrative
Agent has been designated which shall reflect: (i) with respect to
Revolving Credit Borrowings for such Borrowers: (w) the outstanding
Revolving Credit Loans to each such Borrower, (x) the Ratable Portion of
each Bank in the outstanding Revolving Credit Borrowings to each Borrower,
(y) the Ratable Portion of each Bank in all payments made in respect of
such Revolving Credit Loans and (z) accrued interest on the Revolving
Credit Loans to each Borrower, (ii) with respect to Swing Line Loans: (x)
the outstanding Swing Line Loans to each such Borrower by each Designated
Swing Line Lender, (y) the Ratable Portion (or participating interest ) of
each Bank in such outstanding Swing Line Loans and (z) to the extent
applicable, the participating interest of each Bank in all payments made
and all accrued interest on Swing Line Loans in which such Bank has a
participating interest, (iii) all Letter of Credit drawings and (iv) all
other Obligations of any Borrower that have become payable hereunder. Each
entry by such Designated European Administrative Agent in the Designated
European Control Account shall be, absent manifest error, prima facie
evidence of the data entered. Such entries by such Designated European
Administrative Agent shall not be a condition to any Borrower's obligation
to repay the Obligations. If requested by the Administrative Agent, the
Designated European Administrative Agent shall notify the Administrative
Agent, on a weekly basis, of the information reflected in the Designated
European Control Account as of the end of the prior week.
(e) CONTROL ACCOUNT CHARGES AND CREDITS; ADMINISTRATIVE AGENT
REPORTS.
The Control Account and Designated European Control Account
maintained by the Administrative Agent and each Designated European
Administrative Agent, as the case may be, in respect of each Borrower will
be charged with all Revolving Credit Loans, Term Loans and all Swing Line
Loans made by the Banks or the applicable Designated Swing Line Lender to
such Borrower and all other Obligations of such Borrower under this
Agreement or any other Loan Document. Each of the Borrowers hereby
authorizes each Bank to charge its Loan Account in respect of such
Borrower with such Obligations. The Control Account and each Designated
European Control Account in respect of a Borrower will be credited in
accordance with this Section (b) with all payments received by the
Administrative Agent and the Designated European Administrative Agent, as
the case may be, directly from such Borrower or for the account of such
Borrower. The Administrative Agent and each Designated European
Administrative Agent shall send the Borrower Representative statements for
the Borrowers in accordance with the Administrative Agent's and such
Designated European Administrative Agent's standard procedures. Any and
all such periodic or other statements or reconciliations of the Control
Account and Designated European Control Account shall be final, binding
and conclusive upon the Borrowers in all respects, absent manifest error,
unless the Administrative Agent or the applicable Designated European
Administrative Agent, as the case may be, receives specific written
objection thereto from the Borrower Representative within thirty (30)
Business Days after such statements or reconciliation shall have been sent
to the Borrower Representative by the Administrative Agent or such
Designated European Administrative Agent. The Loan Accounts of each Bank
shall reflect the activity in the Control Account applicable to such Bank.
(f) AUTHORIZATION TO CHARGE BANKING ACCOUNTS.
If and to the extent any payment owed by a Borrower to the
Administrative Agent, any Designated European Administrative Agent, any
Bank or any Designated Swing Line Lender is not made when due hereunder or
under the Notes, each of the Borrowers hereby authorizes the
Administrative Agent, such Designated European
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Administrative Agent, such Bank and such Designated Swing Line Lender, as
the case may be, to charge from time to time against any or all of the
accounts of the Borrowers or any Borrower with the Administrative Agent,
such Designated European Administrative Agent, such Bank or such
Designated Swing Line Lender, as the case may be, any amount so due,
provided, however, that in no case shall any Foreign Borrower be liable
for any amounts owing by any other Borrower. Notice of any such charge
shall be given promptly to the Borrower Representative by the
Administrative Agent, such Designated European Administrative Agent, such
Bank or such Designated Swing Line Lender, as the case may be.
(g) COMPUTATIONS OF INTEREST AND FEES.
All computations of interest on LIBOR Rate Loans hereunder and
of fees and other compensation hereunder shall be made by the
Administrative Agent on the basis of a year of 360 days in each case for
the actual number of days elapsed (commencing on the date such Loan was
advanced but excluding the date such Loan shall be paid in full) occurring
in the period for which such interest or fees are payable; provided, that
all computations of interest on Alternate Base Rate Loans which are based
on NCB's "prime rate" shall be made by the Administrative Agent on the
basis of a year of 365 or 366 days, as the case may be, for the actual
number of days elapsed. Each determination by the Administrative Agent or
the applicable Designated European Administrative Agent, as the case may
be, of interest, fees or other amounts of compensation due hereunder shall
be rebuttably presumed to be correct.
(h) PAYMENT NOT ON BUSINESS DAY.
Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day. Any such extension or reduction
of time shall in such case be included in the computation of payment of
interest, fees or other compensation, as the case may be.
(i) FAILURE TO PAY IN ALTERNATE CURRENCY.
If it is impossible or illegal for any Borrower to effect
payment of a LIBOR Rate Loan denominated in an Alternate Currency in the
same Alternate Currency as such Loan was borrowed, as required by Section
2.10(a), or if any Borrower shall default in the payment when due of any
payment in an Alternate Currency, the Required Banks may, at their option,
require such payment to be made to the Administrative Agent or applicable
Designated European Administrative Agent, as the case may be, in Dollars
in the Dollar equivalent of such Alternate Currency. In any case in which
such Borrower shall make such payment in Dollars in the amount of the
Dollar equivalent, such Borrower agrees to hold the Banks harmless from
any loss incurred by the Banks arising from any change in the value of
Dollars in relation to such Alternate Currency between the date such
payment became due and the date of payment thereof, including, without
limitation the costs of conversion and any other costs related thereto.
The Borrowers' obligations under this Section (i) shall survive
termination of this Agreement with respect to amounts requested by any
Bank within thirty (30) days after such termination.
(j) ALTERNATE CURRENCY AMOUNTS.
Notwithstanding anything contained herein to the contrary, the
Administrative Agent or applicable Designated European Administrative
Agent, as the case
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may be, may with respect to Credit Requests by the Borrower Representative
for Borrowings comprised of LIBOR Rate Loans denominated in an Alternate
Currency or notices of voluntary prepayments of less than the full amount
of a LIBOR Rate Loan denominated in an Alternate Currency, engage in
mutually agreeable rounding of the Alternate Currency amounts requested to
be advanced or repaid; and, in such event, the Administrative Agent or
such Designated European Administrative Agent shall promptly notify the
Banks of such rounded amounts, and the Borrower Representative's Credit
Request or notice shall thereby be deemed to reflect such rounded amounts.
(k) PRESUMPTION OF PAYMENT IN FULL BY THE BORROWERS.
Unless the Administrative Agent or the applicable Designated
European Administrative Agent, as the case may be, shall have received
notice from a Borrower or the Borrower Representative on behalf of a
Borrower prior to the date on which any payment is due to the Banks
hereunder that such Borrower will not make such payment in full, the
Administrative Agent or such applicable Designated European Administrative
Agent may assume that such Borrower has made such payment in full to the
Administrative Agent on such date. In reliance upon such assumption, the
Administrative Agent and such Designated European Administrative Agent, as
applicable, may, but shall not be obligated to, distribute to each Bank on
such due date the amount then due such Bank. If and to the extent a
Borrower shall not have made such payment in full to the Administrative
Agent or such Designated European Administrative Agent, each Bank shall
repay to the Administrative Agent or such Designated European
Administrative Agent promptly upon demand the amount distributed to such
Bank, together with interest thereon (except to the extent otherwise paid
by such Borrower) for each day from the date such amount is distributed to
such Bank until the date such Bank repays such amount to the
Administrative Agent or such Designated European Administrative Agent at
the Federal Funds Effective Rate or the Cost of Funds Rate, as applicable,
if the failure to pay relates to Revolving Credit Loans or Term Loans, or
the Cost of Funds Rate of such Designated European Administrative Agent,
if the failure to pay relates to Money Market Rate Swing Line Loans. All
amounts payable under this Section 2.17(k) shall be payable in Dollars or
the applicable Alternate Currency, as the case may.
2.18 LIBOR RATE LOANS: UNASCERTAINABLE RATE; ILLEGALITY; INCREASED COSTS.
(a) UNASCERTAINABLE RATE; ILLEGALITY; INCREASED COSTS.
In the event that (x) in the case of clause (i) below, the
Administrative Agent or, with respect to Swing Line Loans or other LIBOR
Rate Loans to a Borrower for which a Designated European Administrative
Agent has been designated, the applicable Designated European
Administrative Agent or (y) in the case of clauses (ii) and (iii) below,
any Bank or Designated Swing Line Lender, shall have determined on a
reasonable basis (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto):
(i) on any date for determining the LIBOR Rate for LIBOR Rate
Loans for any Interest Period that, by reason of any changes arising
after the Effective Date affecting the London interbank
eurocurrrency market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for
in the definition of the "London Interbank Offered Rate"; or
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(ii) at any time, that such Bank or Designated Swing Line
Lender shall incur increased costs or reductions in the amounts
received or receivable hereunder in an amount which such Bank or
Designated Swing Line Lender deems material with respect to any
LIBOR Rate Loans (other than any increased cost or reduction in the
amount received or receivable resulting from the imposition of or a
change in the rate of taxes or similar charges) to a Borrower
because of any change since the Effective Date in any applicable
law, governmental rule, regulation, guideline, order or request
(whether or not having the force of law), or in the interpretation
or administration thereof and including the introduction of any new
law or governmental rule, regulation, guideline, order or request
(such as, for example, but not limited to, a change in official
reserve requirements, but, in all events, excluding reserves
includable in the "London Interbank Offered Rate" pursuant to the
definition thereof); or
(iii) at any time, that the making or continuance of any
Eurocurrency Loan denominated in Dollars or in an Alternate Currency
has become unlawful by compliance by such Bank or Designated Swing
Line Lender in good faith with any change since the Effective Date
in any law, governmental rule, regulation, guideline or order, or
the interpretation or application thereof, or would conflict with
any thereof not having the force of law but with which such Bank
customarily complies;
THEN, and in any such event, such Bank or Designated Swing Line Lender (or
the Administrative Agent or such Designated European Administrative Agent,
as applicable, in the case of clause (i) above) shall (x) on such date and
(y) within 10 Business Days of the date on which such event no longer
exists give notice (by telephone confirmed in writing) to the Borrower
Representative and to the Administrative Agent and such Designated
European Administrative Agent, as the case may be, of each such
determination (which notice the Administrative Agent or Designated
European Administrative Agent, as the case may be, shall promptly transmit
to each of the other applicable Banks). Thereafter (x) in the case of
clause (i) above, LIBOR Rate Loans shall no longer be available until such
time as the Administrative Agent or Designated European Administrative
Agent, as applicable, notifies the Borrower and the applicable Banks that
the circumstances giving rise to such notice by the Administrative Agent
or such Designated European Administrative Agent no longer exist, and any
Credit Request or Rate Conversion/Continuation Request given by the
Borrower Representative with respect to LIBOR Rate Loans which have not
yet been incurred or converted shall be deemed rescinded by the Borrower
or, in the case of a Credit Request, shall, at the option of the Borrower,
be deemed converted into a Credit Request for Alternate Base Rate Loans to
be made on the date of Borrowing contained in such Credit Request, (y) in
the case of clause (ii) above, the affected Borrower shall pay to such
Bank or Designated Swing Line Lender, upon written demand therefor, such
additional amounts (in the form of an increased rate of, or a different
method of calculating, interest or otherwise as such Bank or Designated
Swing Line Lender shall determine) as shall be required to compensate such
Bank or Designated Swing Line Lender, for such increased costs or
reductions in amounts receivable hereunder (a written notice as to the
additional amounts owed to such Bank or Designated Swing Line Lender,
showing the basis for the calculation thereof, which basis must be
reasonable, submitted to the Borrower by such Bank or Designated Swing
Line Lender shall, absent manifest error, be final and conclusive and
binding upon all parties hereto) and (z) in the case of clause (iii)
above,
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the Borrower shall take one of the actions specified in section 2.18(b) as
promptly as possible and, in any event, within the time period required by
law.
(b) CANCELLATION OF REQUESTS; CONVERSION OF OUTSTANDINGS.
At any time that any LIBOR Rate Loan is affected by the
circumstances described in Section 2.18(a)(ii), the Borrower to which the
affected Bank or Designated Swing Line Lender has advanced such LIBOR Rate
Loan may, and, in the event any LIBOR Rate Loan is affected by the
circumstances described in Section 2.18(a)(iii), such affected Borrower
shall, either (i) if the affected LIBOR Rate Loan is then being made
pursuant to a Borrowing, by causing the Borrower Representative to give
the Administrative Agent or the applicable Designated European
Administrative Agent, as the case may be, telephonic (confirmed promptly
in writing if requested) notice thereof on the same date that the Borrower
Representative was notified by a Bank or a Designated Swing Line Lender
pursuant to Section 2.18(a)(ii) or (iii), cancel said Borrowing, convert
the related Credit Request into one requesting a Borrowing of Alternate
Base Rate Loans or require the affected Bank to make its requested Loan as
a Alternate Base Rate Loan, or (ii) if the affected LIBOR Rate Loan is
then outstanding, upon at least one Business Day's notice from the
Borrower Representative to the Administrative Agent or such Designated
European Administrative Agent, as the case may be, require the affected
Bank or Designated Swing Line Lender to convert each such LIBOR Rate Loan
into an Alternate Base Rate Loan or, in the case of the Designated Swing
Line Lender, into a Money Market Rate Loan with such conversion to be
effective on the last day of the Interest Period currently applicable to
such LIBOR Rate Loan, if the affected Bank or such Designated Swing Line
Lender may lawfully continue to maintain and fund such Loan until such
last day, or immediately, if the affected Bank or such Designated Swing
Line Lender is not legally permitted to maintain and fund such Loan until
such last day; provided, that, in the case of the Banks, if more than one
Bank is affected at any time, then all affected Banks must be treated the
same pursuant to this Section 2.18(b).
2.19 PRO RATA TREATMENT OF BANKS.
Except as set forth in Sections 2.7, 2.16 and 9.6 of this Agreement,
and except as set forth in the Administrative Agent Fee Letter, each Borrowing
and participating interest hereunder, each payment or prepayment of principal of
any Borrowing, any reduction of commitments, each payment of interest on the
Loans, and each payment of the fees provided for hereunder shall be allocated
among the Banks ratably in accordance with each Bank's Ratable Portion thereof.
2.20 EUROPEAN ECONOMIC AND MONETARY UNION.
(a) EFFECTIVENESS OF PROVISIONS.
The provisions of paragraphs (b) through (g) of this Section shall
be effective from and after January 1, 1999; provided that, if and to the extent
that any such provision relates to any state (or the currency of such state)
that is not a Participating Member State on the date hereof, such provision
shall become effective in relation to such state (and the currency of such
state) at and from the date on which such state becomes a Participating Member
State.
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(b) REDENOMINATION OF ALTERNATIVE CURRENCIES.
Each obligation under this Agreement of a party to this Agreement
which has been denominated in the National Currency Unit of a Participating
Member State shall be denominated, or redenominated into, the Euro Unit in
accordance with EMU Legislation, provided that if and to the extent that any EMU
Legislation provides that an amount denominated either in the Euro or in the
National Currency Unit of a Participating Member State and payable within the
Participating Member State by crediting an account of the creditor can be paid
by the debtor either in the Euro Unit or in that National Currency Unit, any
party to this Agreement shall be entitled to pay or repay any such amount either
in the Euro Unit or in such National Currency Unit.
(c) PAYMENTS BY THE ADMINISTRATIVE AGENT GENERALLY.
With respect to the payment of any amount denominated in the Euro or
in a National Currency Unit, neither the Administrative Agent nor any Designated
European Administrative Agent shall be liable to any Borrower or any of the
Banks in any way whatsoever for any delay, or the consequences of any delay, in
the crediting to any account of any amount required by this Agreement to be paid
by the Administrative Agent or such Designated European Administrative Agent, if
the Administrative Agent or such Designated European Administrative Agent shall
have taken all relevant steps to achieve, on the date required by this
Agreement, the payment of such amount in immediately available, freely
transferable, cleared funds (in the Euro Unit or, as the case may be, in a
National Currency Unit) to the account of such Borrower or any Bank, as the case
may be, in the principal financial center in the Participating Member State
which such Borrower or, as the case may be, such Bank shall have specified for
such purpose. In this paragraph (c), "all relevant steps" shall mean all such
steps as may be prescribed from time to time by the regulations or operating
procedures of such clearing or settlement system as the Administrative Agent or
such Designated European Administrative Agent may from time to time determine
for the purpose of clearing or settling payments of the Euro.
(d) BASIS OF ACCRUAL.
If the basis of accrual of interest or fees expressed in this
Agreement with respect to the Alternate Currency of any state that becomes a
Participating Member State shall be inconsistent with any convention or practice
in the applicable interbank market for the basis of accrual of interest or fees
in respect of the Euro, such convention or practice shall replace such expressed
basis effective as of and from the date on which such state becomes a
Participating Member State; provided that, if any Loan denominated in the
Alternate Currency of such state is outstanding immediately prior to such date,
such replacement shall take effect, with respect to such Loan, at the end of the
then current Interest Period (if any) for such Loan.
(e) ROUNDING.
Without prejudice and in addition to any method of conversion or
rounding prescribed by the EMU Legislation, each reference in this Agreement to
a minimum amount (or a multiple thereof) in a National Currency Unit to be paid
to or by the Administrative Agent or the applicable Designated European
Administrative Agent shall be replaced by a reference to such reasonably
comparable and convenient amount (or a multiple thereof) in the Euro Unit as the
Administrative Agent or such Designated European Administrative Agent may from
time to time specify.
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(f) OTHER CONSEQUENTIAL CHANGES.
Each provision of this Agreement or the other Loan Documents shall
be subject to such reasonable changes of construction as the Administrative
Agent may from time to time specify to be necessary or appropriate to reflect
the introduction of or changeover to the Euro in Participating Member States.
SECTION 3 CONDITIONS OF LENDING.
3.1 CONDITIONS PRECEDENT TO INITIAL LOANS.
The effectiveness of this Agreement, the obligation of each Bank to
make a Loan on the occasion of each Borrowing, the obligation of each Designated
Swing Line Lender to make a Swing Line Loan, and the obligation of each
Designated Letter of Credit Issuer to issue any Letters of Credit, are subject
to the condition precedent that: (i) the conditions set forth in Annex III,
attached hereto and incorporated herein by reference, shall have been satisfied,
as determined by the Administrative Agent, in its sole discretion, on or before
the Closing Date of this Agreement and (ii) the Administrative Agent shall have
received on or before the Closing Date of this Agreement the documents and
deliveries set forth on said Annex III (which, in the case of exhibits to this
Agreement, shall be in the forms attached hereto, with blanks completed).
3.2 CONDITIONS PRECEDENT TO ALL LOANS.
The obligation of each Bank to make a Loan on the occasion of each
Borrowing, Rate Conversion and Rate Continuation, the obligation of each
Designated Swing Line Lender to make a Swing Line Loan, and the obligation of
each Designated Letter of Credit Issuer to issue or renew any Letter of Credit,
is subject to the conditions precedent that:
(a) REPRESENTATION BRINGDOWN.
As of the date of any Credit Event, and before and after
giving effect thereto, the representations and warranties contained in
this Agreement and all other Loan Documents are (i) to the extent such
representations and warranties are not otherwise subject by their terms to
a materiality or Material Adverse Effect threshold, true and correct in
all material respects on and as of the date of such Credit Event with the
same effect as though made on and as of such date, except to the extent
such representations and warranties expressly relate to an earlier date,
and (ii) to the extent such representations and warranties are otherwise
subject by their terms to a materiality or Material Adverse Effect
threshold, true and correct in all respects on and as of the date of such
Credit Event with the same effect as though made on and as of such date,
except to the extent such representations and warranties expressly relate
to an earlier date; and
(b) NO DEFAULT; COMPLIANCE WITH TERMS.
As of the date of any Credit Event, and before and after
giving effect thereto, each of the Borrowers shall be in compliance with
all other terms and provisions set forth herein and in each other Loan
Document on its part to be observed or performed, and at the time of and
immediately after such Credit Event, no Potential Default or Event of
Default shall have occurred and be continuing; and
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(c) NO MATERIAL ADVERSE CHANGE.
As of the date of any Credit Event, and before and after
giving effect thereto, there shall have been no event which has had, or
could reasonably be expected to have, a Material Adverse Effect.
(d) CONFIRMATION OF BORROWING BASE.
The Borrowers shall have delivered to the Administrative Agent
a Borrowing Base Certificate required to have been delivered for the
period in which such Credit Event occurs.
(e) OTHER DELIVERIES.
The Administrative Agent shall have received such other
approvals or documents as the Administrative Agent may reasonably request
consistent with the terms of this Agreement.
Each Credit Event shall constitute a representation and warranty by each of the
Borrowers that on the date of such Credit Event, the statements in clauses (a)
through (c) above are true and correct as of such date and that the actions
required under clauses (d) and (e) above have in fact been taken as of such
date.
SECTION 4 SECURITY INTEREST IN COLLATERAL; COLLATERAL REQUIREMENTS.
4.1 GRANT OF SECURITY INTEREST.
(a) DOMESTIC BORROWER COLLATERAL.
To secure the prompt payment and performance of: (w) the Obligations
(including Obligations of any Borrower as a Borrower Guarantor to pay the
Guaranteed Obligations of other Borrowers owing to the Banks, the Swing Line
Exposure of the Banks and the LC Exposure of the Banks), (x) the Swing Line
Obligations of any Borrower owing to a Designated Swing Line Lender, the Letter
of Credit Obligations of any Borrower owing to a Designated Letter of Credit
Issuer and (z) the Designated Hedge Obligations owing by any Borrower to a
Designated Hedge Creditor, as the case may be, each Domestic Pledging Borrower
hereby grants (or, by executing the Additional Borrower Addendum hereto, grants)
to the Administrative Agent for itself and for the benefit of the Banks, each
Designated Swing Line Lender, each Designated Letter of Credit Issuer and the
Designated Hedge Creditor, a continuing security interest in and to and a pledge
of all of the tangible and intangible, real property and personal property and
assets of such Borrower (collectively, the "Domestic Borrower Collateral"),
whether now owned or existing or hereafter acquired or arising and wheresoever
located including, without limitation: (a) all Accounts, (b) all Inventory, (c)
all Equipment, (d) all General Intangibles, (e) all Investment Property
(provided, no capital stock in Foreign Subsidiaries of Instron Corporation will
be taken as Collateral except to the extent specified in the Pledge and Security
Agreements attached hereto as Exhibit D-2 and D-3), (f) any and all deposits or
other sums at any time credited by or due from the Banks to such Borrower,
whether in a depository account or other account, (g) all Instruments,
documents, documents of title, policies and certificates of insurance,
securities, goods, choses in action, Chattel Paper, cash or other property, to
the extent owned by such Borrower or in which such Borrower has an interest, (h)
all Collateral of such Borrower which now or hereafter is at any time in the
possession or control of any of the Banks or in transit by mail or carrier to or
from any of the Banks or in the
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possession of any Person acting in a Bank's behalf, without regard to whether
such Bank received the same in pledge, for safekeeping, as Administrative Agent
for collection or transmission or otherwise or whether such Bank had
conditionally released the same, and any and all balances, sums, proceeds and
credits of such Pledging Borrower with such Bank, (i) all accessions to,
substitutions for, and all replacements, Products and Proceeds of the herein
above-referenced property of such Borrower described in this Subsection
including, but not limited to, proceeds of insurance policies insuring such
property and (j) all books, records, and other property (including, but not
limited to, credit files, programs, printouts, computer software, programs, and
disks, magnetic tape and other magnetic media, and other materials and records)
of such Borrower pertaining to any such above-referenced property of such
Borrower. Such continuing security interest and pledge in the Domestic Borrower
Collateral shall be in addition to any other security interest or Lien in the
tangible or intangible, real and personal property and assets of any Person
securing the Obligations and/or the Designated Hedge Obligations; provided,
however, that, with respect to General Intangibles or Equipment of a Pledging
Domestic Borrower, to the extent that:
(i) any such General Intangible is subject by reason of the
terms of the instrument or agreement creating such General
Intangible itself (and not any third party agreement) to a valid and
effective contractual restriction prohibiting the creation or a
security interest without the consent of another Person or otherwise
requires the consent of such Person to permit such creation or
(ii) any such item of Equipment is subject to a purchase money
security interest permitted by Section 7.3(d) of this Agreement
prohibiting the creation of any other security interest in such item
of Equipment without the consent of another Person,
THEN, the above stated grant of a security interest to the Administrative Agent
shall not be effective as to such General Intangible or item of Equipment until
such time as consent has been obtained from such Person; provided, further that,
upon the occurrence of an Event of Default which is continuing and has not been
waived in accordance with Section 14.1 hereof, such Domestic Pledging Borrower
will, upon the written request of the Administrative Agent, obtain such consent.
(b) U.K. COLLATERAL.
Pursuant to the U.K. Collateral Documents, Instron, Ltd. shall
grant to the Administrative Agent for the benefit of the Banks, the
Designated U.K. Swing Line Lender, the Designated U.K. Letter of Credit
Issuer and any Designated Hedge Creditor, effective as of the Closing Date, a
Lien on the U.K. Collateral to secure the prompt payment and performance of
all Obligations of Instron, Ltd. to the Banks, the Swing Line Obligations
owing from Instron, Ltd. to the Designated U.K. Swing Line Lender, the Letter
of Credit Obligations owing by Instron, Ltd. to the Designated U.K. Letter of
Credit Issuer, and Instron, Ltd.'s Ratable Borrower Share of Designated Hedge
Obligations.
(c) GERMAN COLLATERAL.
Pursuant to the German Collateral Documents, Instron Schenck Testing
Systems, GmbH and Instron Wolpert GmbH shall each grant to the Administrative
Agent for the benefit of the Banks, the Designated German Swing Line Lender, the
Designated German Letter of Credit Issuer and any Designated Hedge Creditor,
effective as of the Closing Date, a Lien on the German Collateral to secure the
prompt payment and performance of all Obligations of Instron
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Schenck Testing Systems, GmbH and Instron Wolpert GmbH to the Banks, the Swing
Line Obligations owing from Instron Schenck Testing Systems, GmbH and Instron
Wolpert GmbH to the Designated German Swing Line Lender, the Letter of Credit
Obligations owing by Instron Schenck Testing Systems, GmbH and Instron Wolpert
GmbH to the Designated German Letter of Credit Issuer, and Instron Schenck
Testing Systems, GmbH and Instron Wolpert GmbH Ratable Borrower Share of
Designated Hedge Obligations.
4.2 PERFECTION.
Each Pledging Borrower shall execute such financing or other similar
statements as are provided for by applicable law, and otherwise take such other
action and execute such assignments or other instruments, control agreements or
documents, in each case as the Administrative Agent may request to evidence,
perfect, or record the Administrative Agent's security interest in the
Collateral or to enable the Administrative Agent to exercise and enforce its
rights and remedies under this Agreement and the other Loan Documents with
respect to any Collateral. Each Pledging Borrower hereby authorizes the
Administrative Agent on behalf of the Banks, each Designated Letter of Credit
Issuer and the Designated Hedge Creditor to execute and file any such financing
statement or continuation statement on such Borrower's behalf. Each Domestic
Pledging Borrower acknowledges that a carbon, photographic, or other
reproduction of this Agreement shall be sufficient as a financing statement to
the extent permitted by law.
4.3 CHANGES AFFECTING PERFECTION.
No Domestic Pledging Borrower shall, without giving the
Administrative Agent at least twenty (20) days prior written notice thereof: (a)
make any change in any location within the domestic United States where
Inventory or Equipment of such Borrower is maintained (other than a change in
location which relocates such Collateral to a location previously disclosed in
the Supplemental Schedule), or locate any of such Inventory or Equipment at any
new locations (other than in connection with (i) Inventory relocated without
such conveyance of ownership to locations of Foreign Borrowers or Foreign
Subsidiaries in connection to processing of such Inventory thereby to the extent
permitted by proviso (X)(V) of Section 7.3(a)(xii) hereof, or (ii) Inventory or
Equipment used in connection with a Sales Office relocated pursuant to the
addition, closure or relocation of such Sales Office) provided that this
limitation on changes in location of Inventory and Equipment is not applicable
to changes in the location of (A) Inventory sold in the ordinary course of its
business, (B) Equipment the ownership of which is conveyed to the extent
permitted by Section 7.3(a)(ii), 7.3(a)(xi) or 7.3(a)(xii)(D) hereof or proviso
(X)(I), (X)(III) and (X)(IV) of Section 7.3(a)(xii) hereof or (C) Inventory the
ownership of which is conveyed to Foreign Borrowers or Foreign Subsidiaries in
connection with the processing of such Inventory thereby to the extent permitted
by Section 7.3(a)(xii)(C) hereof, (b) make any change in the location of its
chief executive office, principal place of business or the office where its
records pertaining to its Accounts and General Intangibles are kept, (c) add any
new places of business or close of any of its existing places of business
(except that no notice hereunder shall be required with respect to the addition,
relocation or closure of any Sales Office), (d) make any change in its name or
corporate structure, adopt new trade names, assumed names or fictitious names or
otherwise add any name under which it does business, or (e) make any other
change (excluding from the calculation of the limitation provided in this clause
(e), the creation or suffering to exist of Liens permitted by Section 7.3(d)
hereof), and changes in location without notification required by clause (a)
hereof shall not be a violation of this Section unless, such other changes and
changes in location without notice would reasonably be expected to affect the
perfection or priority of the Administrative Agent's Lien in Collateral with a
fair market value exceeding Two Million Dollars ($2,000,000) in the aggregate
during the term of this Agreement.
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4.4 INSPECTION; VERIFICATION.
During regular business hours and after reasonable notice to the
Borrower Representative, the Administrative Agent (by any of its officers,
employees, Administrative Agents, representatives, or designees, including a
Bank) shall have the right, at the applicable Pledging Borrower's expense, to
inspect the Collateral and to inspect and audit, all books, records, journals,
orders, receipts, or other correspondence related thereto (and to make extracts
or copies thereof as the Administrative Agent may request) and to inspect the
premises upon which any of the Collateral is located for the purpose of
verifying the amount, quality, quantity, value, and condition of, or any other
matter relating to, the Collateral; provided, however, that subject to the
following proviso, the aggregate number of such inspections shall not exceed one
(1) in any calendar year; provided, further, that during any period commencing
upon the occurrence of an Event of Default and continuing until such Event of
Default no longer continues or has been waived in accordance with Section 14.1
hereof, the Administrative Agent may exercise such access and other rights, at
the applicable Pledging Borrower's expense, at any time and as often as the
Administrative Agent deems such action necessary or desirable. In addition to
inspections as outlined above (and only to the extent exercised concurrently
with such inspection and to a reasonable extent), the Administrative Agent or
its designee shall have the right, upon reasonable notice to and consultation
with the Borrower Representative, to make test verifications of the Accounts and
other Collateral and physical verifications of the Inventory and other tangible
items of the Collateral at the expense of the applicable Pledging Borrower and
in any manner and through any commercially reasonable medium that the
Administrative Agent considers advisable, and each of the Pledging Borrowers
agrees to furnish all such assistance and information as the Administrative
Agent may require in connection therewith. Any inspection pursuant hereto shall,
at the option of the applicable Pledging Borrower, occur in the presence of an
officer of a Borrower. In addition, the Administrative Agent shall be entitled
to conduct, at the Borrowers' expense, an (i) inventory audit and receivable
testing and (ii) an asset based field examination and collateral audit of each
of the Borrowers, which shall be in each case conducted promptly after the
Closing Date and shall otherwise be in substance satisfactory to the
Administrative Agent, in its reasonable discretion.
4.5 REINSTATEMENT.
The provisions of Section 4 and Section 5 of this Agreement shall
remain in full force and effect and continue to be effective in respect of a
Borrower should any petition be filed by or against such Borrower for
liquidation or reorganization, should such Borrower become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any part of such Borrower's assets or should any other
Financial Impairment relating to such Borrower occur, and shall continue to be
effective or be reinstated, as the case may be, if at any time payment and
performance of the Obligations, or any part thereof, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by any obligee of the Obligations, whether as a "voidable preference",
"fraudulent conveyance", 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 Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
4.6 TERMINATION OF SECURITY INTEREST; RELEASE OF COLLATERAL.
Upon the payment in full of all Obligations, Swing Line Obligations,
and Letter of Credit Obligations, and the termination of the Commitments of each
of the Banks and all LC Exposure and Swing Line Exposure thereof: (a) the
security interests and the other Liens and licenses granted by the Pledging
Borrowers to the Administrative Agent under this Agreement
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and under any other Loan Documents shall terminate, (b) all rights to the
Collateral shall revert to the Borrower with rights therein, (c) the
Administrative Agent will, at such Borrower's expense, (x) execute and deliver
to such Borrower all documents as such Borrower may reasonably request to
evidence the termination of such security interests and the release of such
Domestic Borrower Collateral, and (y) take such other actions with respect to
this Agreement, the other Loan Documents, the Liens created thereby, and the
Obligations as such Borrower shall reasonably request, and (d) this Agreement
and all of the other Loan Documents will be terminated, and such Borrower will
have no further liabilities or obligations thereunder (except any liabilities
and/or obligations which under the terms of this Agreement or any Loan Document
survive termination thereof). Notwithstanding the foregoing:
(i) the pledge by Instron, Ltd. of the U.K. Collateral shall
secure only the Obligations of Instron, Ltd. to the Banks, its Swing
Line Obligations to the Designated U.K. Swing Line Lender, its
Letter of Credit Obligations to the Designated U.K. Letter of Credit
Issuer and its Ratable Borrower Share of any Designated Hedge
Obligations and any fees and expenses owing to the Banks hereunder
and, upon the payment in full of all such Obligations, Swing Line
Obligations, Letter of Credit Obligations and its Ratable Borrower
Share of Designated Hedge Obligations and fees and expenses
hereunder owing by Instron, Ltd. and the termination of the
Commitments of the Banks and the obligation of the Designated U.K.
Swing Line Lender pursuant to the Aggregate Swing Line Commitment to
the extent applicable thereto to Instron, Ltd. and all Swing Line
Exposure related thereto and all LC Exposure attributable to Letters
of Credit issued to Instron, Ltd. or any of its Subsidiaries, the
U.K. Collateral Documents shall terminate, all rights in the U.K.
Collateral shall revert to Instron, Ltd., and the Administrative
Agent will, at the expense of Instron, Ltd., execute and deliver to
thereto all documents as Instron, Ltd. may reasonably request to
evidence the termination of such security interests and the release
of the U.K. Collateral and
(ii) the pledge by Instron Schenck Testing Systems, GmbH and
Instron Wolpert GmbH of the German Collateral shall secure only the
Obligations of Instron Schenck Testing Systems, GmbH and Instron
Wolpert GmbH to the Banks, its Swing Line Obligations to the
Designated German Swing Line Lender, its Letter of Credit
Obligations to the Designated German Letter of Credit Issuer and its
Ratable Borrower Share of any Designated Hedge Obligations and any
fees and expenses owing to the Banks hereunder and, upon the payment
in full of all such Obligations, Swing Line Obligations, Letter of
Credit Obligations and its Ratable Borrower Share of Designated
Hedge Obligations and fees and expenses hereunder owing by Instron
Schenck Testing Systems, GmbH and Instron Wolpert GmbH and the
termination of the Commitments of the Banks and the obligation of
the German Swing Line Lender pursuant to the Aggregate Swing Line
Commitment to the extent applicable thereto to Instron Schenck
Testing Systems, GmbH and Instron Wolpert GmbH and all Swing Line
Exposure related thereto and all LC Exposure attributable to Letters
of Credit issued to Instron Schenck Testing Systems, GmbH or Instron
Wolpert GmbH or any Subsidiaries of either thereof, the German
Collateral Documents shall terminate, all rights in the German
Collateral shall revert to Instron Schenck Testing Systems, GmbH or
Instron Wolpert GmbH, as the case may be, and the Administrative
Agent will, at
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the expense of Instron Schenck Testing Systems, GmbH or Instron
Wolpert GmbH, execute and deliver thereto all documents as Instron
Schenck Testing Systems, GmbH or Instron Wolpert GmbH may reasonably
request to evidence the termination of such security interests and
the release of the German Collateral.
SECTION 5 REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO COLLATERAL.
5.1 GENERAL REPRESENTATIONS AS TO COLLATERAL.
The Supplemental Schedule sets forth: (a) the principal place of
business of each of the Borrowers and its Subsidiaries and the office where the
chief executive offices and accounting offices of each of the Borrowers and such
Subsidiaries are located, (b) the office where each of the Domestic Pledging
Borrowers keeps its records concerning Accounts and General Intangibles, (c) the
location of each Domestic Pledging Borrower's registered office and (d) all
locations of each Domestic Pledging Borrower's material production operations
and facilities (other than locations constituting Sales Offices) and whether
such location is owned or leased and each location at which Inventory, Equipment
or other tangible Collateral (other than Inventory and Equipment located at a
Sales Office and whose location at such office does not disqualify such office
from constituting a Sales Office) of each Domestic Pledging Borrower is located
other than undisclosed locations the aggregate fair market value of all
Collateral at all such undisclosed locations of all Domestic Pledging Borrowers
shall not exceed Two Million Five Hundred Thousand Dollars $2,500,000 unless
prompt disclosure of such excess is made to the Administrative Agent, and all
reasonable assistance is given to the Administrative Agent by such Borrower in
reasonably perfecting the Administrative Agent's security interests at,
sufficient locations to eliminate such excess undisclosed Collateral value)
including, without limitation, the location of any warehouse, bailee or
consignee at which such Collateral is located (with respect to any such
Collateral not located at a specified main location owned by such Borrower, the
Supplemental Schedule shall expressly indicate to the reasonable satisfaction of
the Administrative Agent (1) the type of location of the Collateral (e.g.,
warehouse, bailee, consignee or otherwise); (2) the type of Collateral located
at each such location (e.g., whether the Collateral is Equipment, Inventory or
other tangible Collateral; (3) whether the Collateral is segregated or otherwise
identifiable at each such location; and (4) the approximate dollar value of the
Collateral located at each such location), (e) the locations and addresses of
all owned or leased real property (other than property leased in connection with
a Sales Office) of each Domestic Pledging Borrower, including the name of the
record owner of such property and its respective legal description in each case
where the Equipment Collateral located thereon has a fair market value exceeding
Two Million Five Hundred Thousand Dollars $2,500,000 (each, a "Material Owned or
Leased Real Property"), (f) the locations of each of the Domestic Pledging
Borrowers registered offices, Administrative Agents, other offices and places of
business (other than Sales Offices) during the five (5) years prior to the
Closing Date, and (g) all trade names, assumed names, fictitious names and other
names used by each of the Pledging Borrowers during the five (5) years prior to
the Closing Date. Other than as set forth in the Supplemental Schedule attached
hereto, no Pledging Borrower keeps any Collateral owned by it on any property
not owned in fee simple by such Borrower, except (i) for Collateral consisting
of Inventory and Equipment located at a Sales Office and whose location at such
office does not disqualify such office from constituting a Sales Office and (ii)
other Collateral the fair market value of which at all such locations does not
at any time exceed in the case of all such Pledging Borrowers does not at any
time exceed in the aggregate Two Million Five Hundred Thousand Dollars
($2,500,000).
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5.2 REPRESENTATIONS AND WARRANTIES REGARDING ACCOUNTS.
Each of the Domestic Pledging Borrowers agrees and represents that
each Account and each invoice representing any Account will: (a) cover a bona
fide sale or lease and delivery of merchandise sold or leased in the ordinary
course of business of such Borrower or the rendition by such Borrower of
services to customers in the ordinary course of business, (b) be for a
liquidated amount maturing as stated in the schedule thereof and in the
duplicate invoice covering said sale, and (c) other than the Administrative
Agent's security interest therein, not be subject to any Lien except for those
permitted by proviso (i) or (v) of Section 7.3(d) or to any offset, deduction or
counterclaim; provided, however, that the Borrowers shall not be deemed to have
violated clause (a) or (b) of this section unless the representations therein
are untrue as to Accounts the unpaid obligation of which in the aggregate
exceeds One Million Dollars ($1,000,0000. Each Domestic Pledging Borrower will
use all commercially reasonable efforts consistent with sound business practice
to avoid backdating, postdating or redating of invoices.
5.3 TREATMENT OF ACCOUNTS AND GENERAL INTANGIBLES.
Each of the Domestic Pledging Borrowers shall use commercially
reasonable efforts consistent with sound business practice to settle or adjust
all disputes and claims regarding Accounts. Each of the Domestic Pledging
Borrowers shall use all commercially reasonable efforts consistent with sound
business practice: (i) to grant discounts, credits or allowances only in the
ordinary course of business or on a commercially reasonable basis and (ii) to
enter into extensions, compromises or settlements to any customer or Account
Debtor, and to allow returns of merchandise thereby, only in the ordinary course
of business consistent with past practices or on a commercially reasonable
basis. Each of the Domestic Pledging Borrowers will perform and comply in all
material respects with all obligations in respect of Accounts, Chattel Paper,
General Intangibles and under all other contracts and agreements to which it is
a party or by which it is bound relating to the Collateral where failure to so
comply would result in a Material Adverse Effect.
5.4 LIEN PRIORITY.
From and after the Closing Date, by reason of the filing of
financing statements, assignments of financing statements and termination
statements in all requisite governmental offices, this Agreement and the other
Loan Documents (other than the U.K. Collateral Documents and German Collateral
Documents) will create and constitute a valid and perfected first priority
security interest (except as permitted by this Agreement or the other Loan
Documents) in and Lien on that portion of the Domestic Borrower Collateral which
can be perfected by such filing and by the execution and delivery of this
Agreement and the other Loan Documents (other than the U.K. Collateral Documents
and German Collateral Documents), which security interest will be enforceable
against each of the Domestic Pledging Borrowers and all third parties as
security for payment of all Obligations; except, that the absence of such
perfection and priority will not constitute a violation of this Agreement with
respect to Inventory, Equipment or other tangible Collateral of Domestic
Pledging Borrowers: (x) located at a Sales Office and whose location at such
office does not disqualify such office from constituting a Sales Office or (y)
all such Collateral has an aggregate fair market value not exceeding Two Million
Five Hundred Thousand Dollars ($2,500,000) without prompt disclosure and filings
against Collateral having sufficient fair market value to eliminate such excess
unperfected value). From and after the Closing Date, by reason of the recording
of the mortgages contemplated by this Agreement, this Agreement and the other
Loan Documents (including such mortgages) will create and constitute a valid
first priority Lien in favor of the Administrative Agent on the real property of
Instron Realty Trust II, a Massachusetts business trust, located in Canton,
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Massachusetts and which property is the only real property on which Instron
Corporation's Canton, Massachusetts manufacturing facility is located.
5.5 LIEN WAIVERS, LANDLORD WAIVERS, WAREHOUSE RECEIPTS.
Upon the occurrence of an Event of Default which is continuing and
has not been waived in accordance with Section 14.1 hereof, to the extent any
Inventory or Equipment of a Domestic Pledging Borrower is at any time located on
any real property not owned by such Borrower, such Borrower will, upon the
Administrative Agent's request therefor, obtain and maintain valid and effective
lien waivers in form and substance satisfactory to the Administrative Agent,
whereby each owner, landlord and mortgagee having an interest in such real
property shall disclaim any interest in such Inventory or Equipment, as the case
may be, and shall agree to allow the Administrative Agent reasonable access to
such real property in connection with any enforcement of the security interest
granted hereunder, provided, however, that, notwithstanding the foregoing,
Instron Corporation shall, within ninety (90) days after the Closing Date,
obtain and maintain in effect at all times thereafter such a landlord waiver
with respect to the real property located at Binghamton, New York and on which
its Binghamton, New York manufacturing facility is located. None of the Domestic
Pledging Borrowers shall store Inventory with fair market value exceeding Two
Million Five Hundred Thousand Dollars ($2,500,000) in the aggregate at bailee,
warehouseman or similar party locations without the Administrative Agent's prior
written consent (such consent not to be unreasonably withheld or delayed) and,
if the Administrative Agent gives such consent and requires such action, such
Borrower will concurrently therewith cause any such bailee, warehouseman or
similar party to issue and deliver to the Administrative Agent, in form and
substance satisfactory to the Administrative Agent, warehouse receipts therefor
in the Administrative Agent's name for Inventory so stored having a value in
excess of such aggregated amount.
5.6 MAINTENANCE OF INSURANCE.
Each of the Borrowers and the Subsidiaries thereof will maintain
with financially sound and reputable companies, insurance policies: (a) insuring
the Equipment, the Inventory, and all equipment subject to any lease, against
loss by fire, explosion, theft and such other casualties as are usually insured
against by companies engaged in the same or similar businesses, and (b) insuring
such Borrower and the Administrative Agent against liability for personal injury
and property damage relating to such Equipment, Inventory and equipment covered
by any equipment lease, such policies to be in such form and in such amounts and
coverage as may be reasonably satisfactory to the Administrative Agent (but in
any event be upon such terms as are usual for companies engaged in the same or
similar businesses as such Borrower), with losses payable to such Borrower and
the Administrative Agent as their respective interests may appear, subject to
Section 2.10(c)(i) of this Agreement and in the case of Foreign Borrowers and
the Subsidiaries thereof, to Section 1.8 hereof. All such insurance with respect
to the Equipment and Inventory shall (i) contain a breach of warranty clause in
favor of the Administrative Agent, and (ii) provide that no cancellation,
reduction in amount, change in coverage or expiration thereof shall be effective
until at least thirty (30) days after written notice to the Administrative Agent
thereof.
SECTION 6 GENERAL REPRESENTATIONS AND WARRANTIES.
To induce the Banks to advance or convert Loans hereunder, the Designated
Swing Line Lenders to advance Swing Line Loans hereunder, and the Designated
Letter of Credit Issuers to issue Letters of Credit hereunder, and so long as
the Obligations shall remain outstanding or the Banks shall have any Commitment,
Swing Line Exposure or LC Exposure hereunder, each of the Borrowers represents
and warrants to the Administrative Agent and the Banks as follows:
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6.1 EXISTENCE.
Each of the Borrowers and each Subsidiary thereof is duly organized,
validly existing and in good standing under the laws of their respective states
of incorporation. None of the Borrowers has any Subsidiaries other than as
listed in the Supplemental Schedule. Each of the Borrowers and each of the
Subsidiaries thereof has all requisite corporate power and governmental licenses
and approvals necessary to own its assets and carry on its business as now being
or proposed to be conducted except in the case of such licenses and approvals as
to which the failure to obtain would not have a Material Adverse Effect. Each of
the Borrowers and each Subsidiary thereof is duly qualified or licensed to
transact business in their respective jurisdictions of organization and in each
additional jurisdiction where such qualification or licensure is necessary
except where failure to so qualify or be licensed is not having, and would not
have, a Material Adverse Effect.
6.2 AUTHORIZATION; ENFORCEABILITY
The execution, delivery, and performance of this Agreement, the
other Loan Documents, the Merger Agreement, the other Merger Documents, the
Senior Subordinated Note Indenture, the Senior Subordinated Notes and the other
Senior Subordinated Note Documents to which any Borrower (or any of its
Subsidiaries) is a party: (a) are within such Borrower's or Subsidiary's
corporate powers and (b) have been duly authorized. This Agreement, the other
Loan Documents, the Merger Agreement, the other Merger Documents, the Senior
Subordinated Note Indenture, the Senior Subordinated Notes and the other Senior
Subordinated Note Documents to which any Borrower (or any of its Subsidiaries)
is a party constitute the legal, valid and binding obligations of such Borrower
or Subsidiary, as the case may be, enforceable against such Borrower or
Subsidiary, as the case may be, in accordance with the terms thereof, subject to
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
6.3 NO VIOLATION.
Neither the execution, delivery and performance by any of the
Borrowers of this Agreement, the other Loan Documents, the Merger Agreement, the
other Merger Documents, or the Senior Subordinated Note Indenture or the Senior
Subordinated Notes to which it is party nor compliance with the terms and
provisions thereof, nor consummation of the Merger or the issuance of the Senior
Subordinated Notes pursuant to the Offering (i) will contravene any provision of
any law, statute, rule, regulation, order, writ, injunction or decree of any
court or governmental instrumentality applicable to such Borrower of the
Subsidiaries thereof or its properties and assets, (ii) except as set forth in
the Supplemental Schedule, will conflict with or result in any breach of, any of
the terms, covenants, conditions or provisions of, or constitute a default
under, or result in the creation or imposition of (or the obligation to create
or impose) any Lien (other than the Liens created pursuant to this Agreement and
the other Loan Documents) upon any of the property or assets of any Borrower or
any Subsidiaries thereof pursuant to the terms of any promissory note, bond,
debenture, indenture, mortgage, deed of trust, credit or loan agreement, or any
other material agreement or other instrument, to which such Borrower or
Subsidiaries are a party or by which such Borrower or Subsidiaries or any
property or assets thereof are bound or to which it may be subject, or (iii)
will violate any provision of the certificate or articles of incorporation, code
of regulations or by-laws, or other charter documents of such Borrower or any
Subsidiaries thereof.
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6.4 LITIGATION; PROCEEDINGS.
As of the Closing Date, except as set forth in the Supplemental
Schedule, there are no actions, suits, investigations or proceedings, and no
orders, writs, injunctions, judgments or decrees, now pending, existing or, to
the knowledge of any Borrower, threatened against any of the Borrowers or any
Subsidiaries thereof, which are deemed by management of the Borrowers to be
material to the Borrowers and the Subsidiaries thereof on a consolidated basis
or which affect materially any property material to the Borrowers and the
Subsidiaries thereof on a consolidated basis. There is no such action, suit,
investigation, proceeding, order, writ, injunction, or decree pending against,
or, to the knowledge of any Borrower, threatened against any or all of the
Borrowers that: (i) when taken individually or with all other actions, suits,
investigations, proceedings, orders, writs, injunctions or decrees, is having,
or could reasonably be expected to have, a Material Adverse Effect or (ii) in
any manner, draws into question the validity or enforceability of the this
Agreement, the other Loan Documents, the Merger or the Senior Subordinated
Notes.
6.5 TAXES.
Each of the Borrower and each of the Subsidiaries thereof have filed
all material federal, state and local tax returns which are required to be filed
by any of them, and, except to the extent permitted by Section 7.2(i) of this
Agreement, have paid all taxes and assessments due as shown on such returns,
including interest, penalties and fees. The Borrowers and each of the
Subsidiaries thereof has established on its books such charges, accruals and
reserves in respect of taxes, assessments, fees and other governmental charges
for all fiscal periods as are required by GAAP. None of the Borrowers knows of
any proposed assessment for additional federal, foreign or state taxes for any
period, or of any basis therefor, which, individually or in the aggregate,
taking into account such charges, accruals and reserves in respect thereof as
the Borrowers and the Subsidiaries thereof have made, could reasonably be
expected to have a Material Adverse Effect.
6.6 TITLE.
Each of the Borrowers and each of the Subsidiaries thereof has good
title to all personal property assets reflected as being owned thereby in, and
good and marketable title to all real property assets reflected as being owned
thereby in, the financial statements referred to in Section 6.13 of this
Agreement (other than the Third Party Intellectual Property) and in the
consolidated financial statements delivered from time to time pursuant to
Section 7.1 of this Agreement. All such assets are free of all Liens other than
those in favor of the Administrative Agent and those otherwise disclosed in the
Supplemental Schedule or permitted by Section 7.3(d) of this Agreement or the
other Loan Documents.
6.7 CONSENTS; APPROVALS.
Except as set forth on the Supplemental Schedule, no action, consent
or approval of, registration or filing with or any other action by any
governmental authority or other Person is or will be required in connection with
the transactions contemplated by this Agreement, the other Loan Documents, the
Merger Agreement, the other Merger Documents, the Offering, the Senior
Subordinated Note Indenture, Senior Subordinated Notes and the other Senior
Subordinated Note Documents, except such as have been made or obtained and are
in full force and effect and except for the filings required to create or
perfect the Liens in favor of the Administrative Agent that are contemplated
hereby and by the other Loan Documents.
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6.8 LAWFUL OPERATIONS.
The operations of each of the Borrowers and each of the Subsidiaries
thereof are in compliance with applicable requirements imposed by Law, including
without limitation occupational safety and health laws and zoning ordinances,
except to the extent any such noncompliance, when taken individually or with all
other such noncompliance is not having, and could not reasonably be expected to
have a Material Adverse Effect.
6.9 ENVIRONMENTAL COMPLIANCE.
Each parcel of real property in which a Borrower or any Subsidiary
of a Borrower has a real property interest (whether as fee owner, operator,
lessor (directly or indirectly), lessee (directly or indirectly), mortgagee or
otherwise) (collectively, "Properties") is in compliance with Environmental Laws
except for any noncompliance, when taken individually or with all other such
noncompliance, is not having, and would not reasonably be expected to have, a
Material Adverse Effect. With respect to each of the Properties, (a) there is no
pending or, to the knowledge of the Borrowers, threatened Environmental Claim
against any Borrower or any Subsidiaries thereof or any other environmental
condition with respect to any Property which Environmental Claim or condition,
when taken individually or with all other such Environmental Claims or
conditions, is resulting in, or would reasonably be expected to result in, a
Material Adverse Effect and (b) each of the Borrowers and the Subsidiaries
thereof are in compliance with all Environmental Permits, except to the extent
any such noncompliance, when taken individually or together with all other
instances of such noncompliance, is not resulting in, and would not reasonably
be expected to result in, a Material Adverse Effect. Except as disclosed on the
Supplemental Schedule, no Property is listed or, to the best knowledge of the
Borrowers, proposed for listing on the National Priorities List pursuant to
CERCLA, on the CERCLIS or on any similar federal or state list of sites
requiring investigation or clean-up. Except as disclosed in the Supplemental
Schedule, the Borrowers are not aware: (i) of any underground storage tanks,
active or abandoned, including petroleum storage tanks, landfills, lagoons,
surface impoundments, disposal areas or disposal ponds on or under any Property
that are in violation of any applicable Environmental Law, (ii) any
polychlorinated biphenyls or friable asbestos present at any Property in
violation of any applicable Environmental Law, (iii) any prior use of any
Property by any Persons that constitutes a violation of any Environmental Laws
or has resulted in a release of Hazardous Materials into the environment such as
would give rise to a cleanup obligation or other Environmental Claim, (iv) of
any event, condition or activity which may interfere with or prevent continued
compliance by each Borrower and any Subsidiaries thereof with all Environmental
Laws, (v) of any generation, manufacture, storage, treatment, transportation or
disposal of Hazardous Material which has occurred or is occurring on or from any
Property except in compliance with all applicable Environmental Laws or on any
property adjoining such Property, or (vi) that any of the Borrowers or any
Subsidiaries thereof has directly transported or directly arranged for the
transportation of any Hazardous Material to any location which is listed or
proposed for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar federal or state list or which is the subject of any
federal, state or local enforcement actions or other investigations which would
reasonably be expected to lead to claims against any or all of the Borrowers or
any Subsidiaries thereof for any remedial work, damage to natural resources or
personal injury, including claims under CERCLA provided, however, that, whether
or not disclosed in the Supplemental Schedule, such environmental property
conditions, materials, prior use, or other condition, events or activities,
generation, manufacture, treatment, storage or transportation, when taken
individually or together with all other such matters, is not resulting in, and
would not reasonably be expected to result in, a Material Adverse Effect.
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6.10 ENVIRONMENTAL LAWS AND PERMITS.
Without limiting the representations made in Section 6.9 above, to
the best knowledge of the Borrowers, there are no circumstances with respect to
any Property or the operations of the Borrowers or any Subsidiaries thereof that
would reasonably be expected to: (i) form the basis of an Environmental Claim
against any or all of the Borrowers or any Subsidiaries thereof which would
constitute a violation of Section 7.2(e) hereof, or (ii) cause any Property
owned, leased or funded by any Borrower or any Subsidiaries thereof and material
thereto to be subject to any material restrictions on ownership, occupancy, use
or transferability under any applicable Environmental Law.
6.11 ERISA.
The Supplemental Schedule sets forth a list of all of the Employee
Benefit Plans of each of the Borrowers, all Subsidiaries thereof and each ERISA
Affiliate thereof as of the Closing Date. Compliance by the Borrower with the
provisions hereof and Credit Events contemplated hereby will not involve any
prohibited transaction within the meaning of ERISA or section 4975 of the
Internal Revenue Code. Each of the Borrowers and the Subsidiaries thereof, (i)
have fulfilled all obligations under minimum funding standards of ERISA and the
Code with respect to each Employee Benefit Plan that is not a Multiemployer Plan
or a Multiple Employer Plan, (ii) has satisfied all respective contribution
obligations in respect of each Multiemployer Plan and each Multiple Employer
Plan, (iii) is in compliance in all material respects with all other applicable
provisions of ERISA and the Code with respect to each Employee Benefit Plan,
each Multiemployer Plan and each Multiple Employer Plan. No Accumulated Funding
Deficiency exists in respect of any Employee Benefit Plan that is subject to
Code Section 412 and no Reportable Event has occurred in respect of any Employee
Benefit Plan that is subject to Title IV of ERISA which is continuing and which,
in the case of such Accumulated Funding Deficiency or Reportable Event, when
taken individually or with all other such Reportable Events or Accumulated
Funding Deficiencies, is resulting in, or could reasonably be expected to result
in, material liabilities or claims against the Borrowers and the Subsidiaries
thereof taken as a whole. No "prohibited transactions" (as defined in Section
406 of ERISA or Section 4975 of the Code), have occurred which, when taken
individually or with all other such "prohibited transactions," is resulting in,
or could reasonably be expected to result in, material liabilities or claims
against the Borrowers and the Subsidiaries thereof taken as a whole. None of the
Borrowers, nor any of the Subsidiaries thereof, nor any ERISA Affiliate thereof,
has: (i) had an obligation to contribute to any Multiemployer Plan except as
disclosed in the Supplemental Schedule or (ii) incurred or reasonably expects to
incur any liability for the withdrawal from such a Multiemployer Plan which
withdrawal liability, when taken individually or with all other such withdrawal
liabilities, is resulting in, or could reasonably be expected to result in,
material liabilities or claims against the Borrowers and the Subsidiaries
thereof taken as a whole.
6.12 AGREEMENTS; ADVERSE OBLIGATIONS; LABOR DISPUTES.
The Supplemental Schedule sets forth a list of all Material Business
Agreements of each Borrower and each of its Subsidiaries as of the Closing Date.
As of the Closing Date, the Material Business Agreements of each Borrower are in
full force and effect and have not been revoked or otherwise modified in any
material respect since the execution thereof, except as disclosed on the
Supplemental Schedule. Each Borrower is in material compliance with the terms of
the Material Business Agreements to which it is a party. None of the Borrowers,
nor any of their respective Subsidiaries, is subject to any contract, agreement,
or corporate restriction which could reasonably be expected to have a Material
Adverse Effect. None of the Borrowers, nor any of their respective Subsidiaries,
is a party to any labor dispute (including any strike, slowdown, walkout or
other concerted interruptions by its employees, but excluding grievance
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disputes) which, individually or in the aggregate, is resulting in, or would
reasonably be expected to result in, a Material Adverse Effect. There are no
material strikes, slow downs, walkouts or other concerted interruptions of
operations by employees of any Borrower or its Subsidiaries whether or not
relating to any labor contracts.
6.13 FINANCIAL STATEMENTS; PROJECTIONS.
(a) FINANCIAL STATEMENTS.
The Borrowers have furnished to the Administrative Agent
complete and correct copies of (i) the audited balance sheets of Instron
Corporation and its consolidated Subsidiaries for the Fiscal Year ending
December 31, 1998, and the related statements of income, shareholder's
equity, and cash flows, and, as applicable, changes in financial position
or cash flows for such Fiscal Year, and the notes to such financial
statements, reported upon by PricewaterhouseCoopers, L.L.P., certified
public accountants, and (ii) the internal unaudited financial statements
consisting of a balance sheet and statements of income, shareholder's
equity and cash flows as of July 31, 1999, certified by an executive
officer of Instron Corporation. All such financial statements (a) have
been prepared in accordance with GAAP, applied on a consistent basis
(except as stated therein), with Instron Corporation's financial
statements from prior Fiscal Years and (b) fairly present in all material
respects the financial condition of Instron Corporation and its
consolidated Subsidiaries as of the respective dates thereof and the
results of operations for the respective fiscal periods then ending,
subject in the case of any such financial statements which are unaudited,
to the absence of any notes to such financial statement and to normal
audit adjustments, none of which will involve a Material Adverse Effect.
As of the Closing Date, none of the Borrowers has experienced a Material
Adverse Effect since the December 31, 1998 financial statements, nor has
there been any material change in the any Borrower's accounting procedures
used therein. Instron Corporation and its consolidated Subsidiaries did
not as of December 31, 1998, and will not as of the Closing Date, after
giving effect to the Loans made on the Closing Date and the consummation
of the Merger and the Offering, have any material contingent liabilities,
material liabilities for taxes, unusual and material forward or long-term
commitments or material unrealized or anticipated losses from any
unfavorable commitments, except those reflected in such financial
statements or the notes thereto in accordance with GAAP or, to the extent
not required by GAAP to be reflected therein, were incurred in the
ordinary course of business consistent with past practice, and which
reflected or ordinary course matters in any such case will not be material
in relation to the business, operations, properties, assets or condition
(financial or otherwise) of the Borrower and the Subsidiaries thereof
considered on a consolidated basis.
(b) FINANCIAL PROJECTIONS.
The Borrowers have delivered to the Banks prior to the execution and
delivery of this Agreement (i) a copy of Instron Corporation's Report on
Form 10-K as filed (without Exhibits) with the SEC for its fiscal year
ended December 31, 1998, which contains a general description of the
business and affairs of the Borrowers and the Subsidiaries thereof, and
(ii) financial and business projections prepared by Instron Corporation
with respect to Instron Corporation and its Subsidiaries for the fiscal
years therein covered which take into account, on a pro forma basis, the
recapitalization pursuant to the Merger, the Offering and the transactions
contemplated hereby (the "Financial Projections"). Such Financial
Projections for Instron Corporation and its Subsidiaries submitted to the
Administrative Agent were prepared in good faith and were based upon
assumptions
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which the Borrowers believed to be reasonable (as of the dates of the
Financial Projections).
6.14 INTELLECTUAL PROPERTY.
Each of the Borrowers and each of the Subsidiaries thereof owns or
has the legal and valid right to use all Intellectual Property necessary for the
operation of its business as presently conducted, free from any Lien not
permitted under Section 7.3(d) and free of any restrictions material to the
operation of its business as presently conducted except as set forth in the
Supplemental Schedule. The Supplemental Schedule sets forth Intellectual
Property of Instron Corporation and Instron, Ltd. consisting of patents, patent
applications, trademarks, trademark applications, copyrights and copyright
applications deemed by management in its good faith judgment to be material to
the Borrowers. Except as set forth in the Supplemental Schedule, none of the
Borrowers nor any of the Subsidiaries thereof: (a) licenses as licensee any
material Intellectual Property to any third party or (b) is a party to any
Material License Agreement with respect to Third Party Intellectual Property.
6.15 MERGER; OFFERING.
Prior to the execution and delivery of this Agreement, (a) the
Merger became and is now effective and (b) the transactions contemplated by the
Merger Agreement and the other Merger Documents have each been consummated
strictly (i) in accordance with the respective terms thereof, without any
amendment, waiver, modification or termination of any provision thereof except
for such amendment, waiver, modification, termination or noncompliance therewith
as to which the Administrative Agent has been notified in writing prior to such
consummation and (ii) in compliance with all applicable Law. The Merger
Agreement and the other Merger Documents constitute the legal, valid and binding
obligations of each party thereto, enforceable against such party in accordance
with the terms thereof, subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law). The Merger has been
consummated in compliance with all applicable material laws. The Offering has
been consummated in accordance with all applicable material laws and the holders
of Senior Subordinated Notes will not be able to assert successfully any
applicable rescission rights with respect to the purchase by such holders of the
Senior Subordinated Notes.
6.16 MERGER DOCUMENTS.
The Borrowers shall have delivered to the Administrative Agent true
and correct copies of each of the Merger Agreement, the other Merger Documents
and, to the extent requested by the Administrative Agent, each other instrument,
agreement or document regarding the Merger. Each party to each Merger Document
has performed and/or satisfied all obligations and conditions required of it
prior to or as a condition to the consummation of the transactions contemplated
by and consummated under the applicable Merger Documents except for such
nonperformance or nonsatisfaction as to which the Administrative Agent has been
notified in writing prior to such consummation.
6.17 STRUCTURE; CAPITALIZATION.
By reason of consummation of the Merger, Kirtland Capital, together
with the Affiliates thereof, are the record and beneficial owner of
approximately eighty seven (87%( of the issued and outstanding capital stock of
Instron Corporation. Instron Corporation is the record and beneficial owner of
all issued and outstanding equity interests of each of Instron Schenck
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Testing Systems, GmbH and Instron, Ltd. Instron Corporation has elected to be,
and as of the Closing Date is, a C Corporation for federal tax purposes. By
reason of consummation of the Merger, the authorized and issued capital stock,
as well as issued and outstanding warrants for such stock, of Instron
Corporation as of the Closing Date is as set forth on the Supplemental Schedule.
The authorized and issued capital stock of each of Instron, Ltd., Instron
Schenck Testing Systems, GmbH and of Instron Wolpert GmbH as of the Closing Date
is as set forth on the Supplemental Schedule. Except as set forth on the
Supplemental Schedule and other than the Stockholder Agreement, after giving
effect to the Merger, there are no options, warrants or other rights to acquire
any of the capital stock of Instron Corporation or any of the other Borrowers
and no redemption rights or other repurchase obligations with respect to the
capital stock of Instron Corporation. Instron Corporation and its consolidated
Subsidiaries have and will continue to have a Fiscal Year end on the last day of
December in each calendar year.
6.18 VALUE; SOLVENCY.
Each of the Borrowers has received fair consideration and reasonably
equivalent value for the obligations and liabilities it has incurred to the
Banks, the Designated Swing Line Lenders and the Designated Letter of Credit
Issuers hereunder. After giving effect to the Merger, the Offering and the
Obligations of the Borrowers hereunder as of the Closing Date, each of the
Borrowers is as of the Closing Date Solvent. Instron Corporation and its
consolidated Subsidiaries will at all times hereafter remain Solvent on a
consolidated basis. No Borrower will incur additional Obligations to the Banks,
Swing Line Obligations to the Designated Swing Line Lenders or Letter of Credit
Obligations to the Designated Letter of Credit Issuers if at the time of
incurrence of such additional Indebtedness, or as a result of the incurring of
such additional Indebtedness, such Borrower is or would be rendered not Solvent.
6.19 INVESTMENT COMPANY ACT STATUS.
None of the Borrowers nor any Subsidiaries thereof is an "investment
company", or an "affiliated person" of, or a "promoter" or "principal
underwriter" for an "investment company" (as such terms are defined in the
Investment Company Act of 1940, as amended (15 U.S.C. Section 80(a)(1), et
seq.).
6.20 REGULATION U/REGULATION X COMPLIANCE.
None of the Borrowers nor any Subsidiaries thereof owns any "margin
stock", as that term is defined in Regulation U and Regulation X of the Board of
Governors of the Federal Reserve System ("Margin Stock"). The proceeds of Loans
made to the Borrowers pursuant to this Agreement will be used only for the
purposes contemplated by Section 7.2(g)hereof. No part of the proceeds of Loans
made to any of the Borrowers pursuant to this Agreement will be used, directly
or indirectly, to purchase or carry any Margin Stock (as defined above) for a
purpose which violates any applicable law, rule, or regulation including,
without limitation, the provisions of Regulation T, U or X of the Board of
Governors of the Federal Reserve System, as amended.
6.21 YEAR 2000 COMPLIANCE.
Each of the Borrowers has: (i) conducted a comprehensive review and
assessment of all areas of its business and its Subsidiaries' business that
would reasonably be expected to be materially and adversely affected by the
"Year 2000 Problem" (that is, the risk that Technology is not Year 2000
Compliant), (ii) developed a detailed plan and timeline for addressing the Year
2000 Problem on a timely basis, and (iii) to date, implemented that plan
materially in accordance with that timetable. Each of the Borrowers reasonably
anticipates that all Technology that is
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material to its business and the business of its Subsidiaries will on a timely
basis be Year 2000 Complaint. Each of the Borrowers has made inquiry of each of
the "key suppliers, vendors, and customers" which are material to the business
of such Borrower and its Subsidiaries with respect to such entities' being Year
2000 Compliant and, based on that inquiry, believes that each of them will on a
timely basis be Year 2000 Compliant in all respects which are material to the
business of such Borrower and its Subsidiaries. For the purposes of this
paragraph, (a) "Technology" means computer, manufacturing, electronic equipment
and telecommunications hardware, software and firmware, whether in computer
systems, in embedded microchips or otherwise, which are material to a Borrower's
and its Subsidiaries' businesses and financial operations, (b) "Year 2000
Compliant" means, with respect to the Technology of a Borrower and its
Subsidiaries, such Technology (x) accurately processes date/time data
(including, but not limited to calculating, comparing and sequencing) from, into
and between the twentieth and twenty-first centuries and the years 1999 and 2000
and (y) accurately performs leap year calculations and (c) "key suppliers,
vendors and customers" refers to those suppliers, vendors and customers of such
Borrower and its Subsidiaries the business failure of which would with
reasonable probability result in a Material Adverse Effect.
6.22 FULL DISCLOSURE.
All factual information (taken as a whole) heretofore or
contemporaneously furnished by or on behalf of the Borrowers or any Subsidiaries
thereof in writing to the Administrative Agent or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated herein is, other
than the Financial Projections (as to which representations are made only as
provided in Section 6.13(b) hereof) and all other such factual information
(taken as a whole) hereafter furnished by or on behalf of such person in writing
to any Bank will be, true and accurate in all material respects on the date as
of which such information is dated or certified and not incomplete by omitting
to state any material fact necessary to make such information (taken as a whole)
not misleading at such time in light of the circumstances under which such
information was provided, except that any such future information consisting of
financial projections prepared by the Borrowers is only represented herein as
being based on good faith estimates and assumptions believed by such persons to
be reasonable at the time made, it being recognized by the Banks that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
materially from the projected results.
SECTION 7 COVENANTS OF THE BORROWERS.
So long as any of the Obligations shall remain outstanding or the Banks
shall have any Commitments, Swing Line Exposure or LC Exposure hereunder, each
of the Borrowers shall comply, and will cause any Subsidiaries thereof to
comply, with the following provisions:
7.1 REPORTING AND NOTICE COVENANTS.
(a) QUARTERLY FINANCIAL STATEMENTS.
The Borrowers shall furnish to the Administrative Agent, as
soon as practicable and in any event within forty five (45) days after the
end of each Fiscal Quarter of Instron Corporation, an unaudited
consolidated and consolidating balance sheet of Instron Corporation and
its consolidated Subsidiaries as at the end of such Fiscal Quarter and the
related statements of operations, retained earnings and cash flow for such
Fiscal Quarter, prepared on an unaudited comparative basis with the
comparable period during the prior year and the annual business plan
required by Section 7.1(d) for such
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period and in accordance with GAAP, all in reasonable detail and
certified, subject to normal year-end audit adjustments, by a Responsible
Officer of Instron Corporation.
(b) ANNUAL FINANCIAL STATEMENTS.
The Borrowers shall furnish to the Administrative Agent, as
soon as practicable and in any event within ninety (90) days after the end
of each Fiscal Year of Instron Corporation, (i) a complete copy of the
annual audit report of Instron Corporation and the Subsidiaries thereof
(including, without limitation, all consolidated and consolidating
financial statements of Instron Corporation and its consolidated
Subsidiaries and notes thereto) for such Fiscal Year, all of which shall
be in reasonable detail: (A) prepared on a comparative basis with the
prior year and in accordance with GAAP and (B) accompanied by the opinion
with respect to such financial statements of by independent public
accountants of recognized national standing selected by the Borrowers,
which opinion shall be unqualified and shall (i) state that such
accountants audited such consolidated financial statements in accordance
with generally accepted auditing standards, that such accountants believe
that such audit provides a reasonable basis for their opinion, and that in
their opinion such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Instron
Corporation and its consolidated Subsidiaries as at the end of such fiscal
year and the consolidated results of their operations and cash flows for
such fiscal year in conformity with generally accepted accounting
principles, or (ii) contain such statements as are customarily included in
unqualified reports of independent accountants in conformity with the
recommendations and requirements of the American Institute of Certified
Public Accountants (or any successor organization).
(c) OFFICER'S CERTIFICATE; MANAGEMENT DISCUSSION; STATEMENTS
OF OPERATIONS.
The Borrowers shall furnish to the Administrative Agent:
(i) concurrently with the financial statements delivered in
connection with Sections 7.1(a) and 7.1(b) above, a certificate of a
Responsible Officer of Instron Corporation, in his or her capacity
as a Responsible Officer, setting forth the computations necessary
to determine whether the Borrowers are in compliance with Section
7.4 of this Agreement and satisfaction of the financial standards
required in connection with the determination of the Applicable
Margin and the Applicable Fee Percentage and certifying that: (A)
those financial statements fairly present in all material respects
the financial condition and results of operations of the Borrowers
subject (in the case of interim financial statements to routine
year-end audit adjustments) and (B) no Potential Default or Event of
Default then exists or, if any Potential Default or Event of Default
does exist, a brief description of the Potential Default or Event of
Default and the Borrowers' intentions in respect thereof, and
(ii) Promptly after receipt thereof, any accountants'
management report and any management letters relating to the
financial statement referenced above or the condition of the
Borrowers.
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(iii) as soon as practicable and in any event within thirty
(30) days after the end of each Fiscal Month of Instron Corporation,
a certificate executed by a Responsible Officer of Instron
Corporation reflecting the calculation of the Borrowers' Borrowing
Base, substantially in the form attached hereto as Exhibit H-1 (each
a "Borrowing Base Certificate") and satisfactory in substance to the
Administrative Agent, together with any supporting documentation as
may be reasonably requested by the Administrative Agent.
(d) ANNUAL BUSINESS PLAN.
The Borrowers will furnish to the Administrative Agent the
final budget or business plan approved by the Board of Directors of
Instron Corporation no later than the sixtieth (60th) day after
commencement of each such Fiscal Year, and shall furnish promptly to the
Administrative Agent during each such Fiscal Year, all revisions thereto
approved by the Board of Directors of Instron Corporation and (if and to
the extent prepared by management of the Borrower) for any subsequent
fiscal years, as customarily prepared by management for its internal use,
setting forth the forecasted balance sheet, income statement, operating
cash flows and capital expenditures of Instron Corporation and its
consolidated Subsidiaries for the period covered thereby, and the
principal assumptions upon which forecasts and budget are based.
(e) OTHER INFORMATION.
The Borrowers shall furnish to the Administrative Agent,
promptly upon the Administrative Agent's written request, such other
information about the financial condition, properties and operations of
the Borrowers and the Subsidiaries thereof and any of their Employee
Benefit Plans as the Administrative Agent may from time to time reasonably
request.
(f) NOTICES.
The Borrowers will cause the Responsible Officer of Instron
Corporation to give the Administrative Agent (and in the case of the
circumstance referenced in clause (v) below, to each of the Banks) prompt
written notice whenever (and in any event within ten (10) Business Days
after): (i) any of the Borrowers or any Subsidiaries thereof receives
notice from any court, agency or other governmental authority of any
alleged non-compliance with any Law or order which could reasonably be
expected to have or result in, if such noncompliance is found to exist, a
Material Adverse Effect, (ii) the Internal Revenue Service or any other
federal, state or local taxing authority shall allege any default by any
or all of the Borrowers or the Subsidiaries thereof in the payment of any
tax material in amount or shall threaten or make any assessment in respect
thereof which, if resulting in a determination adverse to the Borrowers,
could reasonably be expected to have or result in a Material Adverse
Effect, (iii) any litigation or proceeding shall be brought against any or
all of the Borrowers or the Subsidiaries thereof before any court or
administrative agency which could, if successfully brought against the
Borrower, reasonably be expected to have or result in a Material Adverse
Effect, (iv) any material adverse change or development in connection with
any such litigation proceeding, or (v) such Responsible Officer reasonably
believes that any Potential Default or Event of Default has occurred or
that any other representation or warranty made herein shall for any reason
have ceased to be true and complete in any material respect.
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(g) NOTICE OF DEFAULT UNDER ERISA.
If any or all of the Borrowers shall receive notice from any
ERISA Regulator or otherwise have knowledge that a Default under ERISA
exists with respect to any Employee Benefit Plan, the Borrowers shall
notify the Administrative Agent of the occurrence of such Default under
ERISA, within ten (10) Business Days after receiving such notice or
obtaining such knowledge (the disclosures contained in the Supplemental
Schedule being such notice of each Default under ERISA disclosed therein
to the extent of the disclosure therein) and shall: (i) so long as the
Default under ERISA has not been corrected to the satisfaction of, or
waived in writing by the party giving notice, the Borrowers shall
thereafter treat as a current liability (if not otherwise so treated) all
liability of such Borrower or Borrowers or the Subsidiaries thereof that
would arise by reason of the termination of or withdrawal from such
Employee Benefit Plan if such plan was then terminated, and (ii) within
forty-five (45) days of the receipt of such notice or obtaining such
knowledge, furnish to the Administrative Agent a current consolidated
balance sheet of the Borrowers with the amount of the current liability
referred to above.
(h) ENVIRONMENTAL REPORTING.
Each of the Borrowers shall promptly deliver to the
Administrative Agent, and in any event within ten (10) Business Days after
receipt or transmittal by any Borrower or the Subsidiaries thereof, as the
case may be, copies or, in the case of investigations or proceedings
having no written embodiment, notice of all Environmental Claims brought
against such Borrower or Subsidiaries which would, either individually or
in the aggregate with all Environmental Claims against the Borrowers and
the Subsidiaries thereof, reasonably be expected to result in a Material
Adverse Effect.
(i) MULTIEMPLOYER PLAN WITHDRAWAL LIABILITY.
The Borrowers shall (i) once in each calendar year beginning
in 1999, request a current statement of withdrawal liability from each
Multiemployer Plan to which any of the Borrowers or any ERISA Affiliate is
or has been obligated to contribute during such year and (ii) within
fifteen (15) days after the Borrowers receive the such current statement,
transmit a copy of such statement to the Administrative Agent.
(j) SEC REPORTS AND REGISTRATION STATEMENTS.
The Borrowers shall deliver to the Administrative Agent,
promptly after transmission thereof or other filing with the SEC, copies
of all registration statements (other than the exhibits thereto and any
registration statement on Form S-8 or its equivalent) and all annual,
quarterly or current reports that the Instron Corporation files with the
SEC on Form 10-K, 10-Q or 8-K (or any successor forms).
(k) ANNUAL, QUARTERLY AND OTHER REPORTS TO SENIOR SUBORDINATED
NOTEHOLDERS PURSUANT TO SENIOR SUBORDINATED NOTE INDENTURE.
The Borrowers shall deliver to the Administrative Agent,
promptly after transmission thereof to holders of Senior Subordinated
Notes, copies of all annual, quarterly and other reports that Instron
Corporation furnishes to holders of Senior Subordinated Notes pursuant to
any requirements of the Senior Subordinated Note Indenture.
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(l) PRESS RELEASES.
The Borrowers shall deliver to the Administrative Agent,
promptly after the release thereof to any news organization or news
distribution organization, copies of any press releases and other similar
statements intended to be made available generally by Instron Corporation
to the public concerning material developments relating to Instron
Corporation or any of its Subsidiaries.
7.2 AFFIRMATIVE COVENANTS.
(a) CORPORATE EXISTENCE.
Each of the Borrowers shall, and shall cause each of the
Subsidiaries thereof to, at all times maintain its respective corporate
existence, rights and franchises, except as permitted under Section
7.3(a), maintain its good standing in the jurisdiction of its
incorporation, and qualify as a foreign corporation in each jurisdiction
where failure to qualify would reasonably be expected to result in a
Material Adverse Effect.
(b) FINANCIAL RECORDS.
The Borrowers shall maintain at all times, correct and
complete financial records in accordance with GAAP, consistently applied,
and, without limiting the generality of the foregoing, make appropriate
accruals to reserves for estimated and contingent losses and liabilities
as required under GAAP.
(c) FINANCIAL EXAMINATION AND REVIEW.
Each of the Borrowers shall, at such Borrower's expense, upon
reasonable prior written or oral notice from the Administrative Agent to
the Borrower Representative permit, and shall cause each of its
Subsidiaries to permit, designated representatives of the Administrative
Agent and the Banks during normal business hours in the presence of an
officer of such Borrower: (i) to examine, with the guidance and
supervision of such Borrower, the Borrower's financial records and to make
copies of and extracts from such records and (ii) to consult with such
Borrower's and Subsidiaries' officers, directors, accountants, actuaries,
trustees and plan administrators, as the case may be, in respect of such
Borrower's and Subsidiaries' financial condition, each of which parties is
hereby authorized by such Borrower to make such information available to
the designated representatives of the Administrative Agent and the Banks
to the same extent that it would to such Borrower.
(d) COMPLIANCE WITH LAW.
Each of the Borrowers will comply, and will cause each of its
Subsidiaries to comply, in all respects with all applicable provisions of
all Laws (whether statutory, administrative, judicial or other and whether
federal, state or local and excluding Environmental Laws to the extent
addressed in Section 7.2(e) of this Agreement) and every lawful
governmental order; provided, however, that any alleged noncompliance
shall not be deemed to be a violation of this Section 7.2(d) so long as:
(i) such noncompliance by such Borrower or such Subsidiaries has not
resulted or could not reasonably be expected to result in a Material
Adverse Effect.
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(e) COMPLIANCE WITH ENVIRONMENTAL LAWS.
Each of the Borrowers will use and operate its facilities and
properties, and cause each of its Subsidiaries to use and operate its
respective facilities and properties, in such a manner that no obligation
shall arise under any Environmental Law, including a clean-up obligation,
which, when taken individually or with all other such obligations, would
result in, or would reasonably be expected to result in, a Material
Adverse Effect; provided, however, that, if any Environmental Claim (even
if such claim will not have a Material Adverse Effect is made or any such
obligation (even if such obligation would not have a Material Adverse
Effect) arises, such Borrower and the Subsidiaries thereof shall, at its
own cost and expense, timely satisfy such claim or obligation, provided,
however, that no such claim or obligation need be satisfied if it is being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if appropriate reserves or other appropriate
provision, if any, as shall be required by GAAP have been made on the
books of such Borrower or the Subsidiaries of such Borrower, as the case
may be. Each of the Borrowers will keep, and will cause each of its
Subsidiaries to keep, all necessary Environmental Permits in effect and
remain in therewith, and handle all Hazardous Materials in compliance with
all applicable Environmental Laws, except to the extent that any such lack
of effectiveness or non-compliance, when taken individually or with all
other instances of lack of effectiveness or non-compliance, would not
result in, and would not reasonably be expected to result in, a Material
Adverse Effect. None of the Borrowers shall suffer to exist, or permit any
of their respective Subsidiaries to suffer to exist, an environmental
condition which, when taken individually or with all other such
conditions, would result in, or would reasonably be expected to result in,
a Material Adverse Effect. The Borrowers shall not suffer or permit the
aggregate of all liabilities or claims against the Borrowers for any
noncompliance with Environmental Laws, any Environmental Claims, any
environmental condition, the above-stated obligations under Environmental
Laws, or any lack of effectiveness of Environmental Permits referenced in
this Section and Section 6.9 hereof, when taken individually or together
with all other such noncompliance, Environmental Claims, environmental
conditions, above-stated obligations under Environmental Laws, and lack of
effectiveness, to result in, or be reasonably expected to result in, a
Material Adverse Effect.
(f) PROPERTIES.
Subject to Sections 5.2 and 7.3(a) of this Agreement, each of
the Borrowers shall maintain, in all material respects, and shall cause
each of its Subsidiaries to maintain, in all material respects, all assets
necessary to its continuing operations in good working order and
condition, ordinary wear and tear excepted, and shall refrain, and shall
cause each of its Subsidiaries to refrain, from wasting or destroying any
such assets or any part thereof.
(g) USE OF PROCEEDS.
The proceeds of (i) the Term Loans shall be used on the
Closing Date by Instron Corporation to finance the portion of the Merger
not otherwise financed by the Senior Subordinated Notes and (ii) the
Revolving Credit Loans and Swing Line Loans, as the case may be, shall be
used (A) on the Closing Date by Instron Corporation to finance any portion
of the Merger not otherwise financed by the Senior Subordinated Notes and
the Term Notes and (B) on the Closing Date, by all of the Borrowers to
repay and refinance all or a portion of the Existing Bank Indebtedness of
such Borrower under the Existing Credit Facilities; provided, however,
that the maximum drawing on the
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Revolving Credit Commitments of the Banks on the Closing Date for all
purposes including the purposes specified in clause (A) and (B) hereof
shall not exceed $30,000,000, (iii) to fund the Borrowers' working capital
requirements provided such use of proceed to fund working capital
requirements involving purchase of material assets shall involve purchases
of assets consistent with past practices and sound and prudent business
requirements and (iv) for transaction costs and other general corporate
purposes of such Borrower (including Permitted Acquisitions and purchasing
management stock as permitted by Section 7.3(c) hereof).
(h) COMPLIANCE WITH TERMS OF ALL MATERIAL CONTRACTS.
Each of the Borrowers shall perform and observe, and shall
cause each of its Subsidiaries to perform and observe, all the material
terms and provisions of each of the Material Business Agreements and the
Material License Agreements to which they are a party.
(i) TAXES.
Each of the Borrowers shall pay in full, and shall cause each
of its Subsidiaries to pay in full, prior in each case to the date when
penalties for the nonpayment thereof would attach, all taxes, assessments
and governmental charges and levies for which it may be or become subject
and all lawful claims which, if unpaid, could reasonably be expected to
become a Lien upon its property; provided, however, that no such tax,
assessment, charge or levy need be paid so long as and to the extent that:
(i) it is contested in good faith and by timely and appropriate
proceedings effective, during the pendency of such proceedings, to stay
the enforcement of such taxes, assessments and governmental charges and
levies and (x) such stay prevents the creation of any Lien (other than
inchoate Liens for property taxes) or (y) a bond has been provided which
prevents the creation of any Lien (other than inchoate Liens for property
taxes) and (ii) appropriate reserves, as required by GAAP, are made on the
books of such Borrower and its Subsidiaries, as applicable; provided,
further, that that the Borrower will not be considered to be in default of
this section the Borrowers or any Subsidiary thereof fails to pay any such
amount which, individually or in the aggregate, is immaterial.
(j) INSURANCE.
Each of the Borrowers shall, on the Closing Date and within
five (5) Business Days of the request by the Administrative Agent
thereafter, provide evidence satisfactory to the Administrative Agent that
such Borrower has adequate personal and real property, casualty,
liability, business interruption and product liability insurance, with the
Administrative Agent listed as loss payee and additional insured (as
applicable), such adequacy to be determined based on insurance maintained
generally by companies in the same business as such Borrower.
(k) LICENSE TO THIRD PARTIES AND SUBSIDIARIES.
Except as disclosed in the Supplemental Schedule, none of the
Borrowers nor any Subsidiary thereof has any existing license agreement as
licensor with respect to Intellectual Property of such Borrower or
Subsidiaries that does not provide, and neither such Borrower nor such
Subsidiary will execute any license agreement as licensor with any Person
(including, without limitation, any Subsidiary of such Borrower) with
respect to any such Intellectual Property that does not provide that (i)
upon an Event of Default and the acceleration of the Obligations, such
license agreement shall, upon the written
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request of the Administrative Agent, terminate and (ii) such agreement may
only be amended in any material respect with the express written consent
of the Administrative Agent, such consent not to be unreasonably withheld
or delayed.
(l) CERTAIN SUBSIDIARIES TO JOIN IN SUBSIDIARY GUARANTY AND STOCK
PLEDGE.
(i) If at any time after the Closing Date (a) any Borrower
creates or acquires any Material Subsidiary or (b) any non-Borrower
Subsidiary of a Borrower that was not a party to a Subsidiary
Guaranty and Subsidiary Security Agreement on the Closing Date
becomes a Material Subsidiary, then the Borrowers shall (x) notify
the Administrative Agent promptly in writing of such event,
identifying the Subsidiary in question and referring specifically
to the rights of the Administrative Agent and the Banks under this
Section, and (y) cause such Material Subsidiary to execute and
deliver to the Administrative Agent for the benefit of the Banks,
within thirty (30) days after the occurrence of such event, (A)
either (I) subject to the satisfaction of all the requirements set
forth in Section 1.4, an Additional Borrower Addendum, or (II) only
in the case of a Material Subsidiary that is also a Domestic
Subsidiary, a joinder supplement, in form and substance
satisfactory to the Administrative Agent and the Required Banks, to
the Subsidiary Guaranty pursuant to which such Material Subsidiary
joins in the Subsidiary Guaranty as a guarantor thereunder and in
the Subsidiary Security Agreement as a grantor thereunder, and (B)
such evidence of the authority of such Material Subsidiary to
execute and deliver such documents as the Administrative Agent
shall reasonably request and (z) cause Instron Corporation to
execute a supplement, in form and substance satisfactory to the
Administrative Agent and the Required Banks, to the Subsidiary
Pledge Agreement pursuant to which the stock of such Material
Subsidiary is pledged by Instron Corporation thereunder.
(ii) If at any time after the Closing Date, any non-Borrower
Subsidiary of a Borrower that is not a party to a Subsidiary
Guaranty or a Subsidiary Security Agreement has, during any Testing
Period, consolidated earnings before interest, taxes, depreciation
and amortization which, when aggregated with the consolidated
earnings before interest, taxes, depreciation and amortization of
all other non-Borrower Subsidiaries of a Borrower that are not
parties to a Subsidiary Guaranty or a Subsidiary Pledge Agreement,
would exceed 15% of Instron Corporation's Consolidated Adjusted
EBITDA for such Testing Period, then the Borrowers shall (x) notify
the Administrative Agent promptly in writing of such event,
identifying all of the Subsidiaries in question and referring
specifically to the rights of the Administrative Agent and the
Banks under this Section, and (y) cause a sufficient number of such
Subsidiaries to execute and deliver to the Administrative Agent for
the benefit of the Banks, within thirty (30) days after the
occurrence of such event, (A) either (I) subject to the
satisfaction of all the requirements set forth in Section 1.4, an
Additional Borrower Addenda, or (II) only in the case of
Subsidiaries that are also a Domestic Subsidiaries, a joinder
supplement, in form and substance satisfactory to the
Administrative
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Agent and the Required Banks, to the Subsidiary Guaranty pursuant to
which such Subsidiary joins in the Subsidiary Guaranty as a
guarantor thereunder and in the Subsidiary Security Agreement as a
grantor thereunder, and (B) such evidence of the authority of such
Material Subsidiary to execute and deliver such documents as the
Administrative Agent shall reasonably request, to ensure that the
consolidated earnings before interest, taxes, depreciation and
amortization of such Subsidiaries is less than or equal to 15% of
Instron Corporation's Consolidated Adjusted EBITDA. and (y) cause
Instron Corporation to execute a supplement, in form and substance
satisfactory to the Administrative Agent and the Required Banks, to
the Subsidiary Pledge Agreement pursuant to which the stock of such
Subsidiaries is pledged by Instron Corporation thereunder.
(m) MOST FAVORED COVENANT STATUS.
The Senior Subordinated Notes, and any indenture, guaranty or
other similar instrument evidencing the Senior Subordinated Notes, shall
not include any affirmative or negative business or financial covenants
(or any events of default or other type of restriction which would have
the practical effect of any affirmative or negative business or financial
covenant, including, without limitation, any 'put' or mandatory prepayment
of such Indebtedness upon the occurrence of a 'change of control')
applicable to the Borrowers which are more restrictive than those set
forth herein or in any of the other Loan Documents. To the extent any
amendment, extension, renewal or refinancing of the Senior Subordinated
Notes, or any indenture, guaranty or other similar instrument evidencing
such amendment, extension, renewal or refinancing of the Senior
Subordinated Notes includes affirmative or negative business or financial
covenants (or any events of default or other type of restriction which
would have the practical effect of any affirmative or negative business or
financial covenant, including, without limitation, any 'put' or mandatory
prepayment of such Indebtedness upon the occurrence of a 'change of
control') applicable to the Borrowers which are more restrictive than
those set forth herein or in any of the other Loan Documents, the
Borrowers shall promptly so notify the Administrative Agent and, if the
Administrative Agent shall so request by written notice to the Borrowers
(after a determination has been made by the Required Banks that any of the
above-referenced documents or instruments contain any such provisions,
which either individually or in the aggregate, are more favorable to the
Banks than any of the provisions set forth herein), the Borrowers, the
Administrative Agent and the Banks shall promptly amend this Agreement to
incorporate some or all of such provisions, in the discretion of the
Administrative Agent and the Required Banks, into this Agreement and, to
the extent necessary and reasonably desirable to the Administrative Agent
and the Required Banks, into any of the other Loan Documents, all at the
election of the Administrative Agent and the Required Banks.
(n) HEDGE AGREEMENTS.
Within sixty (60) day after the Closing Date, the Borrowers
will enter, and will cause the Subsidiaries thereof to enter, into Hedge
Agreements (i) in order to provide protection to the Borrowers and such
Subsidiaries from fluctuations and other changes in interest rates and
currency exchange rates, as and to the extent considered reasonably
necessary by the Borrowers, but without exposing the Borrowers or such
Subsidiaries to predominantly speculative risks unrelated to the amount of
Indebtedness or assets intended to be subject to coverage on a notional
basis under all such Hedge Agreements; and (ii) in the case of any Hedge
Agreement entered into after the Effective Date, only if the proposed form
thereof (including any proposed pricing or other material terms) has
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been provided to the Administrative Agent contemporaneously with the entry
into such Hedge Agreement.
7.3 NEGATIVE COVENANTS.
(a) CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS .
None of the Borrowers shall, nor permit any Subsidiaries
thereof to, (x) merge or consolidate with or into, or enter into any
agreement to merge or consolidate with or into, any other Person or
otherwise be a party to any merger or consolidation; (y) purchase all or
substantially all of the assets and business of another Person (purchases
of inventory and materials in the ordinary course of business being
permitted and leases and purchases of equipment in the ordinary course of
business being permitted subject to Sections 7.3(d) and 7.4(g) hereof), or
(z) except as set forth in the Supplemental Schedule, lease as lessor,
sell, sell-leaseback, license or otherwise convey record or beneficial
ownership (whether in one transaction or a series of transactions) of any
of its property or assets (whether now owned or hereafter acquired);
except that:
(i) each of the Borrowers and any Subsidiaries thereof may
sell or otherwise dispose of its Inventory in the ordinary course of
its business;
(ii) each of the Borrowers and any Subsidiaries thereof may
sell or otherwise dispose of its Equipment that is obsolete, worn
out, unnecessary or no longer used or useful in such Borrower's or
Subsidiaries' business, so long as the Net Proceeds of any such
sales of Equipment shall be applied to repay the Loans to the extent
required by Section 2.10(c) of this Agreement;
(iii) any Domestic Borrower may merge or consolidated with or
into any other Domestic Borrower and any Foreign Borrower (other
than Instron, Ltd.) may merge with or into any other Foreign
Borrower;
(iv) any Domestic Subsidiary of a Borrower may merge or
consolidate with or into, or be liquidated into, a Domestic Borrower
or any Domestic Subsidiary which is a Wholly-Owned Subsidiary of a
Domestic Borrower so long as such Domestic Borrower or such Domestic
Subsidiary is the surviving corporation, or may dispose of its
properties or assets to such Domestic Borrower or such Domestic
Subsidiary (whether such disposal is by means of lease, sale or
other type of transfer except transfers of a type otherwise provided
for in this Section 7.3(a));
(v) any Foreign Subsidiary of a Borrower may merge or
consolidate with or into, or be liquidated into, a Foreign Borrower
or a Domestic Borrower or any Subsidiary which is a Wholly-Owned
Subsidiary of a Foreign Borrower or Domestic Borrower so long as
such Foreign Borrower or Domestic Borrower, as the case may be, or
such Wholly-Owned Subsidiary is the surviving corporation, or may
dispose of its properties or assets to such Foreign Borrower or
Domestic Borrower or such Wholly-Owned Subsidiary (whether such
disposal is by means of lease, sale or other type of transfer except
transfers of a type otherwise provided for in this Section 7.3(a));
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(vi) each of the Borrowers and any Subsidiaries thereof may
make Acquisitions, so long as (A) no Potential Default or Event of
Default then exists or would result therefrom and (B) such
Acquisition constitutes a Permitted Acquisition;
(vii) each of the Borrowers and any Subsidiaries thereof may
lease (as lessee) real or personal property in the ordinary course
of business; provided that (A) any such lease does not create a
Capitalized Lease Obligation not otherwise permitted by Section
7.3(d)(xii) or (B) any such lease constituting an operating lease
does not cause the aggregate rental payments under all operating
leases to exceed the amount otherwise permitted by Section
7.3(d)(x);
(viii) each of the Borrowers and any Subsidiaries thereof may
license or sublicense Intellectual Property owned thereby in the
ordinary course of business; provided that (A) such licenses or
sublicenses shall not interfere in any material respect with the
business of any Borrower or any Subsidiary and (B) the rights of the
licensee under any such license shall be subject to the security
interest granted hereunder in favor of the Administrative Agent;
(ix) each of the Borrowers and any Subsidiaries thereof may
effect sale-leaseback transactions with respect to real property
thereof; provided that (A) the aggregate Net Proceeds of all such
sale-leaseback transactions by all of the Borrowers and the
Subsidiaries thereof shall not exceed $7,500,000, (B) no Default or
Event of Default is then in existence or would result thereby, (C)
each such sale shall be in an amount at least equal to the fair
market value thereof (as determined in good faith by the Board of
Directors of Instron Corporation) and shall be for a consideration
not less than seventy five percent (75%) of which shall be cash
proceeds, (D) the lease obligations created thereby are otherwise
permitted under this Agreement, and (E) to the extent the Required
Lenders consent to sale-leaseback transactions exceeding in the
aggregate the Net Proceeds limits hereof, the Net Proceeds from such
transactions in excess of $7,500,000 are contemporaneously therewith
applied to repay the Loans to the extent required by Section 2.10(c)
of this Agreement;
(x) each of the Borrowers and any Subsidiaries thereof may
grant leases or subleases to other Persons in the ordinary course of
business; provided that such leases or subleases do not interfere in
any material respect with the business of a Borrower or any
Subsidiaries thereof and any interest or title of a lessor under any
lease in violation of this Agreement;
(xi) each of the Borrowers and any Subsidiaries thereof may
sell or otherwise dispose (for purposes of this clause, the granting
of Liens shall not be considered to be a disposition of the asset
secured thereby) of Equipment or Cash Equivalents to Persons (which
are neither Borrowers nor Subsidiaries) not otherwise permitted by
this Section 7.3(a) hereof; provided that (A) the aggregate Net
Proceeds received from all such sales and dispositions by all of the
Borrowers and the Subsidiaries thereof permitted by this clause (xi)
shall not exceed
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$2,000,000 in any Fiscal Year of Instron Corporation, (B) no Default
or Event of Default is then in existence or would result thereby,
(C) each such sale shall be in an amount at least equal to the fair
market value thereof (as determined in good faith by the Board of
Directors Instron Corporation) and for all cash proceeds and (D) the
Net Proceeds of any such sale are contemporaneously therewith
applied to repay the Loans to the extent required by Section 2.10(c)
of this Agreement, and
(xii) Instron Corporation and the Domestic Subsidiaries
thereof may convey ownership of tangible personal property of
Instron Corporation and such Domestic Subsidiaries to Foreign
Borrowers and Foreign Subsidiaries to the extent that: (A) such
personal property does not consist of Accounts, General Intangibles,
or Investment Property (other than Cash Equivalents to the extent
permitted by clause (B) of this Section), (B) any conveyance of cash
and Cash Equivalents are otherwise permitted as intercompany loans
or investments pursuant to Sections 7.3(b) and 7.3(e) hereof; (C)
ownership of any Inventory delivered to such Foreign Borrowers or
Foreign Subsidiaries for processing may be conveyed to such Foreign
Borrower or Foreign subsidiaries only to the extent such conveyance
is consistent with the customary practice of the Borrowers with
respect to the conveyancing of title to Inventory being processed by
such affiliated processors and not otherwise materially adverse to
the financial condition of Instron Corporation and such Domestic
Subsidiaries, taken as a whole, and (D) ownership of Equipment may
be conveyed to Foreign Borrowers or Foreign Subsidiaries in an
amount the fair market value of which (as determined in good faith
by the Board of Directors of Instron Corporation) shall not to
exceed in the aggregate $5,000,000; provided, however, that (X) the
restrictions on conveyances of tangible personal property specified
in this Section 7.3(a) and this Subsection 7.3(a)(xii) are not
applicable to (I) conveyances of Equipment and Inventory with
respect to which fair consideration (as determined in good faith by
the Board of Directors of Instron Corporation) is paid to Instron
Corporation or such Domestic Subsidiaries by such Foreign Borrower
or Foreign Subsidiaries, (II) transfers of Equipment which do not
involve the conveyance of ownership to the extent such transfers are
otherwise permitted by Section 4.3 hereof, (III) conveyances thereof
from any Domestic Borrower or Domestic Subsidiary to any other
Domestic Borrower or any Domestic Subsidiary which is a Wholly-Owned
Subsidiary, (IV) conveyances thereof from any Foreign Borrower or
Foreign Subsidiary to any Domestic Borrower or any Domestic
Subsidiary which is a Wholly-Owned Subsidiary or (V) transfers of
Inventory which do not involve the conveyance of ownership to the
extent such transfers are consistent with the customary practice of
the Borrowers with respect to Inventory being processed by such
affiliated processors and not otherwise materially adverse to the
financial condition of Instron Corporation and such Domestic
Subsidiaries, taken as a whole, and (Y) all conveyances permitted in
this Subsection 7.3(a)(xii) are be undertaken, in good faith, for
commercially sound and prudent business reasons and consistent with
the customary business practices of the Borrowers.
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(xiii) Instron Corporation and the Domestic Subsidiaries
thereof may convey ownership of intangible personal property of
Instron Corporation and such Domestic Subsidiaries to Foreign
Borrowers and Foreign Subsidiaries to the extent that such
transfers: (A) are not materially adverse to the financial condition
of Instron Corporation and such Domestic Subsidiaries, taken as a
whole, and (B) are undertaken, in good faith, for commercially sound
and prudent business reasons and consistent with the customary
business practices of the Borrowers.
(b) CREDIT EXTENSIONS; PREPAYMENTS; PAYMENTS OF SUBORDINATED DEBT.
None of the Borrowers shall, nor permit any Subsidiaries
thereof to, (x) make prepayments or advance payments in respect of
Indebtedness to others (except to the Administrative Agent for the benefit
of the Banks in accordance with this Agreement) or (y) loan any money to,
assume any Indebtedness of or any other obligation of, or undertake any
Guaranty Obligations with respect to the Indebtedness of, any other Person
or (z) make any payments of principal or interest on Subordinated Debt,
except for:
(i) receivables owing to them held or acquired in the ordinary
course of business and payable or dischargeable in accordance with
customary trade terms;
(ii) loans and advances to employees for business-related
travel expenses, moving expenses, costs of replacement homes and
other similar expenses, in each case incurred in the ordinary course
of business;
(iii) loans and advances by any Subsidiary (including any
Foreign Borrower) to Instron Corporation; provided, however, that
the Indebtedness represented thereby constitutes unsecured
Subordinated Debt;
(iv) loans and advances (A) by Instron Corporation to any
Domestic Subsidiary, (B) by Instron Corporation to any Foreign
Borrower or any Foreign Subsidiary, (C) by any Domestic Subsidiary
to any Foreign Borrower, any Foreign Subsidiary or Domestic
Subsidiary, or (D) by any Foreign Borrower or Foreign Subsidiary to
any Foreign Subsidiary, any other Foreign Borrower or any Domestic
Subsidiary; provided, that the cumulative aggregate amount of all
such loans and advances outstanding after the Effective Date (other
than Permitted Assumed Acquisition Indebtedness and Permitted
Subordinated Acquisition Indebtedness in connection with Permitted
Acquisitions and excluding from treatment as a loan or advance, for
purposes of this clause (iv), any intercompany trade payables
incurred in the ordinary course of business consistent with past
practice) by Instron Corporation and Domestic Subsidiaries to
Foreign Borrowers and Foreign Subsidiaries shall not exceed (when
aggregated with all investments by Instron Corporation made therein
after the Effective Date other than Permitted Acquisition
Investments) Ten Million Dollars ($10,000,000) in the aggregate.
(v) unsecured Guaranty Obligations of (A) Instron Corporation
or any Domestic Subsidiary thereof in respect of leases of any
Borrower or any
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Subsidiary thereof which are not prohibited by this Agreement, (B)
any Foreign Borrower or any Foreign Subsidiary thereof in respect of
leases of any such Foreign Borrower or any Foreign Subsidiary
thereof which are not prohibited by this Agreement and (C) a
Borrower or any Subsidiary thereof in respect of any other Person
(other than in respect of indebtedness for borrowed money) arising
as a matter of applicable law because the Borrower or such
Subsidiary is or is deemed to be a general partner of such other
person; provided that no Foreign Borrower or Foreign Subsidiary
shall guaranty any obligations of such Person to the extent such
guaranty would cause U. S. tax recognition by Instron Corporation of
foreign income;
(vi) any endorsement of a check or other medium of payment for
deposit or collection, or any similar transaction in the normal
course of business;
(vii) any unsecured Guaranty Obligations consisting of (A) the
Guaranty Obligations of a Borrower Guarantor consisting of its
obligation to pay Guaranteed Obligations hereunder as provided by
Section 10 hereof, (B) the Guaranty Obligations of any Borrower as
the guarantor of any Letter of Credit Obligor as provided in Section
2.12(l) hereof and (C) other Guaranty Obligations of any Borrower or
any Subsidiary in respect of Obligations of any other Borrower or
Subsidiary thereof;
(viii) any unsecured Guaranty Obligations of the unsecured
Indebtedness of any Subsidiaries (including Foreign Borrowers) of
the Indebtedness permitted in Sections 7.3(c)(xii) and 7.3(c)(xiii)
hereof not otherwise permitted under the foregoing clauses; provided
no Foreign Borrower or Foreign Subsidiary shall guaranty any
obligations of Instron Corporation or any Domestic Subsidiary to the
extent such guaranty would cause U. S. tax recognition by Instron
Corporation of foreign income;
(ix) any loan or advance by any Borrower or Subsidiary for the
benefit of any other Borrower or Subsidiary evidenced by such
Borrower's or Subsidiary's being the account party in respect of
Existing Letters of Credit issued for the benefit of such other
Borrower or other Subsidiary to the extent such Existing Letters of
Credit are permitted by Section 2.12(c) hereof;
(x) any Permitted Assumed Acquisition Indebtedness and
Permitted Subordinated Acquisition Indebtedness;
(xi) loans and advances to employees for purposes deemed
prudent by the Board of Directors of Instron Corporation in an
aggregate amount not to exceed $500,000 during any Fiscal Year, and
any renewals, extensions or replacement thereof;
(xii) so long as such payments are not prohibited pursuant to
the Senior Subordinated Note Indenture at the time such payments
become due, payments by Instron Corporation to the holders of the
Senior Subordinated Notes an amount
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(the "Permissible Senior Subordinated Note Amount") which may not
exceed, during any Fiscal Year, the sum of all regularly scheduled
payments of interest required to be made by Instron Corporation
under the Senior Subordinated Note Documents; except that Instron
Corporation shall not make, nor permit any of its Subsidiaries to
make, any voluntary or optional payment or prepayment or redemption
or acquisition for value (including, without limitation, by way of
depositing with the trustee with respect thereto money or securities
before due for the purpose of paying when due) of the Senior
Subordinated Notes, or effect any mandatory repurchase of the Senior
Subordinated Notes pursuant to a "change of control" (as defined in
the Senior Subordinated Note Indenture), or exchange of, or
refinance or refund, any Senior Subordinated Notes of the Borrower
permitted hereunder; provided, however, that the Borrowers may
refinance or refund any such Subordinated Debt if the aggregate
principal amount thereof is not increased or the weighted average
life to maturity thereof is not reduced by more than 10% (computed
in accordance with standard financial practice) and there is no
change in the subordination provisions applicable thereto which is
materially adverse to the Banks, the Designated Swing Line Lenders
or the Designated Letter of Credit Issuers; and
(xiii) so long as such payments are not prohibited pursuant to
the applicable Subordination Agreement at the time such payments
become due, payment by Instron Corporation or any Subsidiaries
thereof to the holders of Subordinated Debt (other than payments
with respect to the Senior Subordinated Notes) of an amount (the
"Permissible Subordinated Amount") which may not exceed, during any
Fiscal Year, the sum permitted by the applicable Subordination
Agreement; except that Instron Corporation shall not make, nor
permit any of its Subsidiaries to make, any voluntary or optional
payment or prepayment or redemption or acquisition for value
(including, without limitation, by way of depositing with the
trustee with respect thereto money or securities before due for the
purpose of pay or redemption or acquisition for value (including,
without limitation, by way of depositing with the trustee with
respect thereto money or securities before due for the purpose of
paying when due), or effect any mandatory repurchase, or exchange
of, or refinance or refund, any such Subordinated debt except to the
extent permitted in the applicable Subordination Agreement.
(c) INDEBTEDNESS.
None of the Borrowers shall, nor permit any Subsidiaries
thereof to, create, assume, incur, suffer to exist or have outstanding at
any time any Indebtedness or other debt of any kind or be or become a
Guarantor of or otherwise undertake or assume any Guaranty Obligation with
respect to any Indebtedness of any other Person; except that this Section
7.3(c) shall not prohibit:
(i) the Obligations, Swing Line Obligations, Letter of Credit
obligations and Designated Hedge Obligations hereunder;
(ii) ordinary course trade accounts payable or customer
deposits;
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<PAGE> 90
(iii) unsecured Indebtedness of Instron Corporation to any
Subsidiary (including a Foreign Borrower); provided, however, that
such Indebtedness constitutes Subordinated Debt;
(iv) Indebtedness of (A) any Domestic Subsidiary of Instron
Corporation to Instron Corporation, (B) any Foreign Borrower or any
Foreign Subsidiary to Instron Corporation, (C) any Foreign Borrower,
any Foreign Subsidiary or Domestic Subsidiary to any Domestic
Subsidiary, (D) any Foreign Borrower, Foreign Subsidiary or Domestic
Subsidiary to any Foreign Borrower or other Foreign Subsidiary;
provided, however, that the cumulative aggregate amount of all such
Indebtedness outstanding after the Effective Date (other than
Permitted Assumed Acquisition Indebtedness and Permitted
Subordinated Acquisition Indebtedness in connection with Permitted
Acquisitions and excluding from treatment as Indebtedness, for
purposes of this clause (iv), any intercompany trade payables
incurred in the ordinary course of business consistent with past
practice) owing by all Foreign Borrowers and Foreign Subsidiaries to
Instron Corporation and Domestic Subsidiaries shall not at any time
exceed (when aggregated with all investments therein made after the
Effective Date other than Permitted Acquisition Investments) Ten
Million Dollars ($10,000,000) in the aggregate;
(v) Indebtedness under Hedge Agreements or in respect of
currency rate swaps or similar transactions;
(vi) Indebtedness secured by a Lien permitted by clauses (ix),
(x) or (xii) of Section 7.3(d) and up to the amount permitted
therein;
(vii) Indebtedness of a Borrower Guarantor consisting of its
obligation to pay Guaranteed Obligations hereunder as provided by
Section 10 of this Agreement or as the guarantor of any Letter of
Credit Obligor as provided in Section 2.12(l) hereof;
(viii) Indebtedness evidenced by Guaranty Obligations
otherwise permitted by Sections 7.3(b)(v) and 7.3(b)(viii) hereof;
(ix) Indebtedness of Instron Corporation to the holders of the
Senior Subordinated Notes under the Senior Subordinated Note
Documents, to the extent subject to the Senior Subordinated Note
Indenture;
(x) Indebtedness in connection any repurchase of capital stock
of Instron Corporation from management in an amount not to exceed
(when aggregated with cash repurchases of such capital stock by
Instron Corporation permitted by Section 7.3(e)(viii) and 7.3(f)
hereof) $1,000,000 during any Fiscal Year and only to the extent no
Event of Default has occurred which is continuing which has not been
waived in accordance with Section 14.1 hereof or would result by
reason of such repurchase;
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(xi) the existing Indebtedness as of July 3, 1999, to the
extent not otherwise permitted pursuant to the foregoing clauses
(and any refinancing, extension, renewal, or refunding thereof not
involving an increase in the principal amount of such Indebtedness
or a reduction of more than ten percent (10%) in the remaining
weighted average life to maturity thereof (computed in accordance
with standard financial practice) except to the extent such
Indebtedness is required to be refinanced and terminated pursuant to
Section 3.1 hereof;
(xii) unsecured Indebtedness not otherwise permitted pursuant
to the foregoing clauses incurred by Domestic Borrowers and
non-Borrower Domestic Subsidiaries of any Borrower in amount not to
exceed at any time Two Million Five Hundred Thousand Dollars
($2,500,000) in the aggregate;
(xiii) unsecured Indebtedness not otherwise permitted pursuant
to the foregoing clauses incurred by Foreign Borrowers and
non-Borrower Foreign Subsidiaries of any Borrower in an amount not
to exceed at any time Ten Million Dollars ($10,000,000) in the
aggregate;
(xiv) Permitted Subordinated Acquisition Indebtedness
incurred in connection with Permitted Acquisitions and Permitted
Assumed Acquisition Indebtedness, in each case, to the extent
permitted to be incurred in connection with each such Permitted
Acquisitions;
(xv) in connection with Permitted Acquisitions, to the extent
not otherwise permitted by the forgoing clauses, unsecured,
unsubordinated Indebtedness to the extent permitted to be incurred
in connection with a particular Permitted Acquisition in an amount
outstanding not to exceed at any time Two Million Dollars
($2,000,000) in the aggregate; and
(xvi) to the extent not otherwise permitted by the foregoing
clauses, Subordinated Debt of the Borrowers and the Subsidiaries
thereof.
(d) LIENS.
None of the Borrowers shall, nor permit any Subsidiaries
thereof to, (x) acquire or hold any property subject to any Lien, (y) sell
or otherwise transfer any Accounts, whether with or without recourse, or
(z) suffer or permit any property now owned or hereafter acquired by it to
be or become encumbered by a Lien; provided, however, that this Subsection
shall not prohibit:
(i) any lien for a tax, assessment or government charge or
levy for taxes, assessments or charges not yet due and payable or
not yet required to be paid pursuant to Section 7.2(i);
(ii) any deposit or cash pledges securing only workers'
compensation, unemployment insurance or similar obligations (other
than Liens arising under ERISA) in the ordinary course of business;
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(iii) any mechanic's, carrier's, landlord's or similar common
law or statutory lien incurred in the ordinary course of business
for amounts that are not yet due and payable or which are being
diligently contested in good faith, so long as the Administrative
Agent has been notified thereof and adequate reserves are maintained
by such Borrower for their payment;
(iv) zoning or deed restrictions, public utility easements,
rights of way, minor title irregularities and similar matters
relating to real property of such Borrower or its Subsidiaries, in
all such cases having no material adverse effect as a practical
matter on the ownership or use of any of the real property in
question, as such property is used in the ordinary course of
business of such Borrower or its Subsidiaries;
(v) any Lien (1) which arises in connection with judgments or
attachments the occurrence of which does not constitute an Event of
Default under Section 8.12, (2) the execution or other enforcement
of such Lien is effectively stayed and the claims secured thereby
are being actively contested in good faith and by appropriate
proceedings and (3) which is junior in priority to the Liens of the
Administrative Agent securing the Obligations from time to time
outstanding;
(vi) deposits or cash pledges securing performance of
contracts, bids, tenders, leases (other than Capitalized Leases),
statutory obligations, surety and appeal bonds (other than contracts
for the payment of Indebtedness for borrowed money) arising in the
ordinary course of business;
(vii) any Lien in favor of the Administrative Agent created
under the Loan Documents or any existing Lien fully disclosed in the
Supplemental Schedule;
(viii) Liens securing the replacement, extension or renewal of
any Indebtedness permitted to be refinanced by Section 7.3(c) so
long as such Lien is upon the same property previously subject
thereto;
(ix) any Lien (including any Permitted Acquisition Lien in
connection with a Permitted Acquisition) created or assumed in
purchasing, constructing or improving any real property or to which
any real property is subject when purchased; provided, however,
that: (x) the mortgage, security interest or other lien is confined
to the property in question and (y) the Indebtedness secured thereby
does not exceed the total cost of the purchase, construction or
improvement and (z) the aggregate outstanding Indebtedness of such
Borrower secured by such Liens (when taken together with any secured
Indebtedness permitted to be secured pursuant to clause (xii) of
this subsection and when taken together with the aggregate
Indebtedness of the other Borrowers secured by Liens permitted by
this clause (ix) of this subsection) shall not at any time exceed
Five Million Dollars ($5,000,000) in the aggregate;
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(x) any operating lease entered into by such Borrower as
lessee; provided; however, that the scheduled rental payments in
respect to all such leases of such Borrower (when taken together
with all such leases of the Borrower and all other Borrowers) shall
not at any time exceed Ten Million Dollars ($10,000,000) in the
aggregate during any Fiscal Year of Borrowers;
(xi) any transfer of a check or other medium of payment for
deposit or collection, or any similar transaction in the ordinary
course of business;
(xii) any Lien (including any Lien in respect of a Capitalized
Lease of personal property and any Permitted Acquisition Lien in
connection with a Permitted Acquisition) which is created in
connection with the purchase of personal property; provided,
however, that: (x) the Lien is confined to the property in question,
(y) the Indebtedness secured thereby does not exceed the total cost
of the purchase, and (z) the aggregate outstanding Indebtedness
secured by such Liens (when taken together with any secured
Indebtedness permitted to be secured pursuant to clause (ix) of this
subsection and when taken together with the aggregate Indebtedness
of such Borrower and the other Borrowers secured by Liens permitted
by this clause (xii) of this subsection) shall not at any time
exceed Five Million Dollars ($5,000,000) in the aggregate;
(xiii) security deposits to secure the performance of
operating leases and deposits received from customers, in each case
in the ordinary course of business; and
(xiv) lease and subleases permitted by Section 7.3(a) hereof;
and
(e) INVESTMENTS.
None of the Borrowers shall, nor permit any of its
Subsidiaries to, (x) make or hold any investment in any common stocks,
bonds or securities of any Person, or make any further capital
contribution to any Person or (y) become a party to any partnership or
non-limited liability Person, other than:
(i) investments in the capital of its Subsidiaries existing as
of the Effective Date and the capital contributions therein
outstanding as of the Effective Time(and any increases thereof
attributable to increases in retained earnings);
(ii) investments notes or securities issued by a customer of
such Borrower or its Subsidiaries in connection with a proceeding in
respect of the Financial Impairment of such customer,
(iii) investments in cash and Cash Equivalents;
(iv) investments by Instron Corporation and Domestic
Subsidiaries made after the Effective Date in the capital of
Wholly-Owned Subsidiaries which are not Foreign Subsidiaries (and
any increases thereof attributable to increases in retained
earnings);
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(v) investments (excluding for purposes of calculating the
limitations herein, Permitted Acquisition Investments) by Instron
Corporation and Domestic Subsidiaries made after the Effective Date
in the capital of Foreign Borrowers and Foreign Subsidiaries in an
amount not to exceed (when aggregated with loans and advances made
to such Subsidiaries by Instron Corporation or the Subsidiaries
thereof after the Effective Date other than Permitted Assumed
Acquisition Indebtedness and Permitted Subordinated Acquisition
Indebtedness) at any time Ten Million Dollars ($10,000,000) in the
aggregate (and any increases thereof attributable to increases in
retained earnings);
(vi) investments acquired by Instron Corporation or any
Subsidiaries thereof (A) in exchange for any other investment held
by the Borrower or any such Subsidiary in connection with or as a
result of a bankruptcy, workout, reorganization or recapitalization
of the issuer of such other investment, or (B) as a result of a
foreclosure by Instron Corporation and the Subsidiaries thereof with
respect to any secured investment or other transfer of title with
respect to any secured investment in default;
(vii) investments of Instron Corporation and any Subsidiaries
thereof in Hedge Agreements;
(viii) any repurchase of capital stock of Instron Corporation
from management in an amount not to exceed (when aggregated with
Indebtedness of Instron Corporation to the seller of such capital
stock in connection with such repurchase permitted by Section
7.3(c)(x) hereof) $1,000,000 per annum and only to the extent no
Event of Default has occurred which is continuing which has not been
waived in accordance with Section 14.1 hereof or would result by
reason of such repurchase, and
(ix) any other existing investments to the extent not
otherwise permitted by the forgoing clauses described on the
Supplemental Schedule.
(f) DISTRIBUTIONS; MANAGEMENT FEE.
Other than in a writing made expressly subject to the
Administrative Agent's written consent under this Agreement, Instron
Corporation shall not make or commit itself to make, nor permit any
of its Subsidiaries to make or commit to make, any Distribution
(other than stock dividends) to its shareholders or members at any
time or pay or commit itself to pay any management fee to any
Affiliate of such Borrower or its Subsidiaries at any time; except,
that: (x) each Subsidiary of Instron Corporation may make or commit
itself to make Distributions to its shareholders or members at any
time, (y) the Borrowers may pay management fees and board of
directors fees in an aggregate amount not to exceed $600,000 during
any Fiscal Year to the extent paid pursuant to and in accordance
with the Management Agreement and (z) any repurchase of capital
stock of Instron Corporation from management in an amount not to
exceed during any Fiscal Year (when aggregated with Indebtedness
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incurred during such Fiscal Year by Instron Corporation to the
sellers of such capital stock permitted by Section 7.3(e)(viii)
hereof) $1,000,000 and only to the extent no Event of Default has
occurred which is continuing which has not been waived in accordance
with Section 14.1 hereof or would result by reason of such
repurchase;
(g) CHANGE IN NATURE OF BUSINESS.
None of the Borrowers shall, nor permit any Subsidiaries
thereof to, make any material change in the nature of its business as
carried on at the date hereof.
(h) CHARTER AMENDMENTS.
None of the Borrowers shall amend any of its Charter Documents
or permit amendment of the Charter Documents of any of its Subsidiaries if
such amendment would conflict with or cause and Event of Default or a
Potential Default under this Agreement.
(i) COMPLIANCE WITH ERISA.
None of the Borrowers shall, nor permit any ERISA Affiliate
to: (i) engage in any transaction in connection with which such Borrower
or any ERISA Affiliate could reasonably be expected to be subject to
either a civil penalty assessed pursuant to section 502(i) of ERISA or a
tax imposed by section 4975 of the Internal Revenue Code, terminate or
withdraw from any Employee Benefit Plan (other than a Multiemployer Plan)
in a manner, or take any other action with respect to any such Employee
Benefit Plan (including, without limitation, a substantial cessation of
business operations or an amendment of an Employee Benefit Plan within the
meaning of section 4041(e) of ERISA), which could reasonably be expected
to result in any liability of any or all of the Borrowers or any ERISA
Affiliate to the PBGC, to the Department of Labor or to a trustee
appointed under section 4042(b) or (c) of ERISA, incur any liability to
the PBGC on account of a withdrawal from or a termination of an Employee
Benefit Plan under section 4063 or 4064 of ERISA, incur any liability for
post-retirement benefits under any and all welfare benefit plans (as
defined in section 3(1) of ERISA) other than as required by applicable
statute, fail to make full payment when due of all amounts which, under
the provisions of any Employee Benefit Plan or applicable Law, such
Borrower or any ERISA Affiliate is required to pay as contributions
thereto, or permit to exist any Accumulated Funding Deficiency, whether or
not waived, with respect to any Employee Benefit Plan (other than a
Multiemployer Plan); provided, however, that such engagement, termination,
withdrawal, action, incurrence, failure or permitting shall not be deemed
to have violated this clause (i) unless any such engagement, termination,
withdrawal, action, incurrence, failure or permitting has resulted in, or
could reasonably be expected to result in, a Material Adverse Effect; (ii)
at any time permit the termination of any defined benefit pension plan
intended to be qualified under section 401(a) and 501(a) of the Internal
Revenue Code; provided, however, that such termination shall not be deemed
to have violated this clause (ii) unless (A) the value of any benefit
liability (as defined in section 4001(a)(16) of ERISA) upon the
termination date of any such terminated defined benefit pension plans of
such Borrower, such Borrower's Subsidiaries and their ERISA Affiliates
exceeds the then current value (as defined in section 3 of ERISA) of all
assets in all such terminated defined benefit pension plans by an amount
in excess of Two Million Dollars ($2,000,000), or (B) the payment of such
amount could reasonably be expected to result in a Material Adverse
Effect; or (iii) if such Borrower or
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any ERISA Affiliate becomes obligated under a Multiemployer Plan (except
with respect to the potential liabilities now existing as disclosed in the
Supplemental Schedule), effect a complete or partial withdrawal such that
such Borrower or such Borrower's Subsidiaries or their ERISA Affiliates
incur Withdrawal Liability under Title IV of ERISA with respect to
Multiemployer Plans or otherwise have liability under Title IV of ERISA;
provided, however, that the incurrence of such Withdrawal Liability or
other liability under Title IV of ERISA shall not be deemed to be a
violation of this clause (iii) unless (A) the amount the payment by any or
all of the Borrowers of such Withdrawal Liability or other liability could
reasonably be expected to result in a Material Adverse Effect.
(j) REGULATION U COMPLIANCE.
None of the Borrowers shall use any portion of the proceeds of
any Loan for the purpose of purchasing or carrying any Margin Stock, or
for any other purpose, in violation, in each case, of any requirement of
Law or of the terms and conditions of this Agreement.
(k) ACCOUNTING CHANGES.
None of the Borrowers will, nor permit any of its Subsidiaries
to, make or permit any change in its accounting policies or financial
reporting practices and procedures, except as required or permitted by
GAAP or as required by applicable law, in each case as to which such
Borrower shall have delivered to the Administrative Agent prior to the
effectiveness of any such change a report prepared by a Responsible
Officer of Instron Corporation describing such change and explaining in
reasonable detail the basis therefor and effect thereof.
(l) ARM'S-LENGTH TRANSACTIONS.
Except for (i) indemnification of directors and officers, (ii)
transactions contemplated by the Stockholder Agreement, (iii) transactions
contemplated by the Registration Rights Agreement (as defined in the
Merger Agreement), (iv) employment agreements, (v) transactions with
Affiliates otherwise permitted pursuant to this Agreement and (vi) as set
forth on the Supplemental Schedule, none of the Borrowers will, nor permit
any of its Subsidiaries to, enter into or permit to exist any transaction
(including, without limitation, any transaction involving the investment,
purchase, sale, lease, transfer or exchange of any property or the
rendering of any service) with any Affiliate of such Borrower except in
the ordinary course of the business of such Borrower and its Subsidiaries
and upon fair and reasonable terms not less favorable to such Borrower or
any of its Subsidiaries than would be usual and customary in transactions
with persons who are not such Affiliates; provided, however, that any
payment in connection with the Management Agreement to the extent
permitted by Section 7.3(f) shall be permitted by this Section 7.3(l).
7.4 FINANCIAL COVENANTS.
(a) MINIMUM CONSOLIDATED NET WORTH.
The Borrowers shall not permit the Consolidated Net Worth of
Instron Corporation and its consolidated Subsidiaries: (x) as of December
31, 1999, to be less than an amount equal to the sum one hundred and
fifteen percent (115%) of the Consolidated Net Worth of Instron
Corporation and its consolidated Subsidiaries as of
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September 30, 1999, plus seventy-five percent (75%) of the
Consolidated Net Income (if any and only to the extent a positive
number) of Instron Corporation and its consolidated Subsidiaries for
the Fiscal Quarter commencing October 1, 1999 and ending as of
December 31, 1999, and (y) as at any date of determination ending
after December 31,1999, to be less than the sum of:
(i) the amount specified in clause (x) above, plus
(ii) in respect of Fiscal Years ended after December 31, 1999
and ending on or prior to such date of determination, an aggregate
amount equal to seventy-five percent (75%) of the Consolidated Net
Income of Instron Corporation and its consolidated Subsidiaries (if
any and only to the extent a positive number) attributable to each
such Fiscal Year (which aggregate amount shall not be reduced by
consolidated net losses (if any) reported for any such Fiscal Year);
plus
(iii) in respect of Fiscal Quarters ended prior to the Fiscal
Year end of the Fiscal Year during which such date of determination
is occurring, an aggregate amount equal to seventy-five percent
(75%) of the Consolidated Net Income (if any and only to the extent
a positive number) of Instron Corporation and its consolidated
Subsidiaries for each such Fiscal Quarter ending on or prior to such
date of determination (which aggregate amount shall not be reduced
by consolidated net losses (if any) reported for any such Fiscal
Quarter); plus
(iv) an amount equal to one hundred percent (100%) of the sum
of: (A) the amount of any capital contribution to Instron
Corporation or its consolidated Subsidiaries after the Closing Date,
plus (B) the cash proceeds (net of customary fees, costs and
expenses including, without limitation, underwriters' or placement
Administrative Agents' discounts and commissions and transfer and
similar taxes) from the sale or issuance of equity securities of
Instron Corporation or its consolidated Subsidiaries after the
Closing Date (other than any sale or issuance to management or
employees pursuant to employee benefit plans of general
application), plus (C) the principal amount of any Indebtedness
converted to or exchanged into equity securities of Instron
Corporation or its consolidated Subsidiaries after the Closing Date.
(b) MINIMUM CONSOLIDATED FIXED CHARGE COVERAGE RATIO.
The Borrowers shall not permit the Consolidated Fixed Charge
Coverage Ratio of Instron Corporation and its consolidated Subsidiaries,
as of the end of any Fiscal Quarter ending during the periods set forth
below, to be less than the Consolidated Fixed Charge Coverage Ratio (in
each case, for the Testing Period (as defined below) ending as of such
Fiscal Quarter end) corresponding to such period as set forth below:
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<TABLE>
<CAPTION>
Period Consolidated Fixed
------ ------------------
Charge Coverage Ratio
---------------------
<S> <C>
October 1, 1999 through December 31, 2000 1.05 1.00
January 1, 2001 and thereafter 1.10 to 1.00
</TABLE>
(c) MINIMUM CONSOLIDATED EBIT TO CONSOLIDATED INTEREST EXPENSE RATIO.
The Borrowers shall not permit the Consolidated EBIT to
Consolidated Interest Expense Ratio of Instron Corporation and its
consolidated Subsidiaries as of the end of any Fiscal Quarter ending
during the periods set forth below to be less than the Consolidated EBIT
to Consolidated Interest Expense Ratio (in each case, for the Testing
Period (as defined below) ending as of such Fiscal Quarter end)
corresponding to such period as set forth below:
<TABLE>
<CAPTION>
Minimum Consolidated
--------------------
Period EBIT to Interest Ratio
------ ----------------------
<S> <C>
October, 1, 1999 through December 31, 1999 1.80 to 1.00
January 1, 2000 through December 31, 2000 2.00 to 1.00
January 1, 2001 through December 31, 2001 2.25 to 1.00
January 1, 2002 through December 31, 2002 2.50 to 1.00
January 1, 2003 through December 31, 2003 2.75 to 1.00
January 1, 2004 and thereafter 3.00 to 1.00
</TABLE>
(d) CONSOLIDATED SENIOR FUNDED DEBT TO ADJUSTED EBITDA RATIO.
The Borrowers shall not permit the Consolidated Senior Funded
Debt to Adjusted EBITDA Ratio of Instron Corporation and its consolidated
Subsidiaries, as at the end of any Fiscal Quarter ending during the
periods set forth below, to exceed the Consolidated Senior Funded Debt to
Adjusted EBITDA Ratio (in each case, for the Testing Period ending as of
such Fiscal Quarter end) corresponding to such period as set forth below:
<TABLE>
<CAPTION>
Period Consolidated Senior Funded
------ --------------------------
Debt to Adjusted EBITDA Ratio
-----------------------------
<S> <C>
December 31, 1999 through March 31, 2000 3.50 to 1.00
April 1, 2000 through September 30, 2000 3.25 to 1.00
October 1, 1999 through December 31, 2000 3.00 to 1.00
January 1, 2001 through December 31, 2001 2.75 to 1.00
January 1, 2002 and thereafter 2.50 to 1.00
January 1, 2003and thereafter 2.25 to 1.00
</TABLE>
(e) CONSOLIDATED TOTAL FUNDED DEBT TO ADJUSTED EBITDA RATIO.
The Borrowers shall not permit the Consolidated Total Funded
Debt to Adjusted EBITDA Ratio of Instron Corporation and its consolidated
Subsidiaries, as at the end of any Fiscal Quarter ending during the
periods set forth below, to exceed the Consolidated Total Funded Debt to
Adjusted EBITDA Ratio (in each case, for the
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Testing Period ending as of such Fiscal Quarter end) corresponding to such
period as set forth below:
<TABLE>
<CAPTION>
Consolidated Total Funded
-------------------------
Period Debt to Adjusted EBITDA Ratio
------ -----------------------------
<S> <C>
October 1, 1999 through December 31, 1999 5.75 to 1.00
January 1, 2000 through June 30, 2000 5.50 to 1.00
July 1, 2000 through September 30, 2000 5.25 to 1.00
October 1, 2000 through June 30, 2001 5.00 to 1.00
July 1, 2001 through June 30, 2002 4.75 to 1.00
July 1, 2002 and thereafter 4.50 to 1.00
</TABLE>
(f) MINIMUM CONSOLIDATED ADJUSTED EBITDA.
The Borrowers shall not permit the Consolidated Adjusted
EBITDA of Instron Corporation and its consolidated Subsidiaries as of the
end of any Fiscal Quarter ending during the periods set forth below, to be
less than the Consolidated Adjusted EBITDA (in each case, for the Testing
Period ending as of such Fiscal Quarter end) corresponding to such period
as set forth below:
<TABLE>
<CAPTION>
Period Consolidated Adjusted EBITDA
------ ----------------------------
<S> <C>
October 1, 1999 through December 31, 1999 $22,500,000
January 1, 2000 through December 31, 2000 $25,500,000
January 1, 2001 through December 31, 2001 $28,000,000
January 1, 2002 through December 31, 2002 $30,000,000
January 1, 2003 through December 31, 2003 $31,000,000
January 1, 2004 and thereafter $32,000,000
</TABLE>
(g) MAXIMUM CONSOLIDATED CAPITAL EXPENDITURES.
The Borrowers shall not permit the Consolidated Capital
Expenditures (including any purchase money Indebtedness permitted under
Section 7.3(c) of this Agreement) of Instron Corporation and its
consolidated Subsidiaries to exceed, during any Fiscal Year, Eight Million
Dollars ($8,000,000) in the aggregate.
SECTION 8 EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
8.1 PAYMENT.
Failure by any Borrower (a) to make payment of principal or interest
on the Notes executed by such Borrower when due or (b) to pay any other
Obligation payable by such Borrower when required to be paid hereunder to the
extent such failure is not remedied within three (3) Business Days after such
required date of payment hereunder or thereunder; or
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8.2 REPRESENTATIONS AND WARRANTIES.
Any warranty or representation made or deemed made by a
Borrower in respect of any Borrower, any Subsidiary of a Borrower or any
Borrower Guarantor in this Agreement, any other Loan Document or any
certificate, document or financial or other written statement furnished at any
time in compliance with this Agreement shall prove to have been false or
inaccurate when made or deemed made; or
8.3 REPORTING AND NOTICE PROVISIONS; VIOLATION OF CERTAIN AFFIRMATIVE
COVENANTS.
Failure by a Borrower (in respect of any Borrower, any
Subsidiary of a Borrower or any Borrower Guarantor) to perform, keep or observe
any term, provision, condition or covenant contained in this Agreement (other
than those provisions, terms or conditions referenced in Sections 8.1, 8.2, and
8.4 of this Agreement) or any other Loan Document that is required to be kept or
observed by such Borrower (in respect of any Borrower, any Subsidiary of a
Borrower or any such Borrower Guarantor) and such failure shall continue without
remedy for a period of thirty (30) Business Days; or
8.4 VIOLATION OF NEGATIVE COVENANTS AND FINANCIAL COVENANTS.
Failure by a Borrower to perform, keep, or observe any term,
provision, condition or covenant contained in Sections 4.2, 4.3 or 5.4 of this
Agreement, or Sections 7.1(a) through 7.1(d) of this Agreement or Sections
7.2(a), 7.3 or 7.4 of this Agreement which is required to be performed, kept, or
observed by such Borrower (in respect of any Borrower, any Subsidiary of a
Borrower or any Borrower Guarantor); or
8.5 CROSS-DEFAULT.
(a) Default by a Borrower or any Subsidiary of a Borrower in
respect of: (i) any Indebtedness of such Borrower or such Subsidiary in excess
of Five Million Dollars ($5,000,000) in the aggregate or (ii) the Subordinated
Debt, where such default could permit the holder of such other Indebtedness to
accelerate such Indebtedness or any portion thereof to the extent such default
continues and has not been waived, or (b) default by a Borrower or any
Subsidiary of a Borrower in respect of any Material Business Agreement or any
Material License Agreement where such default (i) would permit the other party
or parties to such agreement to terminate such agreement and (ii) has resulted
or could reasonably be expected to result in a Material Adverse Effect or (c)
failure by any Borrower or any of its Subsidiaries to perform, keep, observe or
enforce any material terms, provisions, conditions or covenants contained in the
Merger Agreement or the Merger Documents to which it is a party; or
8.6 FALSE OR MISLEADING REPORTS.
The making or delivering to the Administrative Agent or the
Banks by a Borrower, or any officers, employees or Administrative Agents of such
Borrower, of any written statement, report, financial statement, or certificate
which is not true and correct in any material respect when made; or
8.7 DESTRUCTION OF COLLATERAL.
The loss, theft, damage or destruction of any portion of the
Collateral having an aggregate value in excess of Two Million Five Hundred
Thousand Dollars ($2,500,000), to the
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extent not insured by an insurance carrier which has acknowledged coverage in
the amount of the claim without any reservation of rights or which has been
ordered by a court of competent jurisdiction to pay such claim; or
8.8 CHANGE OF CONTROL.
The occurrence of a Change of Control; or
8.9 TERMINATION OF EXISTENCE.
The dissolution or termination of existence of any Borrower,
any Subsidiary of a Borrower, or any Borrower Guarantor of the Obligations, but
only to the extent not permitted under Section 7.3(a); or
8.10 FAILURE OF ENFORCEABILITY OF THIS AGREEMENT, CREDIT DOCUMENT;
SECURITY.
If: (a) any covenant, material agreement or any Obligation of
any Borrower, any Subsidiary of a Borrower or any Borrower Guarantor contained
in or evidenced by this Agreement or any of the other Loan Documents shall cease
to be enforceable, or shall be determined to be unenforceable, in accordance
with its terms, or (b) any Borrower, any Subsidiary of a Borrower or any
Borrower Guarantor shall deny or disaffirm its obligations under this Agreement
or any of the other Loan Documents or any of the Liens granted in connection
therewith, or (c) any Liens in favor of the Administrative Agent or the Banks
granted in this Agreement or any of the other Loan Documents shall be determined
to be void, voidable or invalid, or are subordinated or not otherwise given the
priority contemplated by this Agreement, or (d) any perfected Liens granted in
favor of the Administrative Agent or the Banks shall be determined to be
unperfected except in connection with sales of Inventory in the normal course of
the business of a Borrower or the Borrower Guarantor, as expressly contemplated
and permitted by this Agreement and the other Loan Documents, or (e) any
Borrower Guarantor of the Obligations of the Borrowers shall revoke or permit a
payment default under its Guaranty Obligations; or
8.11 ERISA.
If: (a) a Borrower, its Subsidiaries, or any of their ERISA Affiliates
or any other Person institutes any steps to terminate an Employee Benefit Plan
of such Borrower, such Subsidiaries, or such ERISA Affiliates, which Employee
Benefit Plan is subject to Title IV of ERISA and, as a result of such
termination, such Borrower, Subsidiary or ERISA Affiliate is required to make,
or could reasonably be expected to be required to make, a contribution to such
Employee Benefit Plan the payment of which (i) when taken together with all like
termination payments suffered by the Borrowers, the Subsidiaries of the
Borrowers or such ERISA Affiliates, either has resulted in, or could reasonably
be expected to result in, a Material Adverse Effect or (b) such Borrower, such
Subsidiary or such ERISA Affiliate fails to make a contribution to any Employee
Benefit Plan which failure would be sufficient to give rise to a Lien under
Section 302(f) of ERISA; or
8.12 JUDGMENTS.
Any money judgment, writ or warrant of attachment or similar
process involving an amount, when aggregated with all such money judgment, writ
or warrant of attachment or similar process outstanding at such time, in excess
of Five Million Dollars ($5,000,000), to the extent not insured by an insurance
carrier which has acknowledged coverage in the amount of the claim without any
reservation of rights or which has been ordered by a court of competent
jurisdiction to pay such claim) is entered or filed against any or all of the
Borrowers or any
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Subsidiary thereof or against any of their respective assets and is not
released, discharged, vacated, fully bonded or stayed within thirty (30) days
after such judgment, writ or warrant of attachment or similar proceeding is
entered; or
8.13 FORFEITURE PROCEEDINGS.
An adjudication against any Borrower or any Subsidiary of such
Borrower in any criminal proceedings requiring such Borrower's or such
Subsidiary's forfeiture of any asset or assets having, either individually or in
the aggregate, a value in excess of One Million Dollars ($1,000,000); or
8.14 FINANCIAL IMPAIRMENT.
The Financial Impairment of any Borrower or any Material
Subsidiary; provided, however, that, despite paragraph (b) of the definition of
"Financial Impairment," the lack of Solvency of any Material Subsidiary or any
Borrower (other than Instron Corporation and Instron, Ltd.) shall not be the
basis for the occurrence of an Event of Default under this Section 8.14 unless
(x) such other Borrower incurs additional Obligations hereunder after the
existence of such lack of Solvency in violation of the representation set forth
in Section 6.18 hereof or (y) such lack of Solvency has resulted in, or would
reasonably be expected to result in, a Material Adverse Effect on Instron
Corporation and its Subsidiaries on a consolidated basis.
SECTION 9 REMEDIES.
9.1 ACCELERATION; TERMINATION.
Upon the occurrence of an Event of Default described above in
Sections 8.1 through 8.13 above, inclusive, the Administrative Agent may, and at
the written request of the Required Banks shall, have the right to, without
notice: (a) declare all of the Obligations due or to become due from each
Borrower to the Administrative Agent and the Banks, whether under this
Agreement, the Notes or otherwise, immediately due and payable, anything in the
Notes or other evidence of the Obligations or in any of the other Loan Documents
to the contrary notwithstanding, (b) declare all of the Swing Line Obligations
due or to become due from any Borrower to the Designated Swing Line Lender
designated for such Borrower, whether under this Agreement, the Notes or
otherwise, immediately due and payable, anything in the Notes or other evidence
of the Swing Line Obligations or in any of the other Loan Documents to the
contrary notwithstanding (c) terminate each Bank's Revolving Credit Commitment
whereupon no Bank shall have any further obligation to make any Loan or issue
any Letter of Credit hereunder, (d) terminate each Designated Swing Line
Lender's Swing Line Commitment whereupon no Designated Swing Line Lender shall
have any further obligation to make any Swing Line Loan hereunder, (e) terminate
each Designated Letter of Credit Issuer's obligation to issue Letters of Credit
whereupon no Designated Letter of Credit Issuer shall have any further
obligation to issue any Letter of Credit hereunder and (f) terminate each Bank's
obligation to participate in Swing Line Loans and Letters of Credit, as the case
may be, made or issued after such termination of the Swing Line Commitments and
obligations to issue Letters of Credit.
9.2 AUTOMATIC ACCELERATION AND TERMINATION.
If any Event of Default referred to in Section 8.14 above
shall occur, (a) each Bank's Commitments shall automatically and immediately
terminate (if not already expired or terminated by the Borrowers or terminated
pursuant to this Section 9) whereupon no Bank shall have any obligation
thereafter to make any Loan hereunder, (b) each Designated Swing Line Lender's
Designated German Swing Line Lender Commitment and Designated U.K. Swing Line
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Lender Commitment, as the case may be, shall automatically and immediately
terminate (if not already expired or terminated by the Borrowers or otherwise
terminated pursuant to this Section 9.1 hereof) whereupon no Designated Swing
Line Lender shall have any obligation thereafter to make any Swing Line Loan
hereunder, (c) each Designated Letter of Credit Issuer's obligation to issue
Letters of Credit shall immediately terminate whereupon no Designated Letter of
Credit Issuer shall have any obligation thereafter to issue any Letters of
Credit hereunder, and (d) all of the Obligations and all other Indebtedness, if
any, then owing to the Banks, any Designated Swing Line Lenders or any
Designated Letter of Credit Issuer (other than Indebtedness, if any, already due
and payable) shall thereupon become and thereafter be immediately due and
payable in full, all without any presentment, demand or notice of any kind,
which are hereby waived by the Borrowers.
9.3 GENERAL RIGHTS AND REMEDIES OF ADMINISTRATIVE AGENT AND THE BANKS.
With respect to the Collateral, the Administrative Agent shall
have all of the rights and remedies of a secured party under the UCC or under
other applicable Law. The Administrative Agent, the Banks, Designated Swing Line
Lenders and the Designated Letter of Credit Issuers shall have all other legal
and equitable rights to which each may be entitled, all of which rights and
remedies shall be cumulative, and none of which shall be exclusive, to the
extent permitted by law, in addition to any other rights or remedies contained
in this Agreement or in any of the other Loan Documents. Each Bank, Designated
Swing Line Lender and Designated Letter of Credit Issuer hereby expressly agrees
that, unless requested by the Administrative Agent, upon the concurrence of the
Required Banks, such Bank, Designated Swing Line Lender and Designated Letter of
Credit Issuer will not take or cause to be taken, in respect of the Loans or the
other Obligations or the Collateral, any action or remedy that is independent
from the actions or remedies taken or to be taken by the Administrative Agent,
except for any actions taken by any Bank, Designated Swing Line Lender or
Designated Letter of Credit Issuer necessary to preserve its rights in
connection with any Event of Default described in Section 8.14 of this
Agreement.
9.4 ADDITIONAL REMEDIES.
After the Obligations shall have been declared by the
Administrative Agent to be or shall have otherwise hereunder become immediately
due and payable, the Administrative Agent may, and upon direction of the
Required Banks shall, exercise the following rights and remedies to the extent
permitted by applicable law and in addition to any other right or remedy
provided for in this Agreement:
(a) POSSESSION OF COLLATERAL.
The Administrative Agent shall have the right to take
immediate possession of the Collateral and all Proceeds relating to
such Collateral and: (i) require each of the Borrowers, at such
Borrower's expense, to assemble the Collateral of such Borrower and
make it available to the Administrative Agent at such manufacturing
facilities of the Borrowers as the Administrative Agent shall designate
or (ii) enter any of the premises of such Borrower or wherever any
Collateral shall be located and to keep and store the same on such
premises until sold. If the premises on which the Collateral is located
is owned or leased by a Borrower, then such Borrower shall not charge
the Administrative Agent for storage of such Collateral on such
premises.
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(b) FORECLOSURE OF LIENS.
The Administrative Agent shall have the right to
foreclose the Liens created under this Agreement and each of the other
Loan Documents or under any other agreement relating to the Collateral.
(c) DISPOSITION OF COLLATERAL.
The Administrative Agent shall have the right to sell
or to otherwise dispose of all or any Collateral in its then condition,
or after any further manufacturing or processing thereof, at public or
private sale or sales, wholesale dispositions, or sales pursuant to one
or more contracts, with such notice as may be required by law, in lots
or in bulk, for cash or on credit, all as the Administrative Agent, in
its discretion, may deem advisable. Each of the Borrowers acknowledges
and covenants that ten (10) days written notice to the Borrower
Representative of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof, and such sale shall be
at such Borrower's premises or at such other locations where the
Collateral then is located, or as otherwise determined by the
Administrative Agent. The Administrative Agent shall have the right to
conduct such sales on such Borrower's premises, without charge
therefor, and such sales may be adjourned from time to time in
accordance with applicable law without further requirement of notice to
the Borrowers. Each Bank, Designated Swing Line Lender or Designated
Letter of Credit Issuer shall have the right to bid or credit bid any
such sale on its own behalf.
(d) APPLICATION OF COLLATERAL; APPLICATION OF LIQUIDATION
PROCEEDS.
The Administrative Agent, with or without proceeding
with sale or foreclosure or demanding (or having the Designated Swing
Line Lender demand) payment of the Obligations, Swing Line Obligations
or Letter of Credit Obligations shall have the right, without notice,
at any time, to appropriate and apply to any Obligations, Swing Line
Obligations or Letter of Credit Obligations any and all Collateral of a
Borrower in the possession of the Administrative Agent, the Banks, any
Designated Swing Line Lender or Designated Letter of Credit Issuer. All
monies received by the Administrative Agent or any Bank, Designated
Swing Line Lender or Designated Letter of Credit Issuer from the
exercise of remedies under this Agreement or the other Loan Documents
shall, unless otherwise required by the terms of the other Loan
Documents or by applicable law, be applied as follows:
(i) First, to the payment of all reasonable expenses
(to the extent not otherwise paid by the Borrowers) incurred
by the Administrative Agent and the Banks in connection with
the exercise of such remedies, including, without limitation,
all reasonable costs and expenses of collection, reasonable
documented attorneys' fees, court costs and any foreclosure
expenses;
(ii) Second, to the payment pro rata of interest then
accrued (x) in the case of a Foreign Borrower, on the
outstanding Obligations of such Foreign Borrower, and (y) in
the case of a Domestic Borrower, on the outstanding
Obligations of all Borrowers;
(iii) Third, to the payment pro rata of any fees then
accrued and payable to the Administrative Agent or any Bank
under this Agreement in respect
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of the Loans, provided, however, that in no case shall
proceeds of Collateral of any Foreign Subsidiary or monies
received from any Foreign Subsidiary be applied to any
Obligations of any other Borrower;
(iv) Fourth, to the payment pro rata of: (A) the
principal balance then owing on the outstanding Term Loans,
(B) the principal balance then owing on the outstanding
Revolving Credit Loans or (the amount of any participations in
lieu thereof) and (C) the Designated Hedge Obligations then
due under Designated Hedge Agreements to Designated Hedge
Creditors of the Borrowers or any Subsidiary, subject to
confirmation by the Administrative Agent of any calculations
of termination or other payment amounts being made in
accordance with normal industry practice, provided, however,
that in no case shall any proceeds of Collateral of any
Foreign Borrower or Foreign Subsidiary or monies received from
any Foreign Borrower or Foreign Subsidiary be applied to any
Obligations, Swing Line Obligations or Letter of Credit
Obligations or Designated Hedge Obligations of any other
Borrower;
(v) Fifth, to the payment pro rata of all other
amounts owed by the Borrowers to the Administrative Agent or
any Bank, Designated Swing Line Lender or Designated Letter of
Credit Issuer under this Agreement or any other Loan Document,
and to any counterparties under Designated Hedge Agreements of
the Borrowers and the Subsidiaries thereof, and if such
proceeds are insufficient to pay such amounts in full, to the
payment of such amounts pro rata, provided, however, that in
no case shall proceeds of Collateral of any Foreign Subsidiary
or monies received from any Foreign Subsidiary be applied to
any Obligations of any other Borrower; and
(vi) Finally, any remaining surplus after all of the
Obligations and Designated Hedge Obligations have been paid in
full, to the Borrowers or to whomsoever shall be lawfully
entitled thereto.
9.5 APPOINTMENT OF ATTORNEY-IN-FACt.
The Administrative Agent shall hereby have the right, and each
of the Borrowers hereby irrevocably makes, constitutes, and appoints the
Administrative Agent (and all officers, employees, or Administrative Agents
designated by the Administrative Agent) as its true and lawful attorney-in-fact
and Administrative Agent, with full power of substitution, to, from time to time
(but only to the extent following the occurrence of an Event of Default which is
continuing and has not been waived in accordance with Section 14.1 hereof) (a)
effectuate, in the Borrower's name, the Borrower's obligations under this
Agreement, (b) in the Borrower's or Administrative Agent's name: (i) demand
payment of the Accounts, (ii) enforce payment of the Accounts, by legal
proceedings or otherwise, (iii) exercise all of the Borrower's rights and
remedies with respect to the collection of the Accounts and any other
Collateral, (iv) settle, adjust, compromise, extend, or renew the Accounts, (v)
settle, adjust, or compromise any legal proceedings brought to collect the
Accounts, (vi) if permitted by applicable law, sell or assign the Accounts and
other Collateral upon such terms, for such amounts, and at such time or times as
the Administrative Agent deems advisable, (vii) discharge and release the
Accounts and any other Collateral, (viii) take control, in any manner, of any
item of payment or Proceeds relating to any Collateral, (ix) prepare, file, and
sign the Borrower's name on a proof of claim in
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bankruptcy or similar document against any Account Debtor, (x) prepare, file,
and sign the Borrower's name on any notice of Lien, assignment, or satisfaction
of Lien or similar document in connection with the Accounts, (xi) do all acts
and things reasonably necessary, in the Administrative Agent's good faith
discretion, to fulfill the Borrower's obligations under this Agreement, (xii)
endorse the name of the Borrower upon any of the items of payment or Proceeds
relating to any Collateral and deposit the same to the account of the
Administrative Agent on account of the Obligations, (xiii) endorse the name of
the Borrower upon any Chattel Paper, document, Instrument, invoice, freight
bill, bill of lading, or similar document or agreement relating to the Accounts,
Inventory and any other Collateral, (xiv) use the Borrower's stationery and sign
the name of the Borrower to verifications of the Accounts and notices thereof to
Account Debtors, (xv) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Accounts, Inventory, and any other Collateral to which the Borrower has access,
(xvi) make and adjust claims under such policies of insurance, receive and
endorse the name of such Borrower on any check, draft, instrument or other item
of payment for the proceeds of such policies of insurance, and make all
determinations and decisions with respect to such policies of insurance and
(xvii) notify post office authorities to change the address for delivery of the
Borrower's mail to an address designated by the Administrative Agent, receive
and open all mail addressed to the Borrower, and, after removing all collections
and other remittances and Proceeds of Collateral, forward the mail to the
Borrower. Each of the Borrowers hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. This power of attorney is a
power coupled with an interest and shall be irrevocable.
9.6 SET-OFF.
If any Event of Default referred to in Section 8 of this
Agreement shall occur which is continuing and has not been waived in accordance
with Section 14.1 hereof, each Bank, Designated Swing Line Lender, Designated
Letter of Credit Issuer, and any Lending Installation thereof on behalf thereof,
shall have the right (in addition to such other rights as it may have by
operation of Law or otherwise but subject to Section 9.12 of this Agreement) at
any time to set off against and to appropriate and apply toward the payment of
the Obligations, Swing Line Obligations or Letter of Credit Obligations, as
applicable, and all other liabilities under this Agreement and the other Loan
Documents then owing to it (and any participation purchased or to be purchased
pursuant to this Agreement including Section 9.12 below) whether or not the same
shall then have matured, any and all deposit (general or special) and any other
Indebtedness at any time held or owing by such Bank, Designated Swing Line
Lender or Designated Letter of Credit Issuer (including branches and agencies
thereof wherever located) to or for the credit or account of a Borrower, all
without notice to or demand upon such Borrower or any other Person, all such
notices and demands being hereby expressly waived, provided, however, that in no
case shall any such amounts obtained by setoff or otherwise received from any
Foreign Borrower or any Foreign Subsidiary thereof be applied toward payment of
any Obligations, Swing Line Obligations or Letter of Credit Obligations of any
other Borrower other than such Foreign Borrower.
9.7 TERMINATION; EFFECT ON BORROWER OBLIGATIONS.
Any termination by the Administrative Agent and/or any Bank,
Designated Swing Line Lender or Designated Letter of Credit Issuer pursuant to
this Section 9 of its performance shall not absolve, release, or otherwise
affect the liability of the Borrowers in respect of transactions prior to such
termination or affect any of the Liens, rights, powers, and remedies of the
Administrative Agent or such Bank, Designated Swing Line Lender or Designated
Letter of Credit Issuer which such Liens, rights, powers and remedies shall, in
all events, continue until all Obligations, Swing Line Obligations, Letter of
Credit Obligations and all other liabilities
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hereunder of the Borrowers to the Administrative Agent and to the Banks, the
Designated Swing Line Lenders and the Designated Letter of Credit Issuers are
satisfied.
9.8 ACTIONS IN RESPECT OF THE LETTERS OF CREDIT UPON DEFAULT.
Upon the occurrence of an Event of Default which is continuing
and has not been waived in accordance with Section 14.1 hereof, to the extent
that any Letters of Credit have been issued which then are outstanding, the
Administrative Agent, for the benefit of the Designated Letter of Credit Issuers
and the Banks, may, and upon the direction of the Required Banks shall (whether
in addition to taking any of the actions described in this Section 9 or
otherwise), make demand upon Borrowers to, and forthwith upon such demand the
Borrowers will, pay to the Administrative Agent in same day funds and in the
currency in which such Letter of Credit is denominated, for deposit in a special
cash collateral account (the "Letter of Credit Collateral Account"), to secure
(x) in the case of a Foreign Borrower, the Letter of Credit Obligations of such
Foreign Borrower in respect of any outstanding Letters of Credit (including,
without limitation, any such obligations arising under Section 2.12(l)), and (y)
in the case of a Domestic Borrower, the Letter of Credit Obligations of all
Borrowers in respect of any outstanding Letters of Credit (including, without
limitation, any such obligations arising under Section 2.12(l)), to be
maintained at such office of the Administrative Agent as Administrative Agent
shall direct, an amount equal to the maximum amount available to be drawn under
the Letters of Credit. In the event that the Borrowers shall not deposit such
funds upon demand by the Administrative Agent, the Administrative Agent may, in
its sole discretion, deposit any funds of the Borrowers in the possession of the
Administrative Agent to the Letter of Credit Collateral Account until the amount
deposited in such account equals the maximum amount available to be drawn under
the Letters of Credit. The Letter of Credit Collateral Account shall be in the
name of Administrative Agent (as a cash collateral account), but under the sole
dominion and control of the Administrative Agent and subject to the terms of
this Agreement.
9.9 LETTER OF CREDIT COLLATERAL ACCOUNT.
(a) APPLICATION.
The Administrative Agent may, at any time or from
time to time after funds are deposited in the Letter of Credit
Collateral Account, apply funds then held in the Letter of Credit
Collateral Account to the payment of any amounts, in such order as the
Administrative Agent may elect or shall be directed by the Banks, as
shall have become or shall become due and payable by the Borrowers to
the Designated Letter of Credit Issuers under this Agreement or any
Reimbursement Agreement first, in respect of the Letters of Credit and
second, after the occurrence and during the continuance of any Event of
Default, in respect of all other amounts constituting Obligations,
provided, however, that in no case shall proceeds of Collateral of any
Foreign Borrower or any Foreign Subsidiary thereof or monies deposited
into the Letter of Credit Cash Collateral Account by such Foreign
Borrower of any Foreign Subsidiary thereof be applied to any Letter of
Credit Obligations or any other Obligations of any Borrower other than
such Foreign Borrower.
(b) NO BORROWER OR THIRD PARTY CLAIMS.
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Neither the Borrowers nor any Person claiming on
behalf of or through Borrowers shall have any right to withdraw any of
the funds held in the Letter of Credit Collateral Account.
(c) NO LIENS OR TRANSFERS OF ACCOUNT.
Each of the Borrowers agrees that it will not: (i)
sell or otherwise dispose of any interest in the Letter of Credit
Collateral Account or any funds held therein, or (ii) create or permit
to exist any lien, security interest or other charge or encumbrances
upon or with respect to the Letter of Credit Collateral Account or any
funds held therein, except as provided in or contemplated by this
Agreement.
9.10 AUTHORITY TO EXECUTE TRANSFERS.
Without limitation of any authorization granted to the
Administrative Agent hereunder, each of the Borrowers also hereby authorizes the
Administrative Agent, upon the occurrence of an Event of Default which is
continuing and has not been waived in accordance with Section 14.1 hereof, to
execute, in connection with the exercise by the Administrative Agent of its
remedies hereunder, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
9.11 LIMITED LICENSE TO LIQUIDATE.
Each of the Borrowers hereby grants to the Administrative
Agent for the benefit of the Banks, the Designated Swing Line Lenders and
Designated Letter of Credit Issuers: (a) a non-exclusive, royalty-free license
or other right to use, without charge, all of such Borrower's Intellectual
Property (including all rights of use of any name or trade secret) as it
pertains to the Collateral, in manufacturing, advertising for sale and selling
any Collateral; provided, however, that such license and right to use shall be
exercisable by the Administrative Agent for the benefit of the Banks only upon
request by the Administrative Agent after the occurrence of an Event of Default
which is continuing and has not been waived in accordance with Section 14.1
hereof, and (b) to the extent permitted thereunder, all of such Borrower's
rights under all licenses and all franchise agreements, which shall inure to the
Administrative Agent for the benefit of the Banks, the Designated Swing Line
Lenders and Designated Letter of Credit Issuers without charge but only upon
request by the Administrative Agent after the occurrence of an Event of Default
which is continuing and has not been waived in accordance with Section 14.1
hereof.
9.12 EQUALIZATION.
Each Bank agrees with the other Banks that if at any time it
shall obtain any Advantage over the other Banks or any thereof in respect of the
Loans it will purchase from such other Bank or Banks, for cash and at par, such
additional participation in the Loans owing to the other or others as shall be
necessary to nullify the Advantage. If any such Advantage resulting in the
purchase of an additional participation as aforesaid shall be recovered in whole
or in part from the Bank receiving the Advantage, each such purchase shall be
rescinded, and the purchase price restored (with interest and other charges if
and to the extent actually incurred by the Bank receiving the Advantage) ratably
to the extent of the recovery. During the existence of any Potential Default or
Event of Default, any payment (whether made voluntarily or involuntarily, by
offset of any deposit or other indebtedness or otherwise) of any Indebtedness
owing by a Borrower to any Bank, Designated Swing Line Lender or Designated
Letter of Credit Issuer shall be applied to the Obligations, Swing Line
Obligations or Letter of Credit Obligations, as the case may be, owing to such
Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer until
the same shall have been paid in full before any thereof shall be applied to
other
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Indebtedness owing to that Bank, Designated Swing Line Lender or Designated
Letter of Credit Issuer.
9.13 REMEDIES CUMULATIVE.
The above-stated remedies are not intended to be exhaustive
and the full or partial exercise of any of such remedies shall not preclude the
full or partial exercise of any other remedy by the Administrative Agent under
this Agreement, under any Loan Document, or at equity or under law.
SECTION 10 BORROWER GUARANTY.
10.1 DOMESTIC BORROWER CROSS-GUARANTY.
To induce the Banks to make the Loans to the Borrowers, the
Designated Swing Line Lenders to make Swing Line Loans to the designated
Borrowers, and the Designated Letter of Credit Issuers to issue Letters of
Credit, and in consideration thereof, each of the Borrower Guarantors hereby
unconditionally and irrevocably: (a) guarantees, jointly and severally, to the
Administrative Agent and the Banks the due and punctual payment in immediately
available funds of all Obligations owing by all Borrowers, all Swing Line
Exposure and LC Exposure of the Banks with respect to all Borrowers, all Swing
Line Obligations owing by all Borrowers to the Designated Swing Line Lenders,
all Letter of Credit Obligations owing by all Borrowers owing to the Designated
Letter of Credit Issuers, all Designated Hedge Obligations owing by all
Borrowers and of all other sums now or hereafter owed by any other Borrower to
the Administrative Agent or any of the Banks, Designated Swing Line Lenders or
Designated Letter of Credit Issuers under this Agreement or any of the Loan
Documents (whether by acceleration or otherwise) and (b) agrees, jointly and
severally, to pay any and all expenses which may be incurred by the
Administrative Agent in enforcing its rights with respect to such Obligations
(collectively, the "Guaranteed Obligations").
10.2 MAXIMUM LIABILITY.
Solely in the event it is necessary for the enforceability of
a Borrower Guaranty, the maximum liability of a Borrower Guarantor under its
Borrower Guaranty for Guaranteed Obligations of the other Borrowers or their
Subsidiaries shall be the greatest amount which, after taking into consideration
all other valid and enforceable debts and liabilities of such Borrower Guarantor
(but giving full effect in such consideration to the subordinated status of the
Senior Subordinated Notes pursuant to the Senior Subordinated Note Indenture),
an applicable court has determined (after any appeals) would not render such
Borrower Guarantor insolvent, unable to pay its debts as they become due,
inadequately capitalized for the business which it intends to conduct (in all
such cases, within the meaning of Section 548 of the Bankruptcy Code, 11 U.S.C.
Section 101, et. seq., or any other similar state law), or unable to pay a
judgment rendered upon a claim that is the subject of an action or proceeding
pending at the time when the obligations of this Borrower Guaranty are incurred
or increased.
10.3 GUARANTY UNCONDITIONAL.
The obligations of the Borrower Guarantors under this Borrower
Guaranty shall be, joint and several, irrevocable, unconditional and absolute
and, without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by (i) any extension, renewal, settlement,
compromise, waiver or release in respect of any obligation of any advance under
this Agreement or any Loan Document by operation of Law or otherwise; (ii) any
modification or amendment of or supplement to this Agreement or any Loan
Document; (iii) any
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modification, amendment, waiver, release, non-perfection or invalidity of any
direct or indirect security, or of any guarantee or other liability of any third
party, of the Guaranteed Obligations of any Borrower or its Subsidiary; (iv) any
change in the corporate existence, structure, or ownership of, or any
insolvency, bankruptcy, reorganization or other similar proceeding affecting any
Borrower Guarantor or its assets or any resulting release or discharge of any of
the Obligations of the Borrower Guarantors contained in this Agreement or any
Loan Document; (v) the existence of any claim, set-off or other rights which any
Borrower Guarantor may have at any time against the Administrative Agent, any
Bank, any Designated Swing Line Lender, Designated Letter of Credit Issuer,
Designated Hedge Creditor or any other Person, whether or not arising in
connection with this Agreement or any Loan Document, provided, however, that
nothing herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim; (vi) any invalidity or unenforceability relating to or
against any Borrower or its Subsidiary for any reason of this Agreement or any
Loan Document or any provision of applicable law or regulation purporting to
prohibit the payment by any Borrower under this Agreement or any Loan Document;
or (vii) to the extent permitted by applicable Law, any other act or omission to
act or delay of any kind by a Borrower Guarantor, the Administrative Agent, any
Bank, any Designated Swing Line Lender, any Designated Letter of Credit Issuer,
any Designated Hedge Creditor or any other Person or any other circumstance
whatsoever that might, but for the provisions of this paragraph, constitute a
legal or equitable discharge of the Guaranteed Obligations of any Borrower under
this Section 10.
10.4 DISCHARGE; REINSTATEMENT.
The Guaranteed Obligations of each Borrower Guarantor under
this Section 10 shall remain in full force and effect until the Revolving Credit
Commitments of the Banks, the Aggregate Swing Line Commitment of the Designated
Swing Line Lenders and the obligations of the Designated Letter of Credit Issuer
are terminated, and the Obligations, Swing Line Obligations and Letter of Credit
Obligations and all amounts payable by any Borrower or any Subsidiary of any
Borrower under this Agreement or any other Loan Document have been paid in full.
If at any time any payment of any amount payable by Borrower Guarantor under
this Section 10, any other section of this Agreement or other Loan Document is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of any Borrower Guarantor or otherwise, the other
Borrower Guarantor's obligations under this Section 10 with respect to such
payment shall be reinstated at such time as though such payment had become due
but had not been made at such time. This Section 10 shall survive the
termination of this Agreement until the payment in full of all amounts payable
under this Agreement and any Loan Documents.
10.5 WAIVER.
No Borrower Guarantor shall be entitled to enforce any remedy
which the Administrative Agent, any Designated Swing Line Lender, any Designated
Letter of Credit Issuer or any Bank now has or may hereafter have against any
Borrower, any endorser or any Guarantor or other Borrower Guarantor in respect
of all or any part of the Guaranteed Obligations paid by such Borrower Guarantor
until all of the Obligations, Swing Line Obligations and Letter of Credit
Obligations shall have been fully and finally paid to the Administrative Agent
for the benefit of the Banks, the Designated Swing Line Lenders and the
Designated Letter of Credit Issuers and all commitments of the Banks, the
Designated Swing Line Lenders and the Designated Letter of Credit Issuers to the
Borrowers terminated. Each Borrower Guarantor hereby waives any benefit of, and
any right to participate in, any security or collateral given to the
Administrative Agent for the benefit of the Banks, the Designated Swing Line
Lenders or the Designated Letter of Credit Issuers to secure payment of the
Guaranteed Obligations or any other liability of any Borrower, any Guarantor or
any Borrower Guarantor to
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the Administrative Agent or any Designated Swing Line Lender, Designated Letter
of Credit Issuer or Bank. Each Borrower Guarantor also waives all setoffs and
counterclaims and all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance of this Borrower Guaranty. Each Borrower Guarantor further waives
all notices of the existence, creation or incurring of additional Obligations by
any other Borrower, and also waives all notices that the principal amount, or
any portion thereof, and/or any interest on any instrument or document
evidencing all or any part of the Guaranteed Obligations is due, notices of any
and all proceedings to collect all or any part of the Guaranteed Obligations,
and, to the extent permitted by law, notices of exchange, sale, surrender or
other handling of any Collateral given to the Administrative Agent for the
benefit of the Banks, the Designated Swing Line Lenders or the Designated Letter
of Credit Issuers to secure payment of the Guaranteed Obligations.
10.6 STAY OF ACCELERATION.
If acceleration of the time for payment of any amount payable
by any Borrower Guarantor under this Agreement or other Loan Document in respect
of a Guaranteed Obligation is stayed upon the insolvency, bankruptcy or
reorganization of any Borrower Guarantor all such amounts otherwise subject to
acceleration under the terms of this Agreement shall nonetheless be payable by
the other Borrower Guarantors hereunder forthwith on demand by the
Administrative Agent.
10.7 SUBROGATION AND CONTRIBUTION RIGHTS.
If any Borrower Guarantor makes a payment in respect of the
Guaranteed Obligations, it shall be subrogated to the rights, if any, of the
payees against the other Borrower Guarantors with respect to such payment and
shall have the rights of contribution set forth below against the other Borrower
Guarantors; provided, however, that such Borrower Guarantor shall not enforce
its rights to any payment by way of subrogation or by exercising its right of
contribution until all the Obligations, Swing Line Obligations and Letter of
Credit Obligations, as the case may be, owing to the Banks, the Designated Swing
Line Lenders and the Designated Letter of Credit Issuers shall have been finally
paid in full and may not under applicable insolvency laws be required to be
repaid by the Banks, the Designated Swing Line Lenders or the Designated Letter
of Credit Issuers, as the case may be.
(a) GUARANTEED OBLIGATION AND CONTRIBUTION PAYMENTS.
Subject to all of the Obligations, Swing Line
Obligations and Letter of Credit Obligations, as the case may be, owing
to the Banks, the Designated Swing Line Lenders and the Designated
Letter of Credit Issuers having been finally paid in full and not
subject to required repayment under applicable insolvency laws, each
Borrower Guarantor shall make, and agrees with each of the other
Borrower Guarantors (and the successors and assigns of such Borrower
Guarantors) to make, payments in respect of the Obligations of such
Borrower Guarantor to which such other Borrower Guarantors are
subrogated or contribution payments to which such other Borrower
Guarantors are entitled, such that, taking into account all such
payments on account of subrogation or contribution rights:
(i) each Borrower Guarantor shall have paid to the
other Borrower Guarantors on account of such subrogation and
contribution rights at some time after the date hereof, (A)
all Obligations the benefit of which has
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been received by such Borrower Guarantor or which relate to
Obligations the benefit of which has been received by such
Borrower Guarantor or (B) if the aggregate of all such
payments by all Borrower Guarantors to all other Borrower
Guarantors would exceed the outstanding Obligations, such
Borrower Guarantor's pro rata share of the outstanding
Obligations, in accordance with the amount of the benefit
received by the Borrower Guarantor as described under
subsection (a)(i)(A) hereinabove; and
(ii) if there remain Obligations unpaid after
application of the payments referred to above, the deficiency
shall be shared among the Borrower Guarantors pro rata in
proportion to their respective net worth on the effective date
of this Agreement.
(b) JOINDER; WAIVER.
By executing an Additional Borrower Addendum, each
signatory thereby becoming an additional Domestic Borrower shall be
deemed to have agreed to all of the terms of this Section 10 as if an
original signatory to this Agreement. No failure or delay by any
Borrower Guarantor in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and nonexclusive of any
rights or remedies provided by law.
SECTION 11 THE AGENTS.
11.1 THE ADMINISTRATIVE AGENT.
Each Bank, Designated Swing Line Lender and Designated Letter
of Credit Issuer irrevocably appoints the Administrative Agent to act as
Administrative Agent under this Agreement and the other Loan Documents for the
benefit of such Bank, Designated Swing Line Lenders and Designated Letter of
Credit Issuers with full authority to take such actions, and to exercise such
powers, on behalf of such Bank, Designated Swing Line Lenders and Designated
Letter of Credit Issuers in respect of this Agreement and the other Loan
Documents as are herein and therein respectively delegated to the Administrative
Agent or as are reasonably incidental to those delegated powers. The
Administrative Agent in such capacity shall be deemed to be an independent
contractor of the Banks, the Designated Swing Line Lenders and the Designated
Letter of Credit Issuers. Each Designated Swing Line Lender, Designated Letter
of Credit Issuer and each Bank hereby expressly agrees that, without first
obtaining the prior written consent of the Administrative Agent or the Required
Banks, no Designated Swing Line Lender, Designated Letter of Credit Issuer or
Bank will take or cause to be taken, in respect of the Loans or the other
Obligations hereunder, the Swing Line Obligations, the Letter of Credit
Obligations or the Collateral, any enforcement or remedial action or remedy that
is independent from the actions or remedies taken or to be taken by the
Administrative Agent, except for any actions taken by a Designated Swing Line
Lender, Designated Letter of Credit Issuer or any Bank which are necessary to
preserve its rights in connection with any Event of Default described in Section
8.14 of this Agreement.
11.2 DESIGNATED EUROPEAN ADMINISTRATIVE AGENTS.
Each Bank, Designated Swing Line Lender and Designated Letter
of Credit Issuer irrevocably authorizes, and hereby confirms the appointment of,
each Designated European Administrative Agent selected by the Administrative
Agent, after consultation with the Borrower
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Representative, to act as agent under this Agreement and the other Loan
Documents for the benefit of such Bank, Designated Swing Line Lender and
Designated Letter of Credit Issuer with full authority to take such actions, and
to exercise such powers, on behalf of such Bank, Designated Swing Line Lender
and Designated Letter of Credit Issuer in respect of this Agreement and the
other Loan Documents as are herein and therein expressly delegated to each such
Designated European Administrative Agent or as are reasonably incidental to
those delegated powers. Each Designated European Administrative Agent acting in
such capacity shall be deemed to be an independent contractor of the Banks, the
Designated Swing Line Lenders and the Designated Letter of Credit Issuers.
11.3 SYNDICATION AGENT.
Each Bank and each of the Borrowers hereby irrevocably
designates and appoints NCB as Syndication Agent to act as specified herein and
in the other Loan Documents, and each such Bank hereby irrevocably authorizes
the Syndication Agent to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and to exercise such powers and
perform during the Syndication Period such duties as are expressly delegated to
the Syndication Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
11.4 NATURE OF APPOINTMENT.
The Agents shall have no fiduciary relationship with any Bank,
Designated Swing Line Lender or Designated Letter of Credit Issuer by reason of
this Agreement and the other Loan Documents. The Agents shall not have any duty
or responsibility whatsoever to any Bank, Designated Swing Line Lender or
Designated Letter of Credit Issuer except those expressly set forth in this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, each Bank, Designated Swing Line Lender or Designated Letter of
Credit Issuer acknowledges that the Agents are acting as such solely as a
convenience to the Banks and not as a manager of the commitments or the
Obligations evidenced by the Notes. This Section 11 does not confer any rights
upon the Borrowers or anyone else (except the Banks, the Designated Swing Line
Lenders and the Designated Letter of Credit Issuers), whether as a third party
beneficiary or otherwise.
11.5 AGENTS AS BANKS; OTHER TRANSACTIONS.
Each Agent's rights as a Bank under this Agreement and the
other Loan Documents shall not be affected by its serving as an Agent hereunder.
Each of the Agents and its Affiliates may generally transact any banking,
financial, trust, advisory or other business with the Borrowers (including,
without limitation, the acceptance of deposits, the extension of credit and the
acceptance of fiduciary appointments) without notice to the Banks, Designated
Swing Line Lenders or Designated Letter of Credit Issuers, without accounting to
the Banks, Designated Swing Line Lenders or Designated Letter of Credit Issuers
and without prejudice to such Agent's rights as a Bank under this Agreement and
the other Loan Documents except as may be expressly required under this
Agreement.
11.6 INSTRUCTIONS FROM BANKS.
No Agent shall be required to exercise any discretion or take
any action as to matters not expressly provided for by this Agreement and the
other Loan Documents (including, without limitation, collection and enforcement
actions in respect of any Obligations under the Notes or this Agreement and any
collateral therefor) except that the Administrative Agent and Designated
European Administrative Agent, as the case may be, shall take such action or
omit to
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take such action as may be reasonably requested of it in writing by the Required
Banks with instructions to the extent consistent with the terms of this
Agreement and the other Loan Documents and which actions and omissions shall be
binding upon all of the Banks, Designated Swing Line Lenders or Designated
Letter of Credit Issuers; provided, however, that no such Agent shall be
required to act (or omit any act) if, in its judgment, any such action or
omission might expose such Agent to personal liability or might be contrary to
this Agreement, any Loan Document or any applicable Law.
11.7 BANK'S DILIGENCE.
Each Bank, Designated Swing Line Lender and Designated Letter
of Credit Issuer: (a) represents and warrants that it has made its decision to
enter into this Agreement and the other Loan Documents and (b) agrees that it
will make its own decision as to taking or not taking future actions in respect
of this Agreement and the other Loan Documents; in each case without reliance on
the Agents or any other Bank, Designated Swing Line Lender and Designated Letter
of Credit Issuer and on the basis of its independent credit analysis and its
independent examination of and inquiry into such documents and other matters as
it deems relevant and material.
11.8 NO IMPLIED REPRESENTATIONS.
The Agents shall not be liable for any representation,
warranty, agreement or obligation of any kind of any other party to this
Agreement or anyone else, whether made or implied by the Borrowers in this
Agreement or any Loan Document or by a Bank, a Designated Swing Line Lender or a
Designated Letter of Credit Issuer in any notice or other communication or by
anyone else or otherwise.
11.9 SUB-AGENTS.
The Administrative Agent may employ agents and shall not be
liable (except as to money or property received by it or its agents) for any
negligence or willful misconduct of any such agent selected by it with
reasonable care.
11.10 AGENTS' DILIGENCE.
No Agent shall not be required: (a) to keep itself informed as
to anyone's compliance with any provision of this Agreement or any Loan
Document, (b) to make any inquiry into the properties, financial condition or
operation of the Borrowers or any other matter relating to this Agreement or any
Loan Document, (c) to report to any Bank, Designated Swing Line Lender and
Designated Letter of Credit Issuer any information (other than which this
Agreement or any Loan Document expressly requires to be so reported) that such
Agent or any of its Affiliates may have or acquire in respect of the properties,
business or financial condition of the Borrowers or any other matter relating to
this Agreement or any Loan Document or (d) to inquire into the validity,
effectiveness or genuineness of this Agreement or any Loan Document.
11.11 NOTICE OF DEFAULT.
The Administrative Agent shall not be deemed to have knowledge
of any Potential Default or Event of Default unless and until it shall have
received a written notice describing it and citing the relevant provision of
this Agreement or any Loan Document. The Administrative Agent shall give each
Bank reasonably prompt notice of any such written notice except, of course, to
any Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer
that shall have given the written notice.
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11.12 LIABILITY OF AGENTS.
No Agent (acting in its capacity as an Agent) nor any of its
directors, officers, employees, attorneys, and other agents acting for such
Agent in such capacity shall be liable for any action or omission on their
respective parts except for gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, each of the Agents: (a) may treat
the payee of any Note as the holder thereof until such Agent receives a fully
executed copy of any assignment with respect thereto, signed by such payee and
in form satisfactory to such Agent; (b) may consult with legal counsel,
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts which have
been selected by such Agent with reasonable care; (c) makes no warranty or
representation to any Bank and shall not be responsible to any Bank, Designated
Swing Line Lender or Designated Letter of Credit Issuer for any statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Document, including, without limitation, the truth of the
statements made in any certificate delivered by the Borrowers under Section 2 or
Section 3 of this Agreement or in any Credit Request, Rate
Continuation/Conversion Request, Reimbursement Agreement or any other similar
notice or delivery, such Agent being entitled for the purposes of determining
fulfillment of the conditions set forth therein to rely conclusively upon such
certificates; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement, the Notes or any other Loan Document or to inspect the property
(including the books and records) of the Borrowers; (e) shall not be responsible
to any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, or collateral covered by any agreement
or any other Loan Document and (f) shall incur no liability under or in respect
of this Agreement, the Notes or any other Loan Document by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telegram, telecopy, cable or telex) believed by it in good faith to be genuine
and correct and signed or sent by the proper party or parties.
No Agent nor any of its directors, officers, employees or
agents shall have any responsibility to the Borrowers on account of the failure
of or delay in performance or breach by any Bank, Designated Swing Line Lender
or Designated Letter of Credit Issuer of any of its obligations hereunder or to
any Bank on account of the failure of or delay in performance or breach by any
other Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer
or the Borrowers of any of their respective obligations hereunder or under any
Loan Document or in connection herewith or therewith. The Banks, the Designated
Swing Line Lenders and the Designated Letter of Credit Issuers each hereby
acknowledge that no Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement,
the Notes or any other Loan Document unless it shall be requested in writing to
do so by the Required Banks.
11.13 INDEMNITY OF AGENTS.
The Banks, Designated Swing Line Lender or Designated Letter
of Credit Issuer shall indemnify each of the Agents, in its capacity as an Agent
(to the extent such Agent is not otherwise reimbursed by the Borrowers), from
and against: (a) any loss or liability (other than any caused by such Agent's
gross negligence or willful misconduct) incurred by such Agent (in its capacity
as an Agent) as such in respect of this Agreement, the Notes or any Loan
Document and (b) any out-of-pocket expenses incurred by such Agent in defending
itself or otherwise related to this Agreement, the Notes or any Loan Document
(other than any caused by such Agent's gross negligence or willful misconduct)
including, without limitation, reasonable fees and disbursements of legal
counsel of its own selection (including, without limitation, the
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reasonable interdepartmental charges of its salaried attorneys) in the defense
of any claim against it or in the prosecution of its rights and remedies as such
Agent (other than the loss, liability or costs incurred by such Agent in the
defense of any claim against it by the Banks, the Designated Swing Line Lenders
or the Designated Letter of Credit Issuers arising in connection with its
actions in its capacity as an Agent); provided, however, that each Bank,
Designated Swing Line Lender or Designated Letter of Credit Issuer shall be
liable for only its Ratable Portion (calculated to include the commitments or
outstandings of such Designated Swing Line Lender or Designated Letter of Credit
Issuer, as the case may be) of the whole loss or liability.
11.14 RESIGNATION OF AGENT.
The Administrative Agent may resign as Administrative Agent
for any reason effective twenty (20) Business Days after giving notice thereof
to each Designated European Administrative Agent, Bank, Designated Swing Line
Lender and Designated Letter of Credit Issuer and the Borrower Representative.
If the Administrative Agent shall resign as Administrative Agent under this
Agreement, the Required Banks shall appoint from among the Banks (other than the
Bank that has resigned) a successor Administrative Agent for the Banks, the
Designated Swing Line Lenders and the Designated Letter of Credit Issuers which
successor Administrative Agent shall be reasonably acceptable to the Borrower
Representative. If, however, in the case of resignation by the Administrative
Agent, no successor Administrative Agent shall have been appointed by the time
such resignation becomes effective, then the retiring Administrative Agent may,
on behalf of the Banks, the Designated Swing Line Lenders and the Designated
Letter of Credit Issuers, appoint a successor Administrative Agent from among
the remaining Banks. Upon appointment (whether effected by the Required Banks or
the retiring Administrative Agent on behalf of the Banks) and acceptance of such
appointment as "Administrative Agent," the successor Administrative Agent shall
succeed to the rights, powers and duties of the Administrative Agent, and the
terms "Administrative Agent" and "Agent," as the case may be, shall mean such
successor Administrative Agent, effective upon its appointment and acceptance,
and the former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement or any holder of the Notes. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of Section
11.13 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement.
11.15 RESIGNATION OF DESIGNATED EUROPEAN ADMINISTRATIVE AGENTS.
A Designated European The Administrative Agent may resign as
such for any reason effective twenty (20) Business Days after giving notice
thereof to the Administrative Agent, and each Bank, Designated Swing Line Lender
and Designated Letter of Credit Issuer and the Borrower Representative. If a
Designated European Administrative Agent shall resign as such Agent under this
Agreement, the Administrative Agent shall appoint from among the Banks (other
than the Bank that has resigned) a successor Designated European Administrative
Agent. which successor Designated European Administrative Agent shall be
reasonably acceptable to the Borrower Representative. Upon appointment and
acceptance of such appointment as "Designated European Administrative Agent,"
the successor Designated European Administrative Agent shall succeed to the
rights, powers and duties of the resigning Designated European Administrative
Agent, and the terms "Designated European Administrative Agent" and "Agent," as
the case may be, shall mean such successor Designated European Administrative
Agent, effective upon its appointment and acceptance, and the former Designated
European Administrative Agent's rights, powers and duties as such shall be
terminated, without any other or further act or deed on the part of such former
Designated European Administrative Agent or any of the parties to this Agreement
or any holder of the Notes. After any retiring
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Designated European Administrative Agent's resignation hereunder as such, the
provisions of Section 11.13 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Designated European Administrative
Agent under this Agreement.
SECTION 12 TRANSFERS AND ASSIGNMENTS.
12.1 TRANSFER OF COMMITMENTS.
Each Bank shall have the right at any time or times to
transfer to another financial institution that is an Eligible Assignee, without
recourse, all or, if less than all, any fixed percentage of (which percentage,
with the consent of the Administrative Agent to be exercised in its sole
discretion but uniformly with respect to all of the Banks, does not have to be
pro rata and may vary in percentage among the Revolving Credit Commitment and
outstanding Revolving Credit Loans of such Bank and the outstanding Term Loan of
such Bank but the assigned portion resulting therefrom must in each case be at
least equal to $5,000,000 or an integral multiple of $1,000,000 in excess
thereof), such Bank's rights and obligations under this Agreement and the other
Loan Documents, including, without limitation, such Bank's Commitments, any Loan
made by such Bank, any Note executed in favor of such Bank, any participations
in Letters of Credit and any participations purchased by the Bank pursuant to
Section 9.12 of this Agreement; provided, however, in each such case, that the
transferor and the transferee shall have complied with the following
requirements:
(a) PRIOR CONSENT.
Transfers (other than transfers by any Bank to any
Affiliate of such Bank or to any other Bank which is not a Defaulting
Lender) to any Eligible Assignee may be consummated pursuant to this
Section 12 only upon the prior written consent of the Administrative
Agent and, unless an Event of Default has occurred which is continuing
and has not been waived in accordance with Section 14.1 hereof, the
Borrower Representative on behalf of the Borrowers, which shall not be
unreasonably withheld or delayed. Notwithstanding anything to the
contrary, any Bank may at any time (i) assign all or any portion of its
rights under this Agreement and its Notes to a Federal Reserve Bank, or
(ii) create a security interest in all or any portion of such rights in
favor of any Federal Reserve Bank, in each case in accordance with
Regulation A or the Board of Governors of the Federal Reserve System,
and no such assignment or creation shall release such assigning Bank
from its obligations hereunder.
(b) AGREEMENT; TRANSFER FEE.
The transferor: (i) shall remit to the Administrative
Agent an administrative fee of Three Thousand Five Hundred Dollars
($3,500) and (ii) shall cause the transferee to execute and deliver to
the Borrower Representative, the Administrative Agent and each Bank (A)
an Assignment Agreement, substantially in the form of Exhibit J
attached hereto, and otherwise in form and substance satisfactory to
the Administrative Agent and its counsel (an "Assignment Agreement"),
together with the consents and releases referenced therein and (B) such
additional amendments, assurances and other writings as the
Administrative Agent may reasonably require to effect such transfer.
(c) NO PROHIBITED TRANSACTION.
The transferee shall be required to represent and
warrant that its purchase shall not constitute a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code).
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(d) NOTES.
The Borrowers shall execute and deliver: (i) to the
Administrative Agent, the transferor and the transferee, any consent or
release (of all or a portion of the obligations of the transferor) to
be delivered in connection with the Assignment Agreement, (ii) if a
Bank's entire interest in its Commitments and in all of its Loans have
been transferred, to the transferee appropriate Notes against return of
the Notes (each marked "replaced") held by the transferor and (iii) if
only a portion of a Bank's interest in its Commitments and Loans has
been transferred, new Notes to each of the transferor and the
transferee against return of the original such Notes of the transferor
(each marked "replaced") held by the transferor; provided, that,
simultaneously with the Borrower's delivery of new Notes pursuant to
this Section 12(c), the transferor Bank will deliver to the Borrowers
any note being replaced in whole or in part, and each such note
delivered by the transferor Bank shall be conspicuously marked
"replaced" when so delivered.
(e) PARTIES.
Upon satisfaction of the requirements of this Section
12.1, including the payment of the fee and the delivery of the
documents set forth in Section 12.1(b) above, (i) the transferee shall
become and thereafter be deemed to be a "Bank" for the purposes of this
Agreement and (ii) the transferor (A) shall continue to be a "Bank" for
the purposes of this Agreement only if and to the extent that the
transfer shall not have been a transfer of its entire interest in its
Commitments and Loans, (B) shall cease to be and thereafter shall no
longer be deemed to be a "Bank" in the case of any transfer of its
entire interest in its Commitments and Loans and (C) the signature
pages hereto and Annex I hereto shall be automatically amended, without
further action, to reflect the result of any such transfer.
12.2 SALE OF PARTICIPATIONS.
Each Bank shall have the right at any time or times to sell
one or more participations or subparticipations to a financial institution in
all or, if less than all, any constant fixed percentage of: such Bank's
Commitments, any Loan made by such Bank, any Note executed in favor of such
Bank, any participation by such Bank in a Letter of Credit and any
participations, if any, purchased by such Bank pursuant to 9.12 of this
Agreement or this Section 12; provided, however, in each such case, that the
transferor and the transferee shall have complied with the following
requirements:
(a) BENEFITS OF PARTICIPANT.
The provisions of Section 13 of this Agreement shall
inure to the benefit of each purchaser of a participation or
subparticipation (provided that (i) each such participant shall look
solely to the seller of its participation for those benefits, (ii) no
such seller (whether or not a Bank) shall have a claim against the
Borrowers of any kind whatsoever resulting from such benefits, and
(iii) the Borrowers' liabilities, if any, under any of those sections
shall not be increased as a result of the sale of any such
participation) and Administrative Agent shall continue to distribute
payments pursuant to this Agreement as if no participation has been
sold.
(b) RIGHTS RESERVED.
In the event any Bank shall sell any participation or
subparticipation, that Bank shall, as between itself and the purchaser,
retain all of its rights (including, without
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limitation, rights to enforce against the Borrowers this Agreement and
the other Loan Documents) and duties pursuant to this Agreement and the
other Loan Documents, including, without limitation, that Bank's right
to approve any waiver, consent or amendment pursuant to Section 14.1 of
this Agreement and such purchaser shall not be a Bank for any purposes
of this Agreement and the other Loan Documents, except if and to the
extent that any such waiver, consent or amendment would (A) reduce any
fee or commission allocated to the participation or subparticipation,
as the case may be, (B) reduce the amount of any principal payment on
any Loan allocated to the participation or subparticipation, as the
case may be, or reduce the principal amount of any Loan so allocated or
the rate of interest payable thereon, (C) extend the time for payment
of any amount allocated to the participation or subparticipation, as
the case may be, or (D) result in the release of a substantial portion
of the Collateral.
(c) NO DELEGATION.
No participation or subparticipation shall operate as
a delegation of any duty of the seller of such participation or
subparticipation. Under no circumstance shall any participation or
subparticipation be deemed a novation in respect of all or any part of
the selling Bank's obligations pursuant to this Agreement.
(d) NO PROHIBITED TRANSACTION.
Each purchaser of a participation or subparticipation
shall be required to represent and warrant that its purchase shall not
constitute a "prohibited transaction" (as defined in Section 406 of
ERISA or Section 4975 of the Code).
12.3 CHANGE OF LENDING OFFICE; REPLACEMENT OF BANKS.
(a) CHANGE OF LENDING OFFICE.
Each Bank, Designated Swing Line Lender and Designated Letter
of Credit Issuer agrees that, upon the occurrence of any event giving rise to
the operation of any of Sections 2.12(k), 2.18, 13.1 or 13.3 with respect to
such Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer
it will, if requested by a Borrower, use reasonable efforts (subject to overall
policy considerations of such Bank, Designated Swing Line Lender and Designated
Letter of Credit Issuer) to designate another Lending Office for any Loans or
Commitment affected by such event, provided that such designation is made on
such terms that such Bank and its Lending Office suffer no material economic,
legal or regulatory disadvantage, with the object of avoiding the consequence of
the event giving rise to the operation of any such section. All terms of this
Agreement shall apply to any Lending Office and the Loans and any Notes issued
hereunder shall be deemed held by each Bank, Designated Swing Line Lender and
Designated Letter of Credit Issuer for the benefit of its Lending Office.
(b) REPLACEMENT OF BANKS.
If any Bank, Designated Swing Line Lender and Designated
Letter of Credit Issuer requests any compensation, reimbursement or other
payment under any of Sections 2.12(k), 2.18 or 13.1 with respect to such Bank,
Designated Swing Line Lender or Designated Letter of Credit Issuer, or if the
Borrower is required to pay any additional amount to any Bank, Designated Swing
Line Lender or Designated Letter of Credit Issuer or governmental authority
pursuant to Section 13.3, or if any Bank is a "Defaulting Lender" hereunder, or
if any Bank otherwise fails to fund its Ratable Portion of Revolving Credit
Borrowings or the participation purchase price payable by such Bank for its
participating interest hereunder as
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specified in Section 2.5 hereof, or if any Bank notifies the Administrative
Agent that it is exercising any right under this Agreement not to fund or
maintain a LIBOR Rate Loan denominated in Dollars or in an Alternative Currency
which the other Banks are willing or prepared to fund or maintain, then the
Borrowers may, at their sole expense and effort, upon notice to such Bank,
Designated Swing Line Lender or Designated Letter of Credit Issuer and the
Administrative Agent, require such Bank, Designated Swing Line Lender or
Designated Letter of Credit Issuer, as the case may be, to assign and delegate,
without recourse (in accordance with the restrictions contained in Section
12.1), all its interests, rights and obligations under this Agreement to an
assignee that shall assume such obligations (which assignee may be another Bank,
if a Bank accepts such assignment); provided that (i) the Borrower shall have
received the prior written consent of the Administrative Agent, which consent
shall not be unreasonably withheld, (ii) such Bank, Designated Swing Line Lender
or Designated Letter of Credit Issuer shall have received payment of an amount
equal to the outstanding principal of its Loans, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder, from the assignee
(to the extent of such outstanding principal and accrued interest and fees) or
the Borrowers (in the case of all other amounts, including any breakage
compensation under Section 13.4 hereof), and (iii) in the case of any such
assignment resulting from a claim for compensation, reimbursement or other
payments required to be made under any of Sections 2.12(k), 2.18 or 13.1 with
respect to such Bank, Designated Swing Line Lender or Designated Letter of
Credit Issuer, or resulting from any required payments to any Bank or
governmental authority pursuant to Section 13.3, such assignment will result in
a reduction in such compensation, reimbursement or payments. No Bank, Designated
Swing Line Lender or Designated Letter of Credit Issuer shall be required to
make any such assignment and delegation if, prior thereto, as a result of a
waiver by such Bank, Designated Swing Line Lender or Designated Letter of Credit
Issuer or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.
(c) EFFECT ON RIGHTS AND OBLIGATIONS.
Nothing in this Section 12.3 shall affect or postpone any of
the obligations of any Borrower or the right of any Bank, Designated Swing Line
Lender or Designated Letter of Credit Issuer provided in any of Sections
2.12(k), 2.18 13.1 or 13.3.
12.4 CONFIDENTIALITY.
The Administrative Agents, each Designated Swing Line Lender,
each Designated Letter of Credit Issuer and each Bank hereby agree to use
reasonable efforts to hold all non-public information obtained pursuant to the
requirements of this Agreement and the other Loan Documents and appropriately
designated in writing to the Administrative Agent by the Borrower Representative
as being confidential information in accordance with the customary procedure of
the Administrative Agents, such Designated Swing Line Lender, Designated Letter
of Credit Issuer or Bank, as the case may be, for handling confidential
information of this nature and in accordance with safe and sound banking
practices, except that this Section shall not preclude any Administrative Agent,
any Designated Swing Line Lenders, any Designated Letter of Credit Issuer or any
Bank from furnishing any such confidential information: (i) subject to the
Borrower Representative's receipt of prior notice from such Administrative
Agent, such Designated Letter of Credit Issuer or such Bank, as the case may be,
if permitted under applicable law and such legal proceedings, to the extent
which may be required by subpoena or similar order of any court of competent
jurisdiction, (ii) to the extent such information is required to be disclosed to
any regulatory or administrative governmental agency or commission having any
regulatory authority over such Administrative Agent, such Designated Swing Line
Lender, such Designated Letter of Credit Issuer or Bank or its securities, (iii)
to any other party to this Agreement, (iv) to any Affiliate of the such
Administrative Agent, such Designated Swing Line
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Lender, such Designated Letter of Credit Issuer or Bank so long as such
Affiliate agrees to be bound in writing by the provisions of this Section 12.4
prior to the time of such disclosure and so long as such information is received
in connection with customary banking practices, (v) to any actual or prospective
transferee, participant or subparticipant of all or part of a Bank's rights
arising out of or in connection with the Loan Documents and this Agreement or
any thereof so long as such prospective transferee, participant or
subparticipant to whom disclosure is made agrees in writing to be bound by the
provisions of this Section 12.4 prior to the time of such disclosure, (vi) to
anyone if it shall have been already publicly disclosed (other than by such
Administrative Agent, any other Administrative Agent, such Designated Swing Line
Lender, such Designated Letter of Credit Issuer or such Bank, as the case may
be, in contravention of this Section 12.4) prior to the time of such disclosure,
(vii) to the extent reasonably required in connection with the preparation,
negotiation or administration of this Agreement and the other Loan Documents or
the exercise of any right or remedy under this Agreement or any other Loan
Document, to the counsel, auditors, professional advisors and consultants, and
accountants to such Administrative Agent, such Designated Swing Line Lender,
such Designated Letter of Credit Issuer or the Banks, who have a need to know
such information in accordance with customary banking practices and requirements
and who receive the information having been made aware of the restrictions set
forth herein and (ix) to the extent reasonably required in connection with any
legal proceedings instituted by or against such Administrative Agent, such
Designated Swing Line Lender, such Designated Letter of Credit Issuer or any
Bank in its respective capacities as such Administrative Agent, the Designated
Letter of Credit Issuer or a Bank under this Agreement; provided, further that
for any disclosure pursuant to clauses (i), (ii), (vii) or (ix) hereof, such
Administrative Agent, such Designated Swing Line Lender, such Designated Letter
of Credit Issuer or such disclosing Bank, as the case may be, shall (x) use
reasonable efforts to disclose only that portion of the confidential information
as it is legally required, in the opinion of counsel, to disclose and (y) to the
extent possible under the applicable proceeding, at the Borrowers' expense,
request a protective order as to the confidentially thereof.
SECTION 13 INDEMNITIES.
13.1 INCREASED COSTS.
If, after the Effective Date of this Agreement, (a) the
introduction of any Law, rule or regulation or any change therein, (b) any
change in the interpretation or administration of any Law, rule or regulation by
any central bank or other governmental authority or (b) the compliance by any
Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer with
any guideline, request or directive from any central bank or other governmental
authority (whether or not having the force of Law) shall increase the cost to
any Bank or Designated Swing Line Lender (other than any increase in the cost of
the overhead of such Bank or Designated Swing Line Lender) of agreeing to make
or making, funding or maintaining Loans to a Borrower or the cost to any
Designated Letter of Credit Issuer or Bank of issuing, maintaining or
participating in any Letter of Credit, then such Borrower shall from time to
time, upon demand by such Bank (with a copy of such demand to the Administrative
Agent), pay to the Administrative Agent for the account of such Bank, Designated
Swing Line Lender or Designated Letter of Credit Issuer additional amounts
sufficient to indemnify such Bank, Designated Swing Line Lender or Designated
Letter of Credit Issuer for such increased cost.
13.2 RISK-BASED CAPITAL.
If any Bank, Designated Swing Line Lender or Designated Letter
of Credit Issuer shall have determined that after the Effective Date, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
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charged by law with the interpretation or administration thereof, or compliance
by such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer
or the parent corporation of any thereof with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank, or comparable agency, in each case made subsequent to the
Effective Date, has or would have the effect of reducing by an amount reasonably
deemed by such Bank, Designated Swing Line Lender or Designated Letter of Credit
Issuer to be material to the rate of return on the capital or assets of such
Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer or the
parent corporation of any thereof as a consequence of the commitments or
obligations of such Bank, Designated Swing Line Lender or Designated Letter of
Credit Issuer hereunder to a level below that which such Bank, Designated Swing
Line Lender or Designated Letter of Credit Issuer or the parent corporation of
any thereof could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration policies of such Bank, Designated Swing
Line Lender or Designated Letter of Credit Issuer or the parent corporation of
any thereof with respect to capital adequacy), then from time to time, within 15
days after demand by such Bank, Designated Swing Line Lender or Designated
Letter of Credit Issuer (with a copy to the Administrative Agent), the Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer or the
parent corporation of any thereof for such reduction. Each Bank, Designated
Swing Line Lender or Designated Letter of Credit Issuer upon determining in good
faith that any additional amounts will be payable pursuant to this section 13.2,
will give prompt written demand therefor.
13.3 TAXES.
(a) TAXES; WITHHOLDING.
Any and all payments by the Borrowers hereunder,
under the Notes or the other Loan Documents shall be made, in
accordance with the provisions of Section 2, free and clear of and
without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Bank, Designated Swing
Line Lender and Designated Letter of Credit Issuer taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction under
the Laws of which such Bank is organized or is doing business, or any
political subdivision thereof (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrowers shall be required
by Law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Bank, any Designated Swing Line
Lender, any Designated Letter of Credit Issuer or any Administrative
Agent: (i) the sum payable shall be increased as may be necessary so
that after making all required deductions (including deductions
applicable to additional sums payable under this Section 13.3) such
Bank receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrowers shall make such
deductions and (iii) the Borrowers shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance
with applicable Law. All such Taxes shall be paid by the Borrowers
prior to the date on which penalties attach thereto or interest accrues
thereon; provided, however, that, if any such penalties or interest
become due, the Borrowers shall make prompt payment thereof to the
appropriate governmental authority. The Borrowers shall indemnify each
of the Administrative Agents and each Bank, Designated Swing Line
Lender, Designated Letter of Credit Issuer for the full amount of such
Taxes (including any Taxes on amounts payable under this Section
13.3(a) paid by such Bank, Designated Swing Line Lender, Designated
Letter of Credit Issuer and any Administrative Agent and any liability
(including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes were correctly or legally
asserted. Any indemnification
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payment shall be made within thirty (30) days from the date such Bank,
Designated Swing Line Lender, Designated Letter of Credit Issuer or any
such Administrative Agent makes written demand therefor.
(b) STAMP TAXES.
The Borrowers agree to pay, and will indemnify each
Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer
and the Administrative Agents for, any present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under the
Notes or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or the Notes (hereinafter referred to
as "Other Taxes").
(c) OTHER TAXES.
Except as specifically limited by Section 13.3(a),
the Borrowers will indemnify each Bank, Designated Swing Line Lender,
Designated Letter of Credit Issuer and Administrative Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable
under this Section 13.3) paid by such Bank, Designated Swing Line
Lender, Designated Letter of Credit Issuer or Administrative Agent (as
the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. Any
indemnification payment shall be made within 30 days from the date such
Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer
or such Administrative Agent (as the case may be) makes written demand
therefor.
(d) REQUEST FOR REFUND.
At the reasonable request of the Borrower
Representative, each Bank, Designated Swing Line Lender, Designated
Letter of Credit Issuer or Administrative Agent, as the case may be,
shall apply at the applicable Borrower's expense for a refund in
respect of Taxes or Other Taxes previously paid by such Borrowers
pursuant to this Section 13.3 if in the opinion of such Bank,
Designated Swing Line Lender, Designated Letter of Credit Issuer or
Administrative Agent there is a reasonable basis for such refund.
Notwithstanding the foregoing, none of the Banks, Designated Swing Line
Lenders, Designated Letter of Credit Issuers or Administrative Agent
shall be obligated to pursue such refund if, in its sole good faith
judgment, such action would be disadvantageous to it, but shall be
required to cooperate in good faith with the Borrowers if the Borrowers
should choose to pursue such refund. If any Bank, Designated Swing Line
Lender, Designated Letter of Credit Issuer or Administrative Agent
subsequently receives from a taxing authority a refund of any Tax
previously paid by the Borrowers and for which the Borrowers has
indemnified the Bank pursuant to this Section 13.3, such Bank,
Designated Swing Line Lender, Designated Letter of Credit Issuer or
Administrative Agent shall within thirty (30) days after receipt of
such refund, and to the extent permitted by applicable law, pay to the
Borrowers the net amount of any such recovery after deducting taxes and
expenses attributable thereto.
(e) EXEMPTION CERTIFICATE.
Not later than: (a) the Closing Date, (b) in the case
of any bank or financial institution that becomes a Bank, Designated
Swing Line Lender or Designated Letter of Credit Issuer after the
Closing Date, the date of the instrument of assignment
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pursuant to which such bank or financial institution became a Bank,
Designated Swing Line Lender or Designated Letter of Credit Issuer, (c)
annually on each Anniversary Date thereafter or (d) such other times as
the Administrative Agent or the Borrower Representative may reasonably
request: (i) each Bank, Designated Swing Line Lender or Designated
Letter of Credit Issuer organized under the laws of a jurisdiction
outside the United States shall provide the Administrative Agent and
the Borrower Representative with duly completed copies of Form 1001 or
Form 4224 or any successor form prescribed by the Internal Revenue
Service of the United States certifying that such Bank, Designated
Swing Line Lender or Designated Letter of Credit Issuer is exempt from
United States withholding taxes with respect to all payments to be made
to such Bank hereunder or other document satisfactory to the Borrowers
and the Administrative Agent indicating that all payments to be made to
such Bank, Designated Swing Line Lender or Designated Letter of Credit
Issuer hereunder are not subject to such taxes and (ii) each other
Bank, Designated Swing Line Lender or Designated Letter of Credit
Issuer shall provide the Administrative Agent and the Borrower
Representative with a written statement which certifies that such Bank,
Designated Swing Line Lender or Designated Letter of Credit Issuer is
not a non-resident alien or foreign corporation and which otherwise
satisfies Treasury Regulation Section 1.1441-5(b) or any successor
regulation under the Internal Revenue Code (each such certificate or
statement, an "Exemption Certificate"). Unless the Administrative Agent
and the Borrower Representative have received an Exemption Certificate
from such Bank, Designated Swing Line Lender or Designated Letter of
Credit Issuer, the Borrowers, or the Administrative Agent if the
Borrowers have not withheld, may withhold taxes from such payments at
the applicable statutory rate (subject, in the case of the Borrowers to
the requirements of Section 13.3(a) above); provided, however, that, if
the Borrowers have withheld, the Borrower Representative shall so
notify the Administrative Agent. Any Bank, Designated Swing Line Lender
or Designated Letter of Credit Issuer which ceases to be exempt from
United States withholding taxes shall notify the Administrative Agent
and the Borrower Representative promptly thereof.
(f) FURNISHING OF CERTIFICATE.
Within 30 days after the date of any payment of
Taxes, the Borrower Representative will furnish to the Administrative
Agent, at its address referred to in Section ERROR! REFERENCE SOURCE
NOT FOUND. of this Agreement, the original or a certified copy of a
receipt evidencing payment thereof. If Taxes ever become payable in
respect of any payment hereunder or under the Notes made during a
Fiscal Quarter, thereafter the Borrower Representative will furnish to
the Administrative Agent, within thirty (30) days after the end of such
Fiscal Quarter, at such address, a certificate from the Borrowers
stating that any payments made during such Fiscal Quarter are exempt
from or not subject to Taxes.
(g) FILINGS TO CLAIM U.K. WITHHOLDING EXEMPTION OR REDUCTION.
The Banks listed on the signature pages hereof as
Banks on the Closing Date agree to submit promptly after the Closing
Date to the taxing authority of the country in which such Bank is
resident for tax purposes (with a copy to the Administrative Agent and
Instron, Ltd.), for certification and forwarding by such taxing
authority to the appropriate United Kingdom taxing authority, two
copies of Form "Claim on Behalf of a United States Domestic Corporation
to Relief from United Kingdom Income Tax on Interest and Royalties
Arising in the United Kingdom" (or its counterpart for jurisdictions
other than the United States), or any successor forms (wherein such
Bank claims entitlement to complete exemption from or reduced rate of
United Kingdom withholding tax on interest paid by such Borrower
hereunder) and to provide successor
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forms thereto if any previously delivered form is found to be
incomplete or incorrect in any material respect or upon the
obsolescence of any previously delivered form. Each Bank, Designated
Swing Line Lender and Designated Letter of Credit Issuer becoming such
after the Closing Date that is managed and controlled from or
incorporated under the laws of any jurisdiction other than the United
Kingdom and which is making a Loan to Instron, Ltd. through a lending
branch or lending office located outside the United Kingdom agrees to
submit on or before the time of becoming such a Bank, Designated Swing
Line Lender or Designated Letter of Credit Issuer to the taxing
authority of the country in which such Bank is resident for tax
purposes on or prior to becoming Bank, Designated Swing Line Lender and
Designated Letter of Credit Issuer to the taxing authority of the
country in which such Bank is resident for tax purposes (with a copy to
the Administrative Agent and Instron, Ltd.), for certification and
forwarding by such taxing authority to the appropriate United Kingdom
taxing authority, two copies of Form "Claim on Behalf of a United
States Domestic Corporation to Relief from United Kingdom Income Tax on
Interest and Royalties Arising in the United Kingdom" (or its
counterpart for jurisdictions other than the United States), or any
successor forms (wherein such Bank claims entitlement to complete
exemption from or reduced rate of United Kingdom withholding tax on
interest paid by such Borrower hereunder) and to provide successor
forms thereto if any previously delivered form is found to be
incomplete or incorrect in any material respect or upon the
obsolescence of any previously delivered form. Unless the
Administrative Agent and the Borrower Representative have received a
copy of the Claim on behalf of a United States Domestic Corporation to
Relief from United Kingdom Income Tax on Interest and Royalties Arising
in the United Kingdom" (or its counterpart for jurisdictions other than
the United States) from such Bank, Designated Swing Line Lender or
Designated Letter of Credit Issuer, Instron, Ltd., or the Designated
European Administrative Agent if Instron, Ltd. has not withheld, may
withhold taxes from such payments at the applicable statutory rate
(subject, in the case of Instron, Ltd. to the requirements of Section
13.3(a) above); provided, however, that, if Instron, Ltd. have
withheld, the Borrower Representative shall so notify the
Administrative Agent or, if applicable, the Designated European
Administrative Agent. Any Bank, Designated Swing Line Lender or
Designated Letter of Credit Issuer which ceases to be exempt from
United Kingdom withholding taxes shall notify the Administrative Agent
or such Designated European Administrative Agent and the Borrower
Representative promptly thereof.
(h) RELATED TAX EXEMPTION FILINGS.
Upon the written request of any Borrower, each Bank
promptly will provide to such Borrower and to the Administrative Agent,
or file with the relevant taxing authority (with a copy to the
applicable Administrative Agent) such form, certification or similar
documentation that it is legally able to provide (each duly completed,
accurate and signed) as is required by the relevant jurisdiction in
order to obtain an exemption from, or reduced rate of Taxes or Other
Taxes to which such Bank or the Administrative Agent is entitled
pursuant to an applicable tax treaty or the law of the relevant
jurisdiction; provided, however, such Bank will not be required to (i)
disclose information which in its reasonable judgment it deems
confidential or proprietary or (ii) incur a disadvantage if such
disadvantage would, in its reasonable judgment, be substantial.
(i) U.K. TAX CREDITS
If and to the extent that any Bank that is either a
Non-UK Lender or a UK Lender is able, in its sole opinion, to apply or
otherwise take advantage of any offsetting
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Tax credit or other similar Tax benefit out of or in conjunction with
any deduction, withholding or payment which gives rise to an obligation
on Instron, Ltd. to pay any additional amount pursuant to paragraph (a)
or (b) of this Section 13.3 such Bank shall, to the extent that in its
sole opinion it can do so without prejudice to the retention of the
amount of such credit or benefit and without any other adverse Tax
consequences for that Bank, reimburse to Instron, Ltd., at such time as
such Tax credit or benefit shall have actually been received by that
Bank such amount as that Bank shall, in its sole opinion, have
determined to be attributable to the relevant deduction, withholding or
payment and as will leave it in no better or worse position in respect
of its worldwide Tax liabilities than it would have been in if the
payment of such additional amount had not been required.
(j) SURVIVAL OF PROVISION.
Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements and liabilities of
the Borrowers contained in this Section 13.3 shall survive the payment
in full of the Obligations.
13.4 LOSSES.
If any payment of principal of, or Rate Conversion or Rate
Continuation of, any LIBOR Rate Loan or Money Market Rate Loan, as the case may
be, is not paid when due or is made on a day other than on the last day of an
Interest Period relating to such Loan, as a result of a payment or Rate
Conversion or Rate Continuation pursuant to the provisions of Section 2.11 of
this Agreement or acceleration of the maturity of the Revolving Credit Notes or
Swing Line Notes pursuant to Section 9 of this Agreement or for any other
reason, the Borrowers shall, upon demand by any Bank or Designated Swing Line
Lender (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Bank or Designated Swing Line
lender, as the case may be, any amounts required to compensate such Bank or
Designated Swing Line Lender for any additional losses, costs or expenses which
it may reasonably incur as a result of such payment or Rate Conversion or Rate
Continuation, including, without limitation, any loss, cost or expense (other
than any expenses directly attributable to loan origination efforts) incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Bank or Designated Swing Line Lender to fund or maintain such Loan.
13.5 INDEMNIFICATION FOR REQUESTS.
Whenever a Borrower: (a) shall revoke any Credit Request or
Rate Conversion/Continuation Request involving any LIBOR Rate Loan, (b) shall
for any other reason fail to borrow pursuant to any such Credit Request, Swing
Line Request or Rate Conversion/Continuation Request or otherwise comply
therewith, (c) shall fail to fulfill, on or before the date specified in any
such request, the applicable conditions set forth in Section 3 of this Agreement
or (d) shall fail to honor any prepayment notice with respect to LIBOR Rate
Loans, then, in each case on any Bank's or Designated Swing Line Lender's
demand, such Borrower shall indemnify each Bank, Designated Swing Line Lender
and Administrative Agent against any loss, cost or expense incurred by such
Bank, Designated Swing Line Lender or Administrative Agent as a result of any
such failure by such Borrower, including, without limitation, any loss, cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Bank, Designated Swing Line Lender or
Administrative Agent to fund the LIBOR Rate Loan or Money Market Rate Loans, as
the case may be, to be made by such Bank, Designated Swing Line Lender or
Administrative Agent in connection with such request when such LIBOR Rate Loan,
as a result of such failure by such Borrower, is not made on such date.
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13.6 GENERAL INDEMNITY.
The Borrowers shall indemnify and hold harmless the each
Administrative Agent and each Bank, Designated Swing Line Lender and Designated
Letter of Credit Issuer, and the respective directors, officers, employees and
Affiliates thereof, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever including, without limitation,
reasonable fees and disbursements of counsel and settlements costs, which may be
imposed on, incurred by, or asserted against any such Administrative Agent, any
Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, or the
respective directors, officers, employees and Affiliates thereof in connection
with any investigative, administrative or judicial proceeding (whether such
Administrative Agent or such Bank, Designated Swing Line Lender or Designated
Letter of Credit Issuer is or is not designated as a party thereto) directly or
indirectly relating to or arising out of this Agreement or any other Loan
Document, the transactions contemplated thereby, or any actual or proposed use
of proceeds hereunder or thereunder, except that none of the Administrative
Agents nor any Bank, Designated Swing Line Lender or Designated Letter of Credit
Issuer, nor any such directors, officers, employees and Affiliates thereof shall
have the right to be indemnified hereunder for its own gross negligence or
willful misconduct as determined by a court of competent jurisdiction.
13.7 ENVIRONMENTAL INDEMNITY.
Each of the Borrowers shall, at its sole cost and expense,
indemnify, defend and save harmless each of the Administrative Agents, each
Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer (and
each of their respective officers, directors, employees, Administrative Agents,
representatives and contractors and any subsequent owner of the Collateral who
purchases Collateral through the Bank or pursuant to any enforcement action by
the Bank) from and against any and all damages, losses, liabilities,
obligations, penalties, claims, litigations, demands, defenses, judgments,
suits, actions, proceedings, costs, disbursements and/or expenses (including,
without limitation, reasonable attorneys' and experts' fees, expenses and
disbursements) of any kind or nature whatsoever which may at any time be imposed
upon, incurred by or asserted against any of such indemnified Persons directly
or indirectly relating to, resulting from or arising out of: (i) Environmental
Claims against such Borrower, (ii) a material misrepresentation or inaccuracy in
any representation or warranty contained in this Agreement relating to any
environmental matters applicable to such Borrower or (iii) a breach or failure
to perform any covenant made by such Borrower in this Agreement with respect to
environmental matters which continues uncured after the expiration of any
applicable grace period. Each of the Borrowers will pay any sums owing by such
Borrower to each Administrative Agent and each Bank, Designated Swing Line
Lender and Designated Letter of Credit Issuer pursuant to this indemnification
obligation five (5) days after demand by the Administrative Agent, on behalf of
any such Administrative Agent, Bank, Designated Swing Line Lender or Designated
Letter of Credit Issuer, together with interest on such amount accruing from and
after the expiration of such period at the default rate of interest hereunder.
13.8 CERTIFICATE FOR INDEMNIFICATION.
Each demand by an Administrative Agent, or a Bank, Designated
Swing Line Lender or Designated Letter of Credit Issuer for payment pursuant to
this Section 13 shall be accompanied by a certificate setting forth the reason
for the payment, the amount to be paid, and the computations and assumptions in
determining the amount, which certificate shall, absent manifest error, be
presumed to be correct. In determining the amount of any such payment
thereunder, each Administrative Agent and each Bank, Designated Swing Line
Lender and Designated Letter of Credit Issuer may use reasonable averaging and
attribution methods, so
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long as such methods are set forth in the certificate referred to in the
preceding sentence. The failure to give any such notice shall not release or
diminish any of the Borrower's obligations to pay additional amounts pursuant to
this Section 13 upon the subsequent receipt of such notice.
13.9 DUTY TO MITIGATE; STANDARD TREATMENT; REIMBURSEMENT LIMITATION
PERIOD.
Each Administrative Agent and each Bank, Designated Swing Line
Lender or Designated Letter of Credit Issuer seeking payment pursuant to this
Section 13 shall use reasonable efforts and take all reasonable actions to avoid
the cause of the payment and to minimize the amount thereof. Each Bank agrees
that it will not seek compensation or reimbursement provided for in this Section
13 unless such Administrative Agent, Bank, Designated Swing Line Lender or
Designated Letter of Credit Issuer, as the case may be, as a matter of policy
intends generally to seek comparable compensation or reimbursement from other
borrowers similarly situated and similarly documented financial accommodations.
Notwithstanding anything in this Agreement to the contrary, none of the
Administrative Agents nor any Bank, Designated Swing Line Lender or Designated
Letter of Credit Issuer, as the case may be, shall be entitled to compensation
or payment or reimbursement of other amounts under Sections 2.18, 13.1 or 13.2
for any amounts incurred or accruing more than 180 days prior to the giving of
notice to the Borrower Representative of additional costs or other amounts of
the nature described in such Sections.
SECTION 14 GENERAL.
This Agreement and the other Loan Documents shall be governed by the
following provisions:
14.1 AMENDMENTS AND WAIVERS.
No amendment or waiver of any provision of this Agreement or
the Notes or any other Loan Document, nor consent to any departure by the
Borrowers therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Required Banks (or, if unanimous consent of all Banks
is required herein, all of the Banks (other than a Bank which is a Defaulting
Lender), the Administrative Agent, the Designated European Administrative Agent,
the Borrowers, and, only with respect to amendments and waivers of, or consents
regarding, provisions of this Agreement directly affecting the rights of any
Designated Swing Line Lender or any Designated Letter of Credit Issuer, by such
Designated Swing Line Lender or Designated Letter of Credit Issuer, as the case
may be, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. Unanimous consent of all
Banks (other than a Bank which is a Defaulting Lender) shall be required with
respect to (a) the extension of maturity of any Note, or the extension of the
payment date for interest, principal and/or fees thereunder, or (b) any
reduction in fees hereunder or the rate of interest on the Notes (other than a
reduction by virtue of a waiver of an Event of Default, as contemplated in
Sections 2.16(e) and 2.13(b)), or in any amount of principal or interest due on
any Note, or in the manner of pro rata application of any payments made by the
Borrowers to the Banks hereunder, or (c) any change in any percentage voting
requirement in this Agreement, or (d) any amendment changing the dollar amount
or percentage of the Banks' Commitments or any Bank's Commitment, or (e) any
change in the amount of, or extension of the payment date for, any fees payable
under Section 2.16 of this Agreement, or (f) any change in the definitions
"Collateral" or "Required Banks" under this Agreement, or (g) any change in any
provision of this Agreement which requires all of the Banks to take any action
under such provision, (h) the release of all or any substantial portion of the
Collateral, or (i) the release of all or substantially all of the Collateral or
the release of any Borrower Guarantor, any Guaranty by a Borrower of any Letter
of Credit Obligor or any other Guarantor or (j) any change in Section 11,
Sections 12.1 or 12.2,
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Section 13 or this Section 14.1 itself. Notice of amendments or consents
ratified by the Banks hereunder shall immediately be forwarded by the
Administrative Agent to the Borrower Representative, any Designated European
Administrative Agent and to all Banks. Each Bank or other holder of a Note,
Designated European Administrative Agent, Designated Swing Line Lender and
Designated Letter of Credit Issuer shall be bound by any amendment, waiver or
consent obtained as authorized by this Section 14.1, regardless of its failure
to agree thereto.
14.2 GENERAL APPOINTMENT AS ATTORNEY-IN-FACT.
In addition to the provisions of Sections 9.5 of this
Agreement, each of the Borrowers hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or Administrative Agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Borrower and in
the name of such Borrower or in its own name, from time to time following the
occurrence of an Event of Default which is continuing (unless waived in
accordance with Section 14.1 of this Agreement), in the Administrative Agent's
reasonable discretion, for the purpose of carrying out the terms of this
Agreement, without notice (except as specifically provided herein) to or assent
by the Borrowers, to take to the extent permitted by law any and all appropriate
action and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Agreement, including,
without limiting the generality of the foregoing, the power and right, on behalf
of such Borrower, to do the following: (a) to pay or discharge taxes, liens,
security interests or other encumbrances levied or placed on or threatened
against the Collateral, to effect any repairs or any insurance, called for by
the terms of this Agreement and to pay all or any part of the premiums therefor
and the costs thereof, and otherwise to itself perform or comply with, or
otherwise cause performance or compliance with, any of the covenants or other
agreements of such Borrower contained in this Agreement which such Borrower has
failed to perform or with which such Borrower has not complied; (b) upon notice
to such Borrower, to commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of any
Collateral; (c) upon notice to such Borrower, to defend any suit, action or
proceeding brought against such Borrower with respect to any Collateral; (d)
upon notice to such Borrower, to settle, compromise or adjust any suit, action
or proceeding described above and, in connection therewith, to give such
discharges or releases as the Administrative Agent may deem appropriate; (e) to
sell, transfer, pledge, make any agreement with respect to or otherwise deal
with any of the Collateral generally as fully and completely as though the
Administrative Agent were the absolute owner thereof for all purposes; and (f)
to do, at the Administrative Agent's option and such Borrower's expense, at any
time, or from time to time, all acts and things which the Administrative Agent
reasonably deems necessary to protect, preserve or realize upon the Collateral
and the Administrative Agent's security interest therein, in order to effect the
intent of this Agreement, all as fully and effectively as such Borrower might
do. Each of the Borrowers hereby ratifies all that said attorneys shall lawfully
do or cause to be done by virtue hereof. This power of attorney is a power
coupled with an interest and shall be irrevocable.
(a) ADMINISTRATIVE AGENT NOT LIABLE.
The powers conferred on the Administrative Agent
hereunder are solely to protect its interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The
Administrative Agent shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and
neither it nor any of its officers, directors, employees or
Administrative Agents shall be responsible to the Borrowers for any act
or failure to act, except for its own gross negligence or willful
misconduct.
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(b) PERFORMANCE BY ADMINISTRATIVE AGENT OF THE BORROWERS'
OBLIGATIONS.
If a Borrower fails to perform or comply with any of
its agreements contained herein and an Event of Default shall have
occurred which is continuing and has not been waived in accordance with
Section 14.1 hereof, and the Administrative Agent shall itself perform
or comply, or otherwise cause performance or compliance, with such
agreement, the expenses of the Administrative Agent incurred in
connection with such performance or compliance, together with interest
thereon at the highest rate of interest that would from time to time
apply to any Type of Borrowing under Section 2.14, shall be payable by
such Borrower to the Administrative Agent on demand and upon the
expiration of five (5) calendar days after such demand such Borrower
shall be deemed to have delivered a Deemed Credit Request in the
relevant amounts. The Administrative Agent will notify the Borrower
Representative as soon as it is practicable of any action taken by it
of the nature referred to herein.
14.3 JUDGMENT CURRENCY.
(a) CONVERSION.
If, for the purpose of obtaining judgment in any
court, it is necessary to convert a sum owing hereunder in one currency
into another currency, each party hereto agrees, to the fullest extent
that it may effectively do so, that the rate of exchange used shall be
that at which in accordance with normal banking procedures in the
relevant jurisdiction the first currency could be purchased with such
other currency on the Business Day immediately preceding the day on
which final judgment is given.
(b) DISCHARGE.
The obligations of each Borrower in respect of any
sum due to any party hereto or any holder of the obligations owing
hereunder (the "Applicable Creditor") shall, notwithstanding any
judgment in a currency (the "Judgment Currency") other than the
currency in which such sum is stated to be due hereunder (the
"Agreement Currency"), be discharged only to the extent that, on the
Business Day following receipt by the Applicable Creditor of any sum
adjudged to be so due in the Judgment Currency, the Applicable Creditor
may in accordance with the normal banking procedures in the relevant
jurisdiction purchase the Agreement Currency with the Judgment
Currency; if the amount of the Agreement Currency so purchased is less
than the sum originally due the Applicable Creditor in the Agreement
Currency, such Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify the Applicable Creditor
against such loss. The obligations of the Borrowers contained in this
Section 14.3 shall survive the termination of this Agreement and the
payment of all other amounts owing hereunder.
(c) COSTS OF CONVERSION.
For purposes of determining the equivalent in one
currency as provided in this section, such amount shall include any
premium and costs payable in connection with the conversion into or
from the Judgment Currency.
14.4 CUMULATIVE PROVISIONS.
Each right, power or privilege specified or referred to in
this Agreement is in addition to and not in limitation of any other rights,
powers and privileges that the
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Administrative Agent and the Banks may otherwise have or acquire by operation of
Law, by other contract or otherwise.
14.5 EFFECTIVE AGREEMENT; BINDING EFFECT.
This Agreement shall become effective on the date and as of
the time (the "Effective Date") on and as of which each of the Borrowers, each
of the Banks, Designated Swing Line Lenders and Designated Letter of Credit
Issuers, and any European Administrative Agents shall have signed a copy hereof
(whether the same or different copies) and, in the case of each of the Borrowers
shall have delivered the same to the Administrative Agent at the address
specified in Section 14.13 or, in the case of the Banks, the Designated Swing
Line Lenders, the Designated Letter of Credit Issuers, and any European
Administrative Agents, shall have given to the Administrative Agent telephonic
(confirmed in writing), written telex or facsimile transmission notice (actually
received) at such office that the same has been signed and mailed to it. As of
the Effective Time, this Agreement shall be binding upon and inure to the
benefit of the Borrowers, the Administrative Agents, the Banks, the Designated
Swing Line Lenders and the Designated Letter of Credit Issuers, and their
respective successors and assigns, except that the Borrowers shall not have the
right to assign its rights hereunder or any interest herein without the prior
unanimous written consent in accordance with Section 14.1 hereof of the
Administrative Agent, the Banks, the Designated Swing Line Lenders and the
Designated Letter of Credit Issuers.
14.6 COSTS AND EXPENSES.
Each of the Borrowers agrees to pay on demand all reasonable
costs and expenses of: (a) the Administrative Agent (including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Administrative Agent) in connection with (i) the preparation, execution,
delivery, administration, modification, amendment and waiver of this Agreement
or the other Loan Documents and (ii) the arrangement on or after the Closing
Date of a syndicate of Banks to purchase a portion of the Commitments (including
travel and administration expenses of the Administrative Agent and Syndication
Agent); provided, however, that the Borrowers shall not be responsible to pay
for any costs or expenses of the Designated Swing Line Lenders, the Designated
Letter of Credit Issuers or the Banks (including, without limitation, the fees
and out-of-pocket expenses of counsel to the Designated Swing Line Lenders, the
Designated Letter of Credit Issuers and the Banks) in connection with any of the
matters specified in clauses (a)(i) and (ii) above and (b) the Administrative
Agent, any other Agent, the Designated Swing Line Lenders, the Designated Letter
of Credit Issuers and the Banks (including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel to the Administrative Agent, such
other Agents, the Designated Swing Line Lenders, the Designated Letter of Credit
Issuers and the Banks) in connection with the enforcement of, the exercise of
remedies under, or the preservation of rights and remedies under this Agreement
or any of the other Loan Documents (including any collection, bankruptcy or
other enforcement proceedings arising with respect to such Borrower, this
Agreement, or any Event of Default under this Agreement).
14.7 SURVIVAL OF PROVISIONS.
All representations and warranties made in or pursuant to this
Agreement shall survive the execution and delivery of this Agreement and of the
Notes. The provisions of Section 12.4 and Section 13 of this Agreement shall
survive the payment of the Obligations and any other Indebtedness owed by the
Borrowers hereunder and the termination of this Agreement (whether by
acceleration or otherwise).
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14.8 CAPTIONS.
The several captions to different Sections and the respective
subsections thereof are inserted for convenience only and shall be ignored in
interpreting the provisions of this Agreement.
14.9 SHARING OF INFORMATION.
Subject to the provisions of Section 12.4, each Bank,
Designated Swing Line Lender and Designated Letter of Credit Issuer shall have
the right to furnish to its Affiliates, its accountants, its employees, its
officers, its directors, its legal counsel, potential participants, and to any
governmental agency having jurisdiction over such Bank, Designated Swing Line
Lender and Designated Letter of Credit Issuer information concerning the
business, financial condition, and property of the Borrowers, the amount of the
Loans of the Borrowers hereunder, and the terms, conditions and other provisions
applicable to the respective parts thereof.
14.10 INTEREST RATE LIMITATION.
Notwithstanding anything herein to the contrary, if at any
time the applicable interest rate, together with all fees and charges that are
treated as interest under applicable law as provided for herein or in any other
document executed in connection herewith, or otherwise contracted for, charged,
taken, received or reserved by any Bank or any Designated Swing Line Lender
shall exceed the maximum lawful rate that may be contracted for, charged, taken,
received or reserved by the Bank in accordance with applicable law (the "Maximum
Lawful Rate"), then so long as the Maximum Lawful Rate would be so exceeded, the
rate of the rate of interest and all such charges payable, contracted for,
charged, taken, received or reserved in respect of the Loans of the Banks or the
Designated Swing Line Lenders to the Borrowers shall be equal to the Maximum
Lawful Rate; provided, that, if any time thereafter the applicable interest
rate, together with all fees and charges that are treated as interest under
applicable law as provided for herein or in any other document executed in
connection herewith, or otherwise contracted for, charged, taken, received or
reserved by the Banks shall be less than the Maximum Lawful Rate, the Borrowers
shall continue to pay such interest and fees hereunder at the Maximum Lawful
Rate until such time as the total interest received by the Administrative Agent
for the benefit of the Banks and the Designated Swing Line Lenders, is equal to
the total interest and fees that would have been received had the interest rate
payable hereunder been (but for the operation of this Section 14.10) the
interest rate payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, interest payable hereunder shall be paid at the rate(s)
of interest and the charges provided in Section 2.13 of this Agreement, unless
and until the rate of interest again exceeds the Maximum Lawful Rate, and at
that time this Section 14.10 shall again apply. In no event shall the total
interest, together with all fees and charges that are treated like interest,
received by any Bank or Designated Swing Line Lender pursuant to the terms
hereof exceed the amount which such Bank or Designated Swing Line Lender could
lawfully have received had the interest and such fees and charges due hereunder
been calculated for the full term hereof at the Maximum Lawful Rate. If,
notwithstanding the provisions of this Section 14.10, a court of competent
jurisdiction shall finally determine that a Bank or Designated Swing Line Lender
has received interest, or fees and charges that are treated like interest,
hereunder in excess of the Maximum Lawful Rate, the Administrative Agent shall,
to the extent permitted by applicable Law, promptly apply such excess to the
principal amounts owing to such Bank or Designated Swing Line Lender and
thereafter shall refund any excess to the Borrowers or as a court of competent
jurisdiction may otherwise order.
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14.11 LIMITATION OF LIABILITY.
To the extent permitted by applicable law, no claim may be
made by the Borrowers, the Administrative Agent, any other Agent, any Designated
Swing Line Lender, any Designated Letter of Credit Issuer, any Bank or any other
Person against the Administrative Agent, any such Designated Swing Line Lender,
Designated Letter of Credit Issuer or Bank, or the Affiliates, directors,
officers, employees, Administrative Agents, attorneys and consultants of any of
them, for any special, indirect, consequential or punitive damages in respect of
any claim for breach of contract or any other theory of liability arising out of
or related to the transactions contemplated by this Agreement, or any act,
omission or event occurring in connection therewith; and the Administrative
Agent, the Designated Swing Line Lenders, the Designated Letter of Credit
Issuers, the Borrowers and the Banks hereby waive, release and agree not to sue
upon any claim for any such damages, whether or not accrued and whether or not
known or suspected to exist in its favor.
14.12 ILLEGALITY.
If any provision in this Agreement or any other Loan Document
shall for any reason be or become illegal, void or unenforceable, that
illegality, voidness or unenforceability shall not affect any other provision.
14.13 NOTICES.
All notices, requests, demands and other communications
provided for hereunder shall be in writing and shall be given solely: (a) by
hand delivery or by overnight courier delivery service, with all charges paid,
(b) by facsimile transmission, if confirmed same day in writing by first class
mail mailed, or (c) by registered or certified mail, postage prepaid and
addressed to the parties. For the purposes of this Agreement, such notices shall
be deemed to be given and received: (i) if by hand or by overnight courier
service, upon actual receipt, (ii) if by facsimile transmission, upon receipt of
machine-generated confirmation of such transmission (and provided the
above-stated written confirmation is sent) or (iii) if by registered or
certified mail, upon the first to occur of actual receipt or the expiration of
48 hours after deposit with the U.S. Postal Service; provided, however, that
notices from the Borrower Representative to Administrative Agent, the Designated
European Administrative Agent the Banks, the Designated Swing Line Lenders or
the Designated Letter of Credit Issuers pursuant to any of the provisions
hereof, including without limitation Section 2 and Section 7.1 of this
Agreement, shall not be effective until actually received by the Administrative
Agent, the Designated European Administrative Agent, the Banks, the Designated
Swing Line Lenders or the Designated Letter of Credit Issuers, as the case may
be. Notices or other communications hereunder shall be addressed, if to the
Borrowers, to the address specified on the signature pages of this Agreement; if
to the Administrative Agent, to the Notice Office of the Administrative Agent
specified on the signature pages of this Agreement; if to any Designated
European Administrative Agent, to the Notice Office of such Designated European
Administrative Agent specified on the signature pages of the joinder agreement
pursuant to which such Designated European Administrative Agent is selected and
becomes a party to this Agreement; if to a Bank, to the Notice Office of such
Bank specified on the signature pages of this Agreement or, if such Bank shall
have become a party hereto pursuant to Section 12.1, in the most recent
Assignment Agreement to which such Bank is a party; if to the Designated Swing
Line Lender, to the Notice Office of such Designated Swing Line Lender specified
on the signature pages of this Agreement and, if to the Designated Letter of
Credit Issuer, to the Notice Office of such Designated Letter of Credit Issuer
specified on the signature pages of this Agreement.
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14.14 GOVERNING LAW.
This Agreement and the other Loan Documents and the respective
rights and obligations of the parties hereto shall be governed by and construed
in accordance with the internal laws of the State of Ohio (without giving effect
to the conflict of laws rules thereof and except to the extent perfection of the
Administrative Agent's security interests and Liens and the effect thereof are
otherwise governed pursuant to the UCC or the applicable Law of any foreign
jurisdiction).
14.15 ENTIRE AGREEMENT.
This Agreement and the other Loan Documents referred to in or
otherwise contemplated by this Agreement set forth the entire agreement of the
parties as to the transactions contemplated by this Agreement.
14.16 JURY TRIAL WAIVER.
EACH OF THE BORROWERS, THE ADMINISTRATIVE AGENT, EACH OF THE
DESIGNATED SWING LINE LENDERS, EACH OF THE DESIGNATED LETTER OF CREDIT ISSUERS
AND EACH OF THE BANKS WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE
BORROWERS, THE ADMINISTRATIVE AGENT, THE DESIGNATED SWING LINE LENDERS, THE
DESIGNATED LETTER OF CREDIT ISSUERS AND THE BANKS, OR ANY THEREOF, ARISING OUT
OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THE TRANSACTIONS RELATED THERETO.
14.17 JURISDICTION.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY OHIO STATE COURT OR FEDERAL COURT OF THE UNITED STATED OF
AMERICA SITTING IN CUYAHOGA COUNTY, OHIO, AND ANY APPELLATE COURT FROM ANY
THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTES OR ANY LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF
ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH OHIO STATE OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT
A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY
MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT,
THE NOTES OR ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION.
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14.18 VENUE; INCONVENIENT FORUM.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO
SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
NOTES OR ANY OTHER LOAN DOCUMENT IN ANY OHIO STATE OR FEDERAL COURT SITTING IN
OHIO. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING IN ANY SUCH COURT. EACH OF THE BORROWERS CONFIRMS THAT THE
FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.
14.19 EXECUTION IN COUNTERPARTS; EXECUTION BY FACSIMILE.
This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement. Delivery of an executed counterpart
hereof by facsimile shall be effective as manual delivery of such counterpart;
provided, however, that, each party hereto will promptly thereafter deliver
counterpart originals of such counterpart facsimiles delivered by or on behalf
of such party.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers or Administrative Agents thereunto duly
authorized, as of the date first above written.
INSTRON CORPORATION
By: /s/ John R. Barrett
------------------------------
John R. Barrett, Vice President
ADDRESS FOR NOTICES:
Instron Corporation
100 Royall Street
Canton, MA 02021
Attention: President
Telephone: (781) 828-2500
Telecopy: (781) 575-5765
With a copy to:
Kirtland Capital Partners III L.P.
2550 SOM Center Road, Suite 105
Willoughby Hills, OH 44094
Attention: Thomas N. Littman
Telephone: 440-585-9010
Telecopy: 440-585-9699
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INSTRON, LTD.
By: /s/ John R. Barrett
--------------------------------------------
John R. Barrett, Duly Authorized Attorney
ADDRESS FOR NOTICES:
Instron Corporation, as Borrower Representative
100 Royall Street
Canton, MA 02021
Attention: President
Telephone: (781) 828-2500
Telecopy: (781) 575-5765
With a copy to:
Instron, Ltd.
Coronation Road
High Wycombe
Bucks, HP12 3SY
United Kingdom
Attention: Managing Director
Telephone: 44-1494-464-646
Telecopy: 44-1494-456-123
128
<PAGE> 138
INSTRON SCHENCK TESTING SYSTEMS, GMBH
By: /s/John R. Barrett
--------------------------------------------
John R. Barrett, Duly Authorized Attorney
ADDRESS FOR NOTICES:
Instron Corporation, as Borrower Representative
100 Royall Street
Canton, MA 02021
Attention: President
Telephone: (781) 828-2500
Telecopy: (781) 575-5765
With a copy to:
Instron Schenck Testing Systems, GmbH
Landwehrstrasse 55
Darmstadt D64293
Federal Republic of Germany
Attention: ________________
Telephone: _______________
Telecopy: ________________
129
<PAGE> 139
INSTRON WOLPERT GMBH
By: /s/ John R. Barrett
--------------------------------------------
John R. Barrett, Duly Authorized Attorney
ADDRESS FOR NOTICES:
Instron Corporation, as Borrower Representative
100 Royall Street
Canton, MA 02021
Attention: President
Telephone: (781) 828-2500
Telecopy: (781) 575-5765
With a copy to:
Instron Wolpert GmbH
Landwehrstrasse 55
Darmstadt D64293
Federal Republic of Germany
Attention: Managing Director
Telephone: 49-69-6151-324-700
Telecopy: 49-69-6151-324-900
130
<PAGE> 140
THE ADMINISTRATIVE AGENT
NATIONAL CITY BANK, as Administrative Agent
By: /s/ Donald B. Hayes
-----------------------------------------
Donald B. Hayes, Senior Vice President
PAYMENT OFFICE:
National City Bank, as Administrative Agent
National City Bank, Administrative Agent Services
1900 East 9th Street
Cleveland, Ohio 44114
Attention: Kim Stephenson
Telephone: (216) 575-2398
Telecopy (216)-222-0012
NOTICE OFFICE:
National City Bank, as Administrative Agent
National City Center
1900 East Ninth Street
Cleveland, Ohio 44114
Attention: Donald B. Hayes, SVP.
Telephone (216) 575-2120
Telecopy: (216) 575-9396
131
<PAGE> 141
NATIONAL CITY BANK, as the Designated
U.S. Letter of Credit Issuer
By: /s/ Donald B. Hayes
---------------------------------------------
Donald B. Hayes, Senior Vice President
LENDING OFFICE:
National City Bank, as the Designated U.S. Letter
of Credit Issuer
1900 East Ninth Street
Cleveland, Ohio 44114
Attention: Kim Stephenson
Telephone: (216) 575-2398
Telecopy (216)-222-0012
NOTICE OFFICE:
National City Bank, as the Designated U.S. Letter
of Credit Issuer
National City Center
1900 East Ninth Street
Cleveland, Ohio 44114
Attention: Donald B. Hayes, SVP.
Telephone (216) 575-2120
Telecopy: (216) 575-9396
132
<PAGE> 142
THE BANKS
NATIONAL CITY BANK, as a Bank
By: /s/ Donald B. Hayes
----------------------------------------
Donald B. Hayes, Senior Vice President
LENDING OFFICE:
National City Bank, as a Bank
1900 East 9th Street
Cleveland, Ohio 44114
Attention: Kim Stephenson
Telephone: (216) 575-2398
Telecopy (216)-222-0012
NOTICE OFFICE:
National City Bank, as a Bank
National City Center
1900 East Ninth Street
Cleveland, Ohio 44114
Attention: Donald B. Hayes, SVP.
Telephone (216) 575-2120
Telecopy: (216) 575-9396
133
<PAGE> 143
134
<PAGE> 144
ANNEX I
TO
CREDIT AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 29, 1999,
AMONG THE BORROWERS, THE ADMINISTRATIVE AGENT (AND THE DESIGNATED EUROPEAN
ADMINISTRATIVE AGENTS, THE BANKS, THE DESIGNATED SWING LINE LENDERS AND THE
DESIGNATED LETTER OF CREDIT ISSUERS, AS DESIGNATED HEREUNDER)
REVOLVING CREDIT COMMITMENTS AND PERCENTAGES OF THE BANKS
<TABLE>
<CAPTION>
Bank Revolving Credit Percentage Term Loan Commitment Percentage Total
Commitment
<S> <C> <C> <C> <C> <C>
National City Bank $50,000,000 100% $30,000,000 100% 100%
Totals: $50,000,000 100% $30,000,000 100% $80,000,000
</TABLE>
I-1
<PAGE> 145
ANNEX II
TO
CREDIT AND SECURITY AGREEMENT
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"ACCOUNTS" means "accounts" (as defined in the UCC) including,
without limitation, all present and future rights to payment for goods
sold or leased or for services rendered, which are not evidenced by
Instruments or Chattel Paper, and whether or not they have been earned
by performance.
"ACCOUNT DEBTOR" means any Person who is or becomes obligated
to a Borrower under, with respect to, or on account of an Account.
"ACCUMULATED FUNDING DEFICIENCY" has the meaning ascribed
thereto in section 302(a)(2) of ERISA.
"ACQUISITION" means and includes (i) any acquisition on a
going concern basis (whether by purchase, lease or otherwise) of any
facility and/or business operated by a Person which is not a Subsidiary
of a Borrower and (ii) any acquisition of all or a majority interest in
the outstanding equity or other similar interests in any corporate
Person or limited liability company Person (whether by merger, stock
purchase, creation of a corporate joint venture or otherwise).
"ACQUISITION COMPANY" means ISN Acquisition Corporation, a
Massachusetts corporation.
"ADDITIONAL BORROWER ADDENDUM" means the Additional Borrower
Addendum , the form of which is set forth as Annex V to this Agreement,
whereby a signatory thereto becomes Borrower hereunder pursuant to
Section 1.4 of this Agreement.
"ADMINISTRATIVE AGENT" means National City Bank, a national
banking association, in its capacity as Administrative Agent for the
Banks, each Designated Swing Line Lender, each Designated Letter of
Credit Issuer and any Designated Hedge Creditor.
"ADVANTAGE" means any payment (whether made voluntarily or
involuntarily, by offset of any deposit or other Indebtedness or
otherwise) received by a Bank in respect of the Obligations if the
payment results in any other Bank's having more than its Ratable
Portion of the Obligations in question.
"AFFILIATE" means, with respect to a specified Person, any
other Person: (a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with such specified Person, (b) which beneficially owns or
holds with power to vote five percent (5%) or more of any class of the
voting stock of such specified Person, (c) five percent (5%) or more of
the voting stock of which other Person is beneficially owned or held by
such specified Person, or (d) who is an executive officer or director
of such specified Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
II-1
<PAGE> 146
"AGENTS" means any and all of the Administrative Agent, any
Designated European Administrative Agent and the Syndication Agent.
"AGENT FEE LETTER" means that certain letter executed by the
Borrowers and the Administrative Agent, dated May 3, 1999.
"AGGREGATE SWING LINE COMMITMENT" has the meaning specified in
Section 2.7(a) of this Agreement.
"AGREEMENT" means this Credit and Security Agreement and each
amendment, supplement or modification, if any, to this Credit and
Security Agreement.
"ALTERNATE BASE RATE" means, for any day, a rate per annum
equal to the higher of: (a) the rate of interest which is established
from time to time by NCB at its principal office in Cleveland, Ohio as
its "prime rate" or "base rate" in effect, such rate to be adjusted
automatically, without notice, as of the opening of business on the
effective date of any change in such rate (it being agreed that: (i)
such rate is not necessarily the lowest rate of interest then available
from NCB on fluctuating rate loans and (ii) such rate may be
established by NCB by public announcement or otherwise) and (b) the
Federal Funds Effective Rate in effect on such day plus one half of one
percent (1/2 of 1%) per annum.
"ALTERNATE BASE RATE LOAN" means a Loan, denominated in
Dollars, which bears interest as provided in Section 2.13(a)(i) of this
Agreement.
"ALTERNATE BASE RATE BORROWING" means a Borrowing consisting
of Alternate Base Rate Loans.
"ALTERNATE CURRENCY" means and includes:
(i) German Marks, Pounds Sterling and Euros, if at the
time of any Credit Request applicable thereto, such
currency is readily and freely transferable and
convertible into Dollars; and
(ii) any other lawful currency other than Dollars which at
the time of any Credit Request applicable thereto is
readily and freely transferable and convertible into
Dollars and which (A) in the case of any Revolving
Loans to be denominated in such Alternate Currency,
is acceptable to all of the Banks with Revolving
Credit Commitments, (B) in the case of any Swing Line
Loans to be denominated in such Alternate Currency,
is acceptable to the applicable Designated Swing Line
Lender and all of the Banks, and (C) in the case of
any Letter of Credit which is payable in such
Alternate Currency, is acceptable to applicable
Designated Letter of Credit Issuer and all of the
Banks.
"ALTERNATE CURRENCY LC EXPOSURE" means, with respect to any
Bank, at any time of determination, such Bank's Ratable Portion of the
sum of: (a) the aggregate undrawn amount of all Letters of Credit
outstanding at such time that are issued in Alternate Currency
denominations, plus (b) the aggregate amount that has been drawn under
such Letters of Credit issued in Alternate Currency denominations for
which the applicable Designated Letter of Credit Issuer or the Banks,
as the case may be, have not at such time been reimbursed by the
Borrower.
"ALTERNATE CURRENCY SWING LINE EXPOSURE" means, with respect
to any Bank, at any time of determination, such Bank's Ratable Portion
of the aggregate principal
II-2
<PAGE> 147
amount of Swing Line Loans denominated in Alternate Currencies
outstanding at such time that have been advanced by all of the
Designated Swing Line Lenders to all of the Borrowers
"ALTERNATE CURRENCY SUBLIMIT" has the meaning specified in
Section 2.1(a).
"APPLICABLE FEE PERCENTAGE" means, (a) from the Closing Date
until April 1, 2000, a percentage equal to (i) 3.00% per annum with
respect to the risk participation fee payable on outstanding Letters of
Credit under Section 2.16(d)(i), and (ii) 0.50% per annum with respect
to the unused commitment fee payable under Section 2.16(c), and (b)
with respect to any Fee Percentage Adjustment Date commencing on and
after April 1, 2000, the applicable percentage corresponding to the
Consolidated Total Funded Debt to Adjusted EBITDA Ratio set forth below
(determined on the basis of the Consolidated Total Funded Debt to
Adjusted EBITDA Ratio for the Testing Period ending on the Fee
Percentage Determination Date applicable to such Fee Percentage
Adjustment Date):
<TABLE>
<CAPTION>
---------------------------------------------------------------
Consolidated Total Applicable Unused Applicable Letter
Funded Debt to Commitment Fee of Credit Fee
Adjusted EBITDA Ratio Percentage Percentage
---------------------------------------------------------------
<S> <C> <C>
> 3.75 to 1 0.500% 3.00%
---------------------------------------------------------------
> 3.00 to 1 but 0.50% 2.75%
<or = 3.75 to 1
---------------------------------------------------------------
<or = 3.00 to 1 0.50% 2.50%
---------------------------------------------------------------
</TABLE>
"APPLICABLE MARGIN" means (i) from the Closing Date until
April 1, 2000, 3.00% per annum with respect to LIBOR Rate Loans
comprising a Revolving Credit Borrowing, a Term Loan Borrowing or a
Swing Line Loan and 1.50% per annum with respect to Alternate Base Rate
Loans comprising a Revolving Credit Borrowing or a Term Loan Borrowing,
and (ii) with respect to any Margin Adjustment Date commencing on and
after April 1, 2000, the percentage per annum applicable to Alternate
Base Rate Loans or LIBOR Rate Loans, as the case may be, corresponding
to the Consolidated Total Funded Debt to Adjusted EBITDA Ratio set
forth below (determined on the basis of the Consolidated Total Funded
Debt to Adjusted EBITDA Ratio for the Testing Period ending on the
Margin Determination Date applicable to such Margin Adjustment Date):
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Consolidated Total Funded LIBOR Rate Loan Alternate Base Rate Loan
Debt to Adjusted EBITDA Ratio
-----------------------------------------------------------------------------------
<S> <C> <C>
> 3.75 to 1 3.00% 1.50%
-----------------------------------------------------------------------------------
> 3.00 to 1 but 2.75% 1.25%
<or = 3.75 to 1
-----------------------------------------------------------------------------------
<or = 3.00 to 1 2.50% 1.00%
-----------------------------------------------------------------------------------
</TABLE>
II-3
<PAGE> 148
"ASSIGNMENT AGREEMENT" has the meaning specified in Section
12.1(b).
"BANKS" means the financial institutions listed on the
signature pages hereof as "Banks" and the successors thereto and
assignees thereof.
"BORROWER" means any of the Borrowers and such other
Wholly-Owned Subsidiaries of any Borrower as may from time to time
execute an Additional Borrower Addendum which is accepted by the
Administrative Agent and the Lenders pursuant to Section 1.4 of this
Agreement and otherwise satisfies the terms and conditions of this
Agreement.
"BORROWER GUARANTOR" means each Domestic Borrower with respect
to the Obligations owing to the Banks by the other Borrowers and
expressly excludes any Foreign Borrower.
"BORROWER GUARANTY" means the joint and several obligation of
each Borrower Guarantor to pay the Obligations of the other Borrowers
pursuant to Section 10 of this Agreement.
"BORROWER REPRESENTATIVE" means Instron Corporation.
"BORROWERS" means each of Instron Corporation, Instron, Ltd.,
Instron Wolpert GmbH and Instron Schenck Testing Systems, GmbH and such
other Wholly-Owned Subsidiaries of any Borrower as may from time to
time execute an Additional Borrower Addendum which is accepted by the
Administrative Agent and the Banks pursuant to Section 1.4 of this
Agreement and otherwise satisfies the terms and conditions of this
Agreement.
"BORROWING" means a group of Loans of a single Type,
denominated in a single currency, made by the Banks on a single date
and as to which a single Interest Period is in effect (i.e., any group
of Loans made by the Banks of a different Type, or having a different
Interest Period (regardless of whether such Interest Period commences
on the same date as another Interest Period), or made on a different
date shall be considered to comprise a different Borrowing).
"BORROWING BASE" means, at any date of determination, an
amount not in excess of an amount equal to the sum of:
(i) eighty-five percent (85%) of the amount due and
owing on the Eligible Accounts of the Borrowers, plus ----
(ii) fifty percent (50%) of the cost or market value
(whichever is lower) of the Eligible Inventory of the
Borrowers;
provided, however, that the above-stated advance rates shall be subject
to, and the Administrative Agent hereby reserves the right and shall be
entitled to, upon receipt of: (i) inventory audit and receivable
testing (which shall be conducted promptly and by a Person reasonably
satisfactory to the Administrative Agent) and (ii) an asset based field
examination and collateral audit of each of the Borrowers, which shall
be in each case be conducted promptly after the Closing Date and shall
otherwise be in substance satisfactory to the Administrative Agent, in
its reasonable discretion, to adjust the advance rates above specified
to the extent deemed appropriate by the Administrative Agent, in the
good faith exercise of customary credit judgment.
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<PAGE> 149
"BORROWING BASE CERTIFICATE" has the meaning specified in
Section 7.1(c)(iii) of this Agreement.
"BUSINESS DAY" means: (i) for purposes other than those
covered by clause (ii), (iii) or (iv) below, a day of the year on which
banks are not required or authorized to close in the city in which the
applicable Lending and Payment Office of the Administrative Agent, the
applicable Designated Swing Line Lender or applicable Designated Letter
of Credit Issuer, as the case may be, is located, and (ii) if the
applicable Business Day is relevant to notices and determinations in
connection with, and payments of principal and interest on, LIBOR Rate
Loans denominated in Dollars, a day of the year which is a Business Day
described in clause (i) above and which is also a day on which dealings
in Dollar deposits are carried on in the London interbank market and
banks are open for business in London, (iii) if the applicable Business
Day is relevant to notices and determinations in connection with, and
payments of principal and interest on, LIBOR Rate Loans or Swing Line
Loans denominated in an Alternate Currency, a day of the year which is
a Business Day described in clause (i) and (ii) above and which is also
a day on which banks are open for general banking business in the city
which is the principal financial center of the country of issuance of
such Alternate Currency, or (iv) if the applicable Business Day is
relevant to notices and determinations in connection with, and payments
of principal and interest on, LIBOR Rate Loans or Swing Line Loans
denominated in the Euro (or any National Currency Unit), a day of the
year which is a Business Day described in clause (i), (ii) and (iii)
above and which is also TARGET Operating Day.
"CASH EQUIVALENT" means (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (PROVIDED that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than one year from the date of
acquisition, (ii) U.S. dollar denominated time deposits, certificates
of deposit and bankers' acceptances of (x) any Bank or (y) any bank
whose short-term commercial paper rating from S&P is at least A-1 or
the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank, an "Approved Lender"), in each case
with maturities of not more than 90 days from the date of acquisition,
(iii) commercial paper issued by any Bank or Approved Lender or by the
parent company of any Banks or Approved Lender and commercial paper
issued by, or guaranteed by, any industrial or financial company with a
short-term commercial paper rating of at least A-1 or the equivalent
thereof by S&P or at least P-1 or the equivalent thereof by Moody's, or
guaranteed by any industrial company with a long term unsecured debt
rating of at least A or A2, or the equivalent of each thereof, from S&P
or Moody's, as the case may be, and in each case maturing within 90
days after the date of acquisition and (iv) investments in money market
funds substantially all the assets of which are comprised of securities
of the types described in clauses (i) through (iii) above.
"CAPITAL EXPENDITURES" means any and all amounts invested,
expended or incurred (including Indebtedness under Capitalized Leases)
by a Person in respect of the purchase, acquisition, improvement,
renovation or expansion of any land and depreciable or amortizable
property of such Person (including, without limitation, expenditures
required to be capitalized in accordance with GAAP), each as determined
on a consolidated basis in accordance with GAAP; provided, however,
that, in the case of Instron Corporation and its consolidated
Subsidiaries, a "Capital Expenditure" resulting from a Permitted
Acquisition will be excluded in determining the aggregate amount
Capital Expenditures of Instron Corporation and its consolidated
Subsidiaries.
II-5
<PAGE> 150
"CAPITALIZED LEASE OBLIGATIONS" means all obligations under
Capitalized Leases of a Person in each case taken into account in the
amount thereof accounted for as liabilities identified as "capitalized
lease obligations" (or any similar words) on a consolidated balance
sheet of such Person and its Subsidiaries, as determined on a
consolidated basis in accordance with GAAP.
"CAPITALIZED LEASES" means, in respect of any Person, any
lease of property imposing obligations on such Person, as lessee of
such property, which are required in accordance with GAAP to be
capitalized on a balance sheet of such Person.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. Sections
9601 et seq.
"CHANGE IN CONTROL" means: from and after the Closing Date (i)
the ceasing of Instron Corporation to have record and beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as
amended) or control of ninety-five percent (95%) (on a fully-diluted
basis, disregarding any director qualifying share ownership) of the
combined voting power or economic benefit of the then outstanding
equity interests of Instron, Ltd. and Instron GmbH (or any successor,
by operation of law or otherwise, or assign thereof) entitled to vote
generally in the election of directors or their foreign equivalents, as
the case may be, of such Borrowers, (ii) the ceasing of Instron, Ltd.
to have record and beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended) or control of ninety-five percent
(95%) (on a fully-diluted basis, disregarding any director qualifying
share ownership) of the combined voting power or economic benefit of
the then outstanding equity interests of Instron International, Ltd.,
(iii) the ceasing of Instron International, Ltd. to have record and
beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended) or control of ninety-five percent (95%) (on a
fully-diluted basis, disregarding any director qualifying share
ownership) of the combined voting power or economic benefit of the then
outstanding equity interests of Instron Wolpert GmbH (or any successor,
by operation of law or otherwise, or assign thereof) entitled to vote
generally in the election of directors or their foreign equivalents, as
the case may be, of such Borrowers, (iii) the ceasing of Instron GmbH
to have record and beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended) or control of ninety-five percent
(95%) (on a fully-diluted basis, disregarding any director qualifying
share ownership) of the combined voting power or economic benefit of
the then outstanding equity interests of Instron Schenck Testing
Systems, GmbH (or any successor, by operation of law or otherwise, or
assign thereof) entitled to vote generally in the election of directors
or their foreign equivalents, as the case may be, of such Borrowers,
(iv) the ceasing of Kirtland Capital and Affiliates thereof to have
record and beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended) or control of more than fifty percent (50%)
(on a fully-diluted basis, disregarding any director qualifying share
ownership) of the combined voting power or economic benefit of the then
outstanding equity interests of Instron Corporation (or any successor,
by operation of law or otherwise, or assign thereof) entitled to vote
generally in the election of directors; or (iv) individuals who
constitute the board of directors of Instron Corporation on the Closing
Date (each an "Incumbent Board") shall cease to constitute for any
reason at least a majority of the Board of Directors of such Person at
any time; provided, that any Person becoming a director subsequent to
the date hereof whose election (or nomination for election) was
approved by a vote of at least 60% of the directors comprising an
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<PAGE> 151
Incumbent Board shall be considered for purposes hereof as though such
Person was a member of such Incumbent Board (and the former member of
such Incumbent Board who has been replaced thereby shall thereupon no
longer be considered to be a member of such Incumbent Board).
"CHARTER DOCUMENTS" means, as to any Person (other than a
natural person), the charter, certificate or articles of incorporation,
by-laws, regulations, general or limited partnership agreement,
certificate of limited partnership, certificate of formation, operating
agreement, or other similar organizational or governing documents of
such Person.
"CHATTEL PAPER" means "chattel paper" as defined in the UCC.
"CLOSING DATE" means the date and the time as of which the
initial Borrowings are made under this Agreement.
"COLLATERAL" means, collectively, the Domestic Borrower
Collateral and the U.K. Collateral.
"COMMITMENT" means, with respect to any Bank, such Bank's
Revolving Credit Commitment, if any, or its Term Commitment, if any, or
any or all of such Commitments of such Bank, as applicable.
"CONSOLIDATED ADJUSTED EBITDA" means, with respect to a
Person, for any period, (a) Consolidated EBIT of such Person and its
consolidated Subsidiaries for such period; plus (b) the sum (without
duplication) of the amounts taken into account for such period in
determining such Consolidated EBIT of (i) Consolidated Depreciation
Expense of such Person and its consolidated Subsidiaries for such
period, (ii) Consolidated Amortization Expense of such Person and its
consolidated Subsidiaries for such period, and (iii) Consolidated
Non-Cash Expenses of such Person and its consolidated Subsidiaries for
such period, all as determined on a consolidated basis in accordance
with GAAP; provided, however, that, notwithstanding anything to the
contrary contained herein, the Consolidated Adjusted EBITDA of Instron
Corporation and its consolidated Subsidiaries:
(A) shall be increased for any Testing Period ending as of or
prior to the Fiscal Quarter ended December 31, 1999, for purposes of
determining compliance with those financial covenants set forth in
Sections 7.4 during such Testing Period, by the amount of (a) with
respect to the Fiscal Quarter ending on March 31, 1999, $200,000, (b)
with respect to the Fiscal Quarter ending on June 30, 1999, $200,000,
and (c) with respect to the Fiscal Quarter ending on September 30,
1999, $200,000; and
(B) shall include for any Testing Period the appropriate
financial items for any Person or business unit of a Person which has
been acquired by the Borrowers on a going concern basis, for the
portion of such Testing Period prior to the date of acquisition;
provided that in so including financial items for such Person or
business unit for any period prior to the date of acquisition, such
items shall be included based on an assumed contribution to
Consolidated Adjusted EBITDA acceptable to the Required Banks in their
reasonable credit judgment; and
(C) shall exclude for any Testing Period the appropriate
financial items for any Person or business unit of a Person which has
been disposed of by the Borrowers, for the portion of such Testing
Period prior to the date of disposition; provided that in so excluding
financial items for such Person or business unit for any period prior
to the date
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<PAGE> 152
of disposition, such items shall be excluded based on an assumed
contribution to Consolidated Adjusted EBITDA acceptable to the Required
Banks in their reasonable credit judgment.
"CONSOLIDATED AMORTIZATION EXPENSE" means, with respect to a
Person, for any period, all amortization expenses of such Person and
its consolidated Subsidiaries during such period, as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED CAPITAL EXPENDITURES" means, with respect to a
Person for any period, all Capital Expenditures of such Person and its
consolidated Subsidiaries during such period, as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED DEPRECIATION EXPENSE" means, with respect to a
Person, for any period, all depreciation expenses of such Person and
its consolidated Subsidiaries during such period, as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED EBIT" means, with respect to a Person, for any
period, (a) Consolidated Net Income of such Person and its consolidated
Subsidiaries for such period; plus (b) the sum (without duplication) of
the amounts taken into account for such period in determining such
Consolidated Net Income of (i) Consolidated Interest Expense of such
Person and its consolidated Subsidiaries for such period, (ii)
Consolidated Income Tax Expense of such Person and its consolidated
Subsidiaries for such period, (iii) amortization or write-off of
deferred financing costs of such Person and its consolidated
Subsidiaries for such period, (iv) with respect to Instron Corporation
and its Consolidated Subsidiaries for any period, the amortization for
such period of the original issue discount incurred with respect to the
Senior Subordinated Notes, (v) Recapitalization Expenses and Costs,
(vi) Kirtland Capital Management Fees and fees paid to the Board of
Directors of Instron Corporation paid during such period not to exceed
$600,000 and (vii) extraordinary losses and losses on sales of assets
(other than sales of Inventory in the ordinary course of business of
such Person or its consolidated Subsidiaries) and other non-recurring
non-cash losses; less (c) the sum (without duplication) of the amounts
taken into account for such period in determining such Consolidated Net
Income of (i) gains on sales of assets (other than sales of Inventory
in the ordinary course of business of such Person or its consolidated
Subsidiaries) and (ii) other extraordinary gains and other
non-recurring non-cash gains; all as determined on a consolidated basis
in accordance with GAAP.
"CONSOLIDATED EBIT TO CONSOLIDATED INTEREST EXPENSE RATIO"
means, with respect to a Person, as at the end of any Fiscal Quarter,
the ratio of: (a) Consolidated EBIT of such Person and its consolidated
Subsidiaries for the Testing Period then ended to (b) the Consolidated
Interest Expense of such Person and its consolidated Subsidiaries for
the Testing Period then ended.
"CONSOLIDATED EXCESS CASH FLOW" means, with respect to a
Person, for any period of determination, the excess of: (a) the
Consolidated Adjusted EBITDA of such Person and its consolidated
Subsidiaries for such period over (b) the sum of (i) the Consolidated
Fixed Charges of such Person and its consolidated Subsidiaries for such
period plus (ii) any decrease (or minus any increase) in Consolidated
Working Capital from the last day of the immediately preceding period
to the last day of such period plus (iii) any voluntary prepayment of
outstanding Term Loans pursuant to 2.10(d) during such period.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect
to a Person, for any Testing Period, the ratio of: (x) the Consolidated
Adjusted EBITDA of such
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Person and its consolidated Subsidiaries for such period to (y) the
Consolidated Fixed Charges of such Person and its consolidated
Subsidiaries for such period, as determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED FIXED CHARGES" means, with respect to a Person,
for any period of determination, the sum of: (a) the Consolidated
Interest Expense of such Person and its consolidated Subsidiaries for
such period, plus (b) the Consolidated Income Tax Expense of such
Person and its consolidated Subsidiaries during such period, plus (c)
the Consolidated Capital Expenditures of such Person and its
consolidated Subsidiaries for such period, plus (d) all scheduled
principal payments (including the principal payment portion of any
scheduled Capitalized Lease rental payments) of such Person and its
consolidated Subsidiaries made during such period with respect to the
Consolidated Total Funded Debt, all as determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED INCOME TAX EXPENSE" means, with respect to a
Person, for any period, all taxes (based on the net income of such
Person and its consolidated Subsidiaries for such period) paid in cash
during such period (including, without limitation, any additions to
such taxes and any penalties and interest with respect thereto), all as
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to a
Person, for any period, (a) the net amount of interest expense of such
Person and its consolidated Subsidiaries paid in cash during such
period on the aggregate outstanding principal amount of the
Indebtedness of such Person and its consolidated Subsidiaries plus (b)
any capitalized interest of such Person and its consolidated
Subsidiaries which accrued during such period, plus (c) the interest
payment portion of any Capitalized Lease rental payment of such Person
and its consolidated Subsidiaries made during such period, all as
determined on a consolidated basis in accordance with GAAP, and
excluding, with respect to Instron Corporation and its Consolidated
Subsidiaries for any Testing Period, the amortization for such Testing
Period of the original issue discount incurred with respect to the
Senior Subordinated Notes.
"CONSOLIDATED NET INCOME" means, with respect to a Person, for
any period, the net income (or loss) of such Person and its
consolidated Subsidiaries for such period (after taxes and
extraordinary items but without giving effect to any expense related to
the fair market value adjustment of inventory) taken as a single
accounting period determined on a consolidated basis in conformity with
GAAP; provided, however, that there shall be excluded from Consolidated
Net Income of Instron Corporation and its consolidated Subsidiaries:
(i) the income, (or loss) of any entity (other than the consolidated
Subsidiaries of Instron Corporation) in which Instron Corporation or
any such consolidated Subsidiaries has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid
to Instron Corporation or any of its consolidated Subsidiaries during
such period, and (ii) the income of any Subsidiary of Instron
Corporation or any of its consolidated Subsidiaries to the extent that
the declaration or payment of dividends or similar distributions by
that Subsidiary of that income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary.
"CONSOLIDATED NET WORTH" means, with respect to a Person, as
of the date of determination, all amounts that would be included under
the caption "total shareholders' equity" (or any like caption) on a
consolidated balance sheet of such Person and its consolidated
Subsidiaries as at such date (and including in such amount the amount
in
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respect of any preferred stock of such Person), all as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED NON-CASH EXPENSES" means, with respect to a
Person, for any period, the non-cash expenses of such Person and its
consolidated Subsidiaries for such period (for the purposes of this
definition, excluding any capitalized interest and deferred taxes and
any write-offs of previously capitalized finance costs), all as
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED SENIOR FUNDED DEBT" means, with respect to a
Person, at any date of determination, (a) Consolidated Total Funded
Debt of such Person and its consolidated Subsidiaries less, (b) in the
case of Instron Corporation and its consolidated Subsidiaries, the then
outstanding principal amount of Subordinated Debt owing by any Borrower
or any Subsidiary thereof, all as determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED SENIOR FUNDED DEBT TO ADJUSTED EBITDA RATIO"
means, with respect to a Person, as at the end of any Fiscal Quarter,
the ratio of: (a) the aggregate principal amount of the Consolidated
Senior Funded Debt of such Person and its Subsidiaries outstanding as
of the end of such Fiscal Quarter to (b) the Consolidated Adjusted
EBITDA of such Person and its consolidated Subsidiaries for the Testing
Period then ended.
"CONSOLIDATED TOTAL FUNDED DEBT" means, with respect to a
Person, at any date of determination, without duplication, all
Indebtedness of such Person and its consolidated Subsidiaries which
consists of: (a) Indebtedness for borrowed money, (b) bonds, notes,
debentures and similar debt securities, (c) the deferred purchase price
of capital assets or services which in accordance with GAAP would be
shown on the liability side of a consolidated balance sheet of such
Person and its consolidated Subsidiaries, (d) all Capitalized Lease
Obligations, (e) the present value, determined on the basis of the
implicit interest rate, of all basic rental obligations under all
synthetic leases (i.e. leases accounted for by the lessee as operating
leases under which the lessee is the "owner" of the leased property for
Federal income tax purposes), (f) all obligations of such Person as an
account party in respect of letters of credit, banker's acceptances,
Demand Guarantees and Contract Guarantees (in each case valued at the
stated face amount there for, to the extent less, the stated or
determinable amount (or where not so stated or determinable, the
reasonably anticipated liability with respect to which such letters of
credit, banker's acceptances, Demand Guarantees and Contract Guarantees
were issued as determined in good faith by the Board of Directors of
Instron Corporation); provided, however, that, for all purposes of this
Agreement including determining the Borrowers' compliance with Sections
7.4(d) and 7.4(e) hereof and determining the Applicable Fee Percentage
and the Applicable Margin, obligations of the Borrowers and the
Subsidiaries thereof as account party in respect of (x) any unsecured
Existing Letters of Credit comprised of Demand Guarantees or Contract
Guarantees, (y) any unsecured renewals, extensions or replacements
thereof, and (z) any unsecured Demand Guarantees or Contract Guarantees
issued after the Effective Date which are not Letters of Credit issued
hereunder (in each case, valued at the stated face amount thereof or,
to the extent less, the stated or determinable amount (or where not so
stated or determinable, the reasonably anticipated liability with
respect to which such Existing Letter of Credit, renewals, extensions
or replacements or subsequently issued Demand Guarantees or Contract
Guarantees were issued as determined in good faith by the Board of
Directors of Instron Corporation) to the extent the aggregate thereof
is not in excess of the amount of such obligations permitted by Section
7.3(b)(ix) or Section ERROR! REFERENCE SOURCE NOT FOUND. hereof, shall
not be considered as Consolidated Total Funded Debt of Instron and
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its Consolidated Subsidiaries, (g) all net obligations of such Person
under Hedge Agreements, (h) the full outstanding value of trade
accounts receivable sold with full or limited recourse (other than
sales of delinquent accounts receivable for collection purposes), (i)
the stated value, or liquidation value (if higher), of all Redeemable
Stock of such Person, and (j) in the case of Instron Corporation and
its consolidated Subsidiaries, including the then outstanding principal
amount of all Loans owing by each of the Borrowers to the Banks under
this Agreement and all Subordinated Debt owing by any of the Borrowers,
all as determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED TOTAL FUNDED DEBT TO ADJUSTED EBITDA RATIO"
means, with respect to a Person, as at the end of any Fiscal Quarter,
the ratio of: (a) the aggregate principal amount of the Consolidated
Total Funded Debt of such Person and its Subsidiaries outstanding as of
the end of such Fiscal Quarter to (b) the Consolidated Adjusted EBITDA
of such Person and its Subsidiaries for the Testing Period then ended.
"CONSOLIDATED WORKING CAPITAL" means, with respect to a
Person, as of any date of determination, the excess of consolidated
current assets of such Person and its Subsidiaries on such date over
the consolidated current liabilities of such Person and its
Subsidiaries on such date, all as determined on a consolidated basis in
accordance with GAAP.
"CONTRACT GUARANTEE" means any guarantee or other payment
undertaking for the payment of money on presentation, in conformity
with the terms of such undertaking, supported by a judicial or arbitral
award justifying the claim for payment under the contract guarantee and
otherwise constituting a contract guarantee subject to the Uniform
Rules for Contract Guarantees (1978), International Chamber of Commerce
Publication No. 325, and any subsequent revisions thereof.
"CONTROL ACCOUNT" has the meaning set forth in Section 2.17(c)
of this Agreement.
"COST OF FUNDS RATE" means the interest rate per annum
determined from time to time by the Designated Swing Line Lender as its
cost of funds, which rate may not be the lowest cost of funds available
to the Designated Swing Line Lender, in any one or more money market to
which the Designated Swing Line Lender may have access which Cost of
Funds Rate shall be a fluctuating rate per annum (computed on the basis
of a year of 360 days for actual number of days elapsed) and shall
change automatically from time to time effective as of the time each
such change in such Cost of Funds rate is effective.
"CREDIT EVENT" means: (a) the making of a Revolving Credit
Loan by any Bank, (b) the making of any Swing Line Loan by any
Designated Swing Line Lender, (c) the issuance of any Letter of Credit
by a Designated Letter of Credit Issuer and the participation by the
Banks in the risk thereof, (d) the delivery by the Borrower of: (w) a
Credit Request requesting a Revolving Credit Borrowing, (x) a Swing
Line Loan Request requesting a Swing Line Loan, (y) a Letter of Credit
Request requesting a Letter of Credit or (z) a Rate Conversion/
Continuation Request requesting the conversion or continuation with
respect to a LIBOR Rate Borrowing, or (e) a Rate Conversion or Rate
Continuation pursuant to such a Rate Conversion/Continuation Request.
"CREDIT REQUEST" means a request (i) for a Revolving Credit
Borrowing made in accordance with Section 2.2(a), in the form attached
hereto as Exhibit B-1 and incorporated herein by reference.
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"DEEMED CREDIT REQUEST" has the meaning specified in Section
2.2(b) of this Agreement.
"DEFAULTING LENDER" means any Bank with respect to which a
Lender Default is in effect.
"DEFAULT UNDER ERISA" means: (a) the occurrence or existence
of a material Accumulated Funding Deficiency in respect of any Employee
Benefit Plan within the scope of Section 302(a) of ERISA, or (b) any
failure by Borrower or any Subsidiary to make a full and timely payment
of premiums required by Section 4001 of ERISA in respect of any
Employee Benefit Plan, or (c) the occurrence or existence of any
material liability under Section 4062, 4063, 4064, 4069, 4201, 4217 or
4243 of ERISA in respect of any Employee Benefit Plan, or (d) the
occurrence or existence of any material breach of any other law or
regulation in respect of any such Employee Benefit Plan, or (e) the
institution or existence of any action for the forcible termination of
any such Employee Benefit Plan which is within the scope of Section
4001(a)(3) or (15) of ERISA.
"DEMAND GUARANTEE" means any guarantee or other payment
undertaking for the payment of money on presentation, in conformity
with the terms of such undertaking, of a written demand for payment and
such other documents as may be specified in such Demand Guarantee and
otherwise constituting a demand guarantee subject to the Uniform Rules
for Demand Guarantees (1992 Revision), International Chamber of
Commerce Publication No. 458, and any subsequent revisions thereof.
"DESIGNATED EUROPEAN ADMINISTRATIVE AGENT" means each Bank, in
its capacity as Designated European Administrative Agent pursuant to
the terms of this Agreement, as the Administrative Agent, with the
consent of the Borrowers, has designated to act as Designated European
Administrative Agent for Foreign Borrowers specified by the
Administrative Agent pursuant to Section 11.2 of this Agreement and
which becomes a party to this Agreement pursuant to a joinder agreement
executed by such Designated European Administrative Agent in form and
substance satisfactory to the Administrative Agent and pursuant to
which such Designated European Administrative Agent becomes a party to
this Agent in such capacity.
"DESIGNATED EUROPEAN CONTROL ACCOUNT" has the meaning set
forth in 2.17(d) of this Agreement.
"DESIGNATED GERMAN LETTER OF CREDIT ISSUER" means the Bank or
Banks, in the capacity as a Designated Letter of Credit Issuer for
Letters of Credit (including Demand Guarantees and Contract
Guarantees), designated by the Administrative Agent from time to time,
in its sole discretion in consultation with the applicable Designated
European Administrative Agent designated for such Borrowers and with
the consent of such Borrowers, to issue such Letters of Credit to
Instron Schenck Testing Systems, GmbH, Instron Wolpert GmbH, and
Foreign Subsidiaries (other than U.K. Foreign Subsidiaries) thereof,
and each successor and assign thereof.
"DESIGNATED GERMAN SWING LINE LENDER" means the Bank or Banks,
in the capacity as a Designated Swing Line Lender, designated by the
Administrative Agent from time to time, in its sole discretion in
consultation with the applicable Designated European Administrative
Agent designated for such Borrowers and with the consent of such
Borrowers, to advance Swing Line Loans to Instron Schenck Testing
Systems, GmbH, Instron Wolpert GmbH, and Foreign Subsidiaries (other
than U.K. Foreign Subsidiaries) thereof, and its successors and
assigns.
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"DESIGNATED HEDGE AGREEMENT" means any Hedge Agreement to
which a Borrower is a party which, pursuant to a written instrument
signed by the Administrative Agent, has been designated as a Designated
Hedge Agreement so that credit exposure of the counterparty thereunder
with respect to a Borrower and the will be entitled to share in the
benefits of the grant of security interests by such Borrower set forth
in Section 4.1 of this Agreement under Designated Hedge Agreements. The
Administrative Agent may, without the approval or consent of the Banks,
designate a Hedge Agreement as a Designated Hedge Agreement if the
counterparty is a Bank or an Affiliate of a Bank and the maximum credit
exposure of such counterparty under such Hedge Agreement to the
applicable Borrower is reasonably determined by the Administrative
Agent, in accordance with its own customary valuation practices, not to
exceed $3,000,000; provided, however, that if the counterparty is not a
Bank or an Affiliate of a Bank, or such maximum credit exposure is so
determined by the Administrative Agent to be greater than $3,000,000,
the Administrative Agent shall only designate the Hedge Agreement
involving such counterparty as a Designated Hedge Agreement if the
Administrative Agent is instructed to do so by the Required Banks. The
Administrative Agent may impose as a condition to any designation of a
Designated Hedge Agreement a requirement that the counterparty enter
into an intercreditor or similar agreement with the Administrative
Agent under which recoveries from the Borrowers with respect to such
Designated Hedge Agreement will be shared in a manner consistent with
the provisions of Section 9.4(d) of this Agreement.
"DESIGNATED HEDGE CREDITOR" means the counterparty to any
Hedge Agreement to which any Borrower is a party which has been
designated by the Administrative Agent in accordance with this
Agreement as a Designated Hedge Agreement.
"DESIGNATED HEDGE OBLIGATIONS" means the obligations of a
Borrower to the Designated Hedge Creditor under any Designated Hedge
Agreement.
"DESIGNATED LETTER OF CREDIT ISSUER" means, unless otherwise
agreed by the Borrower Representative, the Required Banks and the
Administrative Agent (and except for Existing Letters of Credit which
remain outstanding for all purposes as Letters of Credit hereunder
pursuant to the terms of Section 2.12(b) hereof and which have been
issued to a Borrower by a Designated Letter of Credit Issuer not
otherwise designated for such Borrower), (a) with respect to Letters of
Credit issued or to be issued to Domestic Borrowers and Domestic
Subsidiaries, the Designated U.S. Letter of Credit Issuer, (b) with
respect to Letters of Credit issued or to be issued to Instron Schenck
Testing Systems, GmbH, Instron Wolpert GmbH, and Foreign Subsidiaries
(other than U.K. Foreign Subsidiaries) thereof, the Designated German
Letter of Credit Issuer or its Lending Installation, (c) with respect
to Letters of Credit issued or to be issued to Instron, Ltd. and U.K.
Foreign Subsidiaries, the Designated U.K. Letter of Credit Issuer or
its Lending Installation, and (d) each other Bank that is requested and
agrees to act as a Designated Letter of Credit Issuer by the Borrower
Representative and is approved by the Administrative Agent which
approval shall not be unreasonably be withheld.
"DESIGNATED SWING LINE LENDER" means, unless otherwise agreed
by the Borrower Representative, the Required Banks and the
Administrative Agent, (a) with respect to Swing Line Loans to Instron
Schenck Testing Systems, GmbH and Instron Wolpert GmbH, the Designated
German Swing Line Lender, and (b) with respect to Swing Line Loans
advanced or to be advanced to Instron, Ltd., the Designated U.K. Swing
Line Lender
"DESIGNATED U.K. LETTER OF CREDIT ISSUER" means the Bank or
Banks, in the capacity as a Designated Letter of Credit Issuer for
Letters of Credit (including Demand
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Guarantees and Contract Guarantees), designated by the Administrative
Agent from time to time, in its sole discretion in consultation with
the applicable Designated European Administrative Agent designated for
such Borrowers and with the consent of such Borrowers, to issue such
Letters of Credit to Instron, Ltd. and U.K. Foreign Subsidiaries, and
each successor and assign thereof.
"DESIGNATED U.K. SWING LINE LENDER" means the Bank or Banks,
in the capacity as a Designated Swing Line Lender, designated by the
Administrative Agent from time to time, in its sole discretion in
consultation with the applicable Designated European Administrative
Agent designated for such Borrowers and with the consent of such
Borrowers, to advance Swing Line Loans to Instron, Ltd. and the U.K.
Foreign Subsidiaries thereof, and its successors and assigns.
"DESIGNATED U.S. LETTER OF CREDIT ISSUER" means NCB in its
capacity as a Designated Letter of Credit Issuer for Letters of Credit,
and its successors and assigns.
"DISTRIBUTION" means, in respect of a Person, a payment made,
liability incurred or other consideration given by such Person for the
purchase, acquisition, redemption or retirement of any capital stock
(whether added to treasury or otherwise) of such Person or as a
dividend, return of capital or other distribution in respect of the
capital stock of such Person (other than any stock dividend or stock
split payable solely in capital stock of such Person).
"DOLLARS" and the sign "$" each means lawful money of the
United States.
"DOMESTIC BORROWER COLLATERAL" has the meaning set forth in
Section 4.1(a).
"DOMESTIC BORROWERS" means Instron Corporation and each
Domestic Subsidiary Borrower.
"DOMESTIC PLEDGING BORROWER" means each Pledging Borrower that
is also a Domestic Borrower.
"DOMESTIC SUBSIDIARY" means any Subsidiary organized under the
laws of the United States, any State thereof, the District of Columbia,
or any United States possession, the chief executive office and
principal place of business of which is located in, and which conducts
the majority of its business within, the United States and its
territories and possessions but excludes any such Subsidiary the
majority*** of whose capital stock is owned directly or indirectly by a
Foreign Subsidiary or by a Foreign Borrower.
"DOMESTIC SUBSIDIARY BORROWERS" means each Domestic Subsidiary
of Instron Corporation that is also a Borrower.
"EFFECTIVE TIME" has the meaning specified in Section 14.5 of
this Agreement.
"ELIGIBLE ACCOUNTS" means only such Accounts of each of the
Borrowers as the Administrative Agent, in its good faith business
judgment, shall from time to time consider to be Eligible Accounts and,
by way of example and not limitation, excluding Accounts which:
(a) unless payment of such Accounts is guaranteed by
a letter of credit in form and substance and issued by a
financial institution reasonably satisfactory to the
Administrative Agent and which has been transferred or
assigned to the
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Administrative Agent as security for the Obligations, either:
(i) remain unpaid more than ninety (90) days after the
original due date of invoice or (ii) have an original due date
greater than ninety (90) days after the original date of
invoice;
(b) have arisen from services performed by such
Borrower to or for the Account Debtor outside the ordinary
course of business;
(c) have arisen from the sale by such Borrower of
goods where such goods have not been shipped or delivered to
the Account Debtor;
(d) have arisen from transactions which are not
complete, are not bona fide, or require further acts on the
part of such Borrower to make such Account payable by the
Account Debtor;
(e) have arisen in connection with sales of goods
which were shipped or delivered to the Account Debtor on other
than an absolute sale basis, such as shipments or deliveries
made on consignment, a sale or return basis, a guaranteed sale
basis, a bill and hold basis, or on the basis of any similar
understanding;
(f) have arisen in connection with sales of goods
which were, at the time of sale thereof, subject to any Lien,
except the security interest in favor of the Administrative
Agent created by the Loan Documents;
(g) are subject to any provision prohibiting
assignment or requiring notice of or consent to such
assignment;
(h) are subject to any Lien other than the Liens
described in Section 7.3(d)(i), (iii) above (v) above, or
(vii) above;
(i) are Accounts with respect to which the Account
Debtor is currently asserting setoff, counterclaim, defense,
allowance, dispute, or adjustment rights to the extent of such
setoff, counterclaim, defense, allowance, dispute, or
adjustment rights, or are Accounts that have arisen in
connection with the sale of goods which have been returned,
rejected, repossessed, lost or damaged;
(j) are owed from an Account Debtor of which such
Borrower has received notice that such Account Debtor is the
subject of Financial Impairment or has suspended normal
business operations, dissolved, liquidated or terminated its
existence;
(k) are owed by any Account Debtor located in New
Jersey or Minnesota unless such Borrower has filed all legally
required Notice of Business Activities Reports with the New
Jersey Department of Taxation or the Minnesota Department of
Revenue, respectively;
(l) are Accounts with respect to which the Account
Debtor is located in any state which requires that such
Borrower, in order to sue any Person in such state's courts,
either (i) qualify to do business in such state prior to the
time the claim against such Person arises or prior to the time
such Borrower first does business within such state, as
applicable or (ii) file a report with the taxation division of
such state for the then current year, unless such Borrower has
fulfilled such requirements to the extent applicable for the
then current year;
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(m) are evidenced by Chattel Paper or any Instrument
of any kind (including, without limitation, any promissory
notes);
(n) are Accounts with respect to which any of the
representations, warranties, covenants and agreements
contained in this Agreement or any of the other Loan Documents
are not or have ceased to be complete and correct or have been
breached;
(o) are Accounts with respect to which the Account
Debtor is also a supplier or creditor of such Borrower, except
to the extent that, in each case, the aggregate amount owed
such Borrower by such Account Debtor exceeds the aggregate
amount owed to such Account Debtor by such Borrower;
(p) are Accounts with respect to which the
Administrative Agent does not have a first priority, perfected
security interest;
(q) represent a progress billing or have had the time
for payment extended by such Borrower without the consent of
the Administrative Agent (for the purposes hereof, "progress
billing" means any invoice for goods sold or leased or
services rendered under a contract or agreement pursuant to
which the Account Debtor's obligation to pay such invoice is
conditioned upon such Borrower's completion of any further
performance under the contract or agreement);
(r) are owed by the United States or any department,
agency, or instrumentality thereof unless such Borrower has
complied with the Federal Assignment of Claims Act in respect
of the Administrative Agent's security interest therein as
granted hereunder;
(s) are owed by any State or any department, agency,
or instrumentality thereof unless such Borrower has complied
with any applicable statutory or regulatory requirements
thereof in respect of the Administrative Agent's security
interest therein as granted hereunder;
(t) are owed to such Borrower by an Affiliate of such
Borrower;
(u) are owed by an Account Debtor with respect to
which more than twenty-five percent (25%) of the balances then
outstanding on Accounts owed by such Account Debtor and its
Affiliates to such Borrower have remained unpaid for more than
ninety (90) days from the dates of their original due dates,
as applicable; or
(v) are, in the Administrative Agent's good faith
judgment, Accounts of an Account Debtor which is deemed to be
an unacceptable credit risk or Accounts which are otherwise
deemed unacceptable (the Administrative Agent using reasonable
efforts to notify the Borrower Representative of any such
determination under this clause (v) at least five (5) Business
Days prior to excluding the Accounts excluded under this
clause (v), but having no liability for any damages arising
out of any failure to so notify the Borrower Representative).
"ELIGIBLE ASSIGNEE" means (a) a Bank or any Affiliate thereof;
(b) a commercial bank having total assets in excess of $1,000,000,000;
(c) a savings and loan association or savings bank organized under the
laws of the United States or any state thereof having total assets in
excess of $1,000,000,000; or (d) a finance company, insurance company,
other financial institution or fund acceptable to the Administrative
Agent and the
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Borrower Representative, which acceptance shall not be unreasonably
withheld; provided that each Person described in each of the foregoing
clauses (a) through (d) shall have provided to the Borrower
Representative and the Administrative Agent or Designated European
Administrative Agent to the extent a Designated European Administrative
Agent h as been designated for Instron, Ltd. or such other Foreign
Borrower, (i) if such Person is organized under the laws of a
jurisdiction outside the United States, duly completed copies of Form
1001 or Form 4224 or any successor form prescribed by the Internal
Revenue Service of the United States certifying that such Person is
exempt from United States withholding taxes with respect to all
payments to be made to such Person if such Person were to become a Bank
hereunder or other documents satisfactory to the Borrower and the
Administrative Agent indicating that all payments to be made to such
Person if such Person were to become a Bank hereunder are not subject
to such taxes and, if any such forms or other documents are so
provided, such Person was eligible under applicable law at the time
such information was so provided to make such provision and (ii) for
any other Person, an Exemption Certificate (as defined in Section
13.3(e)) and (iii) if such Person is managed and controlled from or
incorporated under the laws of any jurisdiction other than the United
Kingdom and which is making a Loan to Instron Ltd. through a lending
branch or lending office located outside the United Kingdom, duly
submitted copies of Form "Claim on behalf of a United States Domestic
Corporation to Relief from United Kingdom Income Tax on Interest and
Royalties Arising in the United Kingdom (or its counterpart for
jurisdictions other than the United States) and (iv) if such Person has
filed in any other relevant jurisdiction to the extent legally possible
for such Person to so file, such filing or documentation required to
request exemption form withholding in such jurisdiction.
"ELIGIBLE INVENTORY" means only such Inventory of each of the
Borrowers, valued at the lower of cost (on a first in, first out basis)
or market, as the Administrative Agent, in its good faith judgment,
shall from time to time consider to be Eligible Inventory and, by way
of example and not limitation, excluding Inventory which:
(a) consists of obsolete, damaged, defective,
unmerchantable, spoiled, outdated or unsaleable items;
(b) consists of: goods not held for sale (such as,
without limitation, any labels, packaging, lubricants,
maintenance items and supplies and any Inventory used in
connection with research and development), any
work-in-process, or any other Inventory which is not raw
material or finished goods held for resale;
(c) are subject to any Lien other than the Liens
described in Section 7.3(d)(i), (iii) above (v) above, or
(vii) above;
(d) is not subject to a first priority, perfected
security interest in favor of the Administrative Agent (other
than Inventory consisting of finished goods designated as
"shipped not invoiced");
(e) is located at a location not owned by such
Borrower and for which such Borrower has not delivered to the
Administrative Agent an appropriate landlord or warehouseman's
waiver, in form and substance reasonably satisfactory to the
Administrative Agent;
(f) is in the possession of a bailee or other third
Person including Inventory held by a third party for
processing or Inventory purchased by but not yet delivered to
such Borrower and for which such Borrower has not delivered to
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the Administrative Agent an appropriate bailee's waiver, in
form and substance reasonably satisfactory to the
Administrative Agent;
(g) is held by such Borrower on consignment or
Inventory held by or placed into the possession of a third
Person for sale or display by that Person;
(h) is located outside of the United States unless
such Inventory is located in the United Kingdom or the Federal
Republic of Germany and the Administrative Agent has a first
priority Lien perfected to the satisfaction of the
Administrative Agent in such Inventory;
(i) is manufactured, produced or purchased pursuant
to any contract with the United States government, any agency
or instrumentality thereof or prime contractor thereof, which
contract provides for progress or Loan payments to the extent
such Inventory is identified to such contract; or
(j) is, in the Administrative Agent's good faith
judgment, Inventory which is otherwise deemed ineligible (the
Administrative Agent using reasonable efforts to notify the
Borrower representative of any such determination under this
clause (j) at least five (5) Business Days prior to excluding
the Inventory excluded under this clause (j), but having no
liability for any damages arising out of any failure to so
notify the Borrower Representative).
"EMPLOYEE BENEFIT PLAN" means an "employee benefit plan" as
defined in Section 3(3) of ERISA of a Borrower or any of its ERISA
Affiliates or any "multiemployer plan" as defined in Section 4001(a)(3)
of ERISA or any "pension plan" as defined in Section 3(2) of ERISA or
any "welfare plan" as defined in Section 3(1) of ERISA.
"EMU" means Economic and Monetary Union as contemplated in the
Treaty on European Union.
"EMU LEGISLATION" means legislative measures of the European
Council (including European Council regulations) for the introduction
of, changeover to or operation of a single or unified European currency
(whether known as the Euro or otherwise), being in part the
implementation of the third stage of EMU.
"ENVIRONMENTAL CLAIMS" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
complaints, liens, notices of non-compliance, requests for information,
investigations, proceedings, consent orders or consent agreements
relating in any way to any Environmental Law or any Environmental
Permit, instituted by any Person, including, without limitation, (a) by
governmental or regulatory authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law or (b) by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health or the environment.
"ENVIRONMENTAL LAWS" means any foreign, federal, state or
local law, regulation, ordinance, or order pertaining to the protection
of the environment and the health and safety of the public, including
(but not limited to) CERCLA, RCRA, the Hazardous Materials
Transportation Act, 49 USC Sections 1801 et seq., the Federal
Water Pollution Control Act (33 USC Sections 1251 et seq.), the
Toxic Substances Control Act (15 USC Sections 2601 et seq.) and
the Occupational Safety and Health Act (29 USC Sections 651 et
seq.), and
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all similar foreign, state, regional or local laws, treaties,
regulations, statutes or ordinances, common law, civil laws, or any
case precedents, rulings, requirements, directives or requests having
the force of law of any foreign or domestic governmental authority,
agency or tribunal, and all foreign equivalents thereof, as the same
have been or hereafter may be amended, and any and all analogous future
laws, treaties, regulations, statutes or ordinances, common law, civil
laws, or any case precedents, rulings, requirements, directives or
requests having the force of law of any foreign or domestic
governmental authority, agency or tribunal and the regulations
promulgated pursuant thereto, which governs: (a) the existence, cleanup
and/or remedy of contamination on property; (b) the emission or
discharge of Hazardous Materials into the environment; (c) the control
of hazardous wastes; (d) the use, generation, transport, treatment,
storage, disposal, removal or recovery of Hazardous Materials; or (e)
the maintenance and development of wetlands.
"ENVIRONMENTAL PERMITS" means all permits, approvals,
certificates, notifications, identification numbers, licenses and other
authorizations required under any applicable Environmental Laws or
necessary for the conduct of business.
"ENVIRONMENTAL REMEDIATION" means any curative measure taken
in respect of any non-compliance with, or otherwise related to, any
Environmental Law.
"EQUIPMENT" means "equipment" (as defined in the UCC) and
fixtures (as defined in the UCC) including, without limitation, all
machinery, equipment, furniture, furnishings, fixtures, and packaging
production equipment, parts, material handling equipment, supplies,
aircraft and motor vehicles (titled and untitled) of every kind and
description, now or hereafter owned by a Borrower, or in which such
Borrower may have or may hereafter acquire any interest, wheresoever
located.
"ERISA" means the Employee Retirement Income Security Act of
1974 (Public Law 93-406), as amended, and in the event of any amendment
affecting any section thereof referred to in this Agreement, that
reference shall be a reference to that section as amended,
supplemented, replaced or otherwise modified.
"ERISA AFFILIATE" of any Person means any other Person that is
under common control with such Person within the meaning of Section
4001(a)(14) of ERISA, or is a member of a group which includes such
Person and which is treated as a single employer under Sections 414(b)
or (c) of the Internal Revenue Code. In addition, for provisions of
this Agreement that relate to Section 412 of the Internal Revenue Code,
the term "ERISA Affiliate" of any Person shall mean any other Person
aggregated with such Person under Sections 414(b), (c), (m) or (o) of
the Internal Revenue Code.
"ERISA REGULATOR" means any governmental agency (such as the
Department of Labor, the Internal Revenue Service and the Pension
Benefit Guaranty Corporation) having any regulatory authority over any
Employee Benefit Plan.
"EURO" means the single currency of Participating Member
States of the European Union, which shall be an Alternate Currency
under this Agreement.
"EUROCURRENCY RESERVE PERCENTAGE" means, for any Interest
Period in respect of any LIBOR Rate Loan, as of any date of
determination, the aggregate of the then stated maximum reserve
percentages (including any marginal, special, emergency or supplemental
reserves), expressed as a decimal, applicable to such Interest Period
(if more than one such percentage is applicable, the daily average of
such percentages for those days in such Interest Period during which
any such percentages shall be so
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applicable) by the Board of Governors of the Federal Reserve System,
any successor thereto, or any other banking authority, domestic or
foreign, to which the Administrative Agent or any Bank may be subject
in respect to eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Federal Reserve
Board) or in respect of any other category of liabilities including
deposits by reference to which the interest rate on LIBOR Rate Loans is
determined or any category of extension of credit or other assets that
include the LIBOR Rate Loans. For purposes hereof, such reserve
requirements shall include, without limitation, those imposed under
Regulation D of the Federal Reserve Board and the LIBOR Rate Loans
shall be deemed to constitute Eurocurrency Liabilities subject to such
reserve requirements without benefit of credits for proration,
exceptions or offsets which may be available from time to time to any
Bank under said Regulation D.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"EURO UNIT" means a currency unit of the Euro.
"EVENT OF DEFAULT" has the meaning specified in Section 8 of
this Agreement.
"EXCHANGE RATE" means, on any date, (a) with respect to any
Alternate Currency in relation to Dollars, the rate at which such
Alternate Currency may be exchanged into Dollars, as set forth on such
date on the relevant Reuters currency page at or about 11:00 a.m.
London time, on such date, (b) with respect to Dollars in relation to
any specified Alternate Currency, the rate at which Dollars may be
exchanged into such Alternate Currency, as set forth on such date on
the relevant Reuters currency page at or about 11:00 a.m. London time,
on such date, and (c) with respect to any Alternate Currency in
relation to any other Alternate Currency, the rate at which such
Alternate Currency may be exchanged into such other Alternate Currency,
as set forth on such date on the relevant Reuters currency page at or
about 11:00 a.m. London time, on such date, provided, however, that in
the event that any of the foregoing rates does not appear on any
Reuters currency page, the "Exchange Rate" with respect to such
currency shall be determined by reference to such other publicly
available service for exchange rates as may be agreed upon by the
Administrative Agent and Instron Corporation or, in the absence of such
agreement, such "Exchange Rate" shall instead be the Administrative
Agent's spot rate of exchange in the market which its foreign currency
exchange operations are then being conducted, at or about 10:00 A.M.,
local time in such market, on such date for such currencies, for
delivery two (2) Business Days later; provided, further, that if at the
time of any such determination, no such spot rate can be reasonably
quoted, the Administrative Agent may use any reasonable method as it
deems applicable to determine such rate, and such determination shall
be conclusive absent manifest error.
"EXISTING CREDIT FACILITIES" means each agreement, document or
instrument set forth in the Supplemental Schedule and evidencing
Existing Indebtedness for borrowed money of any of the Borrowers, and
all instruments, agreements and other documents executed in connection
therewith, other than those which are unsecured and which evidence in
the aggregate less than One Million Dollars ($1,000,000), in each case
as the same have been amended, supplemented or otherwise modified
through the Closing Date.
"EXISTING INDEBTEDNESS" means all Indebtedness of the
Borrowers and the Subsidiaries thereof outstanding under the Existing
Credit Facilities.
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"EXISTING LETTERS OF CREDIT" means letters of credit, Demand
Guarantees and Contract Guarantees outstanding on the Closing Date
which will continue in effect after the Closing Date.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the rate
per annum (rounded upwards, if necessary, to the nearest one hundredth
of one percent (1/100th of 1%) equal to the weighted average of the
rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day,
as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day; provided, however, that: (a) if the day
for which such rate is to be determined is not a Business Day, the
Federal Funds Effective Rate for such day shall be such a rate on such
transactions on the immediately preceding Business Day as so published
on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Effective Rate for
such Business Day shall be the average of quotations for such day on
such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by the
Administrative Agent.
"FEE PERCENTAGE ADJUSTMENT DATE" has the meaning specified in
Section 2.16(e) of this Agreement.
"FEE PERCENTAGE DETERMINATION DATE" has the meaning specified
in Section 2.16(e) of this Agreement.
"FINANCIAL IMPAIRMENT" means, in respect of a Person, the
distressed economic condition of such Person manifested by any one or
more of the following events:
(a) the discontinuation of the business of the
Person;
(b) the Person generally ceases or is generally
unable or admits in writing its inability, generally, to make
timely payment upon the Person's debts, obligations, or
liabilities as they mature or come due;
(c) the assignment by the Person for the benefit of
creditors;
(d) the voluntary institution by the Person of, or
the consent granted by the Person to the involuntary
institution of (whether by petition, complaint, application,
default, answer (including, without limitation, an answer or
any other permissible or required responsive pleading
admitting: (i) the jurisdiction of the forum or (ii) any
material allegations of the petition, complaint, application,
or other writing to which such answer serves as a responsive
pleading thereto), or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt,
dissolution, liquidation, receivership, trusteeship, or
similar proceeding pursuant to or purporting to be pursuant to
any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation, receivership,
trusteeship, or similar law of any jurisdiction;
(e) the voluntary application by the Person for or
consent granted by the Person to the involuntary appointment
of any receiver, trustee, or similar officer (i) for the
Person or (ii) of or for all or any substantial part of the
Person's property; or
(f) the commencement or filing against a Person,
without such Person's application, approval or consent, of an
involuntary proceeding or an
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involuntary petition seeking: (a) liquidation, reorganization
or other relief in respect of such Person, its debts or all or
a substantial part of its assets under any Federal, state or
foreign bankruptcy, insolvency, receivership, or similar law
now or hereafter in effect or (b) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or
similar official for such Person or for a substantial part of
its assets, and, in any such case, either (i) such proceeding
or petition shall continue without dismissal for sixty (60)
days or (ii) an order or decree approving or ordering any of
the foregoing shall be entered.
"FISCAL MONTH" means any of the twelve consecutive monthly
fiscal accounting periods collectively forming a Fiscal Year of Instron
Corporation.
"FISCAL QUARTER" means any of the four consecutive three-month
fiscal accounting periods collectively forming a Fiscal Year of Instron
Corporation.
"FISCAL YEAR" means regular annual accounting period for
federal income tax purposes of Instron Corporation and its consolidated
Subsidiaries which is currently established as ending December 31.
"FOREIGN SUBSIDIARY" means any Subsidiary (i) which is not
incorporated in the United States and substantially all of whose assets
and properties are located, or substantially all of whose business is
carried on, outside the United States, (ii) substantially all of whose
assets consist of investments in Subsidiaries that are Foreign
Subsidiaries as defined in clause (i) of this definition , or (iii)
which is a majority owned Subsidiary of a Foreign Subsidiary or a
Foreign Borrower.
"FOREIGN BORROWER" means each Foreign Subsidiary of Instron
Corporation that is also a Borrower.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles
Board, the American Institute of Certified Public Accountants and the
Financial Accounting Standards Board or in such other statements by
such other entity as may be in general use by significant segments of
the accounting profession.
"GENERAL INTANGIBLES" means all "general intangibles" (as
defined in the UCC) of a Borrower including, without limitation, all
present and future choses in action, causes of action and all other
intangible personal property of such Borrower of every kind and nature
(other than Accounts), now or hereafter arising, all corporate or other
business records; inventions, designs, blueprints, patents and patent
applications, trademarks and trademark applications, trade names, trade
secrets, goodwill, registrations, copyrights, licenses, franchises,
customer lists, tax refunds, tax refund claims, rights and claims
against carriers and shippers, and rights to indemnification.
"GERMAN COLLATERAL" means such personal property and assets of
Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH
(including book accounts and inventory stock thereof), as are defined
in the German Collateral Documents.
"GERMAN COLLATERAL DOCUMENTS" means, collectively, (i) each
Security Transfer Agreement, each dated as of the date hereof and
executed by Instron Schenck Testing Systems, GmbH or Instron Wolpert
GmbH, as the case may be, in favor of the Administrative Agent, with
respect to the accounts of Instron Schenck Testing Systems, GmbH and
Instron Wolpert GmbH specified therein and substantially in the form
attached hereto as Exhibit F-3, (ii) that certain Share Pledge, dated
as of the date hereof,
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executed in favor of the Administrative Agent by Instron Corporation,
with respect to the capital stock of Instron GmbH and (iii) such other
agreements, documents and instruments executed in connection with the
German Collateral Documents, in each case, as the same may from time to
time be amended, supplemented or otherwise modified.
"GUARANTOR" means a Person obligated in respect of any
Guaranty Obligations.
"GUARANTEED OBLIGATIONS" has the meaning specified in Section
10.1 of this Agreement.
"GUARANTY OBLIGATIONS" means, with respect to any Person,
without duplication, any obligation of such Person guaranteeing any
Indebtedness ("primary Indebtedness") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether contingent,
(a) to purchase any such primary Indebtedness or any property
constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary
Indebtedness or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise maintain the net worth or solvency of
the primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
Indebtedness of the ability of the primary obligor to make payment of
such primary Indebtedness, or (d) otherwise to assure or hold harmless
the owner of such primary Indebtedness against loss in respect thereof;
provided, however, that (i) the term "Guaranty Obligations" shall not
include endorsements of instruments for deposit or collection in the
ordinary course of business and (ii) for purposes of this definition,
the amount of any Guaranty Obligation shall be deemed to be an amount
equal to the stated or determinable amount of the primary Indebtedness
in respect of which such Guaranty Obligation is made or, if not stated
or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"HAZARDOUS MATERIAL" means and includes: (a) any asbestos or
other material composed of or containing asbestos which is, or may
become, even if properly managed, friable, (b) petroleum and any
petroleum product, including crude oil or any fraction thereof, and
natural gas or synthetic natural gas liquids or mixtures thereof, (c)
any hazardous, toxic or dangerous waste, substance or material defined
as such in (or for purposes of) CERCLA or RCRA, any so-called
"Superfund" or "Superlien" law, or any other applicable Environmental
Laws, and (d) any other substance whose generation, handling,
transportation, treatment or disposal is regulated pursuant to any
Environmental Laws.
"HEDGE AGREEMENT" means any interest rate swap agreement, any
interest rate cap agreement, any interest rate collar agreement, or
similar agreement or arrangement designed to protect against in
interest rate exposure, with a financial institution or institutions
reasonably acceptable to the Administrative Agent, and which conforms
to ISDA (or any successor) standards.
"INDEBTEDNESS" means, with respect to any Person, without
duplication, (a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person evidenced by bonds, notes,
debentures and similar debt securities or instruments, (c) all
obligations of such Person for the deferred purchase price of capital
assets or services which in accordance with GAAP would be shown on the
liability side of a sheet of such Person, (d) all obligations of such
Person to pay a specified purchase for goods or services whether yet
delivered or accepted (i.e. take or pay or similar purchase
obligation), (e) all of the principal portion of Capitalized Lease
Obligations of such
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Person, (f) the present value, determined on the basis of the implicit
interest rate, of all basic rental obligations under all synthetic
leases (i.e. leases accounted for by the lessee as operating leases
under which the lessee is the "owner" of the leased property for
Federal income tax purposes), (g) all obligations of such Person as an
account party in respect of letters of credit, banker's acceptances,
Demand Guarantees or Contract Guarantees (in each case, valued at the
stated face amount thereof or, to the extent less, the stated or
determinable amount (or where not so stated or determinable, the
reasonably anticipated liability in respect of which such letters of
credit, banker's acceptances, Demand Guarantees or Contract Guarantees
were issued, as determined by such Person in good faith) of liability
supported thereby) and excluding, for purposes of the definition of
"Indebtedness" under this Agreement, obligations of the Borrowers and
the Subsidiaries thereof as account party in respect of (i) any
unsecured Existing Letters of Credit comprised of Demand Guarantees or
Contract Guarantees, (ii) any unsecured renewals, extensions or
replacements thereof, and (iii) any unsecured Demand Guarantees or
Contract Guarantees issued after the Effective Date which are not
Letters of Credit issued hereunder, (h) all net obligations of such
Person under Hedge Agreements, (i) the full outstanding value of trade
accounts receivable sold with full or limited recourse (other than
sales of delinquent accounts receivable for collection purposes), (j)
the stated value, or liquidation value (if higher), of all Redeemable
Stock of such Person, (k) all liabilities of such Person in respect of
unfunded vested benefits under plans covered by Title IV of ERISA, (l)
any Indebtedness of a second party secured by a Lien encumbering any
property owned or being acquired by such Person even if the full faith
and credit of the Person is not pledged to the payment thereof, and (m)
all Guaranty Obligations of such Person and (n) in the case of the
Borrowers, including, without limitation, the then outstanding
principal amount of all Loans owing by the Borrowers to the Banks under
this Agreement and all Subordinated Debt owing by any of the Borrowers;
provided, however, that neither trade accounts payable nor accrued
expenses arising in the ordinary course of business of such Person ,
nor obligations in respect to insurance policies or performance or
surety bonds which themselves are not guarantees of Indebtedness (nor
draft, acceptances, or similar instruments evidencing the same nor
obligations in respect of letter of credit supporting the payments of
the same), shall constitute Indebtedness.
"INSTRUMENTS" means "instruments" as defined by the UCC of a
Borrower.
"INTELLECTUAL PROPERTY" means all inventions, designs,
patents, and applications therefor, trademarks, service marks, trade
names, and registrations and applications therefor, copyrights, any
registrations therefor, and any licenses thereof, whether now owned or
existing or hereafter arising or acquired.
"INTEREST PERIOD" means, for each LIBOR Rate Loan comprising a
Borrowing, the period commencing on the date of such LIBOR Rate Loan or
the date of the Rate Conversion, Rate Continuation of any Loans into
such LIBOR Rate Loan and ending on the numerically corresponding day of
the period selected by the Borrower Representative pursuant to the
provisions hereof and each subsequent period commencing on the last day
of the immediately preceding Interest Period in respect of such LIBOR
Rate Loan and ending on the last day of the period selected by the
Borrower Representative pursuant to the provisions hereof; provided,
however, that the duration of each such Interest Period shall be one,
two, three or six months, in each case as the Borrower Representative
may select by delivery to the Administrative Agent or applicable
Designated European Administrative Agent designated for a Borrower to
which such LIBOR Rate Loan is being advanced of a Credit Request
therefor in accordance with Section 2.2(a) of this Agreement or a Rate
Conversion/Continuation Request in accordance with Section 2.11 of this
Agreement; provided, further, that, during the Syndication Period, if
the Borrower
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Representative selects Interest Periods of greater than one month, the
Borrowers shall be obligated to reimburse the Banks and Designated
Swing Line Lenders pursuant to Section hereof for any prepayment of
LIBOR Rate Loans made on other than the last day of such Interest
Periods resulting from completion of the Syndication Period as
determined by the Syndication Agent and; provided, further, that:
(i) the Interest Period for each LIBOR Rate Loan
comprising part of the same Borrowing shall be of the
same duration;
(ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day,
the last day of such Interest Period shall be
extended to occur on the next succeeding Business
Day; provided, however, that, if such extension would
cause the last day of such Interest Period to occur
in the next following calendar month, the last day of
such Interest Period shall occur on the immediately
preceding Business Day;
(iii) if the Interest Period commences on a Business Day
for which there is no numerical equivalent in the
calendar month in which the Interest Period is to
end, such Interest Period shall end on the last
Business Day of that calendar month;
(iv) no Interest Period may end on a date later than the
Revolving Credit Termination Date; and
(v) with respect to LIBOR Rate Loans comprising any
outstanding Term Borrowing, no Interest Period may
end on a date later than any Term Loan Repayment Date
unless, after giving effect to such selection, the
aggregate unpaid principal amount of the Alternate
Base Rate Loans comprising Term Borrowings, together
with the aggregate unpaid principal amount of LIBOR
Rate Loans comprising Term Borrowings which have an
Interest Period ending on or prior to such Term Loan
Repayment Date, shall be at least equal to that
portion of the aggregate principal amount of such
Term Borrowing due and payable on and prior to such
Repayment Date.
"INVENTORY" means all "inventory" (as defined in the UCC) now
owned or hereafter acquired by the Borrowers including, without
limitation, all goods, merchandise, work-in-process, raw materials,
finished goods, and inventory held for lease to other Persons, all
other materials, supplies, and tangible personal property of any kind,
nature, or description held for sale or lease or for display or
demonstration, or furnished or to be furnished under contracts of
service, or which are or which might be used or consumed in connection
with the manufacturing, packing, shipping, advertising, selling,
leasing, or furnishing of such goods, merchandise, or other personal
property, all documents of title or other documents pertaining thereto,
and all proceeds of the foregoing.
"INVESTMENT PROPERTY" means all "Investment Property" (as
defined in the UCC from and after January 1, 1998), including, without
limitation, interests in money market funds or other mutual funds, now
or hereafter acquired by the Borrowers.
"KIRTLAND CAPITAL" means Kirtland Capital Partners III L.P.,
an Ohio limited partnership, and its Affiliates.
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"LAW" means any law, treaty, regulation, statute or ordinance,
common law, civil law, or any case precedent, ruling, requirement,
directive or request having the force of law of any foreign or domestic
governmental authority, agency or tribunal.
"LC EXPOSURE" means, with respect to any Bank, at any time of
determination, such Bank's Ratable Portion of the sum of: (a) the
aggregate undrawn amount of all Letters of Credit outstanding at such
time, plus (b) the aggregate amount that has been drawn under such
Letters of Credit for which the applicable Designated Letter of Credit
Issuer (or the Banks, pursuant to any participation therein), has not
at such time been reimbursed by the Borrowers or the applicable Letter
of Credit Obligor.
"LENDER DEFAULT" means (i) the refusal (which has not been
retracted) of a Bank in violation of its obligations under this
Agreement to make available to the Administrative Agent its Ratable
Portion of any Revolving Credit Borrowing hereunder or to fund any
portion of the participation purchase price payable by such Bank for
its participating interests hereunder or (ii) the notification to the
Administrative Agent or any Borrower by a Bank that such Bank does not
intend to comply with its obligations hereunder to make available to
the Administrative Agent its Ratable Portion of any Revolving Credit
Borrowing hereunder or to fund any portion of the participation
purchase price payable by such Bank for its participating interests
hereunder, in either and each case, as a result of the appointment of a
receiver or conservator with respect to such Bank at the direction of
any regulatory agency or authority.
"LENDING INSTALLATION" means, with respect to a Bank, the
branch, Subsidiary or Affiliate of such Bank specified under the name
of such Bank on the signature pages hereto or as otherwise selected by
such Bank pursuant to Section of this Agreement, or such other branch,
Subsidiary or Affiliate as such Bank may from time to time specify in
writing to the Borrower Representative, the Administrative Agent and
the Banks as its Lending Installation.
"LENDING OFFICE" means, with respect to any Bank, Designated
Swing Line Lender or Designated Letter of Credit Issuer, the office of
such Bank, Designated Swing Line Lender or Designated Letter of Credit
Issuer specified as its "Lending Office" under its name on the
signature pages hereto, or such other office of such Bank, Designated
Swing Line Lender or Designated Letter of Credit Issuer as such Bank,
Designated Swing Line Lender or Designated Letter of Credit Issuer may
from time to time specify in writing to the Borrower Representative and
the Administrative Agent as the office at which Revolving Credit Loans,
Swing Line Loans or Letters of Credit are to be made, issued and
maintained, as the case may be.
"LETTER OF CREDIT" means: (i) each documentary standby letter
of credit for the account of a Borrower or any of its Subsidiaries
issued by the Designated Letter of Credit Issuer designated for such
Borrower and such Subsidiaries pursuant to the terms of this Agreement,
(ii) each Demand Guarantee for the account of such Borrower or
Subsidiaries pursuant to the terms of this Agreement and (iii) each
Contract Guarantee for the account of such Borrower or Subsidiaries
pursuant to the terms of this Agreement, in each case in support or
guarantee of (x) worker compensation obligations, liability insurance,
releases of contract retention obligations, contract tender or bid
performance obligations, obligations for repayment of advance payments,
contract performance obligations, and other bonding obligations of such
Borrower or such Subsidiaries incurred in the ordinary course of
business thereof and consistent with past practices thereof and (y)
such other standby obligations of such Borrower and such Subsidiaries
incurred in the ordinary course of business thereof and consistent with
past practices thereof.
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<PAGE> 171
"LETTER OF CREDIT COLLATERAL ACCOUNT" has the meaning set
forth in Section 9.8.
"LETTER OF CREDIT OBLIGORS" has the meaning set forth in
Section 2.12.
"LETTER OF CREDIT OBLIGATIONS" means (a) the obligations of a
Borrower to reimburse the Designated Letter of Credit Issuer hereunder,
(b) all fees owing to such Designated Letter of Credit Issuer under
this Agreement and the other Loan Documents, (c) any costs and expenses
reimbursable to such Designated Letter of Credit Issuer pursuant to
Section 14.6 of this Agreement; and (d) taxes, Other Taxes,
compensation, indemnification obligations or other amounts owing by
such Borrower to the Designated Letter of Credit Issuer under this
Agreement, the reimbursement agreement executed of such Designated
Letter of Credit Issuer or any other Loan Document, and (d) any amounts
owing by such Borrower as a Borrower Guarantor with respect to its
guaranty of the Guaranteed Obligations owing by the other Borrowers to
the Banks or as a guarantor of the obligations of other Letter of
Credit Obligors under Section 2.12(l).
"LIBOR RATE LOAN" means a Loan, denominated in Dollars or in
an Alternate Currency, which bears interest as provided in Section
2.13(a)(ii) of this Agreement.
"LIBOR RATE BORROWING" means a Borrowing consisting of LIBOR
Rate Loans.
"LIEN" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"LOAN" means a Revolving Credit Loan, Term Loan or Swing Line
Loan.
"LOAN ACCOUNT" has the meaning set forth in Section 2.1(c).
"LOAN DOCUMENTS" means this Agreement, any note, mortgage,
deed of trust, security agreement, or other lien instrument,
reimbursement agreement, financial statement, audit report,
environmental audit, notice, request of Loan, Hedge Agreement, cash
management agreement, officer's certificate or other writing of any
kind which is now or hereafter required to be delivered by or on behalf
of the Borrowers to the Administrative Agent, the Designated Swing Line
Lenders, the Designated Letter of Credit Issuers or the Banks (or any
of their respective Affiliates) in connection with this Agreement,
including, without limitation, the Revolving Credit Notes, the Swing
Line Notes, and the other writings referred to in Section 2 and Section
3 of this Agreement.
"LONDON INTERBANK OFFERED RATE" means, for any Interest Period
with respect to a LIBOR Rate Borrowing, the quotient (rounded upwards,
if necessary, to the nearest one sixteenth of one percent (1/16th of
1%) of: (x) the per annum rate of interest, determined by the
Administrative Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) as of
approximately 11:00 a.m. (London time) two Business Days prior to the
beginning of such Interest Period pertaining to such LIBOR Rate Loan,
appearing on page 3750 or 3740 (or other applicable page with respect
to Alternate Currency) of the Dow Jones Telerate Screen (or any
successor or substitute page of such Service, or any successor to or
substitute for such Service providing rate quotations comparable to
those currently provided on such page of such Service, as determined by
the Administrative Agent from time to time for purposes of providing
quotations of interest rates applicable to deposits in Dollars or in
the applicable Alternate Currency in the London interbank market) as
the rate in the London interbank market for deposits in Dollars or the
applicable Alternate Currency in
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immediately available funds with a maturity comparable to such Interest
Period divided by (y) a number equal to 1.00 minus the Eurocurrency
Reserve Percentage. In the event that such rate quotation is not
available for any reason, then the rate (for purposes of clause (x)
hereof) shall be the rate, determined by the Administrative Agent as of
approximately 11:00 a.m. (London time) two Business Days prior to the
beginning of such Interest Period pertaining to such LIBOR Rate Loan,
to be the average (rounded upwards, if necessary, to the nearest one
sixteenth of one percent (1/16th of 1%)) of the per annum rates at
which deposits in Dollars or the applicable Alternate Currency in
immediately available funds in an amount comparable to NCB's Ratable
Portion of such LIBOR Borrowing and with a maturity comparable to such
Interest Period are offered to the prime banks by leading banks in the
London interbank market. The London Interbank Offered Rate shall be
adjusted automatically on and as of the effective date of any change in
the Eurocurrency Reserve Percentage.
"MANAGEMENT AGREEMENT" means that certain Advisory Services
Agreement between Instron Corporation and Kirtland Capital Partners,
Ltd., dated as of the date hereof.
"MARGIN ADJUSTMENT DATE" has the meaning specified in Section
2.13(b)(i) of this Agreement.
"MARGIN DETERMINATION DATE" has the meaning specified in
Section 2.13(b)(i) of this Agreement.
"MARGIN STOCK" has the meaning specified in Section 6.20.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on:
(a) the business, properties, operations or condition (financial or
otherwise) of the Borrowers and the Subsidiaries thereof taken as a
whole, (b) a material portion of the Collateral or any portion of the
Collateral exceeding Five Million Dollars ($5,000,000), (c) a
Borrower's ability to repay the Obligations of such Borrower, (d)
enforceability or perfection of the Administrative Agent's security
interest and Lien on any of the Collateral or the priority thereof, or
(e) the legality, validity or enforceability of this Agreement or the
other Loan Documents
"MATERIAL BUSINESS AGREEMENT" means each agreement of a
Borrower (not including Material License Agreements) the termination
(other than due to the natural expiration of the term thereof) of which
would reasonably be expected to result in a Material Adverse Effect.
"MATERIAL LICENSE AGREEMENT" means each license agreement of a
Borrower in respect of Third Party Intellectual Property set forth on
the Supplemental Schedule as being a license agreement the termination
(other than due to the natural expiration of the term thereof) of which
would reasonably be expected to result in a Material Averse Effect.
"MATERIAL OWNED OR LEASED REAL PROPERTY" has the meaning, in
respect of a Domestic Pledging Borrower and Instron, Ltd. as specific
in Section 5.1 of this Agreement.
"MATERIAL RECOVERY EVENT" means (a) any casualty loss in
respect of asset of a Borrower covered by casualty insurance, (b) any
compulsory transfer or taking under threat of compulsory transfer of
any asset of a Borrower with a fair market value in excess of Five
Million Dollars ($5,000,000) by any agency, department, authority,
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commission, board, instrumentality or political subdivision of the United
States, any state or municipal government, and (c) any recovery in good
funds by a Borrower by reason of a nonappealable judgment against any
other Person in excess of $5,000,000 to the full extent thereof.
"MATERIAL SUBSIDIARY" means, at any time, with reference to any
Person, any Subsidiary of such Person (x) that has assets at such time
comprising 5% or more of the consolidated assets of such Person and its
Subsidiaries (the consolidated assets of such Person being determined for
purposes hereof on a consolidated basis with any Person with respect to
which such Person is a Subsidiary) or (y) whose operations in the current
fiscal year are expected to, or whose operations in the most recent fiscal
year did (or would have if such Person had been a Subsidiary for such
entire fiscal year), represent 10% or more of the consolidated earnings
before interest, taxes, depreciation and amortization of such Person and
its Subsidiaries (the consolidated earnings of such Person being
determined for purposes hereof on a consolidated basis with any Person
with respect to which such Person is a Subsidiary) for such fiscal year.
"MAXIMUM LAWFUL RATE" has the meaning specified in Section ERROR!
REFERENCE SOURCE NOT FOUND..
"MERGER" means the merger of Acquisition Company with and into
Instron Corporation, such that Instron Corporation is the surviving
corporation, as contemplated by the Merger Agreement.
"MERGER AGREEMENT" means that certain Agreement and Plan of Merger,
among Instron Corporation, Kirtland Capital and Acquisition Company, dated
as of May 6, 1999, executed in connection with the
Merger.
"MERGER DOCUMENTS" means the Merger Agreement and any other
writings or documents executed at any time in connection with the Merger,
as the same may from time to time be amended, supplement or otherwise
modified.
""MONEY MARKET RATE LOANS" means the Swing Line Loans, denominated
in Dollars or, to the extent acceptable to the applicable Designated Swing
Line Lender, in an Alternate Currency, and bearing interest at the Quoted
Money Market Rate.
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a
"multiemployer plan" as such term is defined in section 4001(a)(3) of
ERISA.
"NATIONAL CURRENCY UNIT" means a unit of any Alternate Currency
(other than a Euro Unit) of a Participating Member State.
"NCB" means National City Bank, a national banking association, in
its capacity as a Bank hereunder.
"NET PROCEEDS" means (a) the cash proceeds (including cash proceeds
subsequently received in respect of non-cash consideration initially
received) from any sale, transfer or other disposition of assets of a
Borrower or any Subsidiaries thereof to a Person (other than: (i) any sale
of Inventory in the ordinary course, (ii) disposition in the ordinary
course of such Borrower's or Subsidiaries' business of assets that are
obsolete, worn out or no longer used or useful in such Borrower's or
Subsidiaries business, (iii) disposition of capital assets the proceeds of
which (net of taxes payable with respect to the disposition and the
reasonable costs and expenses of sale) are reinvested within a reasonable
period of time in capital assets of such Borrower or Domestic Subsidiaries
of such Borrower (in the case of a sale by a Domestic Borrower or Domestic
Subsidiaries
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thereof) or such Borrower, any other Borrower or any Domestic Subsidiaries
or Foreign Subsidiaries (in the case of a sale by a Foreign Borrower or
the Foreign Subsidiaries thereof, (iv) any sale, transfer or other
disposition of assets of a Borrower or Subsidiary to any other Borrower or
Subsidiary or (v) any sale of assets pursuant to a sale leaseback
transaction to the extent permitted by Section ERROR! REFERENCE SOURCE NOT
FOUND. hereof) to the extent that such sale proceeds (in each of the above
cases, net of (x) selling expenses, including without limitation any
reasonable broker's fees or commissions, costs of discontinuing operations
associated with such assets and sales, transfer and similar taxes and (y)
the repayment of any Indebtedness secured by a purchase money Lien on such
assets that is permitted under this Agreement) exceeds Five Million
Dollars ($5,000,000) in any Fiscal Year of Instron Corporation and its
consolidated Subsidiaries and only to the extent of such excess; (b) the
cash proceeds from the issuance and/or sale of equity or debt securities
of any Borrower pursuant to any public offering or private placement, net
of transaction costs (net of customary fees, costs and expenses including,
without limitation, underwriters' or placement Administrative Agents'
discounts and commissions and transfer and similar taxes) (excluding any
(i) proceeds from the issuance or sale of equity or debt securities in
connection with a Permitted Acquisition and (ii) proceeds from the
issuance of any equity or debt securities pursuant to compensation plans
for employees or executive officers of the Borrowers and the Subsidiaries
thereof and (iii) proceeds from the issuance of the Senior Subordinated
Notes), (c) the cash proceeds from any additional Indebtedness (excluding
the Indebtedness evidenced by the Senior Subordinated Notes) permitted
hereunder to the extent such proceeds, when aggregated for the purposes of
this clause (c) with the debt securities referred to in clause (b) hereof,
exceed Five Million Dollars ($5,000,000) and only to the extent of such
excess, and (d) the cash proceeds from any Material Recovery Event (net of
any amounts in respect of insurance proceeds or proceeds of compulsory
takings which are reinvested in repair or replacement of the capital
assets of a Borrower or the Subsidiaries thereof which were subject to
such casualty or taking).
"NON-COMPLIANCE NOTICE" has the meaning specified in Section
ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement.
"NOTES" means, collectively, each Revolving Credit Note executed and
delivered by a Borrower in favor of a Bank under this Agreement, each Term
Note executed and delivered by a Borrower in favor of a Bank under this
Agreement and each Swing Line Note executed and delivered by a Borrower to
a Designated Swing Line Lender under this Agreement.
"NOTICE OFFICE" means (i) with respect to the Administrative Agent,
such office of the Administrative Agent specified as its "Notice Office"
under its name on the signature pages hereto, or such other office,
located in a city in the United States Eastern Time Zone, as the
Administrative Agent may from time to time specify in writing to the
Borrower Representative, the Banks, the Designated Swing Line Lenders and
the Designated Letters of Credit Issuers as the office to which notices to
the Administrative Agent are to be given by the Borrower
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<PAGE> 175
Representative, the Banks, the Designated Swing Line Lenders and the
Designated Letters of Credit Issuers, as the case may be, (ii) with
respect to each Designated European Administrative Agent, such office of
such Designated European Administrative Agent specified as its "Notice
Office" under its name on the signature pages hereto, or such other
office, located in a city in the United Kingdom or the Federal Republic of
Germany, as the Designated European Administrative Agent may from time to
time specify in writing to the Borrower Representative, the Administrative
Agent, the Banks, the Designated Swing Line Lenders and the Designated
Letters of Credit Issuers as the office to which notices to such
Designated European Administrative Agent are to be given by the Borrower
Representative, the Administrative Agent, the Banks, the Designated Swing
Line Lenders and the Designated Letters of Credit Issuers, as the case may
be, and (iii) with respect to each Bank, each Designated Swing Line Lender
and each Designated Letter of Credit Issuer, such office thereof specified
as its "Notice Office" under its name on the signature pages hereto, or
such other office as such Bank, Designated Swing Line Lender and
Designated Letter of Credit Issuer may from time to time specify in
writing to the Borrower Representative, the Administrative Agent, the
other Banks, the Designated Swing Line Lenders and the Designated Letters
of Credit Issuers as the office to which notices thereto are to be given
by the Borrower Representative, the Banks, the Designated Swing Line
Lenders and the Designated Letters of Credit Issuers, as the case may be.
"OBLIGATED BANK" has the meaning specified in Section ERROR!
REFERENCE SOURCE NOT FOUND. of this Agreement.
"OBLIGATIONS" means the present and future obligations of each of
the Borrowers to the Banks under this Agreement or any other Loan
Document, including, without limitation: (a) with respect to the
outstanding principal and accrued interest (including interest accruing
after a petition for relief under the federal bankruptcy laws has been
filed) in respect of any Revolving Credit Loans or Term Loans advanced to
such Borrower by the Banks plus the outstanding Swing Line Exposure of the
Banks plus the outstanding LC Exposure of the Banks and reimbursement
obligations of each such Borrower with respect to the LC Exposure, (b) all
fees owing to the Designated Letter of Credit Issuer, the Banks or the
Administrative Agent under this Agreement and the other Loan Documents,
(c) any amounts owing by such Borrower as a Borrower Guarantor with
respect to its guaranty of the Guaranteed Obligations owing by the other
Borrowers to the Banks or as a guarantor of the obligations of other
Letter of Credit Obligors under Section ERROR! REFERENCE SOURCE NOT
FOUND., (d) any costs and expenses reimbursable to the Banks, the
Designated Letter of Credit Issuer, the Administrative Agent and each
Designated European Administrative Agent pursuant to Section ERROR!
REFERENCE SOURCE NOT FOUND. of this Agreement, and (e) taxes, Other Taxes,
compensation, indemnification obligations or other amounts owing by the
Borrowers to the Administrative Agent, the Designated Letter of Credit
Issuer or the Banks under this Agreement, the Notes or any Loan Document.
"OFFERING" means the offering by Instron Corporation of the Senior
Subordinated Notes pursuant to Section 144A of the Securities Act of 1933.
"OPERATING ACCOUNT" means, with respect to each of the Borrowers,
the account described in the Supplemental Schedule and maintained by and
in the name of such Borrower: (i) with National City Bank, for the
purposes of disbursing the proceeds of Revolving Credit Loans and Term
Loans which account shall in no case be a payroll account, (ii) with
National City Bank or the Designated European Administrative Agent, if
applicable, for purposes of disbursing the proceeds of Revolving Credit
Loans and Swing Line Loans to Instron, Ltd. which account shall in no case
be a payroll account, and (iii) with National City Bank or the Designated
European Administrative Agent, if applicable, for purposes of disbursing
the proceeds of Revolving Credit Loans and Swing Line Loans to Instron
Schenck Testing Systems, GmbH and Instron Wolpert GmbH, respectively.
"OTHER TAXES" has the meaning specified in Section ERROR!
REFERENCE SOURCE NOT FOUND. of this Agreement.
"PARTICIPATING MEMBER STATE" means each state so described in any
EMU Legislation.
"PAYMENT OFFICE" means (i) with respect to the Administrative Agent,
such office of the Administrative Agent specified as its "Payment Office"
under its name on the
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<PAGE> 176
signature pages hereto, or such other office, located in a city in the
United States Eastern Time Zone, as the Administrative Agent may from time
to time specify in writing to the Borrower Representative, the Banks, the
Designated Swing Line Lenders and the Designated Letter of Credit Issuers,
as the case may be, as the office to which payments are to be made by the
Borrowers or funds made accessible to the Administrative Agent by the
Banks, as the case may be, and (ii) with respect each Designated European
Administrative Agent, such office of such Designated European
Administrative Agent specified as its "Payment Office" under its name on
the signature pages hereto, or such other office, located in a city in the
United Kingdom or the Federal Republic of Germany, as such Designated
European Administrative Agent may from time to time specify in writing to
the Borrower Representative, the Administrative Agent, the Banks, the
Designated Swing Line Lenders and the Designated Letter of Credit Issuers,
as the case may be, as the office to which payments are to be made by
Borrowers as to which such Designated European Administrative Agent is
designated or funds made accessible to such Designated European
Administrative Agent by the Banks or Swing Line Lenders, as the case may
be.
"PBGC" means the Pension Benefit Guaranty Corporation or any other
governmental authority succeeding to any of its functions.
"PERMISSIBLE SENIOR SUBORDINATED NOTE AMOUNT" has the meaning
specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this
Agreement.
"PERMITTED ACQUISITION" shall mean and include any Acquisition as to
which all of the following conditions are satisfied:
(i) the Acquisition does not involve the Acquisition of a
Person which is (A) a general partnership, general partner
of a limited partnership or is otherwise a Person as to
which limited liability is unavailable to the holders of
its equity or other similar interests therein or (B) a
limited partnership interest, or (C) a trust or
unincorporated association, or (D) without the consent of
the Required Banks, a person having an equity interest or
other similar interest held by a foreign government or any
political subdivision or agency thereof;
(ii) such Acquisition (A) involves a line or lines of business
which is complementary to the lines of business in which
the Borrowers and their Subsidiaries, considered as an
entirety, are engaged on the Closing Date, and (B) involves
a line or lines of business which has generated a positive
earnings before interest, income taxes, depreciation and
amortization for its most recently completed four full
fiscal quarters for which financial information is
available, unless the Required Banks specifically approve
or consent to such Acquisition in writing;
(iii) such Acquisition is not actively opposed by the board of
directors (or similar governing body) of the selling Person or
the person whose equity interests are to be acquired, unless
all of the Banks specifically approve or consent to such
Acquisition in writing;
(iv) in the case of an Acquisition by virtue of which the Person
acquired becomes a Subsidiary of a Borrower or a Subsidiary
thereof, the aggregate consideration for any such
Acquisition (including any Permitted Subordinated
Acquisition Indebtedness and the Permitted Assumed
Acquisition Indebtedness (without duplication) any such
acquired Person)
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<PAGE> 177
does not exceed $7,500,000, in each case, unless the Required
Banks specifically approve or consent in writing to a greater
aggregate consideration for such Acquisition;.
(v) the Borrowers would, after giving effect to such Acquisition,
on a pro forma basis, be in compliance with the financial
covenants contained in Section ERROR! REFERENCE SOURCE NOT
FOUND.; and
(vi) at least 10 Business Days prior to the completion of such
transaction the Borrowers shall have delivered to the
Administrative Agent a certificate of a Responsible Officer
of Instron Corporation demonstrating, in reasonable detail,
the computations necessary to show compliance with the
financial covenants contained in Section ERROR! REFERENCE
SOURCE NOT FOUND. on a pro forma basis, such pro forma
calculations being determined as if (x) such Acquisition
had been completed at the beginning of the most recent
Testing Period for which financial information for the
Borrowers and the business of Person to be acquired is
available and has been delivered to the Bank at least 10
Business Days prior to the completion of such transaction
(which shall in the case of the acquired business include
audited financial statements for the most recent fiscal
year, unless the same are unavailable and unaudited
financial statements are acceptable to the Required Banks),
and (y) any such Indebtedness, or other Indebtedness
incurred to finance such Acquisition, had been outstanding
for such entire Testing Period.
"PERMITTED ACQUISITION INVESTMENTS" means investments in the capital
of any Subsidiary or Person (acquired in a Permitted Acquisition which
does not become a Subsidiary by virtue of a Permitted Acquisition) by
Instron Corporation or any other Subsidiaries thereof the proceeds of
which are used in connection with a Permitted Acquisition.
"PERMITTED ACQUISITION LIEN" means any Lien on assets acquired in
connection with a Permitted Acquisition; provided, however, that the
Indebtedness secured by such Lien shall not exceed the amount permitted
under Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement, shall
be expressly limited to the assets acquired in the Permitted Acquisition,
and shall in no event secure Permitted Subordinated Acquisition
Indebtedness.
"PERMITTED ASSUMED ACQUISITION INDEBTEDNESS" means principal amount
of any assumed Indebtedness of a Person acquired pursuant to a Permitted
Acquisition which is assumed by Instron Corporation or any Subsidiaries
thereof in connection with the Permitted Acquisition to the extent such
assumption is permitted by the definition of "Permitted Acquisition) set
forth in this Agreement.
"PERMITTED SUBORDINATED ACQUISITION INDEBTEDNESS" means unsecured
Indebtedness incurred by the Borrowers or any Subsidiaries thereof in
connection with a Permitted Acquisition in favor of the Person who is the
seller with respect to the Permitted Acquisition; provided, however, that
such seller shall agree to be expressly subordinate and junior in right of
payment and action to the payment and performance in full of the
Obligations, Swing Line Obligations, Letter of Credit Obligations and
Designated Hedge Obligations and which subordination is evidenced by
written agreement in form and substance satisfactory to the Administrative
Agent.
"PERSON" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association,
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an entity joint venture or other entity, or a government or any political
subdivision or agency thereof.
"PLEDGING BORROWER" means (a) with respect to the Domestic
Borrower Collateral, each Domestic Borrower, (b) with respect to the
U.K. Collateral, Instron, Ltd. and (c) with respect to the German
Collateral, Instron Schenck Testing Systems, GmbH and Instron Wolpert
GmbH.
"POTENTIAL DEFAULT" means an event, condition or thing which with
the lapse of any applicable grace period or with the giving of notice or
both would constitute, an Event of Default referred to in ERROR! REFERENCE
SOURCE NOT FOUND. of this Agreement and which has not been appropriately
waived in accordance with Section ERROR! REFERENCE SOURCE NOT FOUND. of
this Agreement or fully corrected, prior to becoming an actual Event of
Default.
"PROCEEDS" means all "proceeds" (as defined in the UCC) of any and
all of the Collateral or of any Proceeds made or due and payable to a
Borrower from time to time including, without limitation, all proceeds in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of such collateral by any governmental body,
authority, bureau or agency (or any Person acting under color of
governmental authority) and, to the extent not otherwise included, all
payments under insurance (and, in the case of the Administrative Agent,
whether or not the Administrative Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of such collateral.
"PRODUCTS" means property directly or indirectly resulting from any
manufacturing, processing, assembling or commingling of any Inventory.
"PROPERTIES" has the meaning specified in Section ERROR!
REFERENCE SOURCE NOT FOUND. of this Agreement.
"QUOTED MONEY MARKET RATE" means, for any Swing Line Loan to a
Borrower, a rate per annum equal to the fixed or floating interest rate
quoted by the Designated European Administrative Agent for such Borrower
as such quotation is provided in Section ERROR! REFERENCE SOURCE NOT
FOUND. of this Agreement as applicable to Swing Line Loans made on or
prior to a date specified in the quote and having a maturity contemplated
by such Designated European Administrative Agent with such quotation being
obtained by the Borrower Representative from such Designated European
Administrative Agent.
"RATABLE BORROWER SHARE" means, with respect to any Borrower, such
amount of the Obligations hereunder that represents a good faith
allocation by the Borrowers of all general fees, charges and other
Obligations hereunder not specifically attributable to or the
responsibility of a particular Borrower (Loans and Letters of Credit made
to or for the account of a Borrower and interest thereon being specific to
the Borrower affected thereby ) to each Borrower so that no Foreign
Borrower shall have or be construed as having liability or responsibility
for any Obligations of any Domestic Borrower or any other Foreign
Borrower.
"RATABLE PORTION" means, in respect of any Bank, the quotient
(expressed as a percentage) obtained at any determination date by
dividing: (x) the sum of such Bank's Revolving Credit Commitment at such
time plus outstanding Term Loans at such time by (y) the sum of the
aggregate amount of the Revolving Credit Commitments of all of the Banks
at such time plus the aggregate outstanding Term Loans of all of the
Banks; provided, however, that, if all of the Revolving Credit Commitments
are terminated pursuant to the terms hereof, then, Ratable Portion means
the quotient (expressed as a
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percentage) obtained at any determination date by dividing (x) the
aggregate amount of such Bank's Revolving Credit Loans (and any
participations in such Revolving Credit Loans) outstanding at such time
plus Term Loans outstanding at such time by (y) the aggregate amount of
Revolving Credit Loans (and such participations therein) of all of the
Banks outstanding at such time plus the aggregate amount of Term Loans of
all of the Banks outstanding at such time; provided, further, that to the
extent any Bank does not have a constant but rather a variable percentage
of the aggregate outstanding Revolving Credit Commitments (or aggregate
outstanding Revolving Credit Loans upon termination of the Revolving
Credit Commitments) of the Banks, the aggregate outstanding Term Loans of
the Banks, such Bank's Ratable Portion shall be (I) calculated separately
with respect to such Bank's percentage interest in the Revolving Credit
Commitments (or Revolving Credit Loans upon such termination) and
percentage interest in the Term Loans, and (II) for purposes of
allocations pursuant to and determinations under this Agreement, such
Bank's variable Ratable Portion as so calculated shall be applied
separately where appropriate to the context of such allocation or
determination with respect to outstanding Revolving Credit Commitments (or
Revolving Credit Loans upon such termination) and\or outstanding Term
Loans, as the case may be.
"RATE CONTINUATION" means a continuation pursuant to Section ERROR!
REFERENCE SOURCE NOT FOUND. of this Agreement of LIBOR Rate Loans having a
particular Interest Period as LIBOR Rate Loans having an Interest Period
of the same duration.
"RATE CONVERSION" means a conversion pursuant to Section ERROR!
REFERENCE SOURCE NOT FOUND. of this Agreement of Loans of one Type into
Loans of another Type and, with respect to LIBOR Rate Loans, from one
permissible Interest Period to another permissible Interest Period.
"RATE CONVERSION/CONTINUATION REQUEST" has the meaning specified
in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement.
"RATE QUOTE REQUEST" has the meaning specified in Section ERROR!
REFERENCE SOURCE NOT FOUND. of this Agreement.
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. SectionSection 6901 et seq.
"RECAPITALIZATION EXPENSES AND COSTS" means all nonrecurring fees,
expenses and costs relating to the recapitalization of Instron Corporation
pursuant to the Merger, the Offering and transactions contemplated by this
Agreement incurred on or prior to the Effective Time, including, without
limitation, any fees and expenses incurred in connection with the
Offering, the Merger, and this Agreement, any compensation expense
incurred in connection with the cancellation, retirement, or acceleration
of vesting of stock options or restricted stock, modifications of existing
employment agreements and expenses related to early extinguishment of
debt.
"REDEEMABLE STOCK" means, with respect to any Person, the capital
stock or similar equity interests in such Person which (a) is by its terms
subject to mandatory redemption, in whole or in part, pursuant to a
sinking fund, scheduled redemption or similar provisions, at any time
prior to the Revolving Credit Termination Date or (b) is otherwise
required to be repurchased or retired on a scheduled date, upon the
occurrence of any event or circumstance, at the option of the holder or
holders thereof, or otherwise, prior to the Revolving Credit Termination
Date other than repurchases pursuant to Stockholders Agreement.
II-35
<PAGE> 180
"REFUNDING NOTICE" has the meaning specified in Section ERROR!
REFERENCE SOURCE NOT FOUND. of this Agreement.
"REGULATORY CHANGE" means, as to any Bank, any change in United
States federal, state or foreign Laws or regulations or the adoption or
making of any interpretations, directives or requests of or under any
United States federal, state or foreign Laws or regulations (whether or
not having the force of Law) by any court or governmental authority
charged with the interpretation or administration thereof.
"REPORTABLE EVENT" means any of the events set forth in Section 4043
of ERISA excluding those events for which the requirement of notice has
been waived by the PBGC.
"REQUIRED BANKS" means, at any time, Banks (excluding, for purposes
of this definition, Banks then constituting "Defaulting Lenders" under
Section ERROR! REFERENCE SOURCE NOT FOUND.) having at least sixty six and
two thirds percent (66 2/3%) of the aggregate amount of: the Revolving
Credit Commitments of all of the Banks at such time plus the outstanding
principal amount of the Terms Loans of all of the Banks outstanding at
such time; provided, however, that, if all of the Revolving Credit
Commitments are terminated pursuant to the terms hereof, then, the term
"Required Banks" means Banks (excluding, for purposes of this definition,
Banks then constituting "Defaulting Lenders" under Section ERROR!
REFERENCE SOURCE NOT FOUND.) having at least sixty six and two thirds
percent (66 2/3%) of the aggregate amount of the Revolving Credit Loans of
all of the Banks outstanding at such time plus the aggregate outstanding
principal amount of the Term Loans of all of the Banks outstanding at such
time (excluding, for purposes of determining the aggregate outstanding
Commitments of the Banks and the aggregate outstanding principal amount of
Revolving Credit Loans and Term Loans of the Banks, as the case may be,
outstanding at such time, the outstanding Revolving Credit Commitments and
the outstanding principal amount of the Revolving Credit Loans and Term
Loans, as the case may be, of any such Defaulting Lender).
"REQUIRED REVOLVING CREDIT BANKS" means, at any time, Banks
(excluding, for purposes of this definition, any Banks then constituting a
"Defaulting Lender" under Section ERROR! REFERENCE SOURCE NOT FOUND.)
having at least 66 2/3% of the aggregate outstanding Revolving Credit
Commitments of all of the Banks at such time; provided, however, that, if
the Revolving Credit Commitments are terminated pursuant to the terms
hereof, then, the term "Required Lenders" shall mean Banks (excluding any
Bank then constituting a Defaulting Lender) having at least 66 2/3% of the
aggregate outstanding principal amount of the Revolving Credit Loans of
all of the Banks outstanding at such time (excluding, for purposes of
determining the aggregate amount of outstanding Commitments of the Banks
and the aggregate outstanding principal amount of Revolving Credit Loans
of the Banks, as the case may be, outstanding at such time, the
outstanding Revolving Credit Commitment and the outstanding principal
amount of Revolving Credit Loans of such Defaulting Lender outstanding at
such time).
"REQUIRED TERM BANKS" means, at any time, Banks (excluding, for
purposes of this definition, any Bank then constituting a "Defaulting
Lender" under Section ERROR! REFERENCE SOURCE NOT FOUND.) having at least
66 2/3% of the aggregate outstanding principal amount of the Term Loans of
all of the Banks outstanding at such time (excluding, for purposes of
determining the aggregate outstanding principal amount of Term Loans of
the Banks outstanding at such time, the outstanding principal amount of
Term Loans of such Defaulting Lender at such time).
II-36
<PAGE> 181
"RESPONSIBLE OFFICER" means, with respect to Instron Corporation,
the Chief Executive Officer, President or Chief Financial Officer
thereof.
"REVOLVING CREDIT BORROWING" means a Borrowing consisting of
Revolving Credit Loans.
"REVOLVING CREDIT COMMITMENT" means, in respect of any Bank, the
commitment of such Bank to Loan Revolving Credit Loans up to the amount
set forth in Annex I.
"REVOLVING CREDIT LOAN" means a Loan made by a Bank to a Borrower
pursuant to Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement
(whether made by a Bank pursuant to a Credit Request or by reason of a
Deemed Credit Request).
"REVOLVING CREDIT NOTE" means, with respect to the Borrowers, the
promissory note of each Borrower (including without limitation any
Borrower that becomes a Borrower after the Closing Date pursuant to an
Additional Borrower Addendum), payable to the order of a Bank, in
substantially the form of Exhibit A-1 hereto, and in the original
principal amount of such Bank's Revolving Credit Commitment, evidencing
the aggregate indebtedness of such Borrower to such Bank resulting from
the Revolving Credit Loans made by such Bank, as each such promissory note
may from time to time be amended, supplemented or otherwise modified.
"REVOLVING CREDIT TERMINATION DATE" means April 1, 2005, or earlier
if the Revolving Credit Commitments of the Banks are terminated pursuant
to the terms of this Agreement.
"SALES OFFICE" means any office of a Domestic Pledging Borrower or
any Subsidiary thereof the primary functions of which are conducting sales
operations and acting as the location for sales personal involved in such
sales operations but excludes any office (i) at which are located the
records pertaining to any Accounts or General Intangibles, (ii) which is
also the location of the principal place of business of such Borrower or
Subsidiary or the chief executive office thereof, (iii) at which is
located Inventory other than immaterial amounts of Inventory used for
sales purposes or (iv) at which Equipment (other than Equipment used in
the ordinary course operation of the sale office) is located.
"SENIOR SUBORDINATED NOTE INDENTURE" means that certain Indenture,
dated as of September 29, 1999, between Instron Corporation, Norwest Bank
Minnesota, National Association, as Trustee, and the Guarantors (as
defined therein). as the same may from time to time be amended, supplement
or otherwise modified.
"SENIOR SUBORDINATED NOTES" means the 13.25% Senior Subordinated
Notes due 2009 sold by Instron Corporation pursuant to the Offering in the
aggregate original principal amount of $60,000,000.
"SENIOR SUBORDINATED NOTE DOCUMENTS" means the Senior Subordinated
Note Indenture, the Senior Subordinated Notes, the Warrant to Purchase
30,654 Shares of Common Stock executed in connection therewith, and any
other writings or documents executed at any time in connection with the
Senior Subordinated Notes, as the same may from time to time be amended,
supplement or otherwise modified.
"SOLVENT" means, with respect to any Person, as of any date of
determination, that: (a) the fair value of the property of the Person as
of such date is greater than the total
II-37
<PAGE> 182
amount of the liabilities (including contingent liabilities computed at
the amount that, in light of all the facts and circumstances existing as
of such date, represents the amount that can reasonably be expected to
become an actual or matured liability) of the Person, (b) the present fair
saleable value of the assets of the Person as of such date is not less
than the amount that will be required to pay the probable liabilities of
the Person on its debts as they become absolute and matured, (c) the
Person is able to pay all liabilities of the Person as those liabilities
mature, and (d) the Person does not have unreasonably small capital for
the business in which it is engaged or for any business or transaction in
which it is about to engage. The determination of whether a Person is
Solvent shall take into account all such Person's assets and liabilities
regardless of whether, or the amount at which, any such asset or liability
is included on a balance sheet of such Person prepared in accordance with
GAAP, including assets such as contingent contribution or subrogation
rights, business prospects, distribution channels and goodwill. The
determination of the sum of a Person's assets at a fair valuation or the
present fair saleable value of a Person's assets shall be made on a going
concern basis unless, at the time of such determination, the liquidation
of the business in which such assets are used or useful is in process or
is demonstrably imminent. In computing the amount of contingent or
unrealized assets or contingent or unliquidated liabilities at any time,
such assets and liabilities will be computed at the amounts which, in
light of all the facts and circumstances existing at such time, represent
the amount that reasonably can be expected to become realized assets or
matured liabilities, as the case may be. In computing the amount that
would be required to pay a Person's probable liability on its existing
debts as they become absolute and matured, reasonable valuation
techniques, including a present value analysis, shall be applied using
such rates over such periods as are appropriate under the circumstances,
and it is understood that, in appropriate circumstances, the present value
of contingent liabilities may be zero.
"SPC" has the meaning specified in Section ERROR! REFERENCE
SOURCE NOT FOUND. of this Agreement.
"STOCKHOLDERS AGREEMENT" means that certain Stockholders Agreement,
dated as of September 29, 1999, among Instron Corporation and the
stockholders of Instron.
"SUBORDINATION AGREEMENT" means any written agreement by which
Indebtedness of any Borrower or any Subsidiary thereof is expressly
subordinated and made junior in right of payment and action to the payment
and performance in full of the Obligations , Swing Line Obligations,
Letter of Credit Obligations and Designated Hedge Obligations and which
written subordination agreement is in form and substance satisfactory to
the Administrative Agent.
"SUBORDINATED DEBT" means the (a) Senior Subordinated Notes
(including subordination of the above-referenced Warrants to Purchase
30,654 of Common Stock) and (b) all other Indebtedness (including the
Indebtedness evidenced by the value of any Redeemable Stock issued by
Instron Corporation) of the Borrowers or any Subsidiaries thereof, now or
hereafter existing, that is expressly subordinated and junior in right of
payment and action to the payment and performance in full of the
Obligations and which subordination is evidenced by written agreement in
form and substance satisfactory to the Administrative Agent.
"SUBSIDIARY" means, in respect of a corporate Person at any time, a
corporation or other business entity the shares constituting a majority of
the outstanding capital stock (or other form of ownership) or constituting
a majority of the voting power in any election of directors (or shares
constituting both majorities) of which are (or upon the exercise of any
outstanding warrants, options or other rights would be) owned directly or
II-38
<PAGE> 183
indirectly at such time by such Person or another Subsidiary of such
Person or any combination of the foregoing.
"SUBSIDIARY GUARANTOR" means any Domestic Subsidiary which has
executed the Subsidiary Guaranty in favor of the Administrative Agent for
the benefit of the Banks.
"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty dated as of the
date hereof, substantially in the form attached hereto as Exhibit L-1
attached hereto, as the same may from time to time be amended,
supplemented or otherwise modified.
"SUBSIDIARY PLEDGE AGREEMENT" means the Subsidiary Pledge Agreement
dated as of the date hereof, substantially in the form attached hereto as
Exhibit D-1 attached hereto, as the same may from time to time be amended,
supplemented or otherwise modified.
"SUBSIDIARY SECURITY AGREEMENT" means the Subsidiary Security
Agreement, dated as of the date hereof, substantially in the form attached
hereto as Exhibit L-2 attached hereto, as the same may from time to time
be amended, supplemented or otherwise modified
"SUPPLEMENTAL SCHEDULE" means the schedule which is attached hereto
as Annex III and is incorporated into this Agreement.
"SWING LINE BORROWING" means, with respect to a Swing Line Loan, a
Swing Line Loan to a Borrower consisting of a Quoted Money Market Rate
Loan or a LIBOR Rate Loan, denominated in the same currency, made by a
Designated Swing Line Lender to such Borrower on a single day and as to
which a single maturity date is in effect (i.e., any Swing Line Loan made
by a Designated Swing Line Lender, comprised of a different Type, made in
a different currency, having a different maturity date (regardless of
whether such maturity period commences on the same date as another
selected maturity period), or made on a different date shall be considered
to comprise a different Swing Line Borrowing).
"SWING LINE EXPOSURE" means, with respect to any Bank, at any time
of determination, such Bank's obligation to refund, or purchase a
participation equal to, its Ratable Portion of the aggregate principal
amount of Swing Line Loans outstanding at such time that have been
advanced by all of the Designated Swing Line Lenders to all of the
Borrowers.
"SWING LINE LOAN ACCOUNT" has the meaning set forth in Section
ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement.
"SWING LINE LOANS" means Loans made by a Designated Swing Line
Lender to a Borrower pursuant to Section ERROR! REFERENCE SOURCE NOT
FOUND. of this Agreement.
"SWING LINE NOTE" means, with respect to each Designated Swing Line
Lender, the promissory note of the Borrower for which such Designated
Swing Line Lender is designated payable to the order of such Designated
Swing Line Lender, in substantially the form of Exhibit A-2 hereto, and in
the original principal amount of the Designated Swing Line Lender
Commitment of the Designated Swing Line Lender, evidencing the aggregate
indebtedness of such Borrower to such Designated Swing Line Lender
II-39
<PAGE> 184
resulting from the Swing Line Loans made by the Designated Swing Line
Lender to such Borrower.
"SWING LINE OBLIGATIONS" means (a) the obligations of a Borrower to
the Designated Swing Line Lender hereunder, (b) all fees owing to such
Designated Swing Line Lender under this Agreement and the other Loan
Documents, (c) any costs and expenses reimbursable to the Designated Swing
Line Lender pursuant to Section ERROR! REFERENCE SOURCE NOT FOUND. of this
Agreement, and (d) taxes, Other Taxes, compensation, indemnification
obligations and other amounts owing by such Borrower to the Designated
Swing Line Lender under this Agreement, the Swing Line Note executed in
favor of such Designated Swing Line Lender or any Loan Document.
"SWING LINE REQUEST" has the meaning in Section ERROR! REFERENCE
SOURCE NOT FOUND. of this Agreement.
"SWING LINE TERMINATION DATE" means April 1, 2005, or earlier if
the Aggregate Swing Line Commitment of the Designated Swing Line Lenders
is terminated pursuant to the terms of this Agreement.
"SYNDICATION AGENT" means NCB and shall include any successor to
the Syndication Agent appointed pursuant to Section ERROR! REFERENCE
SOURCE NOT FOUND. of this Agreement.
"SYNDICATION PERIOD" means the period commencing with the Effective
Date and ending as of the earlier of (i) the date which is 120 days after
the Effective Date or (ii) the date which the Syndication Agent determine,
in its sole discretion (and notifies the Borrower Representative and the
Administrative Agent) that the primary syndication by the initial Banks
hereunder of portions of the Term Loans and Revolving Credit Commitments
to new Banks has been completed and, during which Syndication Period, the
Conditions Letter shall remain in effect and enforceable between the
Syndication Agent and the Borrowers.
"TERM BORROWING" means a Borrowing of LIBOR Rate Loans or Alternate
Base Rate Loans by Instron Corporation from all of the Banks having Term
Commitments which Borrowing comprises all or a portion of the Term Loan of
each of such Banks to Instron Corporation.
"TERM COMMITMENT" means, with respect to each Bank, (i) the
amount, if any, set forth opposite such Bank's name in Annex I hereto
as its Term Commitment or (ii) the amount, if any, set forth opposite
such Bank's name in that certain Letter Allocating Initial Commitments
to be executed as of the Syndication Date as its "Term Commitment," as
either may be reduced from time to time pursuant to Sections ERROR!
REFERENCE SOURCE NOT FOUND. and/or ERROR! REFERENCE SOURCE NOT FOUND.
or ERROR! REFERENCE SOURCE NOT FOUND. hereof, or adjusted from time to
time as a result of assignments to or from such Bank pursuant to
Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement.
"TERM LOAN" has the meaning specified in Section ERROR! REFERENCE
SOURCE NOT FOUND. hereof and is a one time Loan made by a Bank on an
amortizing term basis pursuant to Section ERROR! REFERENCE SOURCE NOT
FOUND. of this Agreement.
"TERM LOAN MATURITY DATE" has the meaning specified in Section
ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement, or such earlier
date on which the Term Commitments are terminated hereunder.
"TERM LOAN REPAYMENT DATE" has the meaning specified in Section
ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement.
II-40
<PAGE> 185
"TERM NOTE" means, with respect to each Bank, the promissory note of
Instron Corporation payable to the order of such Bank, in substantially
the form of Exhibit A-3 hereto, and in the original principal amount of
the Term Commitment of such Bank, evidencing the Indebtedness of Instron
Corporation to such Bank resulting from the Term Loan made by such Bank to
Instron Corporation.
"TAXES" has the meaning specified in Section ERROR! REFERENCE
SOURCE NOT FOUND. of this Agreement.
"TARGET OPERATING DAY" means any day that is not (i) a Saturday or
Sunday, (ii) Christmas Day or New Year's Day or (iii) any other day on
which the Trans-European Automated Real-time Gross Settlement Express
Transfer system (or any successor settlement system) is not operating (as
determined by the Administrative Agent).
"TESTING PERIOD" means, for any determination, a single period
consisting of the four consecutive fiscal quarters of a Person then last
ended (whether or not such quarters are all within the same fiscal year),
except that, if a particular provision of this Agreement indicates that a
Testing Period shall be of a different specified duration, such Testing
Period shall consist of the particular Fiscal Quarter or Fiscal Quarters
of Instron Corporation and its consolidated Subsidiaries then last ended
which are so indicated in such provision.
"THIRD PARTY INTELLECTUAL PROPERTY" means any Intellectual
Property not owned by the Borrowers.
"TREATY ON EUROPEAN UNION" shall mean the Treaty of Rome of March
25, 1957, as amended by the Single European Act of 1986 and the Maastricht
Treaty (which was signed at Maastricht on February 7, 1992, and came into
force on November 1, 1993), as amended from time to time.
"TYPE" means, when used in respect of any Loan, the LIBOR Rate, the
Alternate Base Rate or the Quoted Money Market Rate in effect in respect
of such Loan.
"UCC" means the Uniform Commercial Code in effect in the State of
Ohio from time to time.
"U.K. COLLATERAL" means, collectively, (i) the real property of
Instron, Ltd., as specified in the U.K. Collateral Documents, and (ii)
the personal property and assets of Instron, Ltd. (including, without
limitation, all book accounts and inventory stock thereof), as defined
in the U.K. Collateral Documents.
"U.K. COLLATERAL DOCUMENTS" means, collectively, (i) that certain
Debenture, dated as of the date hereof, executed by Instron, Ltd. in favor
of the Administrative Agent, with respect to personal and real property of
Instron, Ltd. specified therein and substantially in the form attached
hereto as Exhibit F-2, (ii) that certain Share Charge, dated as of the
date hereof, executed by Instron Corporation in favor of the
Administrative Agent, with respect to the capital stock of Instron,
Holdings, Ltd. owned thereby, and substantially in the form attached
hereto as Exhibit D-2, (iii) to the extent requested by the Administrative
Agent, that certain Third Party Charge of Shares, dated as of the date
hereof, executed by Instron Holdings, Ltd. in favor of the Administrative
Agent, with respect to the capital stock of Instron, Ltd. and owned
thereby, and substantially in the form attached hereto as Exhibit D-4, and
(iv) such other agreements, documents and instruments executed in
connection with the U.K. Collateral Documents,
II-41
<PAGE> 186
in each case, as the same may from time to time be amended, supplemented
or otherwise modified.
"U.K. FOREIGN SUBSIDIARIES" means Instron, Ltd., Instron
International, Ltd., Instron, Ltd., IST Enterprises, Ltd., IST, Ltd.,
Seven Furnaces, Ltd., IST Enterprises, Ltd., R.H.T., Ltd., and any other
direct or indirect Subsidiary of Instron Corporation which is organized
under the laws of the United Kingdom.
"UNITED STATES" and "U.S." each means United States of America.
"WITHDRAWAL LIABILITY" means (in respect of the Borrowers,
Subsidiaries thereof and their ERISA Affiliates), at any date of
determination, the amount equal to the aggregate present value (as defined
in section 3 of ERISA) at such date of the amount claimed to have been
incurred as a result of a withdrawal less any portion thereof as to which
the Borrowers reasonably believes, after appropriate consideration of the
possible adjustments arising under subtitle E of Title IV of ERISA, the
Borrowers, Subsidiaries thereof and their ERISA Affiliates will have no
liability; provided; however, that the Borrowers shall obtain promptly
written advice from independent actuarial consultants supporting such
determination.
"WHOLLY-OWNED SUBSIDIARY" means, in respect of any Person, a
Subsidiary of such Person at least 95% of whose capital stock (or other
form of ownership), other than director's qualifying shares or similar
interests, are owned directly or indirectly by such Person.
II-42
<PAGE> 187
ANNEX III
TO
CREDIT AND SECURITY AGREEMENT
CONDITIONS PRECEDENT TO INITIAL LOANS
<PAGE> 188
ANNEX IV
TO
CREDIT AND SECURITY AGREEMENT
SUPPLEMENTAL SCHEDULE
<PAGE> 1
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Nine Months Ended --------- ---------
Year Ended December 31, ----------------------- Year Nine Months
---------------------------------------------- Sept. 26, October 2, December 31, October 2,
1994 1995 1996 1997 1998 1998 1999 1998 1999
------- -------- -------- -------- -------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income
taxes and losses from equity
investees $6,979 $ 7,684 $ 7,475 $12,295 $21,140 $15,283 $(4,547) $ 6,585 $ (790)
Add:
Portion of rents representative
of interest factor 1,127 1,248 1,116 1,232 1,333 1,287 1,270 1,333 1,270
Interest on indebtedness 1,300 1,490 1,548 1,465 1,175 819 1,097 12,990 9,743
Amortization of debt issuance
costs -- -- -- -- -- -- -- 816 612
Accretion of debt discount -- -- -- -- -- -- -- 225 169
------- -------- -------- -------- -------- ---------- ---------- ------------ ----------
Income as adjusted 9,406 10,422 10,139 14,992 23,648 17,389 (2,180) 21,724 11,004
------- -------- -------- -------- -------- ---------- ---------- ------------ ----------
Fixed charges:
Portion of rents representative
of interest factor 1,127 1,248 1,116 1,232 1,333 1,287 1,270 1,333 1,270
Interest on indebtedness 1,300 1,490 1,548 1,465 1,175 819 1,097 12,990 9,743
Amortization of debt issuance
costs -- -- -- -- -- -- -- 816 612
Accretion of debt discount -- -- -- -- -- -- -- 225 250
------- -------- -------- -------- -------- ---------- ---------- ------------ ----------
Fixed charges 2,427 2,738 2,664 2,697 2,508 2,106 2,367 15,364 11,875
------- -------- -------- -------- -------- ---------- ---------- ------------ ----------
Ratio of earnings to fixed
charges 3.9 3.8 3.8 5.6 9.4 8.3 (A) 1.4 (B)
======= ======== ======== ======== ======== ========== ========== ============ ==========
</TABLE>
(A) Due to the Company's loss in the nine month period ended October 2, 1999,
the ratio coverage was less than 1:1. The Company must generate additional
earnings of $187 to achieve a coverage ratio of 1:1.
(B) Due to the Company's Pro Forma loss in the nine month period ended October
2, 1999, the ratio coverage was less than 1:1. The Company must generate
additional pro forma earnings of $871 to achieve a coverage ratio of 1:1.
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of
Instron Corporation of our reports dated February 18, 1999 relating to the
financial statements and financial statement schedule of Instron Corporation,
which appear in such Registration Statement. We also consent to the reference to
us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 28, 1999
<PAGE> 1
Exhibit 24
----------
DIRECTORS AND OFFICERS
OF INSTRON CORPORATION
AND ITS SUBSIDIARIES
REGISTRATION STATEMENT ON FORM S-4
POWER OF ATTORNEY
Each of the undersigned officers, directors, and other representatives
of Instron Corporation, a Massachusetts corporation (the "Corporation"), and its
subsidiaries, hereby constitutes and appoints Linton A. Moulding and John R.
Barrett and each of them, with full power of substitution and resubstitution, as
attorneys-in-fact or attorney-in-fact of the undersigned, for him and in his
name, place and stead, to sign and file with the Securities and Exchange
Commission under the Securities Act of 1933 (the "Securities Act") one or more
Registration Statement(s) on Form S-4 relating to the registration of the
offering for exchange of the 13 1/4% Senior Subordinated Notes due 2009 of the
Corporation, with any and all amendments, supplements and exhibits thereto,
including pre-effective and post-effective amendments or supplements or any
additional registration statement filed pursuant to Rule 462 promulgated under
the Securities Act, with full power and authority to do and perform any and all
acts and things whatsoever that any of said attorneys or their substitutes may
deem necessary or desirable, in his or their sole discretion, with any such act
or thing being hereby ratified and approved in all respects without any further
act or deed whatsoever.
EXECUTED as of December 28, 1999.
/s/ Yayha Gharagozlou /s/ Sjomua Izumi
- ---------------------------- ------------------------------
Yayha Gharagozlou Sjomua Izumi
/s/ Arthur D. Hindman /s/ Raymond Lancaster
- ---------------------------- ------------------------------
Arthur D. Hindman Raymond Lancaster
/s/ Thomas N. Littman /s/ Robert C. Marini
- ---------------------------- ------------------------------
Thomas N. Littman Robert C. Marini
/s/ James M. McConnell /s/ Linton A. Moulding
- ---------------------------- ------------------------------
James M. McConnell Linton A. Moulding
/s/ Yasuhisa Okamoto
- ---------------------------- ------------------------------
Yasuhisa Okamoto John F. Turben
/s/ Dennis J. Moore
- ----------------------------
Dennis J. Moore
<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)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
INSTRON CORPORATION
(Exact name of obligor as specified in its charter)
MASSACHUSETTS 04-2057203
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 ROYALL STREET
CANTON, MA 02021
(Address of principal executive offices) (Zip code)
-----------------------------
13.25% SENIOR SUBORDINATED NOTES DUE 2009
(Title of the indenture securities)
================================================================================
<PAGE> 2
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The 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.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of
this Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1
the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of
the trustee to commence business issued
June 28, 1872, by the Comptroller of the
Currency to The Northwestern National Bank
of Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934,
approving the consolidation of The
Northwestern National Bank of Minneapolis
and The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being
titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January
12, 1943, as to change of corporate title of
Northwestern National Bank and Trust Company
of Minneapolis to Northwestern National Bank
of Minneapolis.*
d. A copy of the letter dated May 12, 1983 from
the Regional Counsel, Comptroller of the
Currency, acknowledging receipt of notice of
name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to
Norwest Bank Minneapolis, National
Association.*
<PAGE> 3
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks for
the Comptroller of the Currency certifying
approval of consolidation and merger
effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2,
1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 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.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25.1 filed with
registration statement number 333-93499.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 28th day of December 1999.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Timothy P. Mowdy
------------------------------------
Timothy P. Mowdy
Corporate Trust Officer
<PAGE> 5
EXHIBIT 6
December 28, 1999
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Timothy P. Mowdy
------------------------------------
Timothy P. Mowdy
Corporate Trust Officer
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000050716
<NAME> INSTRON CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> OCT-02-1999
<EXCHANGE-RATE> 1
<CASH> 9,118
<SECURITIES> 0
<RECEIVABLES> 61,409
<ALLOWANCES> 726
<INVENTORY> 37,865
<CURRENT-ASSETS> 117,455
<PP&E> 69,169
<DEPRECIATION> 45,096
<TOTAL-ASSETS> 168,639
<CURRENT-LIABILITIES> 83,235
<BONDS> 60,000
0
0
<COMMON> 557
<OTHER-SE> (14,388)
<TOTAL-LIABILITY-AND-EQUITY> 168,639
<SALES> 125,431
<TOTAL-REVENUES> 150,953
<CGS> 75,117
<TOTAL-COSTS> 92,704
<OTHER-EXPENSES> 62,403
<LOSS-PROVISION> 103
<INTEREST-EXPENSE> 367
<INCOME-PRETAX> (4,547)
<INCOME-TAX> (190)
<INCOME-CONTINUING> (4,357)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,357)
<EPS-BASIC> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., CENTRAL TIME, ON JANUARY
, 2000 UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
13 1/4% SENIOR SUBORDINATED NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING
13 1/4% SENIOR SUBORDINATED NOTES DUE 2009
OF
INSTRON CORPORATION
Deliver to:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Hand Delivery or Overnight Courier: In Person:
Norwest Bank Minnesota, Norwest Bank Minnesota, Norwest Bank Minnesota,
National Association National Association National Association
Corporate Trust Operations Corporate Trust Operations Northstar East Bldg.
P.O. Box 1517 Norwest Center 608 2nd Ave. S.
Minneapolis, MN 55480-1517 Sixth and Marquette 12th Floor
Minneapolis, MN 55479-0113 Corporate Trust Services
Minneapolis, MN 55479-0113
</TABLE>
By Facsimile:
(612) 667-4927
Confirm By Telephone
(612) 667-9764
Your delivery of this letter of transmittal will not be valid unless you
deliver it to one of the addresses, or transmit it to the facsimile number, set
forth above. Please carefully read this entire document, including the
instructions, before completing this letter of transmittal. DO NOT DELIVER THIS
LETTER OF TRANSMITTAL TO INSTRON.
By completing this letter of transmittal, you acknowledge that you have
received and reviewed Instron's prospectus dated January , 2000 and this
letter of transmittal, which together constitute the "Exchange Offer." This
letter of transmittal and the prospectus have been delivered to you in
connection with Instron's offer to exchange its 13 1/4% Senior Subordinated
Notes due 2009, which have been registered under the Securities Act (the
"Exchange Notes") for its outstanding 13 1/4% Senior Subordinated Notes due 2009
(the "Outstanding Notes"). $60,000,000 in principal amount of the Outstanding
Notes are currently issued and outstanding.
This letter of transmittal is to be completed by Holder (this term is
defined below) of Outstanding Notes if:
(1) the Holder is delivering certificates for Outstanding Notes with
this document, or
(2) the tender of certificates for Outstanding Notes will be made by
book-entry transfer to the account maintained by Norwest Bank Minnesota,
National Association, the exchange agent for these notes, at the Depository
Trust Company ("DTC") according to the procedures described in the
prospectus under the heading "The Exchange Offer -- Procedures for
Tendering." Please note that delivery of documents required by this letter
of transmittal to DTC does not constitute delivery to the exchange agent.
<PAGE> 2
You must tender your Outstanding Notes according to the guaranteed delivery
procedures described in this document if:
(1) your Outstanding Notes are not immediately available;
(2) you cannot deliver your Outstanding Notes, this letter of
transmittal and all required documents to the exchange agent before on or
before the Expiration Date; or
(3) you are unable to obtain confirmation of a book-entry tender of
your Outstanding Notes into the exchange agent's account at DTC on or
before the Expiration Date.
More complete information about guaranteed delivery procedures is contained
in the prospectus under the heading "The Exchange Offer -- Guaranteed Delivery
Procedures." You should also read Instruction 1 to determine whether or not this
section applies to you.
As used in this letter of transmittal, the term "Holder" means (1) any
person in whose name Outstanding Notes are registered on the books of Instron,
(2) any other person who has obtained a properly executed bond power from the
registered Holder or (3) any person whose Outstanding Notes are held of record
by DTC who desires to deliver such notes by book-entry transfer at DTC. You
should use this letter of transmittal to indicate whether or not you would like
to participate in the Exchange Offer. If you decide to tender your Outstanding
Notes, you must complete this entire letter of transmittal.
YOU MUST FOLLOW THE INSTRUCTIONS IN THIS LETTER OF TRANSMITTAL -- PLEASE
READ THIS ENTIRE DOCUMENT CAREFULLY. IF YOU HAVE QUESTIONS OR NEED HELP, OR IF
YOU WOULD LIKE ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF
TRANSMITTAL, YOU SHOULD CONTACT THE EXCHANGE AGENT AT (612) 667-9764 OR AT ITS
ADDRESS SET FORTH ABOVE.
Please describe your Outstanding Notes below.
<TABLE>
<C> <C> <S> <C>
- -----------------------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES
- -----------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL
NAME(S) AND ADDRESS(ES) AMOUNT OF
OF REGISTERED HOLDER(S) OUTSTANDING NOTES PRINCIPAL AMOUNT
(PLEASE COMPLETE, IF REPRESENTED BY OF OUTSTANDING
BLANK) CERTIFICATE NUMBER(S) CERTIFICATE(S) NOTES TENDERED*
- -----------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* You will be deemed to have tendered the entire principal amount of Outstanding
Notes represented in the column labeled "Aggregate Principal Amount of
Outstanding Notes Represented by Certificate(s)" unless you indicate otherwise
in the column labeled "Principal Amount of Outstanding Notes Tendered."
If you need more space, list the certificate numbers and principal amount
of Outstanding Notes on a separate schedule, sign the schedule and attach it to
this letter of transmittal.
[ ] CHECK HERE IF YOU HAVE ENCLOSED OUTSTANDING NOTES WITH THIS LETTER OF
TRANSMITTAL.
[ ] CHECK HERE IF YOU WILL BE TENDERING OUTSTANDING NOTES BY BOOK-ENTRY TRANSFER
MADE TO THE EXCHANGE AGENT'S ACCOUNT AT DTC
COMPLETE THE FOLLOWING ONLY IF YOU ARE AN ELIGIBLE INSTITUTION (THIS TERM
IS DEFINED BELOW):
2
<PAGE> 3
Name of Tendering Institution:
- --------------------------------------------------------------------------------
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE DELIVERING TENDERED OUTSTANDING NOTES THROUGH A NOTICE
OF GUARANTEED DELIVERY AND HAVE ENCLOSED THAT NOTICE WITH THIS LETTER OF
TRANSMITTAL
COMPLETE THE FOLLOWING ONLY IF YOU ARE AN ELIGIBLE INSTITUTION:
Name(s) of Registered Holder(s) of Outstanding Notes:
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Window Ticket Number (if available):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name of Institution that Guaranteed Delivery:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Account Number (if delivered by book-entry transfer):
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
Complete this section ONLY if: (1) certificates for untendered Outstanding
Notes are to be issued in the name of someone other than you; (2) certificates
for Exchange Notes issued in exchange for tendered and accepted Outstanding
Notes are to be issued in the name of someone other than you; or (3) Outstanding
Notes tendered by book-entry transfer that are not exchanged are to be returned
by credit to an account maintained at DTC.
Issue Certificate(s) to:
Name
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(PLEASE ALSO COMPLETE SUBSTITUTE FORM W-9)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
Complete this section ONLY if certificates for untendered Outstanding Notes,
or Exchange Notes issued in exchange for tendered and accepted Outstanding Notes
are to be sent to someone other than you, or to you at an address other than the
address shown above.
Mail and deliver Certificate(s) to:
Name
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
3
<PAGE> 4
Ladies and Gentlemen:
According to the terms and conditions of the Exchange Offer, I hereby
tender to Instron the principal amount of Outstanding Notes indicated above. At
the time these notes are accepted by Instron, and exchanged for the same
principal amount of Exchange Notes, I will sell, assign, and transfer to Instron
all right, title and interest in and to the Outstanding Notes I have tendered. I
am aware that the exchange agent also acts as the agent of Instron. By executing
this document, I irrevocably appoint the exchange agent as my agent and
attorney-in-fact for the tendered Outstanding Notes with full power of
substitution to:
1. deliver certificates for the Outstanding Notes, or transfer
ownership of the Outstanding Notes on the account books maintained by DTC,
to Instron and deliver all accompanying evidences of transfer and
authenticity to Instron, and
2. present the Outstanding Notes for transfer on the books of
Instron, receive all benefits and exercise all rights of beneficial
ownership of these Outstanding Notes, according to the terms of the
Exchange Offer. The power of attorney granted in this paragraph is
irrevocable and coupled with an interest.
I represent and warrant that I have full power and authority to tender,
sell, assign, and transfer the Outstanding Notes that I am tendering. I
represent and warrant that Instron will acquire good and unencumbered title to
the Outstanding Notes, free and clear of all liens, restrictions, charges and
encumbrances and that the Outstanding Notes will not be subject to any adverse
claim at the time Instron acquires them. I further represent that:
1. any Exchange Notes I will acquire in exchange for the Outstanding
Notes I have tendered will be acquired in the ordinary course of business;
2. I have not engaged in, do not intend to engage in, and have no
arrangement with any person to engage in, a distribution of any Exchange
Notes issued to me; and
3. I am not an "affiliate" (as defined in Rule 405 under the
Securities Act) of Instron.
I understand that the Exchange Offer is being made in reliance on
interpretations contained in letters issued to third parties by the staff of the
Securities and Exchange Commission ("Commission"). These letters provide that
the Exchange Notes issued in exchange for the Outstanding Notes in the Exchange
Offer may be offered for resale, resold, and otherwise transferred by a Holder
of Exchange Notes, unless that person is an "affiliate" of Instron within the
meaning of Rule 405 under the Securities Act, without compliance with the
registration and prospectus delivery provisions of the Securities Act. The
Exchange Notes must be acquired in the ordinary course of the Holder's business
and the Holder must not be engaging in, must not intend to engage in, and must
not have any arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes.
If I am a broker-dealer that will receive Exchange Notes for my own account
in exchange for Outstanding Notes that were acquired as a result of
market-making activities or other trading activities (a "Participating
Broker-Dealer"), I acknowledge that I will deliver a prospectus in connection
with any resale of the Exchange Notes. However, by this acknowledgment and by
delivering a prospectus, I will not be deemed to admit that I am an
"underwriter" within the meaning of the Securities Act. If I am a Participating
Broker-Dealer, I will, on a weekly basis during the 90-day period following the
Expiration Date, or any longer period required if use of the prospectus has been
suspended by Instron, contact Instron's Investor Relations Department at (781)
828-2500 to confirm the availability of the prospectus for delivery in
connection with resales.
Upon request, I will execute and deliver any additional documents deemed by
the exchange agent or Instron to be necessary or desirable to complete the
assignment, transfer, and purchase of the Outstanding Notes I have tendered.
I understand that Instron will be deemed to have accepted validly tendered
Outstanding Notes when Instron gives oral or written notice of acceptance to the
exchange agent.
If, for any reason, any tendered Outstanding Notes are not accepted for
exchange in the Exchange Offer, certificates for those unaccepted Outstanding
Notes will be returned to me without charge at the address shown below or at a
different address if one is listed under "Special Delivery Instructions." Any
unaccepted
4
<PAGE> 5
Outstanding Notes which had been tendered by book-entry transfer will be
credited to an account at DTC, as soon as reasonably possible after the
Expiration Date.
All authority granted or agreed to be granted by this letter of transmittal
will survive my death, incapacity or, if I am a corporation or institution, my
dissolution and every obligation under this letter of transmittal is binding
upon my heirs, personal representatives, successors, and assigns.
I understand that tenders of Outstanding Notes according to the procedures
described in the prospectus under the heading "The Exchange Offer -- Procedures
for Tendering" and in the instructions included in this document constitute a
binding agreement between myself and Instron subject to the terms and conditions
of the Exchange Offer.
Unless I have described other instructions in this letter of transmittal
under the section "Special Issuance Instructions," please issue the certificates
representing Exchange Notes issued and accepted in exchange for my tendered and
accepted Outstanding Notes in my name, and issue any replacement certificates
for Outstanding Notes not tendered or not exchanged in my name. Similarly,
unless I have instructed otherwise under the section "Special Delivery
Instructions," please send the certificates representing the Exchange Notes
issued in exchange for tendered and accepted Outstanding Notes and any
certificates for Outstanding Notes that were not tendered or not exchanged, as
well as any accompanying documents, to me at the address shown below my
signature. If both "Special Payment Instructions" and "Special Delivery
Instructions" are completed, please issue the certificates representing the
Exchange Notes issued in exchange for my tendered and accepted Outstanding Notes
in the name(s) of, and return any Outstanding Notes that were not tendered or
exchanged and send such certificates to, the person(s) so indicated. I
understand that if Instron does not accept any of the tendered Outstanding Notes
for exchange, Instron has no obligation to transfer any Outstanding Notes from
the name of the registered Holder(s) according to my instructions in the
"Special Payment Instructions" and "Special Delivery Instructions" sections of
this document.
5
<PAGE> 6
PLEASE SIGN HERE WHETHER OR NOT
OUTSTANDING NOTES ARE BEING PHYSICALLY TENDERED HEREBY
<TABLE>
<S> <C>
- ------------------------------------------------ ------------------------------------------------
(Date)
- ------------------------------------------------ ------------------------------------------------
Signature(s) of Registered Holder(s) (Date)
or Authorized Signatory
Area Code and Telephone Number(s):
- --------------------------------------------------------------------------------------------------
Tax Identification or Social Security Number(s):
- --------------------------------------------------------------------------------------------------
</TABLE>
The above lines must be signed by the registered Holder(s) of Outstanding
Notes as their name(s) appear(s) on the certificate for the Outstanding Notes or
by person(s) authorized to become registered Holders(s) by a properly completed
bond power from the registered Holder(s). A copy of the completed bond power
must be delivered with this letter of transmittal. If any Outstanding Notes
tendered through this letter of transmittal are held of record by two or more
joint Holders, then all such Holders must sign this letter of transmittal. If
the signature is by trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, then such person must (1) state his or her full
title below and (2) unless waived by Instron, submit evidence satisfactory to
Instron of such person's authority to act on behalf of the Holder. See
Instruction 4 for more information about completing this letter of transmittal.
<TABLE>
<S> <C>
Name(s):
------------------------------------------------------------
------------------------------------------------------------
(Please Print)
Capacity:
------------------------------------------------------------
Address:
------------------------------------------------------------
------------------------------------------------------------
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution, if
required by Instruction 4:
------------------------------------------------------------
(Authorized Signature)
------------------------------------------------------------
(Title)
------------------------------------------------------------
(Name of Firm)
</TABLE>
Dated
- ------------------------ , 2000
6
<PAGE> 7
PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW.
PAYOR'S NAME: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT ----------------------------
SUBSTITUTE AND CERTIFY BY SIGNING AND DATING BELOW. SOCIAL SECURITY NUMBER
FORM W-9
OR
----------------------------
EMPLOYER IDENTIFICATION NUMBER
----------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PART 3 --
PERJURY, I CERTIFY THAT: AWAITING TIN [ ]
(1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TIN
(OR I AM WAITING FOR A NUMBER TO BE ISSUED TO ME)
AND
(2) I AM NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE
(A) I AM EXEMPT FROM BACKUP WITHHOLDING, OR (B) I
HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE
SERVICE ("IRS") THAT I AM SUBJECT TO BACKUP
WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL
INTEREST OR DIVIDENDS, OR (C) THE IRS HAS
NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
CERTIFICATION INSTRUCTIONS -- YOU MUST CROSS OUT ITEM (2) IN THE BOX ABOVE IF YOU
PAYER'S REQUEST FOR HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING
TAXPAYER IDENTIFICATION BECAUSE OF UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN.
NUMBER ("TIN")
CERTIFICATION SIGNATURE __________ DATE __________ , 1998
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: IF YOU DO NOT COMPLETE AND RETURN THIS FORM YOU MAY BE SUBJECT TO BACKUP
WITHHOLDING OF 31% OF PAYMENTS MADE TO YOU UNDER THIS EXCHANGE OFFER. FOR
MORE INFORMATION, PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9.
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND
EITHER (A) I HAVE MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE
APPROPRIATE INTERNAL REVENUE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE OR (B) I INTEND TO MAIL OR
DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION
NUMBER WITHIN SIXTY (60) DAYS, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD UNTIL I
PROVIDE A NUMBER.
</TABLE>
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------- ------------------------------
Signature Date
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
INSTRUCTIONS
PART OF THE TERMS AND CONDITIONS OF THE
EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OUTSTANDING NOTES. The
tendered Outstanding Notes or a confirmation of book-entry delivery, as well as
a properly completed and executed copy or facsimile of this letter of
transmittal and any other required documents must be received by the exchange
agent at its address listed on the cover of this document before 5:00 p.m.,
central time, on the Expiration Date. YOU ARE RESPONSIBLE FOR THE DELIVERY OF
THE OUTSTANDING NOTES, THIS LETTER OF TRANSMITTAL AND ALL REQUIRED DOCUMENTS TO
THE EXCHANGE AGENT. EXCEPT UNDER THE LIMITED CIRCUMSTANCES DESCRIBED BELOW, THE
DELIVERY OF THESE DOCUMENTS WILL BE CONSIDERED TO HAVE BEEN MADE ONLY WHEN
ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. WHILE THE METHOD OF
DELIVERY IS AT YOUR RISK AND CHOICE, INSTRON RECOMMENDS THAT YOU USE AN
OVERNIGHT OR HAND DELIVERY SERVICE RATHER THAN REGULAR MAIL. YOU SHOULD SEND
YOUR DOCUMENTS WELL BEFORE THE EXPIRATION DATE TO ENSURE RECEIPT BY THE EXCHANGE
AGENT. YOU MAY REQUEST THAT YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY
OR NOMINEE DELIVER YOUR OUTSTANDING NOTES, THIS LETTER OF TRANSMITTAL AND ALL
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT. DO NOT SEND YOUR OUTSTANDING NOTES TO
INSTRON.
If you wish to tender your Outstanding Notes, but:
(a) your Outstanding Notes are not immediately available;
(b) you cannot deliver your Outstanding Notes, this letter of
transmittal and all required documents to the exchange agent before the
Expiration Date; or
(c) you are unable to complete the book-entry tender procedure before
the Expiration Date,
you must tender your Outstanding Notes according to the guaranteed delivery
procedure. A summary of this procedure follows, but you should read the section
in the prospectus titled "The Exchange Offer -- Guaranteed Delivery Procedures"
for more complete information. As used in this letter of transmittal, an
"Eligible Institution" is any participant in a Recognized Signature Guarantee
Medallion Program within the meaning of Rule 17Ad-15 of the Exchange Act.
For a tender made through the guaranteed delivery procedure to be valid,
the exchange agent must receive a properly completed and executed Notice of
Guaranteed Delivery or a facsimile of that notice before 5:00 p.m., central
time, on the Expiration Date. The Notice of Guaranteed Delivery must be
delivered by an Eligible Institution and must:
(a) state your name and address;
(b) list the certificate numbers and principal amounts of the
Outstanding Notes being tendered;
(c) state that tender of your Outstanding Notes is being made through
the Notice of Guaranteed Delivery; and
(d) guarantee that this letter of transmittal, or a facsimile of it,
the certificates representing the Outstanding Notes, or a confirmation of
DTC book-entry transfer, and all other required documents will be deposited
with the exchange agent by the Eligible Institution within three New York
Stock Exchange trading days after the Expiration Date.
The exchange agent must receive your Outstanding Notes certificates, or a
confirmation of DTC book entry, in proper form for transfer, this letter of
transmittal and all required documents within three New York Stock Exchange
trading days after the Expiration Date or your tender will be invalid and may
not be accepted for exchange.
Instron has the sole right to decide any questions about the validity,
form, eligibility, time of receipt, acceptance or withdrawal of tendered
Outstanding Notes, and its decision will be final and binding. Instron's
interpretation of the terms and conditions of the Exchange Offer, including the
instructions contained in this letter of transmittal and in the prospectus under
the heading "The Exchange Offer -- Conditions," will be final and binding on all
parties.
8
<PAGE> 9
Instron has the absolute right to reject any or all of the tendered
Outstanding Notes if
(1) the Outstanding Notes are not properly tendered or
(2) in the opinion of counsel, the acceptance of those Outstanding
Notes would be unlawful.
Instron may also decide to waive any conditions, defects, or invalidity of
tender of Outstanding Notes and accept such Outstanding Notes for exchange. Any
defect or invalidity in the tender of Outstanding Notes that is not waived by
Instron must be cured within the period of time set by Instron.
It is your responsibility to identify and cure any defect or invalidity in
the tender of your Outstanding Notes. Your Outstanding Notes will not be
considered to have been made until any defect is cured or waived. Neither
Instron, the exchange agent nor any other person is required to notify you that
your tender was invalid or defective, and no one will be liable for any failure
to notify you of such a defect or invalidity in your tender of Outstanding
Notes. As soon as reasonably possible after the Expiration Date, the exchange
agent will return to the Holder tendering any Outstanding Notes that were
invalidly tendered if the defect of invalidity has not been cured or waived.
2. TENDER BY HOLDER. You must be a Holder of Outstanding Notes in order to
participate in the Exchange Offer. If you are a beneficial holder of Outstanding
Notes who wishes to tender, but is not the registered Holder, you must arrange
with the registered Holder to execute and deliver this letter of transmittal on
his, her or its behalf. Before completing and executing this letter of
transmittal and delivering the registered Holder's Outstanding Notes, you must
either make appropriate arrangements to register ownership of the Outstanding
Notes in your name, or obtain a properly executed bond power from the registered
Holder. The transfer of registered ownership of Outstanding Notes may take a
long period of time.
3. PARTIAL TENDERS. If you are tendering less than the entire principal
amount of Outstanding Notes represented by a certificate, you should fill in the
principal amount you are tendering in the third column of the box entitled
"Description of Outstanding Notes." The entire principal amount of Outstanding
Notes listed on the certificate delivered to the exchange agent will be deemed
to have been tendered unless you fill in the appropriate box. If the entire
principal amount of all Outstanding Notes is not tendered, a certificate will be
issued for the principal amount of those untendered Outstanding Notes not
tendered.
Unless a different address is provided in the appropriate box on this
letter of transmittal, certificate(s) representing Exchange Notes issued in
exchange for any tendered and accepted Outstanding Notes will be sent to the
registered Holder at his or her registered address, promptly after the
Outstanding Notes are accepted for exchange. In the case of Outstanding Notes
tendered by book-entry transfer, any untendered Outstanding Notes and any
Exchange Notes issued in exchange for tendered and accepted Outstanding Notes
will be credited to accounts at DTC.
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
- If you are the registered Holder of the Outstanding Notes tendered with
this document, and are signing this letter of transmittal, your signature
must match exactly with the name(s) written on the face of the
Outstanding Notes. There can be no alteration, enlargement, or change in
your signature in any manner. If certificates representing the Exchange
Notes, or certificates issued to replace any Outstanding Notes you have
not tendered are to be issued to you as the registered Holder, do not
endorse any tendered Outstanding Notes, and do not provide a separate
bond power.
- If you are not the registered Holder, or if Exchange Note or any
replacement Outstanding Note certificates will be issued to someone other
than you, you must either properly endorse the Outstanding Notes you have
tendered or deliver with this letter of transmittal a properly completed
separate bond power. Please note that the signatures on any endorsement
or bond power must be guaranteed by an Eligible Institution.
- If you are signing this letter of transmittal but are not the registered
Holder(s) of any Outstanding Notes listed on this document under the
"Description of Outstanding Notes," the Outstanding Notes tendered must
be endorsed or accompanied by appropriate bond powers, in each case
signed in the name of the
9
<PAGE> 10
registered Holder(s) exactly as it appears on the Outstanding Notes.
Please note that the signatures on any endorsement or bond power must be
guaranteed by an Eligible Institution.
- If this letter of transmittal, any Outstanding Notes tendered or any bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations, or others acting in a
fiduciary or representative capacity, that person must indicate their
title or capacity when signing. Unless waived by Instron, evidence
satisfactory to Instron of that person's authority to act must be
submitted with this letter of transmittal. Please note that the
signatures on any endorsement or bond power must be guaranteed by an
Eligible Institution.
- All signatures on this letter of transmittal must be guaranteed by an
Eligible Institution unless one of the following situations apply:
- If this letter of transmittal is signed by the registered Holder(s) of
the Outstanding Notes tendered with this letter of transmittal and such
Holder(s) has not completed the box titled "Special Payment
Instructions" or the box titled "Special Delivery Instructions;" or
- If the Outstanding Notes are tendered for the account of an Eligible
Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If different from the name
and address of the person signing this letter of transmittal, you should
indicate, in the applicable box or boxes, the name and address where Outstanding
Notes issued in replacement for any untendered or tendered but unaccepted
Outstanding Notes should be issued or sent. If replacement Original Notes are to
be issued in a different name, you must indicate the taxpayer identification or
social security number of the person named.
6. TRANSFER TAXES. Instron will pay all transfer taxes, if any, applicable
to the exchange of Outstanding Notes in the Exchange Offer. However, transfer
taxes will be payable by you (or by the tendering Holder if you are signing this
letter on behalf of a tendering Holder) if:
- certificates representing Exchange Notes or notes issued to replace any
Outstanding Notes not tendered or accepted for exchange are to be
delivered to, or are to be registered or issued in the name of, a person
other than the registered Holder;
- tendered Outstanding Notes are registered in the name of any person other
than the person signing this letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of
Outstanding Notes according to the Exchange Offer. If satisfactory
evidence of the payment of those taxes or an exemption from payment is
not submitted with this letter of transmittal, the amount of those
transfer taxes will be billed directly to the tendering Holder. Until
those transfer taxes are paid, Instron will not be required to deliver
any Exchange Notes required to be delivered to, or at the direction of,
such tendering Holder.
Except as provided in this Instruction 6, it is not necessary for transfer
tax stamps to be attached to the Outstanding Notes listed in this letter of
transmittal.
7. FORM W-9. You must provide the exchange agent with a correct Taxpayer
Identification Number ("TIN") for the Holder on the enclosed Form W-9. If the
Holder is an individual, the TIN is his or her social security number. If you do
not provide the required information on the Form W-9, you may be subject to 31%
Federal income tax withholding on certain payments made to the Holders of
Exchange Notes. Certain Holders, such as corporations and certain foreign
individuals, are not subject to these backup withholding and reporting
requirements. For additional information, please read the enclosed Guidelines
for Certification of TIN on Substitute Form W-9. To prove to the exchange agent
that a foreign individual qualifies as an exempt Holder, the foreign individual
must submit a Form W-8, signed under penalties of perjury, certifying as to that
individual's exempt status. You can obtain a Form W-8 from the exchange agent.
8. WAIVER OF CONDITIONS. Instron may choose, at any time and for any
reason, to amend, waive or modify certain of the conditions to the Exchange
Offer. The conditions applicable to tenders of Outstanding Notes in the Exchange
Offer are described in the prospectus under the heading "The Exchange
Offer -- Conditions."
10
<PAGE> 11
9. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES. If your
Outstanding Notes have been mutilated, lost, stolen or destroyed, you should
contact the exchange agent at the address listed on the cover page of this
document for further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. If you have questions,
need assistance, or would like to receive additional copies of the prospectus or
this letter of transmittal, you should contact the exchange agent at the address
listed in the prospectus. You may also contact your broker, dealer, commercial
bank, trust company, or other nominee for assistance concerning the Exchange
Offer.
11
<PAGE> 12
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GUIDE THE
PAYER.-- Social Security Numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer Identification Numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ----------------------------------------------------------
<S> <C> <C>
1. An individual's account. The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under State
law
5. Sole proprietorship account The owner(3)
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ----------------------------------------------------------
<S> <C> <C>
6. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(4)
7. Corporate account The corporation
8. Religious, charitable, or The organization
educational organization
account
9. Partnership The partnership
10. Association, club or other The organization
tax-exempt organization
11. A broker or registered The broker or nominee
nominee
12. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a State or local government,
school district, or prison)
that receives agricultural
program payments
- ----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a Social Security Number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's Social Security Number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
12
<PAGE> 13
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a Taxpayer Identification Number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on broker transactions
include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under Section 501(a), an individual
retirement plan, or a custodial account under Section 403(b)(7), if the
account satisfies the requirements of Section 401(f)(2).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A dealer in securities or commodities required to be registered in the
United States, the District of Columbia, or a possession of the United
States.
- A real estate investment trust.
- A futures commissions merchant registered with the Commodity Futures Trading
Commission.
- A common trust fund operated by a bank under Section 584(a).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
- A person registered under the Investment Advisors Act of 1940 who regularly
acts as a broker.
Payments of dividends not generally subject to backup withholding include the
following:
- Payments to nonresident aliens subject to withholding under Section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments described in Section 404(k) made by an employee stock ownership
plan.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct Taxpayer Identification Number to the payer.
- Payments of tax-exempt interest (including tax-exempt interest dividends
under Section 852).
- Payments described in Section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under Section 1451.
- Payments made by certain foreign organizations.
- Payments of mortgage interest to you.
Exempt payees described above should file Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest, or other payments to give Taxpayer Identification Numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold
31% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a Taxpayer Identification Number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your Taxpayer Identification Number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE IRS.
13
<PAGE> 14
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<S> <C> <C>
CERTIFICATE OUTSTANDING NOTES OUTSTANDING NOTES
SURRENDERED TENDERED ACCEPTED
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Delivery Prepared by:
----------------------------------------------------------------------------------
Checked by:
--------------------------------------------------------------------------------------------
Date:
-------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
13- 1/4% SENIOR SUBORDINATED NOTES DUE 2009
OF
INSTRON CORPORATION
As set forth in the Prospectus dated January , 2000 (the "Prospectus"),
of Instron Corporation and in the letter of transmittal, this form or one
substantially similar must be used to accept Instron's offer to exchange all of
its outstanding 13 1/4% Senior Subordinated Notes due 2009 (the "Outstanding
Notes") for its 13 1/4% Senior Subordinated Notes due 2009, which have been
registered under the Securities Act of 1933, if certificates for the Outstanding
Notes are not immediately available or if the Outstanding Notes, the letter of
transmittal or any other required documents cannot be delivered to the exchange
agent, or the procedure for book-entry transfer cannot be completed, prior to
5:00 p.m., central time, on the Expiration Date (as defined in the Prospectus).
This form may be delivered by an Eligible Institution by hand or transmitted by
facsimile transmission, overnight courier or mail to the exchange agent as
indicated below.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., CENTRAL TIME, ON , 2000,
UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OUTSTANDING
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
Deliver to:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Hand Delivery or Overnight Courier: In Person:
Norwest Bank Minnesota, Norwest Bank Minnesota, Norwest Bank Minnesota,
National Association National Association National Association
Corporate Trust Operations Corporate Trust Operations Northstar East Bldg.
P.O. Box 1517 Norwest Center 608 2nd Ave. S.
Minneapolis, MN 55480-1517 Sixth and Marquette 12th Floor
Minneapolis, MN 55479-0113 Corporate Trust Services
Minneapolis, MN 55479-0113
</TABLE>
By Facsimile:
(612) 667-4927
Confirm By Telephone
(612) 667-9764
Delivery of this notice to an address, or transmission of instructions via
a facsimile, other than as set forth above, does not constitute a valid
delivery.
This form is not to be used to guarantee signatures. If a signature on the
letter of transmittal to be used to tender Outstanding Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the letter
of transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Instron Corporation, a Massachusetts
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus and the letter of transmittal (which together constitute
the "Exchange Offer"), receipt of which is hereby acknowledged, Outstanding
Notes pursuant to guaranteed delivery procedures set forth in Instruction 1 of
the letter of transmittal.
The undersigned understands that tenders of Outstanding Notes will be
accepted only in principal amounts equal to $1,000 or integral multiples
thereof. The undersigned understands that tenders of Outstanding Notes pursuant
to the Exchange Offer may be withdrawn only in accordance with the procedures
set forth in "The Exchange Offer -- Withdrawal of Tenders" section of the
Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
<TABLE>
<S> <C>
Certificate No(s). for Outstanding Notes Principal Amount of Outstanding Notes
(if available)
- ----------------------------------------------------- -----------------------------------------------------
Principal Amount of Outstanding Notes Tendered Signature(s)
- ----------------------------------------------------- -----------------------------------------------------
Dated: If Outstanding Notes will be delivered by book-entry
transfer at the Depository Trust Company, Depository
Account No.:
- ----------------------------------------------------- -----------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Outstanding Notes exactly as its (their) name(s) appear on
certificates of Outstanding Notes or on a security position listing as the owner
of Outstanding Notes, or by person(s) authorized to become registered holder(s)
by endorsements and documents transmitted with this
2
<PAGE> 3
Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information:
Please print name(s) and address(es)
<TABLE>
<S> <C>
Name(s):
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Capacity:
------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Address(es):
--------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Area Code and Telephone No.:
---------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., or a commercial bank
or trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934 (the "Exchange Act"), hereby
(a) represents that the above named person(s) "own(s)" the Outstanding
Notes to be tendered within the meaning of Rule 14e-4 under the
Exchange Act,
(b) represents that such tender of Outstanding Notes complies with Rule
14e-4 under the Exchange Act and
(c) guarantees that delivery to the exchange agent of certificates for the
Outstanding Notes to be tendered, proper form for transfer (or
confirmation of the book-entry transfer of such Outstanding Notes into
the exchange agent's account at the Depository Trust company, pursuant
to the procedures for book-entry transfer set forth in the prospectus),
with delivery of a properly completed and duly executed (or manually
signed facsimile) letter of transmittal with any required signatures
and any other required documents, will be received by the exchange
agent at one of its addresses set forth above within five business days
after the Expiration Date.
I HEREBY ACKNOWLEDGE THAT I MUST DELIVER THE LETTER OF TRANSMITTAL AND
OUTSTANDING NOTES TO BE TENDERED TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD
SET FORTH AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO ME.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
Name of Firm Authorized Signature
- -------------------------------------------- --------------------------------------------
Address Title
- -------------------------------------------- Name:
Zip Code --------------------------------------------
(Please Type or Print)
Area Code and Telephone No._________________ Dated:
--------------------------------------------
</TABLE>
NOTE: DO NOT SEND OUTSTANDING NOTES WITH THIS FORM; OUTSTANDING NOTES SHOULD BE
SENT WITH YOUR LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE
EXCHANGE AGENT WITHIN THREE NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE
EXPIRATION DATE.
4
