Exhibit 10.11
SECOND AMENDED AND RESTATED SENIOR NOTE AGREEMENT
Between the Registrant and Principal Mutual Life Insurance
Company
effective September 8, 1997
::ODMA\PCDOCS\NEWYORK\11036\7
EXECUTION COPY
HURCO COMPANIES, INC.
SECOND AMENDED AND RESTATED
NOTE AGREEMENT
Dated as of September 8, 1997
$12,500,000 Principal Amount
10.37% Second Amended and Restated Senior Notes
Due December 1, 2000
HURCO COMPANIES, INC.
SECOND AMENDED AND RESTATED
NOTE AGREEMENT
Dated as of September 8, 1997
To the Purchaser Named
in Schedule I Hereto (the "Purchaser")
Ladies and Gentlemen:
HURCO COMPANIES, INC., an Indiana corporation (the "Company"), agrees
with the Purchaser as follows:
SECTION 1. SECOND AMENDMENT AND RESTATEMENT AND DESCRIPTION OF NOTES
1.1 Second Amendment and Restatement. The Company and the
Purchaser are parties to that certain Note Agreement dated as of December 1,
1990 (the "1990 Agreement") pursuant to which the Company sold to the Purchaser
on December 20, 1990 $12,500,000 aggregate principal amount of its Senior Notes
(the "1990 Notes"). The Company and the Purchaser amended and restated the 1990
Agreement pursuant to the Amended and Restated Note Agreement dated March 24,
1994 (the "1994 Agreement") which replaced in its entirety the 1990 Agreement
and amended and restated the 1990 Notes pursuant to the 11.12% Amended and
Restated Senior Notes dated March 24, 1994 (the "1994 Notes") which replaced in
its entirety the 1990 Notes. The Company and the Purchaser have agreed that this
Second Amended and Restated Note Agreement (the "Agreement") should replace in
its entirety the 1994 Agreement and that from and after the date of the
execution and delivery of this Agreement and the satisfaction of the conditions
set forth in Section] 4 (the "Closing Date"), the 1994 Agreement shall be of no
force or effect except (i) as specifically set forth herein, (ii) that if any
material representation or warranty made by the Company hereunder, or made by
the Company in any written statement or certificate furnished by the Company in
connection with the issuance and sale of the 1990 Notes or the 1994 Notes or
furnished by the Company pursuant to the 1990 Agreement or the 1994 Agreement
proves incorrect in any material respect as of the date of the issuance or
making thereof (a "Prior Misstatement"), the Purchaser shall be entitled to
exercise all of its rights and remedies under applicable law with respect to any
Prior Misstatement other than the declaration of an Event of Default hereunder,
and (iii) that the 1990 Agreement and the 1994 Agreement evidence the terms and
conditions under which the Company heretofore has incurred obligations and
liabilities to the Purchaser, it being the intent of the parties hereto that
from and after the Closing Date, such obligations and liabilities shall be
governed by this Agreement and the "Notes" (as defined below). Notwithstanding
the provisions of the preceding sentence, in the event that any Prior
Misstatement proves to be fraudulent in any material respect, such fraudulent
Prior Misstatement shall constitute an Event of Default hereunder as provided in
Section 8.1(f)(2). The Purchaser is aware of the adjustments of the amount of
inventory of the Company Subsidiaries as described in the Company's Report On
Form 10-Q for the period ending July 31, 1993 and the Purchaser acknowledges
that such inventory adjustments and the other adjustments of income and
financial results caused by such inventory adjustments, to the extent accurate
and taken alone, do not reveal a Prior Misstatement. The Company has agreed to
execute those certain Second Amended and Restated Notes (the "Notes"), each
payable to the Purchaser, which Notes (i) re-evidence all of the indebtedness
heretofore outstanding under the 1990 Notes and 1994 Notes, and (ii) do not
constitute a payment or a novation of the 1990 Notes or the 1994 Notes.
1.2 Description of Notes. The Notes shall be dated the
Closing Date, shall bear interest from such date at the rate of 10.37% per annum
prior to maturity, payable monthly on the first day of each calendar month
commencing [September] 1, 1997, and at maturity, to bear interest on overdue
principal (including any overdue required or optional prepayment), premium, if
any, and (to the extent legally enforceable) on any overdue installment of
interest at the rate of 12.37% per annum, shall be expressed to mature on
December 1, 2000 and to be substantially in the form attached as Exhibit A. Each
required prepayment of principal shall be considered to be overdue if it is not
paid on its due date. The term "Notes" as used herein shall include each Second
Amended and Restated Note delivered pursuant to this Agreement and each Note
delivered in substitution or exchange therefor and, where applicable, shall
include the singular number as well as the plural. Any reference to the
Purchaser in this Agreement shall in all instances be deemed to include any
nominee of the Purchaser or any separate account or other person on whose behalf
the Purchaser has acquired the Notes and any Person to whom a Note is assigned.
Concurrently with execution and delivery to it of the Notes, each of the 1994
Notes shall be marked by Purchaser with the following legend: "This Note has
been amended and, as amended, restated by a promissory note executed pursuant to
an Second Amended and Restated Note Agreement, dated as of September 8, 1997,
executed by Hurco Companies, Inc. and the payee hereof."
SECTION 2. PREPAYMENT OF NOTES
2.1 Required Prepayments. In addition to payment of all
outstanding principal of the Notes at maturity and regardless of the amount of
Notes which may be outstanding from time to time, the Company shall make the
following prepayments:
(a) The Company shall prepay and there shall become due and
payable on the dates set forth below, $1,785,714.29 of the principal amount of
the Notes or such lesser amount as would constitute payment in full on the
Notes, with the remaining principal payable on December 1, 2000: December 1,
1997, December 1, 1998, and December 1, 1999. Each such prepayment shall be at a
price of 100% of the principal amount prepaid, together with interest accrued
thereon to the date of prepayment.
(b) The Company shall prepay and there shall become due and
payable not later than fifteen days after receipt thereof, an amount equal to
the Purchaser's Pro Rata Share of Asset Sale Proceeds. Pro Rata Share shall be
determined as of each date that Asset Sale Proceeds are received by the Company.
Such amounts shall be applied in accordance with Section 2.2(e), and a
prepayment premium shall be required on each date of prepayment to the extent
set forth in Section 2.2(d).
2.2 Optional Prepayments. (a) Upon notice as provided in
Section 2.3, the Company may prepay the Notes, in whole or in part, in an amount
of not less than $250,000 or in integral multiples of $10,000 in excess thereof
at the price set forth in Section 2.2(d).
(b) In the event that (i) the Company proposes a merger,
acquisition, investment, corporate reorganization or recapitalization
(collectively, a "Proposed Transaction") that would result in the failure by the
Company to comply with, or the breach by the Company of, any of the covenants or
conditions contained in this Agreement and (ii) such anticipated noncompliance
or breach is not consented to pursuant to the provisions of Section 9.1, by
Noteholders holding 66-_% in aggregate principal amount of the Notes then
outstanding within 30 days after a receipt of a written request (a "Request") by
the Company (which Request shall describe in detail the Proposed Transaction and
specify the nature of such anticipated noncompliance or breach) to consent to
such non-compliance or breach and (iii) the Company nonetheless determines to
proceed with the Proposed Transaction, then the Company shall prepay, at the
price set forth in Section 2.2(d), upon notice as provided in Section 2.3,
within 150 days following receipt by the Purchasers of the Request, the entire
principal amount of all Notes held by each nonconsenting Noteholder prior to the
Company's consummation of the Proposed Transaction.
(c) In the event of a Change of Control, the Company shall,
within ten days after the date of such Change of Control, give written notice to
each holder of a Note of the Change of Control, accompanied by a certificate of
an authorized officer of the Company specifying the nature of the Change of
Control. Such notice shall contain the written, irrevocable offer by the Company
to prepay, on a date specified in such notice by the Company which shall be not
less than 45 or more than 60 calendar days after the effective date of such
Change of Control, the entire principal amount of the Notes held by each holder
at a price equal to 100% of the principal amount of the Notes to be prepaid plus
interest accrued to the date of prepayment and shall state that notice of
acceptance of the Company's offer to prepay under this Section 2.2(c) must be
delivered to the Company within 30 calendar days after receipt of the Company's
notice. Any holder may revoke its acceptance of the Company's offer by written
notice to such effect delivered to the Company not less than five calendar days
prior to the date fixed for prepayment.
(d) Each prepayment made pursuant to paragraph (a) or (b) of
this Section 2.2 or Section 2.1(b), shall be at a price of (i) 100% of the
principal amount to be prepaid, plus interest accrued thereon to the date of
prepayment, if the Reinvestment Yield, on the applicable Determination Date,
equals or exceeds the interest rate payable on or in respect of the Notes, or
(ii) 100% of the principal amount to be prepaid, plus interest accrued thereon
to the date of prepayment, plus a premium, if the Reinvestment Yield, on such
Determination Date, is less than the interest rate payable on or in respect of
the Notes. The premium shall equal (x) the aggregate present value of the amount
of principal being prepaid (taking into account the manner of application of
such prepayment required by Section 2.2(e) or Section 2.1(b)) and the present
value of the amount of interest (exclusive of interest accrued to the date of
prepayment) which would have been payable in respect of such principal absent
such prepayment, determined by discounting (monthly on the basis of a 360-day
year composed of twelve 30-day months) each such amount utilizing an interest
factor equal to the Reinvestment Yield, less (y) the principal amount to be
prepaid.
(e) Any optional prepayment pursuant to Section 2.1(b),
2.2(a), (b) or (c) of less than all of the Notes outstanding shall be applied,
to reduce, pro rata, the prepayments and payment at maturity required by Section
2.1.
(f) Except as provided in Section 2.1 and this Section 2.2,
the Notes shall not be prepayable in whole or in part.
2.3 Notice of Prepayments. The Company shall give notice of
any optional prepayment of the Notes pursuant to Section 2.2(a) or (b) to each
holder of the Notes not less than 30 days nor more than 60 days before the date
fixed for prepayment, specifying (i) such date, (ii) the principal amount of the
holder's Notes to be prepaid on such date, (iii) the date as of which the
premium, if any, will be calculated and (iv) the accrued interest applicable to
the prepayment. Notice of prepayment having been so given, the aggregate
principal amount of the Notes specified in such notice, together with the
premium if any, and accrued interest thereon shall become due and payable on the
prepayment date.
The Company also shall give notice to each holder of the
Notes by telecopy, telegram, telex or other same-day written communication, as
soon as practicable but in any event not later than two business days prior to
the prepayment date, of the premium, if any, applicable to such prepayment or
any prepayment subject to premium referred to in Section 2.1 and the details of
the calculations used to determine the amount of such premium.
2.4 Surrender of Notes on Prepayment or Exchange. Subject to
Section 2.5, upon any partial prepayment of a Note pursuant to this Section 2 or
partial exchange of a Note pursuant to Section 10.3, such Note may, at the
option of the holder thereof, (i) be surrendered to the Company pursuant to
Section 10.3 in exchange for a new Note equal to the principal amount remaining
unpaid on the surrendered Note, or (ii) be made available to the Company for
notation thereon of the portion of the principal so prepaid or exchanged. In
case the entire principal amount of any Note is prepaid or exchanged, such Note
shall be surrendered to the Company for cancellation and shall not be reissued,
and no Note shall be issued in lieu of such Note.
2.5 Direct Payment. Notwithstanding any other provision
contained in the Notes or this Agreement, the Company will pay all sums becoming
due on each Note held by the Purchaser or any subsequent Institutional Holder by
wire transfer of immediately available funds to such account as the Purchaser or
such subsequent Institutional Holder shall have designated in Schedule I, or as
the Purchaser or such subsequent Institutional Holder may otherwise designate by
notice to the Company, in each case without presentment and without notations
being made thereon, except that any such Note so paid or prepaid in full shall
be surrendered to the Company for cancellation. Any wire transfer shall identify
such payment in the manner set forth in Schedule I and shall identify the
payment as principal, premium, if any, and/or interest. The Purchaser and any
subsequent Institutional Holder of a Note to which this Section 2.5 applies
agree that, before selling or otherwise transferring any such Note, the
Purchaser or it will make a notation thereon of the aggregate amount of all
payments of principal theretofore made and of the date to which interest has
been paid.
2.6 Allocation of Payments. Except in the case of a
prepayment pursuant to Section 2.2(b) or (c), if less than the entire principal
amount of all the Notes outstanding is to be paid, the Company will prorate the
aggregate principal amount to be paid among the outstanding Notes in proportion
to the unpaid principal.
2.7 Payments Due on Saturdays, Sundays and Holidays. In any
case where the date of any required prepayment of the Notes or any interest
payment date on the Notes or the date fixed for any other payment of any Note or
exchange of any Note is a Saturday, Sunday or a legal holiday or a day on which
banking institutions in Des Moines, Iowa are authorized by law to close, then
such payment, prepayment or exchange need not be made on such date but may be
made on the next succeeding business day which is not a Saturday, Sunday or a
legal holiday or a day on which banking institutions in Des Moines, Iowa are
authorized by law to close, with the same force and effect as if made on the due
date.
SECTION 3. REPRESENTATIONS
3.1 Representations of the Company. As an inducement to, and
as part of the consideration for, the Purchaser's entering into the Agreement,
the Company represents and warrants to the Purchaser as follows:
(a) Corporate Organization and Authority. The Company is a
corporation duly organized and validly existing under the laws of the State of
Indiana, has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as presently proposed
to be conducted, to enter into and perform the Agreement and to issue the Notes
and to amend and restate the 1994 Notes.
(b) Qualification to Do Business. The Company is duly
licensed or qualified and in good standing as a foreign corporation authorized
to do business in each jurisdiction where the nature of the business transacted
by it or the character of its properties owned or leased makes such
qualification or licensing necessary, except when the failure to be so qualified
or licensed would not have a material adverse effect on its business,
properties, operation or condition, financial or otherwise.
(c) Subsidiaries. The Company has no Subsidiaries, as
defined in Section 5.1, except those listed in Annex I, which correctly sets
forth the jurisdiction of incorporation and the percentage of the outstanding
Voting Stock or equivalent interest of each Subsidiary which is owned, of record
or beneficially, by the Company and/or one or more Subsidiaries. Each
Subsidiary, which is not an Inactive Subsidiary, has been duly organized and is
validly existing under the laws of its jurisdiction of incorporation or
organization and is duly licensed or qualified and in good standing as a foreign
corporation in each other jurisdiction where the nature of the business
transacted by it or the character of its properties owned or leased makes such
qualification or licensing necessary. Each Subsidiary has full corporate power
and authority to own and operate its properties and to carry on its business as
now conducted and as presently proposed to be conducted. The Company and each
Subsidiary have good and marketable title to all of the shares they purport to
own of the capital stock of each Subsidiary, free and clear in each case of any
lien or encumbrance, and all such shares have been duly issued and are fully
paid and nonassessable. Each Subsidiary identified on Annex I as an "Inactive
Subsidiary" has no assets in excess of $2,000 in book value and does not now
actively engage in any business.
(d) Financial Statements. The consolidated balance sheet of
the Company and its Subsidiaries as of October 31, 1996, and the related
consolidated statements of earnings, stockholders' equity and cash flows or
changes in financial condition, as applicable, for the year ended October 31,
1996, accompanied by the report and opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, independent
certified public accountants, a copy of which has heretofore been delivered to
the Purchaser, was prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved (except as
otherwise noted therein) and present fairly the consolidated financial condition
and consolidated results of operations and cash flows or changes in financial
condition, as applicable, of the Company and its Subsidiaries for and as of the
end of such year.
(e) No Contingent Liabilities or Adverse Changes. Neither
the Company nor any of its Subsidiaries has any contingent liabilities which are
material to the Company and its Subsidiaries taken as a whole other than as
indicated on the financial statements described in the foregoing paragraph (d)
of this Section 3.1, and since October 31, 1996, there have been no changes in
the condition, financial or otherwise, of the Company and its Subsidiaries
except changes occurring in the ordinary course of business, none of which,
individually or in the aggregate, has had a material adverse effect on the
business, properties, operations, assets, or condition, financial or otherwise,
of the Company and its Subsidiaries taken as a whole or on the Company's ability
to perform its obligations under this Agreement or the Notes and except for
losses in the ordinary course of business which do not result in any Event of
Default.
(f) No Pending Litigation or Proceedings. Except as set
forth on Schedule 3.1(f), there are no actions, suits or proceedings pending or
threatened against or affecting the Company or any of its Subsidiaries, at law
or in equity or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which might result, either individually or in the aggregate, in any
material adverse change in the business, properties, operations or condition,
financial or otherwise, of the Company and its Subsidiaries taken as a whole or
on the Company's ability to perform its obligations under this Agreement or the
Notes.
(g) Compliance with Law. (i) Neither the Company nor any of
its Subsidiaries is: (x) in default with respect to any order, writ, injunction
or decree of any court to which it is a named party; or (y) in default under any
law, rule, regulation, ordinance or order relating to its or their respective
businesses, the sanctions and penalties resulting from which defaults described
in clauses (x) and (y) might have a material adverse effect on the business,
properties, operations, assets or condition, financial or otherwise, of the
Company and its Subsidiaries taken as a whole, or on the Company's ability to
perform its obligations under this Agreement or the Notes.
(ii) Neither the Company nor any Subsidiary nor any
Affiliate of the Company is an entity defined as a "designated national" within
the meaning of the Foreign Assets Control Regulations, 31 C.F.R. Chapter V, or
for any other reason, subject to any restriction or prohibition under, or is in
violation of, any federal statute or Presidential Executive Order, or any rules
or regulations of any department, agency or administrative body promulgated
under any such statute or Order, concerning trade or other relations with any
foreign country or any citizen or national thereof or the ownership or operation
of any property.
(h) Pension Reform Act of 1974. Neither the amendment and
restatement of the 1994 Notes by the Notes nor the consummation of any of the
other transactions contemplated by this Agreement is or will constitute a
"prohibited transaction" within the meaning of Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), or Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The Internal
Revenue Service has issued a determination that each "employee pension benefit
plan," as defined in Section 3 of ERISA (a "Plan"), established, maintained or
contributed to by the Company or any Subsidiary (except for any Plan which is
unfunded and maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees)
is qualified under Section 401(a) and related provisions of the Code and that
each related trust or custodial account is exempt from taxation under Section
501(a) of the Code. All Plans of the Company or any Subsidiary comply in all
material respects with ERISA and other applicable laws. There exist with respect
to the Company or any Subsidiary no 'multi-employer plans," as defined in the
Multiemployer Pension Plan Amendments Act of 1980, for which a material
withdrawal or termination liability may be incurred. There exist with respect to
all Plans or trusts established or maintained by the Company or any Subsidiary:
(i) no material accumulated funding deficiency within the meaning of ERISA; (ii)
no termination of any Plan or trust which would result in any material liability
to the Pension Benefit Guaranty Corporation ("PBGC") or any "reportable event,"
as that term is defined in ERISA, which is likely to constitute grounds for
termination of any Plan or trust by the PBGC; and (iii) no "prohibited
transaction," as that term is defined in ERISA, which is likely to subject any
Plan, trust or party dealing with any such Plan or trust to any material tax or
penalty on prohibited transactions imposed by Section 4975 of the Code.
(i) Title to Properties. The Company and each Subsidiary has
(i) good title in fee simple or its equivalent under applicable law to all the
real property owned by it and (ii) good title to all other Property owned by it,
in each case free from all Liens except (x) those securing Indebtedness of the
Company or a Subsidiary, which are listed in the attached Annex II and (y) other
Liens that would be permitted pursuant to Section 7.4.
(j) Leases. The Company and each Subsidiary enjoy peaceful
and undisturbed possession under all leases under which the Company or such
Subsidiary is a lessee or is operating. None of such leases contains any
provision which might materially and adversely affect the operation or use of
the property so leased. All of such leases are valid and subsisting and none of
them is in default.
(k) Franchises, Patents, Trademarks and Other Rights. The
Company and each Subsidiary have all franchises, permits, licenses and other
authority necessary to carry on their businesses as now being conducted and as
proposed to be conducted, and none are in default under any of such franchises,
permits, licenses or other authority which are material to their businesses,
properties, operations or condition, financial or otherwise. The Company and
each Subsidiary own or possess all patents, trademarks, service marks, trade
names, copyrights, licenses and rights with respect to the foregoing necessary
for the present conduct of their businesses, without any known conflict with the
rights of others which might result in any material adverse change in their
businesses, properties, operations or condition, financial or otherwise.
(l) Status of Notes and Sale of Notes. The Notes have been
duly authorized on the part of the Company and, constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with their terms,
except to the extent that enforcement of the Notes may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application relating to or affecting the enforcement of the rights of creditors
or by equitable principles, regardless of whether enforcement is sought in
equity or at law. The issuance of the Notes to amend and restate the 1994 Notes
and compliance by the Company with all of the provisions of this Agreement and
of the Notes (i) are within the corporate powers of the Company, (ii) have been
duly authorized by proper corporate action and (iii) are legal, will not violate
any provisions of any law or regulation or order of any court, governmental
authority or agency and will not result in any breach of any of the provisions
of, or constitute a default under, or result in the creation of any Lien on any
property of the Company or any Subsidiary under the provisions of, any charter
document, by-law, loan agreement or other agreement or instrument to which the
Company or any Subsidiary is a party or by which any of them or their property
may be bound.
(m) No Defaults. No event has occurred and no condition
exists which, upon the issuance of the Notes to amend and restate the 1994
Notes, would constitute an Event of Default, or with the lapse of time or the
giving of notice or both would become an Event of Default, under this Agreement.
Neither the Company nor any Subsidiary is in default under any charter document,
by-law, loan agreement or other material agreement or material instrument to
which it is a party or by which it or its property may be bound except as
described in the preceding sentence.
(n) Governmental Consent. Neither the nature of the Company
or any of its Subsidiaries, their respective businesses or properties, nor any
relationship between the Company or any of its Subsidiaries and any other
Person, nor any circumstances in connection with the issuance of the Notes to
amend and restate the 1994 Notes is such as to require a consent, approval or
authorization of, or withholding of objection on the part of, or filing,
registration or qualification with, any governmental authority on the part of
the Company in connection with the execution and delivery of this Agreement or
the issuance of the Notes to amend and restate the 1994 Notes.
(o) Taxes. Except as set forth on Schedule 3.1(o), all tax
returns required to be filed by the Company or any Subsidiary in any
jurisdiction have been filed, and all taxes, assessments, fees and other
governmental charges upon the Company or any Subsidiary, or upon any of their
respective properties, income or franchises, which are due and payable, have
been paid timely or within appropriate extension periods or contested in good
faith by appropriate proceedings. The Company does not know of any proposed
additional tax assessment against it or any Subsidiary for which adequate
provision has not been made on its books. The federal income tax liability of
the Company and its Subsidiaries has been finally determined by the Internal
Revenue Service and satisfied for all taxable years up to and including the
taxable year ended [October 31, 1989] and no material controversy in respect of
additional taxes due since such date is pending or to the Company's knowledge
threatened. The provisions for taxes on the books of the Company and each
Subsidiary are adequate for all open years and for the current fiscal period.
(p) Status under Certain Statutes. Neither the Company nor
any Subsidiary is: (i) a "public utility company" or a "holding company," or an
"affiliate" or a "subsidiary company" of a "holding company," or an "affiliate"
of such a "subsidiary company," as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended, or (ii) a "public utility" as defined
in the Federal Power Act, as amended, or (iii) an "investment company" or an
"affiliated person" thereof or an "affiliated person" of any such "affiliated
person," as such terms are defined in the Investment Company Act of 1940, as
amended.
(q) Effect of Other Instruments. Neither the Company nor any
Subsidiary is bound by any agreement or instrument or subject to any charter or
other corporate restriction which materially and adversely affects the business,
properties, operations, or condition, financial or otherwise, of the Company and
its Subsidiaries taken as a whole or the Company's ability to perform its
obligations under this Agreement or the Notes.
(r) Margin Stock. Neither the Company nor any Subsidiary
owns or intends to carry or purchase any "margin stock" within the meaning of
Regulation G.
(s) Condition of Property. All of the facilities of the
Company and each of its Subsidiaries are in sound operating condition and repair
except for facilities being repaired in the ordinary course of business or
facilities which individually or in the aggregate are not material to the
business, properties, operations, or condition, financial or otherwise, of the
Company and its Subsidiaries taken as a whole.
(t) Books and Records. The Company and each of its
Subsidiaries (i) maintain books, records and accounts in reasonable detail which
accurately and fairly reflect their respective transactions and business
affairs, and (ii) maintain a system of internal accounting controls sufficient
to provide reasonable assurances that transactions are executed in accordance
with management's general or specific authorization and to permit preparation of
financial statements in accordance with generally accepted accounting
principles.
(u) Full Disclosure. Neither the Company's Annual Report on
Form 10-K for the year ended October 31, 1996, the Company's Annual Report to
Stockholders for the year ended October 31, 1996, the financial statements
referred to in paragraph (d) of this Section 3.1, nor this Agreement, nor any
other written statement or document furnished by the Company to the Purchaser in
connection with the negotiation of this Agreement, taken together, contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein or herein not misleading in light of the
circumstances under which they were made; provided, however, there can be no
assurance that projections provided to the Purchaser, although believed by the
Company to be reasonable, will in fact be achieved. There is no fact known, or
which, with reasonable diligence would be known, by the Company which the
Company has not disclosed to the Purchaser in writing which has a material
adverse effect on or, so far as the Company can now foresee, will have a
material adverse effect on the business, property, operations or condition,
financial or otherwise, of the Company and its Subsidiaries taken as a whole or
the ability of the Company to perform its undertakings under and in respect of
this Agreement and the Notes.
(v) Environmental Compliance. The Company and each
Subsidiary (i) is in compliance in all material respects with all applicable
environmental, transportation, health and safety statutes and regulations,
including, without limitation, regulations promulgated under the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. ▇▇.▇▇. 6901 et seq., and (ii)
has not acquired, incurred or assumed, directly or indirectly, any material
contingent liability in connection with the release or storage of any toxic or
hazardous waste or substance into the environment. The Company and its
Subsidiaries have not acquired, incurred or assumed, directly or indirectly, any
material contingent liability in connection with a release or other discharge of
any hazardous, toxic or waste material, including petroleum, on, in, under or
into the environment surrounding any property owned, used or leased by any of
them.
(w) Stock Issuance. Since October 31, 1996, neither the
Company nor any Subsidiary which is not an Inactive Subsidiary has issued any
additional shares of capital stock other than capital stock issued by the
Company upon exercise of employee stock options.
3.2 Representations of the Purchaser. The Purchaser
represents, and in entering into this Agreement the Company understands, that
(i) the Purchaser is an Institutional Holder, (ii) the Purchaser is accepting
the Notes to amend and restate the 1994 Notes for the purpose of investment for
the Purchaser's own account and not with a view to the resale or distribution
thereof, and (iii) the Purchaser has no present intention of selling,
negotiating or otherwise disposing of the Notes; provided that the disposition
of the Purchaser property shall at all times be and remain within the
Purchaser's control, subject, however, to compliance with federal securities
laws. The Purchaser acknowledges that the Notes have not been registered under
the Securities Act or the laws of any state, and the Purchaser understands that
the Notes must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
The Purchaser has been advised that the Company does not contemplate
registering, and is not legally required to register, the Notes under the
Securities Act.
SECTION 4. CLOSING CONDITIONS
This Agreement shall be subject to the following conditions
to be satisfied on or before the Closing Date:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in this Agreement or otherwise made in
writing in connection herewith shall be true and correct on or as of the Closing
Date and the Company shall have delivered to the Purchaser a certificate to such
effect, dated the Closing Date and executed by the President or the chief
financial officer of the Company.
4.2 Receipt by Purchaser. The Purchaser shall have received
(i) from ▇▇▇▇▇ & ▇▇▇▇▇▇▇ of Indianapolis, Indiana, counsel for the Company,
their opinion, dated as of such Closing Date, in form and substance satisfactory
to the Purchaser and covering substantially the matters set forth or provided in
the attached Exhibit B, and (ii) from the Company the Notes duly executed by the
Company.
4.3 Events of Default. Except as described in Section
3.1(m), no event shall have occurred and be continuing on the Closing Date which
would constitute an Event of Default, as defined in Section 8.1, or with notice
or lapse of time or both would become such an Event of Default, and the Company
shall have delivered to the Purchaser a certificate to such effect, dated the
Closing Date and executed by the President or the chief financial officer of the
Company.
4.4 Payment of Fees and Expenses. The Company shall have
paid all fees, expenses, costs and charges, including the reasonable fees and
expenses of Sidley & Austin, the Purchaser's special counsel, incurred by the
Purchaser through the Closing Date and incident to the proceedings in connection
with, and transactions contemplated by, this Agreement and the Notes.
4.5 Articles; Good Standing. The Purchaser shall have
received the Company's Articles of Incorporation, as amended, modified or
supplemented to the Closing Date, certified to be correct and complete by the
Secretary of State of Indiana, together with a certification of existence of the
Company from such Secretary of State.
4.6 Secretary's Certificate. The Purchaser shall have
received a certificate dated the Closing Date of the Secretary of the Company,
certifying (i) the names and true signatures of the officers authorized to sign
this Agreement and the Notes, (ii) the resolutions of the Board of Directors of
the Company approving the transactions contemplated by this Agreement and the
Notes, and (iii) the Company's by-laws.
4.7 Proceedings and Documents. All proceedings taken in
connection with the transactions contemplated by this Agreement, and all
documents necessary to the consummation of such transactions shall be
satisfactory in form and substance to the Purchaser and the Purchaser's special
counsel, and the Purchaser and the Purchaser's special counsel shall have
received copies (executed or certified as may be appropriate) of all legal
documents or proceedings which they may reasonably request.
SECTION 5. INTERPRETATION OF AGREEMENT
5.1 Certain Terms Defined. The terms hereinafter set forth
when used in this Agreement shall have the following meanings:
Advances - The revolving credit loans made by NBD to the
Company under Section 2.4 of the NBD Agreement, the term loan made by NBD
Michigan to the Company as evidenced by the Fourth Amended and Restated NBD Term
Loan Note of the Company dated January 26, 1996, and the issuance of letters of
credit under Section 2.4 of the NBD Agreement.
Affiliate - Any Person (other than a Subsidiary) (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Company or any Subsidiary or (iii) 5% or more of the Voting Stock (or in the
case of a Person which is not a corporation, 5% of the equity interest) of which
is beneficially owned or held by the Company or a Subsidiary. 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.
Agreement - As defined in Section 1.1.
Asset Sale Proceeds - means the proceeds (net of all
disposition expenses) of selling or otherwise disposing of assets of the Company
or any Subsidiary (other than inventory, machinery and equipment sold in the
ordinary course of business upon customary credit terms and other than sales of
the Company's Capital Stock) to the extent that the aggregate book value
(disregarding any write-downs of such book value other than ordinary
depreciation and amortization) of the assets disposed of in such sales or other
dispositions (a) in any single year exceeds 5% of the Consolidated Total Assets
at the end of the prior fiscal year, or (b) in any two successive fiscal years
exceeds 10% of the Consolidated Total Assets at the end of the fiscal year of
the prior two fiscal years for which the amount of the Consolidated Total Assets
is greater, less all Asset Sale Proceeds paid under Section 2.1(b) resulting
from sales or other dispositions during the first of the two successive fiscal
year.
Autocon - Autocon Technologies, Inc.
Autocon Guaranties - The guaranties dated as of March 24,
1994 and executed by Autocon in favor of the Purchaser and NBD, respectively.
Bond Default - The occurrence of an Event of Default under
Section 601(h) or Section 201(d)(5) of the Trust Indenture, dated as of
September 1, 1990 between The City of Indianapolis, Indiana, and First of
America Bank - Indianapolis, or any corresponding default under the "Loan
Agreement" referred to therein.
Capital Expenditures - For any period, the aggregate of all
expenditures (whether paid in cash or other assets or accrued as a liability)
during such period that, in conformity with generally accepted accounting
principles, are required to be included in or reflected by the Company's fixed
asset account as reflected in the consolidated balance sheet, including, without
limitation, any Capitalized Lease and capitalized software developments costs of
the Company and its Subsidiaries, computed on a consolidated basis.
Capital Stock - of any person means any equity securities,
any securities exchangeable for or convertible into equity securities, and any
warrants, rights, or other options to purchase or otherwise acquire such
securities.
Capitalized Lease - Any lease the obligation for Rentals
with respect to which, in accordance with generally accepted accounting
principles, would be required to be capitalized on a balance sheet of the lessee
or for which the amount of the asset and liability thereunder, as if so
capitalized, would be required to be disclosed in a note to such balance sheet.
Change of Control - The acquisition, through purchase or
otherwise (including the agreement to act in concert without more), by any
Person or group of Persons acting in concert, directly or indirectly, in one or
more transactions, of beneficial ownership or control of securities representing
more than 30% of the combined voting power of the Company's Voting Stock,
provided, however, that there shall not be a Change of Control in the event that
an acquisition is made, directly or indirectly, in one or more transactions, of
the beneficial ownership or control of securities representing (a) 50% or more
of the combined voting power of the Company's Voting Stock by any Person or
group of Persons which is identified as an Executive Officer or Executive
Officers of the Company on its then applicable Annual Report on Form 10-K or (b)
30% or more of the combined voting power of the Company's Voting Stock by
Brynwood Partners Limited Partnership; provided further, however, that Change of
Control shall not be deemed to exist with respect to the acquisitions described
in (a) above only if such acquisitions are approved by a majority of the Board
of Directors of the Company. For purposes of this definition, "beneficial
ownership" shall have the meaning set forth in Rule 13d-3 under the Securities
and Exchange Act of 1934.
Closing Date - As defined in Section 1.1.
Code - As defined in Section 3.1(h).
Consolidated Adjusted Net Worth - The consolidated
stockholders' equity (including preferred stock other than preferred stock which
would be characterized as Indebtedness in accordance with generally accepted
accounting principles) of the Company and its Subsidiaries determined in
accordance with generally accepted accounting principles after elimination of
minority interests, less the sum of all goodwill, trade names, trademarks,
patents, organization expense, unamortized debt discount and expense and other
similar intangibles properly classified as intangibles in accordance with
generally accepted accounting principles, and excluding the effects of any
foreign currency translation adjustment.
Consolidated Current Assets and Consolidated Current
Liabilities - As of the date of any determination thereof, such assets and
liabilities of the Company and its Subsidiaries as shall be determined on a
consolidated basis in accordance with generally accepted accounting principles
to constitute current assets and current liabilities, respectively.
Consolidated Fixed Charges - For any period, the sum of: (i)
interest expense (including the interest component of Rentals under Capitalized
Leases and capitalized interest), of the Company and its Subsidiaries for such
period and (ii) Rentals of the Company and its Subsidiaries under all leases
other than Capitalized Leases.
Consolidated Income Available for Fixed Charges - For any
period, the sum of (i) Consolidated Net Income for such period, plus (to the
extent deducted in determining Consolidated Net Income), (ii) all provisions for
any federal, state, or other income taxes (including without limitation the SBT)
made by the Company and its Subsidiaries during such period and (iii) interest
expense (including the interest component of Rentals under Capitalized Leases
and capitalized interest) of the Company and its Subsidiaries during such
period; and, (iv) Rentals of the Company under all leases other than Capitalized
Leases.
Consolidated Net Income - For any period, the net income and
net losses of the Company and its Subsidiaries determined in accordance with
generally accepted accounting principles, but excluding therefrom (i) any
extraordinary gain or loss so classified in accordance with generally accepted
accounting principles and (ii) the net income or loss of any Person (other than
a Subsidiary) in which the Company or any Subsidiary has an ownership interest
and, with respect to such net income only to the extent that it has not been
received by the Company or such Subsidiary in the form of dividends or other
similar distributions.
Consolidated Total Assets - The consolidated total assets of
the Company and its Subsidiaries determined in accordance with generally
accepted accounting principles.
Consolidated Total Capitalization - The sum of Consolidated
Adjusted Net Worth and Consolidated Total Indebtedness of the Company and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
Consolidated Total Indebtedness - The Indebtedness of the
Company and its Subsidiaries, determined on a consolidated basis in accordance
with generally accepted accounting principles which (a) is interest-bearing, and
(b) in accordance with generally accepted accounting principles, should be
reflected on a consolidated balance sheet for the Company and its Subsidiaries
as of such date.
Contaminant - Any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
Determination Date - The day 3 days before the date fixed
for a prepayment pursuant to a notice required by Section 2.3 or required to be
paid out of Excess Cash Flow or the day 15 days before the date of declaration
pursuant to Section 8.2.
EBITDAR - For any period, the sum of Consolidated Income
Available for Fixed Charges for such period, plus depreciation and amortization
of the Company and its Subsidiaries for such period.
Equity Sale Proceeds - The proceeds (net of reasonable
issuance expenses) of any sales by the Company or its Subsidiaries of newly
issued equity securities or treasury stock of the Company or any of its
Subsidiaries, other than (a) sales to officers or employees of the Company or
its Subsidiaries upon exercising options issued pursuant to the "1990 Stock
Option Plan of Hurco Companies, Inc.", or the "Hurco Companies, Inc. 1997 Stock
Option and Incentive Plan", and (b) sales by a Subsidiary to the Company or any
other Subsidiary.
ERISA - As defined in Section 3.1(h).
Event of Default - As defined in Section 8.1.
Exchange Act - The Securities Exchange Act of 1934, as
amended, and as it may be further amended from time to time.
Guaranties - All obligations (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
of a Person guaranteeing or in effect, guaranteeing any Indebtedness, dividend
or other, obligation, of any other Person in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through an
agreement, contingent or otherwise, by such Person: (i) to purchase such
Indebtedness or obligation or any property or assets constituting security
therefor, (ii) to advance or supply funds (x) for the purchase or payment of
such Indebtedness or obligation, (y) to maintain working capital or other
balance sheet condition or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation, (iii) to lease property
or to purchase securities or other property or services primarily for the
purpose of assuring the owner of such Indebtedness or obligation, or (iv)
otherwise to assure the owner of the Indebtedness or obligation against loss in
respect thereof. For the purposes of all computations made under this Agreement,
a Guaranty in respect of any Indebtedness for borrowed money shall be deemed to
be Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
Inactive Subsidiary - As defined in Section 3.1(c).
Indebtedness - (i) All items of borrowings, including
Capitalized Leases, which in accordance with generally accepted accounting
principles would be included in determining total liabilities as shown on the
liability side of a balance sheet as of the date at which Indebtedness is to be
determined, (ii) all Guaranties (other than Guaranties of Indebtedness of the
Company by a Subsidiary or of a Subsidiary by the Company or of a Subsidiary by
a Subsidiary), letters of credit and endorsements (other than of notes, bills
and checks presented to banks for collection or deposit in the ordinary course
of business), in each case to support Indebtedness of other Persons; and (iii)
all items of borrowings secured by any mortgage, pledge or Lien existing on
property owned subject to such mortgage, pledge, or Lien, whether or not the
borrowings secured thereby shall have been assumed by the Company or any
Subsidiary.
Institutional Holder - Any bank, trust company, insurance
company, pension fund, mutual fund or other similar financial institution,
including, without limiting the foregoing, any "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act, which is or becomes a
holder of any Note.
Investments - All investments made, in cash or by delivery
of property, directly or indirectly, in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations or securities or by
loan, advance, capital contribution or otherwise; provided, however, that
"Investments" shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business.
IRB L/C - means the Irrevocable Letter of Credit No. 252
issued by NBD Michigan in favor of First of America Bank-Indianapolis, in the
face amount of $1,060,274, and any letter of credit issued in exchange or
replacement therefor.
Lien - Any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including any agreement to grant any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of or agreement to file any financing
statement under the Uniform Commercial Code of any jurisdiction in connection
with any of the foregoing.
NBD - NBD Bank, N.A., a national banking association.
NBD Agreement - That certain Amended and Restated Credit
Agreement and Amendment to Reimbursement Agreement dated as of the Closing Date
between the Company, NBD and NBD Bank, as the same may be amended from time to
time.
Noteholder - Any holder of a Note.
Notes - As defined in Section 1.1.
Operating Leases - Any lease, the obligation for rentals
with respect to which, in accordance with generally accepted accounting
principles, would not be required to be capitalized on a balance sheet of the
lessee.
PBGC - As defined in Section 3.1(h).
Plan - As defined in Section 3.1(h).
Permitted Investments - Any and all of the following
---------------------
its Subsidiaries:
(i) Investments in and loans and advances by the Company to
a Subsidiary or to a Person which simultaneously as a result of such
Investment becomes a Subsidiary;
(ii) Investments in commercial paper maturing in 270 days or
less from the date of issuance which, at the time of acquisition, (y)
are accorded the highest rating by Standard & Poor's Corporation or
▇▇▇▇▇'▇ Investors Service, Inc. or (z) are accorded the second highest
rating by Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service,
Inc., provided that the aggregate Investments held by the Company and
its Subsidiaries pursuant to this subparagraph (ii)(z) shall not at any
time exceed $5,000,000;
(iii) certificates of deposit and banker's acceptances
maturing within one year from the date of issuance of United States or
Canadian domiciled commercial banks having (x) capital and surplus
aggregating at least $100,000,000 and (y) long-term deposit ratings of
"A+" or "Al," respectively, by Standard & Poor's Corporation or ▇▇▇▇▇'▇
Investors Service, Inc.;
(iv) direct or indirect obligations unconditionally
guaranteed by the United States government maturing within one year
from the date of issuance;
(v) tax-exempt floating rate option tender bonds maturing in
one year or less rated "AA" or better by Standard & Poor's Corporation
or ▇▇▇▇▇'▇ Investors Service, Inc. and secured by letters of credit
issued by banks having capital and surplus aggregating at least
$100,000,000;
(vi) promissory notes or equity securities received by the
Company in connection with any asset sales permitted under Section 7.7;
Permitted Liens - As defined in Section 7.4.
Person - Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Prior Misstatement - As defined in Section 1.1.
Pro Rata Share - As of any Date, for the Purchaser, the
percentage obtained by dividing (a) the outstanding principal amount of the
Notes as of such date by (b) the sum of the outstanding principal amount of
Advances under the NBD Agreement plus the amount available under the Commitment
under the NBD Agreement plus the face amount of the IRB L/C plus the outstanding
principal amount under the Notes.
Property - Any real or personal or tangible or intangible
asset.
Reinvestment Yield - The sum of (i) the yield set forth
under the heading "This Week" in the weekly statistical release designated
H.15(519) (or any successor publication) of the Board of Governors of the
Federal Reserve System under the caption "U.S. Government Securities--Treasury
Constant Maturities" opposite the maturity corresponding to the Weighted Average
Life to Maturity, rounded to the nearest month, of the principal amount of the
Notes to be prepaid, plus (ii) .60 of 1% with respect to Notes to be prepaid
pursuant to Section 2.2(a) or Notes the payment of which has been accelerated
pursuant to Section 8.2 and (iii) .25 of 1% with respect to Notes to be prepaid
pursuant to Section 2.1(b) or Section 2.2(b) or (c). If no maturity exactly
corresponding to such rounded Weighted Average Life to Maturity shall appear
therein, yields for the two most closely corresponding published maturities (one
of which occurs prior and the other subsequent to the Weighted Average Life to
Maturity) shall be calculated pursuant to the foregoing sentence and the
Reinvestment Yield shall be interpolated from such yields on a straight-line
basis (rounding in each of such relevant periods, to the nearest month). For
purposes of calculating the Reinvestment Yield, the most recent weekly
statistical release published prior to the applicable Determination Date shall
be used.
Release - Release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any property, including the
movement of Contaminants through or in the air, soil, surface water, groundwater
or property.
Rentals - As of the date of any determination thereof, all
fixed payments (including all payments which the lessee is Obligated to make to
the lessor on termination of the lease or surrender of the property) payable by
the Company or a Subsidiary, as lessee or sublessee under a lease of real or
personal property, but exclusive of any amounts required to be paid by the
Company or a Subsidiary (whether or not designated as rents or additional rents)
on account of maintenance, repairs, insurance, taxes, assessments, amortization
and similar charges. Fixed rents under any so-called "percentage leases" shall
be computed solely on the basis of the minimum rents, if any, required to be
paid by the lessee regardless of sales volume or gross revenues.
Reportable Event - As defined in Section 3.1(h).
Restricted Investments - Any Investment which is not a
Permitted Investment.
SBT - means the so-called Single Business Tax imposed by the
State of Michigan.
Securities Act - The Securities Act of 1933, as amended, and
as it may be further amended from time to time.
Subordinated Indebtedness - Any Indebtedness which is
subordinate in right of payment to the Notes.
Subsidiary - Any corporation of which the majority of the
outstanding shares of Voting Stock are owned or controlled by the Company.
Voting Stock - Capital stock of any class of a corporation
having power under ordinary circumstances to vote for the election of members of
the board of directors of such corporation, or persons performing similar
functions (whether or not at the time stock of any class shall have or might
have special voting powers or rights by reason of the happening of any
contingency).
Weighted Average Life to Maturity - As applied to any
prepayment of principal of the Notes, at any date, the number of years obtained
by dividing (a) the then outstanding principal amount of the Notes to be
prepaid, into (b) the sum of the products obtained by multiplying (i) the amount
of each then remaining installment, sinking fund, serial maturity, or other
required payment, including payment at final maturity, foregone by such
prepayment in the case of a prepayment of the Notes by (ii) the number of years
(calculated to the nearest 1/12th) which will elapse between such date and the
making of such payment.
Wholly Owned - When applied to a Subsidiary, any Subsidiary
100% of the Voting Stock of which is owned by the Company and/or its Wholly
Owned Subsidiaries.
Terms which are defined in other Sections of this Agreement
shall have the meanings specified therein.
5.2 Accounting Principles. Where the character or amount of
any asset or liability or item of income or expense is required to be determined
or any consolidation or other accounting computation is required to be made for
the purposes of this Agreement, the same shall be done in accordance with
generally accepted accounting principles in force in the United States of
America at the time of determination, except where such principles are
inconsistent with the requirements of this Agreement.
5.3 Valuation Principles. Except where indicated expressly
to the contrary by the use of terms such as "fair value" or "market value," each
asset, each liability and each capital item of any Person, and any quantity
derivable by a computation involving any of such assets, liabilities or capital
items, shall be taken at the net book value thereof for all purposes of this
Agreement. "Net book value" with respect to any asset, liability or capital item
of any Person shall mean the amount at which the same is recorded or, in
accordance with generally accepted accounting principles, should have been
recorded in the books of account of such Person, as reduced by any reserves
which have been or, in accordance with generally accepted accounting principles,
should have been set aside with respect thereto, but in every case (whether or
not permitted in accordance with generally accepted accounting principles)
without giving effect to any write-up, write-down or write-off (other than any
write-down or write-off the entire amount of which was charged to Consolidated
Net Income or to a reserve which was a charge to Consolidated Net Income)
relating thereto which was made after the date of this Agreement.
5.4 Direct or Indirect Actions. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
SECTION 6. AFFIRMATIVE COVENANTS
The Company agrees that, for so long as any amount remains
unpaid on any Note:
6.1 Corporation Existence. The Company will maintain and
preserve, and will cause each Subsidiary to maintain and preserve, its corporate
existence and right to carry on its business and use, and cause each Subsidiary
to use, its best efforts to maintain, preserve, renew and extend all of its
rights, powers, privileges and franchise necessary to the proper conduct of its
business; provided, however, that the foregoing shall not prevent any
transaction permitted by Section 7.7.
6.2 Insurance. The Company will insure and keep insured at
all times all of its properties and all of its Subsidiaries' properties which
are of an insurable nature and of the character usually insured by companies
operating similar properties, against loss or damage by fire and from other
causes customarily insured against by companies engaged in similar businesses in
such amounts as are usually insured against by such companies. The Company also
will maintain for itself and its Subsidiaries at all times adequate insurance
against loss or damage from such hazards and risks to the person and property of
others as are usually insured against by companies operating properties similar
to the properties of the Company and its Subsidiaries. All such insurance shall
be carried with financially sound and reputable insurers rated A:XII or better
by A.M. Best Company, Inc. The Company shall furnish to the Purchaser within ten
days after the Closing Date a summary of insurance presently in force.
6.3 Taxes, Claims for Labor and Materials. The Company will
pay and discharge when due, and will cause each Subsidiary to pay and discharge
when due, all taxes, assessments and governmental charges or levies imposed upon
it or its property or assets, or upon properties leased by it (but only to the
extent required to do so by the applicable lease), prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become a
Lien upon its property or assets, provided that neither the Company nor any
Subsidiary shall be required to pay any such tax, assessment, charge, levy or
claim, the payment of which is being contested in good faith and by proper
proceedings that will stay the forfeiture or sale of any property and with
respect to which adequate reserves are maintained in accordance with generally
accepted accounting principles.
6.4 Maintenance of Properties. The Company will maintain,
preserve and keep, and will cause each Subsidiary to maintain, preserve and
keep, its properties (whether owned in fee or a leasehold interest) in good
repair and working order, ordinary wear and tear excepted, and from time to time
will make all necessary repairs, replacements, renewals and additions.
6.5 Maintenance of Records. The Company will keep, and will
cause each Subsidiary to keep, at all times proper books of record and account
in which full, true and correct entries will be made of all dealings or
transactions of or in relation to the business and affairs of the Company or
such Subsidiary, in accordance with generally accepted accounting principles
consistently applied throughout the period involved (except for such changes as
are disclosed in such financial statements or in the notes thereto and concurred
in by the independent certified public accountants), and the Company will, and
will cause each Subsidiary to, provide reasonable protection against loss or
damage to such books of record and account.
6.6 Financial Information and Reports. The Company will
furnish to the Purchaser and to any other Institutional Holder (in duplicate if
or such other holder so request), the following:
(a) As soon as available and in any event within 50 days
after the end of each of the first three quarterly accounting periods of each
fiscal year of the Company, a consolidated and a consolidating balance sheet of
the Company and its Subsidiaries as of the end of such period and consolidated
and consolidating statements of earnings and cash flows of the Company and its
Subsidiaries for the periods beginning on the first day of such fiscal year and
the first day of such quarterly accounting period and ending on the date of such
balance sheet, setting forth in comparative form the corresponding consolidated
figures for the corresponding periods of the preceding fiscal year, all in
reasonable detail prepared in accordance with generally accepted accounting
principles consistently applied throughout the period involved (except for
changes disclosed in such financial statements or in the notes thereto and
concurred in by the Company's independent certified public accountants) and
certified by the chief financial officer or principal accounting officer of the
Company (i) outlining the basis of presentation, and (ii) stating that the
information presented in such statements presents fairly the financial condition
of the Company and its Subsidiaries and the results of operations for the
period, subject to customary year-end audit adjustments;
(b) As soon as available and in any event within 110 days
after the last day of each fiscal year a consolidated and a consolidating
balance sheet of the Company and its Subsidiaries as of the end of such fiscal
year and the related consolidated and consolidating statements of earnings,
stockholders' equity and cash flows for such fiscal year, in each case setting
forth in comparative form figures for the preceding fiscal year, all in
reasonable detail, prepared in accordance with generally accepted accounting
principles consistently applied throughout the period involved (except for
changes disclosed in such financial statements or in the notes thereto and
concurred in by independent certified public accountants) and accompanied by a
report as to the consolidated balance sheet and the related consolidated
statements of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP or any firm of independent public accountants
of recognized national standing selected by the Company to the effect that such
financial statements have been prepared in conformity with generally accepted
accounting principles and present fairly, in all material respects, the
financial condition of the Company and its Subsidiaries and that the examination
of such financial statements by such accounting firm has been made in accordance
with generally accepted auditing standards;
(c) Together with the financial statements delivered
pursuant to paragraphs (a) and (b) of this Section 6.6, a certificate of the
chief financial officer or principal accounting officer, (i) to the effect that
such officer has reexamined the terms and provisions of this Agreement and that
at the date of such certificate, during the periods covered by such financial
reports and as of the end of such periods, the Company is not, or was not, in
default in the fulfillment of any of the terms, covenants, provisions and
conditions of this Agreement and that no Event of Default, or event which, with
the lapse of time or the giving of notice, or both, would become an Event of
Default, is occurring or has occurred as of the date of such certificate, during
such periods and as of the end of such periods, or if the signer is aware of any
such default, event or Event of Default, he shall disclose in such statement the
nature thereof, its period of existence and what action, if any, the Company has
taken or proposes to take with respect thereto, and (ii) stating whether the
Company is in compliance with Sections 7.1 through 7.15 and setting forth, in
sufficient detail, the information and computations required to establish
whether or not the Company was in compliance with the requirements of Sections
7.1 through 7.15 during the periods covered by the financial reports then being
furnished and as of the end of such periods;
(d) Together with the financial reports delivered pursuant
to paragraph (b) of this Section 6.6, a certificate of the independent certified
public accountants (i) stating that in making the examination necessary for
expressing an opinion on such financial statements, nothing came to their
attention that caused them to believe that there is in existence or has occurred
any Event of Default hereunder, or any event (the occurrence of which is
ascertainable by accountants in the course of normal audit procedures) which,
with the lapse of time or the giving of notice, or both, would become an Event
of Default hereunder or, if such accountants shall have obtained knowledge of
any such event or Event of Default, describing the nature thereof and the length
of time it has existed and (ii) acknowledging that holders of the Notes may rely
on their opinion on such financial statements;
(e) Within 15 days after the Company obtains knowledge
thereof, notice of any litigation not fully covered by insurance or any
governmental proceeding pending against the Company or any Subsidiary in which
the damages sought exceed $500,000 or which might otherwise materially adversely
affect the business, property, operations or condition, financial or otherwise,
of the Company and its Subsidiaries taken as a whole;
(f) As soon as available, copies of each financial
statement, notice, report and proxy statement which the Company shall furnish to
its stockholders; copies of each registration statement and periodic report
which the Company may file with the Securities and Exchange Commission, and any
other similar or successor agency of the Federal government administering the
Securities Act, the Exchange Act or the Trust Indenture Act of 1939, as amended;
copies of each report relating to the Company or its securities which the
Company may file with any securities exchange on which any of the Company's
securities may be registered; copies of any orders in any material proceedings
to which the Company or any of its Subsidiaries is a party, issued by any
governmental agency, Federal or state, having jurisdiction over the Company or
any of its Subsidiaries; and, except at such times as the Company is a reporting
company under Section 13 or 15(d) of the Exchange Act or has complied with the
requirements for the exemption from registration under the Exchange Act set
forth in Rule 12g-3-2(b), such financial or other information as any holder of
the Notes may reasonably determine is required to permit such holder to comply
with the requirements of Rule 144A under the Securities Act in connection with
the resale by it of the Notes;
(g) As soon as available, a copy of each other report
submitted to the Company or any Subsidiary by independent accountants retained
by the Company or any Subsidiary in connection with any interim or special audit
made by them of the books of the Company or any Subsidiary;
(h) Within ten days after receipt thereof, a copy of any
notice that (i) any violation of any federal, state or local environmental law
or regulation may have been committed or is about to be committed by the
Company, (ii) any administrative or judicial complaint or order has been filed
or is about to be filed against the Company alleging violations of any federal,
state or local environmental law or regulation or requiring the Company to take
any action in connection with any Release of any Contaminant into the indoor or
outdoor environment, or (iii) alleging that the Borrower may be liable or
responsible for costs associated with a response to or cleanup of a Release of
any Contaminant into the indoor or outdoor environment or any damages caused
thereby;
(i) Such additional information as the Purchaser or such
other Institutional Holder of the Notes may reasonably request concerning the
Company and its Subsidiaries.
6.7 Inspection of Properties and Records. The Company will
allow, and will cause each Subsidiary to allow, any representative of the
Purchaser or any other Institutional Holder, so long as the Purchaser or such
other Institutional Holder holds any Note, at the Purchaser's or such
Institutional Holder's expense, to visit and inspect any of its properties
(other than trade secrets related to technology), to examine its books of record
and account and to discuss its affairs, finances and accounts with its officers
and its public accountants (and by this provision the Company authorizes such
accountants to discuss with the Purchaser or such Institutional Holder its
affairs, finances and accounts), all at such reasonable times upon 24 hours
notice and as often as the Purchaser or such Institutional Holder may reasonably
request. So long as a Default or Event of Default has occurred and is
continuing, the Company agrees to pay the costs of any inspections made pursuant
to this Section 6.7. Any proprietary or other confidential, competitively
sensitive information obtained by the Purchaser or any other Noteholder shall
not be disclosed to any Person except (i) in connection with the enforcement of
obligations of the Company under the Notes or this Agreement, (ii) in response
to a subpoena or other legal process, (iii) as otherwise required by applicable
law or regulation or (iv) in connection with the sale or transfer of the Notes
to a subsequent proposed purchaser or transferee.
6.8 ERISA. (a) The Company agrees that all assumptions and
methods used to determine the actuarial valuation of employee benefits, both
vested and unvested, under any Plan of the Company or any Subsidiary, and each
such Plan, whether now existing or adopted after the date hereof, will comply in
all material respects with ERISA and other applicable laws.
(b) The Company will not at any time permit any Plan
established, maintained or contributed to by it or any Subsidiary or "affiliate"
(as defined in Section 407(d)(7) of ERISA) to:
(i) engage in any "prohibited transaction" as
such term is defined in
Section 4975 of the Code or in Section 406 of ERISA;
(ii) incur any "accumulated funding deficiency" as
such term is defined in Section 302 of ERISA, whether or not waived; or
(iii) be terminated under circumstances which are
likely to result in the imposition of a lien on the property of the
Company or any Subsidiary pursuant to Section 4068 of ERISA, if and to
the extent such termination is within the control of the Company;
if the event or condition described in clauses (i), (ii) or (iii) above is
likely to subject the Company or any Subsidiary or ERISA affiliate to a
liability which, in the aggregate, is material in relation to the business,
property, operations, or condition, financial or otherwise, of the Company and
its Subsidiaries taken as a whole.
(c) Upon the request of the Purchaser or any other
Institutional Holder, the Company will furnish a copy of the annual report of
each Plan (Form 5500) required to be filed with the Internal Revenue Service.
Copies of annual reports shall be delivered no later than 30 days after the
later of the date such report has been filed with the Internal Revenue Service
or the date the copy is requested.
(d) Promptly upon the occurrence thereof, the Company will
give the Purchaser and each other Institutional Holder written notice of (i) a
reportable event with respect to any Plan; (ii) the institution of any steps by
the Company, any Subsidiary, any ERISA affiliate, the PBGC or any other person
to terminate any Plan; (iii) the institution of any steps by the Company, any
Subsidiary, or any ERISA affiliate to withdraw from any Plan; (iv) a prohibited
transaction in connection with any Plan; (v) any material increase in the
contingent liability of the Company or any Subsidiary with respect to any
post-retirement welfare liability; or (vi) the taking of any action by the
Internal Revenue Service, the Department of Labor or the PBGC with respect to
any of the foregoing which, in any of the events specified above, would result
in any material liability of the Company or any of its Subsidiaries.
6.9 Compliance with Laws. The Company will comply, and will
cause each Subsidiary to comply, with all laws, rules and regulations relating
to its or their respective businesses, other than laws, rules and regulations
the failure to comply with which or, the sanctions and penalties resulting
therefrom, individually or in the aggregate, would not have a material adverse
effect on the business, property, operations, or condition, financial or
otherwise, of the Company or such Subsidiary, and would not result in the
creation of a Lien which, if incurred in the ordinary course of business, would
not be permitted by Section 7.4 on any of the property of the Company or any
Subsidiary; provided, however, that the Company and its Subsidiaries shall not
be required to comply with laws, rules and regulations the validity or
applicability of which are being contested in good faith and by appropriate
proceedings; provided that the failure to comply with such laws, rules or
regulations would not have a material adverse effect on the business,
properties, operations, assets or condition, financial or otherwise, of the
Company and its Subsidiaries taken as a whole.
6.10 Acquisition of Notes. The Company will forthwith cancel
any Notes in any manner or at any time acquired by the Company or any Subsidiary
or Affiliate and such Notes shall not be deemed to be outstanding for any of the
purposes of this Agreement or the Notes.
6.11 Private Placement Number. The Company consents to the
filing of copies of this Agreement with Standard & Poor's Corporation and the
National Association of Insurance Commissioners to obtain a private placement
number.
6.12 Fiscal Year. The Company will at all times maintain
a fiscal year ending on
-----------
October 31 of each calendar year.
SECTION 7. NEGATIVE COVENANTS
The Company agrees that, for so long as any amount remains
unpaid on any Note:
7.1 Net Worth. The Company will not at any time permit its
Consolidated Adjusted Net Worth to be less than (a) $20,000,000, plus (b) the
cumulative amount equal to 50% of its Consolidated Net Income subsequent to
April 30, 1997 at the end of the fiscal quarter, plus (c) an amount equal to 75%
of the aggregate Equity Sale Proceeds received by the Company or its
Subsidiaries after the Closing Date and on or prior to the end of the fiscal
quarter.
7.2 Indebtedness. The Company will not, and will not permit
any Subsidiary to, create, assume, incur, guarantee or otherwise become liable
for, directly or indirectly, any Indebtedness, other than:
(i) Indebtedness Under the Notes;
(ii) The Indebtedness outstanding under the NBD Agreement
and Indebtedness secured by IRB L/C;
(iii) Indebtedness (other than Indebtedness permitted under
subsections (i) and (ii)) in aggregate outstanding principal amount not
exceeding 15% of the Consolidated Adjusted Net Worth of the Company and its
Subsidiaries from time to time in the aggregate; and
(iv) Indebtedness of any Subsidiary of the Company owing to
the Company or to any other Subsidiary of the Company.
7.3 Fixed Charge Ratio. The Company will not, as of the end
of any fiscal quarter, permit the ratio of Consolidated Income Available for
Fixed Charges to Consolidated Fixed Charges for the preceding twelve months to
be less than 1.25 to 1.0.
7.4 Liens. The Company will not, and will not permit any
Subsidiary to, create, assume, or incur, or permit to exist, directly or
indirectly, any Lien on its properties or assets, whether now owned or hereafter
acquired, except for the following Liens ("Permitted Liens"):
(a) Liens existing on property of the Company or any
Subsidiary as of the date of this Agreement that are described in Annex II to
this Agreement;
(b) Liens for taxes, assessments or governmental charges not
then due and delinquent or the validity of which is being contested in good
faith and by proper proceedings that will stop the forfeiture or sale of any
property and with respect to which adequate reserves are maintained in
accordance with generally accepted accounting principles;
(c) Liens arising in connection with court proceedings,
provided the execution of such Liens is effectively stayed and such Liens are
contested in good faith;
(d) Liens arising in the ordinary course of business and not
incurred in connection with the borrowing of money, including encumbrances in
the nature of zoning restrictions, easements, rights and restrictions of record
on the use of real property, landlord's and lessor's liens in the ordinary
course of business, which do not materially interfere with the conduct of the
business of the Company and its Subsidiaries taken as a whole and do not
materially affect the value of the Property subject to such Liens;
(e) Liens as security for Indebtedness permitted by Section
7.2 which in the aggregate does not exceed 5% of Consolidated Adjusted Net Worth
of the Company existing from time to time;
(f) Liens on Property acquired or constructed by the Company
or a Subsidiary and created contemporaneously with or within 120 days of the
acquisition or construction of such Property, in each case to secure or provide
for all or a portion of the Purchase Price or construction costs of such
Property; provided that (x) such Liens do not extend to other Property of the
Company or any Subsidiary and (y) the aggregate principal amount of Indebtedness
secured by all such Liens does not exceed 100% of the fair market value of the
Property subject to such Liens as measured on the date of acquisition or final
completion of construction of such Property;
(g) Liens resulting from extensions, renewals, refinancings
and refundings of Indebtedness secured by Liens permitted by paragraph (a)
above, provided there is no increase in the original principal amount of
Indebtedness secured thereby and any new Lien attaches only to the same property
theretofore subject to such earlier Lien; and
(h) Liens on equipment granted to lessors under operating
leases described in Section 7.13 and under Capitalized Leases.
7.5 Restricted Payments. The Company will not, except
as hereinafter provided:
(a) declare or pay any dividends, either in cash or
property, on any shares of its capital stock of any class (except dividends or
other distributions payable solely in shares of capital stock of the Company);
(b) directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of its capital stock or any class or any
warrants, rights or options to purchase or acquire any shares of its capital
stock (other than in exchange for or out of the net cash proceeds from the
substantially concurrent issuance or sale of other shares of capital stock of
the Company subsequent to the Closing Date);
(c) make any other payment or distribution, either directly
or indirectly or through any Subsidiary, in respect of its capital stock;
(d) make any payment, either directly or indirectly or
through any Subsidiary, of principal of any Subordinated Indebtedness other than
at the expressed maturity date thereof and scheduled mandatory prepayments or
redemptions thereof in accordance with the original terms of such Subordinated
Indebtedness; or
(e) make, or permit any Subsidiary to make, any Restricted
Investment which in the aggregate would exceed 15% of Consolidated Adjusted Net
Worth;
(all such declarations, payments, purchases, redemptions, retirements,
distributions and investments being herein collectively called "Restricted
Payments") if, after giving effect thereto such Restricted Payment constitutes
or would, with the giving of notice or passage of time, constitute an Event of
Default.
The Company will not declare any dividend which constitutes
a Restricted Payment payable more than 60 days after its date of declaration.
Any dividend which complies with the provisions of this Section 7.5 on the date
of its declaration shall be deemed to comply on its date of payment, provided
that any intervening event giving rise to noncompliance is not the result of a
Restricted Payment.
7.6 Merger or Consolidation. The Company will not, and will
not permit any Subsidiary to, merge or consolidate with any other Person, except
that:
(a) The Company may consolidate with or merge into any
Person or permit any other Person to merge into it, provided that immediately
after giving effect thereto,
(1) The Company is the successor corporation or, if
the Company is not the successor corporation, the successor corporation
is a corporation organized under the laws of a state of the United
States of America or the District of Columbia and shall expressly
assume in writing the Company's obligations under the Notes and this
Agreement;
(2) There shall exist no Event of Default or event
which, with the passage of time or giving of notice, or both, would
constitute an Event of Default; and
(3) The Company or such successor corporation
could incur at least $1.00
of additional Indebtedness;
(b) Any Subsidiary may (i) merge into the Company or another
Wholly Owned Subsidiary or (ii) merge into any Person which, as a result of such
merger, concurrently becomes a Subsidiary, provided in each such instance that
there shall exist no Event of Default or event which, with the passage of time
or giving of Notice, or both, would constitute an Event of Default.
7.7 Sale of Assets. The Company will not, and will not
permit any Subsidiary to, sell, lease, transfer or otherwise dispose of all or a
substantial portion of its business, assets, rights, revenues or property, real,
personal or mixed, tangible or intangible, whether in one or a series of
transactions, other than (i) inventory sold in the ordinary course of business
upon customary credit terms, (ii) trade-ins of any equipment in conjunction with
acquiring replacement equipment, (iii) sales of the Company's Capital Stock,
(iv) leases of real property, (v) sales of obsolete or surplus machinery and
equipment in the ordinary course of business so long as the purchase price is
paid in cash or immediately available funds, if, immediately before and after
such transaction, no Event of Default or event which, with the passage of time
or giving of notice, or both, would constitute an Event of Default shall exist
or shall have occurred and be continuing, and (vi) other sales, leases, or
transfers or dispositions so long as (A) no Event of Default or event which,
with the passage of time or giving of notice, or both, would constitute an Event
of Default shall exist or shall have occurred and be continuing, and (B) all
Asset Sale Proceeds from such sales and dispositions are applied as required
under Section 2.2(e).
7.8 Disposition of Stock of Subsidiaries. The Company will
not, and will not permit any Subsidiary to, issue, sell or transfer the capital
stock of a Subsidiary without the prior written consent of the Purchaser.
7.9 Change in Business.. Neither the Company nor any
Subsidiary will engage in any business substantially different from their
current businesses.
7.10 Transactions with Affiliates. The Company will not, and
will not permit any Subsidiary to, enter into any transaction (including the
furnishing of goods or services) with an Affiliate except in the ordinary course
of business as presently conducted and on terms and conditions no less favorable
to the Company or such Subsidiary than would be obtained in a comparable
arm's-length transaction with a person not an Affiliate.
7.11 Consolidated Tax Returns. The Company will not file, or
consent to the filing of, any consolidated Federal income tax return with any
Person other than a Subsidiary, except to the extent that the Company is
required under the Code to do otherwise.
7.12 Capital Expenditures. The Company will not make any
Capital Expenditure if the aggregate amount of Capital Expenditures made by the
Company and its Subsidiaries during any fiscal quarter, together with the
Capital Expenditures made during the prior three fiscal quarters, would exceed,
on a consolidated basis, an amount equal to the greater of (i) the amount which
would allow the ratio of EBITDAR to the sum of Consolidated Fixed Charges plus
Capital Expenditures to be not less than 1.25 to 1.0 for the four fiscal
quarters immediately preceding the date of the proposed Capital Expenditure and
(ii) the consolidated depreciation and amortization expense of the Company and
its Subsidiaries for such four fiscal quarter period.
7.13 Operating Leases. The Company shall not permit its
consolidated aggregate payment obligations under operating leases to exceed
$2,600,000 during any consecutive four quarter fiscal period of the Company.
7.14 Negative Pledge Limitation. The Company will not enter
into any agreement with any person other than the Purchaser under this Agreement
or NBD pursuant to the NBD Agreement which prohibits or limits the ability of
the Company or any Subsidiary to create, incur, assume or suffer to exist any
Lien upon any of its assets, rights, revenues, or property, real, personal or
mixed, tangible or intangible, whether now owned or hereafter acquired.
7.15 Amendment to NBD Agreement. The Company agrees that it
will not enter into any amendment, modification or agreement which would have
the effect of increasing the amount of any fee payable under or in connection
with the NBD Agreement.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES THEREFOR
8.1 Nature of Events. An "Event of Default" shall exist
if any one or more of the
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following occurs:
(a) Default in the payment of interest when due on any of
the Notes and continuance of such default for a period of five days;
(b) Default in the payment of (i) the principal of any of
the Notes or the premium thereon, if any, at maturity, upon acceleration of
maturity or at any date fixed for prepayment, or (ii) any other amount payable
hereunder not covered by clause (a) or (b)(i), and in each case, continuance of
such default for a period of five days;
(c) Default shall occur (1) in the payment of the principal
of, premium, or interest on any other Indebtedness of the Company or its
Subsidiaries, aggregating in excess of $500,000 as and when due and payable
(whether by lapse of time, declaration, call for redemption or otherwise),
excluding a Bond Default, (ii) under any mortgage, agreement or other instrument
of the Company or any Subsidiary securing such Indebtedness or under or pursuant
to which such Indebtedness aggregating in excess of $500,000 is issued, (iii)
under any leases other than Capitalized Leases of the Company or any Subsidiary,
with aggregate Rentals in excess of $500,000 or (iv) with respect to any
combination of the foregoing involving Indebtedness and/or Rentals aggregating
in excess of $500,000 regardless of whether such defaults would be Events of
Default hereunder, and (x) any such defaults with respect to the payment of
money shall continue, unless waived, beyond the period of grace, if any, allowed
with respect thereto and, (y) solely in the case of any default not involving
the payment of money, such default shall continue, unless waived, beyond the
period of grace, if any, allowed with respect thereto if the effect of such
default is to accelerate or to permit the acceleration of such Indebtedness
and/or Rentals;
(d) Default in the observance or performance of Section 6.7,
7.1 through 7.15 or 8.7 which is not remedied within ten days following written
notice thereof to the Company;
(e) Default in the observance or performance of any other
covenant or provision of this Agreement which is not remedied within thirty days
following written notice thereof to the Company;
(f) (1) Any representation or warranty made by the Company
in this Agreement or made by the Company in any written statement or certificate
furnished by the Company in connection with the issuance of the Notes to amend
and restate the 1994 Notes or furnished by the Company pursuant to this
Agreement, proves incorrect in any material respect as of the date of the
issuance or making thereof of; or (2) any Prior Misstatement proves to have been
fraudulent in any material respect as of the date of the issuance or making
thereof; and in each case such failure continues for more than five days
following written notice thereof to the Company;
(g) Any judgments, writs or warrants of attachment or any
similar processes individually or in the aggregate in excess of $1,000,000 shall
be entered or filed against the Company or any Subsidiary or against any
property or assets of either and either (i) remain unpaid, unvacated, unbonded
or unstayed (through appeal or otherwise) prior to the expiration of the
applicable period of limitations for taking action necessary to stay enforcement
thereof, or if such action shall have been taken, a final order denying such
stay shall have been rendered, or (ii) enforcement proceedings shall have been
commenced by any creditor upon any such judgment or order;
(h) The Company or any Subsidiary shall incur a "Distress
Termination" (as defined in Title IV of ERISA) of any Plan or any trust created
thereunder which results in material liability to the PBGC, the PBGC shall
institute proceedings to terminate any Plan or any trust created thereunder, or
a trustee shall be appointed by a United States District Court pursuant to
Section 4042(b) of ERISA to administer any Plan or any trust created thereunder;
or
(i) The Company or any Subsidiary shall
(i) generally not pay its debts as they become due or admit
in writing its inability to pay its debts generally as they become due;
(ii) file a petition in bankruptcy or for reorganization or
for the adoption of an arrangement under the Federal Bankruptcy Code,
or any similar applicable bankruptcy or insolvency law, as now or in
the future amended (herein collectively called "Bankruptcy Laws"), or
an answer or other pleading admitting or failing to deny the material
allegations of such a petition or seeking, consenting to or acquiescing
in relief provided for under the Bankruptcy Laws, or take action for
the purpose of effecting any of the foregoing;
(iii) make an assignment of all or a substantial part of
its property for the
benefit of its creditors;
(iv) seek or consent to or acquiesce in the appointment of a
receiver, liquidator, custodian or trustee of it or for all or a
substantial part of its property;
(v) be finally adjudicated a bankrupt or insolvent;
(vi) be subject to a proceeding under any Bankruptcy Laws
filed against it, which such proceeding shall remain undismissed or
unstayed for a period of 60 days;
(vii) be subject to the entry of a court order, which shall
not be vacated, set aside or stayed within 30 days from the date of
entry, appointing a receiver, liquidator, custodian or trustee of it or
for all or a substantial part of its property, or entering of an order
for relief pursuant to an involuntary case, or effecting an arrangement
in, bankruptcy or for a reorganization pursuant to the Bankruptcy Laws
or for any other judicial modification or alteration of the rights of
creditors; or
(viii) be subject to the assumption of custody or
sequestration by a court of competent jurisdiction of all or a
substantial part of its property, which custody or sequestration shall
not be suspended or terminated within 30 days from its inception.
8.2 Remedies on Default. When any Event of Default described
in paragraphs (a) through (h) of Section 8.1 has happened and is continuing
other than a Forbearance Default, the holder or holders of at least 25% in
principal amount of the Notes then outstanding may by notice to the Company
declare the entire principal, together with the premium set forth below, and all
interest accrued on all Notes to be, and such Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are expressly waived. Notwithstanding the
foregoing, when (i) any Event of Default described in paragraphs (a), (b) or (c)
of Section 8.1 has happened and is continuing, any holder may by notice to the
Company declare the entire principal, together with the premium set forth below,
and all interest accrued on the Notes then held by such holder to be, and such
Notes shall thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all of which are
expressly waived and (ii) where any Event of Default described in paragraph (i)
of Section 8.1 has happened, then all outstanding Notes shall immediately become
due and payable without presentment, demand or notice of any kind. Upon the
Notes or any of them becoming due and payable as aforesaid, the Company will
forthwith pay to the holders of such Notes the entire principal of and interest
accrued on such Notes, plus a premium in the event that the Reinvestment Yield
shall, on the Determination Date, be less than the interest rate payable on or
in respect of the Notes. Such premium shall equal (x) the aggregate present
value of the principal so accelerated and the aggregate present value of the
interest which would have been payable in respect of such principal absent such
accelerated payment, determined by discounting (monthly on the basis of a
360-day year composed of twelve 30-day months) each such amount utilizing an
interest factor equal to the Reinvestment Yield, less (y) the principal amount
to be prepaid.
8.3 Annulment of Acceleration of Notes. The provisions of
Section 8.2 are subject to the condition that if the principal of and accrued
interest on the Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in paragraphs (a) through
(h), inclusive, of Section 8.1, the holder or holders of 66-2/3%. in aggregate
principal amount of the Notes then outstanding may, by written instrument filed
with the Company, rescind and annul such declaration and the consequences
thereof, provided that (i) at the time such declaration is annulled and
rescinded no judgment or decree has been entered for the payment of any monies
due pursuant to the Notes or this Agreement, (ii) all arrears of interest upon
all the Notes and all other sums payable under the Notes and under this
Agreement (except any principal, interest or premium on the Notes which has
become due and payable solely by reason of such declaration under Section 8.2)
shall have been duly paid and (iii) each and every other Event of Default shall
have been cured or waived; and provided further, that no such rescission and
annulment shall extend to or affect any subsequent default or Event of Default
or impair any right consequent thereto.
8.4 Other Remedies. If any Event of Default shall be
continuing other than a Forbearance Default, any holder of Notes may enforce its
rights by suit in equity, by action at law, or by any other appropriate
proceedings, whether for the specific performance (to the extent permitted by
law) of any covenant or agreement contained in this Agreement or in the Notes or
in aid of the exercise of any power granted in this Agreement, and may enforce
the payment of any Note held by such holder and any of its other legal or
equitable rights.
8.5 Conduct No Waiver: Collection Expenses. No course of
dealing on the part of any holder of Notes, nor any delay or failure on the part
of any holder of Notes to exercise any of its rights, shall operate as a waiver
of such rights or otherwise prejudice such holder's rights, powers and remedies.
If the Company fails to pay, when due, the principal of, or the interest on, any
Note, or fails to comply with any other provision of this Agreement, the Company
will pay to each holder, to the extent permitted by law, on demand, such further
amounts as shall be sufficient to cover the cost and expenses, including but not
limited to reasonable attorneys fees, incurred by such holders of the Notes in
collecting any sums due on the Notes or in otherwise enforcing any of their
rights.
8.6 Remedies Cumulative. No right or remedy conferred upon
or reserved to any holder of Notes under this Agreement is intended to be
exclusive of any other right or remedy, and every right and remedy shall be
cumulative and in addition to every other right or remedy given under this
Agreement or now or hereafter existing under any applicable law. Every right and
remedy given by this Agreement or by applicable law to any holder of Notes may
be exercised from time to time and as often as may be deemed expedient by such
holder, as the case may be.
8.7 Notice of Default. With respect to Events of Default or
claimed defaults other than a Forbearance Default, the Company will give the
following notices:
(a) The Company promptly will furnish to each holder of a
Note notice in writing by registered or certified mail, return receipt
requested, of the occurrence of an Event of Default or an event which, with the
lapse of time or the giving of notice, or both, would become an Event of
Default. Such notice shall specify the nature of such default, the period of
existence thereof and what action the Company has taken or is taking or proposes
to take with respect thereto.
(b) If the holder of any Note or of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default, the Company will forthwith give
written notice thereof to each holder of the then outstanding Notes, describing
the notice or action and the nature of the claimed default.
SECTION 9. AMENDMENTS, WAIVERS AND CONSENTS
9.1 Matters Subject to Modification. Any term, covenant,
agreement or condition of this Agreement may, with the consent of the Company,
be amended, or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), if the Company
shall have obtained the consent in writing of the holder or holders of at least
66-2/3% in aggregate principal amount of outstanding Notes; provided, however,
that, without the written consent of the holder or holders of all of the Notes
then outstanding, no such waiver, modification, alteration or amendment shall be
effective which will (i) change the time of payment (including any required
prepayment) of the principal of or the interest on any Note, (ii) reduce the
principal amount thereof or the premium, if any, or reduce the rate of interest
thereon, (iii) change any provision of any instrument affecting the preferences
between holders of the Notes or between holders of the Notes and other creditors
of the Company, or (iv) change any of the provisions of Section 8.1, Section
8.2, Section 8.3 or this Section 9.
For the purpose of determining whether holders of the
requisite principal amount of Notes have made or concurred in any waiver,
consent, approval, notice or other communication under this Agreement, Notes
held in the name of, or owned beneficially by, the Company, any Subsidiary or
any Affiliate thereof, shall not be deemed outstanding.
9.2 Solicitation of Holders of Notes. The Company will not
solicit, request or negotiate for or with respect to any proposed waiver or
amendment of any of the provisions of this Agreement or the Notes unless each
holder of the Notes (irrespective of the amount of Notes then owned by it) shall
concurrently be informed thereof by the Company and shall be afforded the
opportunity of considering the same and shall be supplied by the Company with
sufficient information to enable it to make an informed decision with respect
thereto. Executed or true and correct copies of any waiver or consent effected
pursuant to the provisions of this Section 9 shall be delivered by the Company
to each holder of outstanding Notes forthwith following the date on which the
same shall have been executed and delivered by the holder or holders of the
requisite percentage of outstanding Notes. The Company will not, directly or
indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any holder of the
Notes as consideration for or as an inducement to the entering into by any
holder of the Notes of any waiver or amendment of any of the terms and
provisions of this Agreement unless such remuneration is concurrently paid, on
the same terms, ratably to each holder of the then outstanding Notes.
9.3 Binding Effect. Any such amendment or waiver shall apply
equally to all the holders of the Notes and shall be binding upon them, upon
each future holder of any Note and upon the Company whether or not such Note
shall have been marked to indicate such amendment or waiver. No such amendment
or waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right related thereto.
SECTION 10. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND
REPLACEMENT
10.1 Form of Notes. The Notes initially delivered under this
Agreement will be in the form of two fully registered Notes in the form attached
as Exhibit A. The Notes are issuable only in fully registered form and in
denominations of at least $100,000 (or the remaining outstanding balance
thereof, if less than $100,000).
10.2 Note Register. The Company shall cause to be kept at
its principal office a register (the "Note Register") for the registration and
transfer of the Notes. The names and addresses of the holders of Notes, the
transfer thereof and the names and addresses of the transferees of the Notes
shall be registered in the Note Register. The Company may deem and treat the
person in whose name a Note is so registered as the holder and owner thereof for
all purposes and shall not be affected by any notice to the contrary, until due
presentment of such Note for registration of transfer as provided in this
Section 10.
10.3 Issuance of New Notes upon Exchange or Transfer. Upon
surrender for exchange or registration of transfer of any Note at the office of
the Company designated for notices in accordance with Section 11.2, the Company
shall execute and deliver, at its expense, one or more new Notes of any
authorized denominations requested by the holder of the surrendered Note, each
dated the date to which interest has been paid on the Notes so surrendered (or,
if no interest has been paid, the date of such surrendered Note), but in the
same aggregate unpaid principal amount as such surrendered Note, and registered
in the name of such person or persons as shall be designated in writing by such
holder. Every Note surrendered for registration of transfer shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or by his attorney duly authorized in writing. The
Company may condition its issuance of any new Note in connection with a transfer
by any Person on compliance by the transferee of the representations required
under Section 3.2, by Institutional Holders on compliance with Section 2.5 and
on the payment to the Company of a sum sufficient to cover any stamp tax or
other governmental charge imposed in respect of such transfer.
10.4 Replacement of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company or in the event of such mutilation upon surrender and cancellation
of the Note, the Company, without charge to the holder thereof, will make and
deliver a new Note, of like tenor in lieu of such lost, stolen, destroyed or
mutilated Note. If any such lost, stolen or destroyed Note is owned by the
Purchaser or any other Institutional Holder, then the affidavit of an authorized
officer of such owner setting forth the fact of loss, theft or destruction and
of its ownership of the Note at the time of such loss, theft or destruction
shall be accepted as satisfactory evidence thereof, and no further indemnity
shall be required as a condition to the execution and delivery of a new Note,
other than a written agreement of such owner (in form reasonably satisfactory to
the Company) to indemnify the Company.
SECTION 11. MISCELLANEOUS
11.1 Expenses. Whether or not the transactions contemplated
herein shall be consummated, the Company agrees to pay directly all reasonable
expenses in connection with the preparation, execution and delivery of this
Agreement, the Notes, and all other documents delivered in connection herewith,
and the transactions contemplated by such documents, including, but not limited
to, out-of-pocket expenses, filing fees of Standard & Poor's Corporation in
connection with obtaining a private placement number, reasonable charges and
disbursements of special counsel, photocopying and printing costs and charges
for shipping the Notes, adequately insured, to the Purchaser at its home office
or at such other address as the Purchaser may designate, and all similar
expenses (including the reasonable fees and expenses of counsel) relating to any
amendments, waivers or consents in connection with this Agreement, the Notes and
the other documents delivered in connection herewith, including, but not limited
to, any such amendments, waivers or consents resulting from any work-out,
renegotiation or restructuring relating to the performance by the Company of its
obligations under this Agreement, the Notes and the other documents delivered in
connection herewith. The Company also agrees that it will pay and save the
Purchaser harmless against any and all liability with respect to stamp and other
documentary taxes, if any, which may be payable, or which may be determined to
be payable in connection with the execution and delivery of this Agreement or
the Notes (but not in connection with a transfer of any Notes), whether or not
any Notes are then outstanding. The obligations of the Company under this
Section 11.1 shall survive the retirement of the Notes.
11.2 Notices. Except as otherwise expressly provided herein,
all communications provided for in this Agreement shall be in writing and
delivered or sent by registered or certified mail, return receipt requested, or
by overnight courier (i) if to the Purchaser, to the address set forth below the
Purchaser's name in Annex I, or to such other address as the Purchaser may in
writing designate, (ii) if to any other holder of the Notes, to such address as
the holder may designate in writing to the Company, and (iii) if to the Company,
to Hurco Companies, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or to
such other address as the Company may in writing designate.
11.3 Reproduction of Documents. This Agreement and all
documents relating hereto, including, without limitation, (i) consents, waivers
and modifications which may hereafter be executed, (ii) documents received by
the Purchaser in connection with the execution and delivery of this Agreement
(except the Notes themselves), and (iii) financial statements, certificates and
other information previously or hereafter furnished to the Purchaser, may be
reproduced by the Purchaser by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process, and the Purchaser
may destroy any original document so reproduced. The Company agrees and
stipulates that any such reproduction which is legible shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by the Purchaser in the regular course of business) and
that any enlargement, facsimile or further reproduction of such reproduction
shall likewise be admissible in evidence; provided that nothing herein contained
shall preclude the Company from objecting to the admission of any reproduction
on the basis that such reproduction is not accurate, has been altered or is
otherwise incomplete.
11.4 Successors and Assigns. This Agreement will inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns.
11.5 Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois. No provision of
this Agreement may be waived, changed or modified, or the discharge thereof
acknowledged, orally, except by an agreement in writing signed by the party
against whom the enforcement of any waiver, change, modification or discharge is
sought.
11.6 Headings. The headings of the sections and subsections
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
11.7 Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart or reproduction thereof
permitted by Section 11.3.
11.8 Reliance on and Survival of Provisions. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant to this Agreement, whether or not in connection
with a closing, (i) shall be deemed to have been relied upon by the Purchaser,
notwithstanding any investigation heretofore or hereafter made by the Purchaser
or on the Purchaser's behalf and (ii) shall survive the delivery of this
Agreement and the Notes.
11.9 Integration and Severability. This Agreement embodies
the entire agreement and understanding between the Purchaser and the Company,
and supersedes all prior agreements and understandings relating to the subject
matter hereof. In case any one or more of the provisions contained in this
Agreement or in any Note, or application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained in this Agreement and in any Note, and any other
application thereof, shall not in any way be affected or impaired thereby.
[The rest of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Company and the Purchaser have
caused this Agreement to be executed and delivered by their respective officer
or officers thereunto duly authorized.
HURCO COMPANIES, INC.
By: /s/ ▇▇▇▇▇ ▇. Wolf__________
Title: Senior Vice President
and Chief Financial Officer
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Counsel
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Assistant Director
Investment Securities