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EXHIBIT 10.1
MERGER NOTE
THIS PROMISSORY NOTE, AND THE PAYMENT OF PRINCIPAL AND INTEREST HEREON, HAVE
BEEN SUBORDINATED PURSUANT TO AN UNCONDITIONAL AND CONTINUING SUBORDINATION
AGREEMENT EXECUTED AND DELIVERED BY THE HOLDER HEREOF IN FAVOR OF FLEET CAPITAL
CORPORATION (SUCCESSOR IN INTEREST TO BANKBOSTON, N.A.), FOR ITSELF AND AS AGENT
FOR THE LENDERS IDENTIFIED THEREIN. THIS PROMISSORY NOTE, AND THE PAYMENT OF
PRINCIPAL AND INTEREST HEREON, HAVE BEEN FURTHER SUBORDINATED PURSUANT TO AN
UNCONDITIONAL AND CONTINUING SUBORDINATION AGREEMENT EXECUTED AND DELIVERED BY
THE HOLDER HEREOF IN FAVOR OF FLEET NATIONAL BANK AND BANK ONE, MICHIGAN.
SUBORDINATED NOTE DUE 2004
$1,750,000 Rome, New York
May 19, 2000
ROME GROUP, INC., a Delaware corporation, its successors or assigns, ("Parent"),
for value received, hereby promises to pay CONNECTIVITY TECHNOLOGIES INC., a
Delaware corporation ("CTI"), or its permitted assigns, in lawful money of the
United States of America, the principal amount of ONE MILLION, SEVEN HUNDRED
FIFTY THOUSAND DOLLARS ($1,750,000), together with interest on the unpaid
principal amount of this Note at a floating rate per annum equal to one-quarter
of one percent ( 1/4%) over the Index Rate. Parent will pay such interest
monthly, in arrears, on the first business day of each calendar month,
commencing June 1, 2000. All interest will be computed on the basis of a 360-day
year, for the actual number of days outstanding. Parent will repay the principal
amount in installments as follows: 36 consecutive installments in the amount of
$48,611.11 each, commencing on July 1, 2001, and continuing on the 1st day (or,
if such date is not a business day, the first succeeding business day) of each
calendar month thereafter until June 1, 2004, by which date the entire principal
amount and all accrued and unpaid interest thereon shall have been repaid in
full. All payments of principal and interest hereunder shall be made at the
principal executive offices of CTI or at such other place as the holder hereof
may designate by notice from time to time.
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This Note represents part of the Merger Consideration paid by Parent in exchange
for the Common Stock, par value $.01 per share of Connectivity Products
Incorporated pursuant to an Agreement and Plan of Merger dated as of May 19,
2000 among Parent, RGCP Acquisition Corp., CTI and Connectivity Products
Incorporated (the "Merger Agreement").
1. Definitions. For purposes of this Note, the following terms have the
meanings set forth below:
"Affiliate" of any Person, any Person that directly or indirectly controls, or
is controlled by, or is under common control with, such Person, where "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management policies of a Person, whether through the
ownership of voting securities, by contract, as trustee or executor, or
otherwise.
"Associate" of a natural Person means a Person who is (i) a member of such
natural Person's immediate family (i.e. a spouse, parent, child (including an
adopted child) or grandchild of that individual), (ii) a partnership of which
each partner is such natural Person or a Person referred to in clause (i), (iii)
a trust of which each beneficiary is such natural Person or a Person referred to
in clause (i), or (iv) a trust in which each beneficiary as to the payment of
principal is such natural Person or a Person referred to in clause (i) and each
beneficiary as to the payment of income is such natural Person or a Person
referred to in clause (i).
"Bank Note Subordination Agreement" means the Subordination Agreement referred
to in the second sentence of the legend appearing at the top of the first page
of this Note.
"Business Day" a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required to close.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock (or equivalent ownership interests in a Person not a corporation)
whether now outstanding or issued after the date of this Note, including,
without limitation, all Common Stock and Preferred
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Stock and any rights, warrants, or options to purchase such Person's capital
stock.
"Capitalized Lease" as applied to any Person means any lease of any property
(whether real, personal or mixed) by such Person as lessee which would, in
accordance with generally accepted accounting principles, be required to be
classified and accounted for as a capital lease on the balance sheet of such
Person.
"Capitalized Lease Obligations" with respect to any Capitalized Lease means the
amount of the thereunder which would, in accordance with generally accepted
accounting principles appear on a balance sheet of such Lease in respect of such
Capitalized Lease.
"Change in Control" means (i) an occurrence of an event at which time any Person
(other than Harvey) becomes a beneficial owner (within the meaning of Rule 13d-1
of the Securities Exchange Act of 1934, as amended) of more than 50% of the
Voting Stock of Parent; (ii) any event or transaction after which any Person
(other than Harvey) beneficially owns a percentage of the Voting Stock of Parent
which is greater than the aggregate percentage of the Voting Stock of Parent
beneficially owned by Harvey; (iii) any event or transaction the result of which
is to reduce the percentage beneficial ownership of the Voting Stock of Parent
beneficially owned by Harvey to less than 25%; or (iv) any transaction resulting
in the sale of all or substantially all of the assets of Parent or the Surviving
Corporation.
"Common Stock" means, with respect to any Person, any and all shares, interests,
participations and other equivalents (however designated) of such Person's
common stock, whether now outstanding or issued after the date of this Note, and
includes, without limitation, all series and classes of such common stock.
"Debtor Relief Laws" means the Bankruptcy Code of the United States of America
and all other applicable Federal or state liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization,
suspension of payments, or similar debtor relief laws from time to time in
effect affecting rights of creditors generally.
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"Guarantee" by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing or in effect guaranteeing any
Indebtedness or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (b) entered into for the purpose
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The amount of any Guarantee shall be equal to the amount of the
obligation guaranteed.
"Harvey" means collectively (i) David E. Harvey, (ii) any Affiliate of David E.
Harvey and (iii) any Associate of David E. Harvey.
"Indebtedness" of any Person means (a) any liability, contingent or otherwise,
of any Person (i) in respect of borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a portion
thereof), or (ii) evidenced by a bond, note, debenture or similar instrument or
letter of credit; (b) all obligations of such Person to pay the deferred and
unpaid purchase price of any property, assets (except any such balance that
constitutes a trade payable), or services; (c) Capitalized Lease Obligations of
such Person; (d) indebtedness secured by a Lien to which the property or assets
owned or held by such Person is subject, whether or not the obligations secured
thereby shall have been assumed; (e) any liability of others described in the
preceding clauses (a)-(d) which such Person has Guaranteed or which is otherwise
its legal liability; and (f) any amendment, renewal, extension or refunding of
any liability of the types referred to in clauses (a)-(e) above.
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"Index Rate" shall mean the rate of interest per annum announced by Fleet
National Bank as its prime lending rate to commercial borrowers.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, adverse
claim, charge, security interest or encumbrance of any kind in respect to 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 and any
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction.
"Merger Agreement" has the meaning given in the second paragraph of this Note.
"New Lender Subordination Agreement" means the Subordination Agreement referred
to in the first sentence of the legend appearing at the top of the first page of
this Note and any replacement subordination agreement entered into pursuant to
Section 6.4(c) of the Merger Agreement.
"Obligations" means all payments of the principal of, interest (including
post-petition interest) on, or fees, costs or expenses relative to, or any other
amounts due from Parent in respect of, this Note.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the date of this Note, and includes, without limitation, all classes and series
of such preferred or preference stock.
"Subordination Agreements" means the New Lender Subordination Agreement and Bank
Note Subordination Agreement as the same are in effect from and after the date
hereof.
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"Surviving Corporation" means Connectivity Products Incorporated, a Delaware
corporation, as the surviving corporation in the merger of [Acquisition
Subsidiary] with and into Connectivity Products Incorporated pursuant to the
Agreement and Plan of Merger referred to in the second paragraph of this Note.
"Voting Stock" of any Person means Capital Stock of such Person ordinarily
having the right to vote in the election of directors of such Person.
2. Prepayment.
2.1. Optional Prepayment. Parent shall have the right to prepay this Note, in
whole or in part, at any time and from time to time, without premium or penalty.
Any such prepayment shall be accompanied by interest accrued to the date of
prepayment. Parent shall give the holder hereof ten Business Days' notice (which
need not be written) prior to such prepayment. Partial prepayments shall be
applied to installments of principal in inverse order of maturity.
2.2. Prepayment Upon Change in Control. The holder of this Note shall have the
option in its sole discretion to require Parent to prepay this Note in full,
without premium or penalty, upon the occurrence of an event or closing of a
transaction constituting a Change in Control.
3. Events of Default and Acceleration of the Note.
3.1. An "Event of Default" on the Note shall exist if any of the following shall
occur:
(a) Subject in all cases to the provisions of the Subordination Agreements, a
default by Parent in the payment when due of principal of the Note, or interest
thereon and continuance of such default for a period of 15 days after receipt by
Parent of written notice of such default;
(b) A receiver, liquidator or trustee of Parent or Surviving Corporation or of
a substantial part of either of their properties shall be appointed by court
order and such order shall remain in effect for more than 90 days; or Parent or
Surviving Corporation shall be adjudicated bankrupt or in-
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solvent; or substantially all of the property of Parent or Surviving Corporation
shall be sequestered by court order and such order shall remain in effect for
more than 90 days; or a petition to reorganize Parent or Surviving Corporation
under any Debtor Relief Law shall be filed against Parent or Surviving
Corporation and shall not be dismissed within 90 days after such filing;
(c) Parent or Surviving Corporation shall file a petition in voluntary
bankruptcy or request reorganization under any Debtor Relief Law, or shall
consent to the filing of any petition against it under any such law;
(d) Parent or Surviving Corporation shall make an assignment for the benefit of
its creditors, or admit in writing its inability to pay its debts generally as
they become due, or consent to the appointment of a receiver, trustee or
liquidator of Parent or Surviving Corporation, as the case may be, or of all or
any substantial part of its properties; or
(e) A default shall have occurred under an instrument or instruments evidencing
or securing Indebtedness of Parent or Surviving Corporation aggregating $100,000
or more in principal amount resulting in the acceleration of such Indebtedness,
whether such Indebtedness exists on the date hereof or is hereafter created, and
such acceleration shall not be rescinded or annulled or such Indebtedness shall
not be paid in full, in each case within 90 days after any such acceleration;
provided, however, that if any acceleration shall be rescinded or annulled or
such Indebtedness shall be paid in full, before any judgment or final decree is
obtained or entered with regard to such Indebtedness, then the Event of Default
under this paragraph shall be deemed likewise to have ceased and to have been
thereupon cured, waived and released and any declaration of acceleration,
pursuant to Section 3.2, of the principal and accrued interest on this Note
solely by reason of such Event of Default and the consequences of such
declaration shall be deemed to have been rescinded and annulled, without further
action upon the part of the holder of this Note.
3.2. Acceleration of the Note. If an Event of Default shall occur, the holder of
this Note may, in addition to such holder's other remedies, by written notice to
Parent,
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accelerate the maturity of the principal amount of this Note and interest then
accrued and unpaid hereon. After an Event of Default shall have been cured, the
holder of this Note may not accelerate the maturity hereof unless the same Event
of Default shall reoccur or another Event of Default shall occur.
Notwithstanding anything to the contrary in this Note, the exercise of any
remedy by the holder of this Note shall be subject to each of the Subordination
Agreements.
4. Purchase for Investment. The holder of this Note, by acceptance hereof,
acknowledges that the Note has not been registered under the Securities Act of
1933, as amended, or under any state securities laws and covenants and agrees
with Parent that the holder is taking and holding this Note for investment and
not with a view to, or for sale in connection with, a distribution thereof.
5. Miscellaneous.
5.1. Successors and Assigns. All the covenants and agreements by or on behalf of
Parent contained in this Note shall bind its respective successors and assigns,
whether so expressed or not, and shall inure to the benefit of the holder
whether so expressed or not.
5.2. Notices. All notices and other communications required or permitted to be
given hereunder shall be in writing (which may include facsimile or other record
communication) and shall be delivered by hand or, if by mail, shall be mailed by
registered mail, return receipt requested, (a) if to the holder, to the holder
at its address as provided to Parent or to such other address as the holder
shall furnish to Parent in accordance with this Section 6.2, or (b) if to
Parent, to Parent at the address of its principal executive offices or to such
other address as Parent shall furnish to the holder in accordance with this
Section 6.2 (and a copy of any such notice or other communication shall
simultaneously be sent by the same mode of communication to any other persons at
the addresses provided as the holder or Parent shall request). A properly
addressed notice or other communication shall be deemed to have been given upon
its delivery by hand, facsimile transmission, or, if mailed as provided above,
five days after its deposit in the United States mails.
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5.3. Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and to be
performed entirely within such State.
5.4. RIGHT OF OFFSET. AMOUNTS OUTSTANDING FROM TIME TO TIME UNDER THIS NOTE,
WHETHER FOR PRINCIPAL, INTEREST OR OTHERWISE, AND WHETHER OR NOT THEN DUE AND
OWING, ARE SUBJECT TO CERTAIN OFFSETS BY PARENT AS PROVIDED IN THE MERGER
AGREEMENT BUT ONLY TO THE EXTENT SUCH LIABILITIES HAVE NOT BEEN RELEASED
PURSUANT TO SECTION 1.2 OF THAT CERTAIN CROSS-RELEASE OF EVEN DATE HEREWITH
AMONG PARENT, RGCP ACQUISITION CORP., CONNECTIVITY PRODUCTS INCORPORATED AND
CTI.
5.5. Conflicts with Subordination Agreements. To the extent that terms set forth
in this Note conflict with terms of either Subordination Agreement, the terms of
such Subordination Agreement shall prevail.
5.6. Costs of Collections. Parent agrees to pay all reasonable costs of
collection when incurred, including reasonable attorneys' fees, disbursements
and court costs.
IN WITNESS WHEREOF, Parent has caused this Note to be duly executed in its
corporate name by a duly authorized officer.
ROME GROUP, INC.
By: /s/ Mary Wuest
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Name:
Title:
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