1
CONFORMED COPY
EXHIBIT 17(A)(1)
II ACQUISITION CORP.
SUBORDINATED NOTE
No. R-3 May 29, 1998
$4,500,000
FOR VALUE RECEIVED, II ACQUISITION CORP. (herein called the
"Borrower"), a corporation organized and existing under the laws of the State of
Delaware, hereby promises to pay to ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or registered assigns
(each, a "Lender"), the sum of (x) the lesser of (a) FOUR MILLION, FIVE HUNDRED
THOUSAND DOLLARS (the "Committed Amount"), and (b) the aggregate unpaid amount
of all revolving loans (the "Loans") made under this Note by the Lender to the
Borrower from time to time during the period (the "Borrowing Period") from and
including the date hereof to May 15, 2008 (the "Termination Date"); and (y)
amounts accrued pursuant to the immediately following paragraph. During the
Borrowing Period, the Borrower may (i) borrow up to the Committed Amount, (ii)
prepay the Loans in whole or in part, and (iii) reborrow, all in accordance with
the terms and conditions hereof; provided, that (A) at no time shall the sum of
the outstanding amount of the Loans hereunder (excluding any amounts accrued
pursuant to the immediately following paragraph) exceed the Committed Amount;
and (B) other than under clause (ii) of this sentence, Loans shall be used by
the Borrower only to fund the merger (the "Merger"), pursuant to Section 253 of
the Delaware General Corporation Law, of Imo Industries Inc. ("Imo") and Imo
Merger Corp., each a Delaware corporation.
The Borrower further agrees to pay interest (computed on the basis
of a 360-day year consisting of twelve 30-day months) on the aggregate unpaid
principal amount of the Loans at a variable rate per annum equal to the sum of
(a) the rate published from time to time in the Wall Street Journal as the
"prime" rate, determined with respect to the date that is two business days
prior to the applicable interest payment date, and (b) 0.375%, from the date
hereof, payable semiannually in arrears on the fifteenth day of November and May
in each year, with the first interest payment being due on November 15, 1998.
The Lender agrees, on the terms and conditions set forth herein, to
make from time to time during the Borrowing Period, upon written request of the
Borrower, Loans to the Borrower; provided, (A) that at no time shall the sum of
the outstanding amount of the Loans hereunder exceed the Committed ▇▇▇▇▇▇; and
(B) that other than
2
CONFORMED COPY
to prepay the Loans in whole or in part, such Loans shall be used by the
Borrower only to fund the Merger.
This Note will mature and become due and payable in full on the
Termination Date.
Payments of principal of and interest on this Note are to be made at
the main office of the holder, or at such other place as the holder shall
designate to the Borrower hereof in writing, in lawful money of the United
States of America.
All Loans as well as repayments of interest or principal shall be
recorded by the registered holder hereof and appropriate notations to evidence
the foregoing information with respect to the principal amount then outstanding
shall be endorsed by such registered holder on the SCHEDULE attached hereto, or
on a continuation of such schedule attached to and made a part hereof; provided
that the failure of such registered holder to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder.
1. Prepayment. The Borrower may at any time and from time to time,
upon notice to the holder of this Note, prepay all or any portion of the
indebtedness represented by this Note, with interest accrued to the date fixed
for prepayment, subject to the subordination provisions set forth below.
2. Subordination. The Borrower agrees, and the registered holder by
accepting this Note agrees, that all indebtedness evidenced by this Note is
subordinated in right of payment, to the extent and in the manner provided
herein, to the prior indefeasible payment in full, for a period of time in
excess of all applicable preference or other similar periods under applicable
bankruptcy, insolvency or creditors' rights law, to all principal of and
premium, if any, interest (including, without limitation, Post-Petition
Interest), costs, expenses, fees, reimbursements, indemnities and other
obligations of the Borrower on or with respect to (a) the Credit and Guaranty
Agreement, dated as of August 29, 1997, between the Borrower, Imo, The Bank of
Nova Scotia as Administrative Agent and Documentation Agent, certain financial
institutions as lenders and NationsBanc Capital Markets, Inc. as Syndication
Agent, and any refinancing or extension thereof; the Note, issued by the
Borrower to Janelia Farm Corp., dated July 23, 1997 and (b) any other
refinancing or extension thereof; and any indebtedness for money borrowed issued
after the date hereof, except indebtedness that is designated as being pari
passu or subordinated in right of payment to this Note (all such nonexcluded
indebtedness, the "Senior Debt") and that the subordination is for the benefit
of, and
2
3
CONFORMED COPY
shall be enforceable by, the holder of the Senior Debt. This Note shall be pari
passu and shall not be subordinated in right of payment to the notes issued by
the Borrower to ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, bearing the registration
numbers R-1, R-2, R-4, R-5, and R-6. For purposes of this Section 2:
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy case or proceeding, of any receivership, liquidation,
reorganization or other similar case or proceeding in connection
therewith, relating to the Borrower or its assets, or (ii) any
liquidation, dissolution or other winding up of the Borrower, whether
voluntary or involuntary or whether or not involving insolvency or
bankruptcy, or (iii) any assignment for the benefit of creditors or any
other marshaling of assets or liabilities of the Borrower.
"Post-Petition Interest" means all interest accrued or accruing
after the commencement of any Insolvency or Liquidation Proceeding (and
interest that would accrue but for the commencement of any Insolvency or
Liquidation Proceeding) in accordance with and at the contract rate
(including, without limitation, any rate applicable upon default)
specified in the agreement or instrument creating, evidencing or governing
any indebtedness, whether or not, pursuant to applicable law or otherwise,
the claim for such interest is allowed as a claim in such Insolvency or
Liquidation Proceeding.
(a) Liquidation; Dissolution; Bankruptcy. Upon any distribution or
payment to creditors of the Borrower in a liquidation, dissolution, winding up
or reorganization of the Borrower of any kind or character and whether voluntary
or involuntary or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Borrower, its property or to its creditors as
such or in an assignment for the benefit of creditors or any marshaling of the
assets and liabilities of the Borrower:
(i) the holder of the Senior Debt shall be entitled to receive
indefeasible payment in full (where used in this Note, "in full" shall
mean the indefeasible payment in cash in full of all amounts owing to the
holders of Senior Debt) of all amounts owing with respect to the Senior
Debt (including, without limitation, interest and expenses accrued after
the occurrence of any such event or the commencement of any such
proceeding at the rate specified in the Senior Debt regardless of whether
or not such interest is allowable as a bankruptcy claim in such
proceeding) before the registered holder shall be entitled to receive,
3
4
CONFORMED COPY
directly or indirectly, any payment of or distribution with respect to
principal, premium, if any, or interest on this Note; and
(ii) until the Senior Debt is paid in full, any payment or
distribution to which the registered holder would be entitled but for
these subordination provisions shall be made to the holder of the Senior
Debt, as its interest may appear, except that the registered holder may
receive securities that are subordinated to at least the same extent as
this Note to the Senior Debt.
(b) Default on Senior Debt. So long as a default in the payment of
any Senior Debt exists and is continuing, the Borrower may not pay principal of,
premium, if any, or cash interest on this Note and may not repurchase, redeem or
otherwise retire this Note (collectively, "pay this Note"), and the registered
holder agrees that it shall not ask, demand or sue for, or take or receive from
Borrower, directly or indirectly, in cash, securities or other property or by
way of set-off, any payment of this Note, subject to the terms of the Senior
Debt.
(c) When Distribution Must Be Paid Over. In the event that a pay
ment or distribution is made to the registered holder at a time when such
payment or distribution is prohibited by paragraphs (a) and (b) hereof, the
registered holder who receives the payment or distribution shall hold it in
trust for the benefit of, and promptly pay it over (in the same form as received
but with any necessary endorsements) to, the holder of the Senior Debt as its
interest may appear, or its agent or representative or the trustee under the
indenture or other agreement (if any) pursuant to which the Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of all obligations with respect to the Senior Debt remaining unpaid to
the extent necessary to pay such obligations in full in accordance with their
terms, after giving effect to any concurrent payment or distribution to or for
the holder of the Senior Debt.
(d) Notice by the Borrower. The Borrower shall promptly notify the
registered holder in writing of any facts known to the Borrower that would cause
a payment of any amounts with respect to this Note to violate the provisions
hereof, but failure to give such notice shall not affect the subordination of
this Note to the Senior Debt.
(e) Subrogation. After all Senior Debt is indefeasibly paid in full
in cash for a period of time in excess of all applicable preference or similar
periods under applicable bankruptcy, insolvency or creditors' rights laws, and
until this Note is paid in full, the registered holder shall be subrogated
(equally and ratably with all other debt that
4
5
CONFORMED COPY
is pari passu with this Note) to the rights of the holder of the Senior Debt to
receive distributions applicable to the Senior Debt to the extent that
distributions otherwise payable to the registered holder have been applied to
the payment of Senior Debt. A distribution made under the subordination
provisions of this Note to the holder of the Senior Debt which otherwise would
have been made to the registered holder is not, as between the Borrower and the
registered holder, a payment by the Borrower on this Note.
(f) Relative Rights. This Note defines the relative rights of the
registered holder and the holder of the Senior Debt. Nothing in this Note shall:
(i) impair, as between the Borrower and the registered holder, the
obligation of the Borrower, which is absolute and unconditional, to pay
principal of and interest on this Note in accordance with its terms;
(ii) affect the relative rights of the registered holder and
creditors of the Borrower other than their rights in relation to the
holder of the Senior Debt; or
(iii) prevent the registered holder from exercising any available
remedies, subject to the rights of the holder of the Senior Debt to
receive distributions and payments otherwise payable to the registered
holder.
(g) Subordination May Not Be Impaired. No right of any present or
future holder of Senior Debt to enforce the subordination of the obligations
with respect to this Note shall be prejudiced or impaired by any act or failure
to act by the Borrower or by any act or failure to act or waiver of any terms of
this Note, by any such holder, or by any noncompliance by the Borrower with the
terms of the subordination provisions of this Note, regardless of any knowledge
thereof which any such holder may have or be otherwise charged with. The holder
of the Senior Debt may extend, renew, modify or amend the terms of the Senior
Debt or any security therefor and release, sell or exchange such security and
otherwise deal freely with the Borrower, all without the consent of or notice
to, and without affecting the liabilities and obligations of, the Borrower or
the registered holder. No provision in any supplemental agreement or document
which modifies the subordination provisions of this Note or otherwise affects
the superior position of the holder of the Senior Debt shall be effective
against the holder of the Senior Debt if such holder has not consented thereto
in accordance with the provisions of the document governing such Senior Debt.
5
6
CONFORMED COPY
(h) The Registered Holder Entitled to Rely. Upon any payment or
distribution pursuant to these subordination provisions, the registered holder
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in paragraph (a)
above are pending, (ii) upon a certificate of the liquidating trustee or agent
or other person making such payment or distribution to the registered holder or
(iii) upon the representatives for the holder of the Senior Debt for the purpose
of ascertaining the persons entitled to participate in such payment or
distribution, the holder of the Senior Debt and other indebtedness of the
Borrower, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to the
subordination provisions of this Note.
(i) Reliance by the Holder of the Senior Debt on Subordination
Provisions. The registered holder, by accepting this Note, acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to the holder of the Senior Debt, whether such
Senior Debt was created or acquired before or after the issuance of this Note,
to acquire and continue to hold, or to continue to hold, such Senior Debt, and
such holder of Senior Debt shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Debt. These subordination provisions are intended to be for
the benefit of, and shall be enforceable directly by, the holder of the Senior
Debt. The registered holder hereby waives to the fullest extent permitted by law
any right to compel marshaling or to otherwise seek to compel the holder of the
Senior Debt to follow any particular order of realization upon any collateral
for or any particular order or manner of enforcement of remedies with respect to
the Senior Debt.
3. Registration, Transfer and Exchange of Notes. (a) The Borrower
shall keep at its principal executive office a register for the registration and
registration of transfers of this Note and any Notes issued upon the transfer or
exchange hereof ("Notes"). The name and address of each holder of one or more
Notes, each transfer thereof and the name and address of each transferee of one
or more Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Borrower shall not be affected by any notice or knowledge to the
contrary.
(b) Upon surrender of any Note at the principal executive office of
the Borrower for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer
6
7
CONFORMED COPY
duly executed by the registered holder of such Note or his attorney duly
authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), the Borrower shall execute and
deliver, at the Borrower's expense (except as provided below), one or more new
Notes (as requested by the holder thereof) in exchange therefor, in an aggregate
principal amount equal to the unpaid principal amount of the surrendered Note.
Each such new Note shall be payable to such Person as such holder may request
and shall be substantially in the form of this Note. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon.
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL (I) THIS
SUBORDINATED NOTE HAS BEEN REGISTERED UNDER THE SECURITIES ACT, OR (II) THE
HOLDER HEREOF PROVIDES THE BORROWER WITH (A) A WRITTEN OPINION OF LEGAL COUNSEL,
WHICH COUNSEL AND OPINION (IN FORM AND SUBSTANCE) SHALL BE REASONABLY
SATISFACTORY TO THE BORROWER, TO THE EFFECT THAT THE PROPOSED TRANSFER OF THIS
SUBORDINATED NOTE MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT,
OR (B) A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") REASONABLY SATISFACTORY TO THE BORROWER TO THE EFFECT THAT UNDER
THE SECURITIES ACT THE PROPOSED TRANSFER OF THIS SUBORDINATED NOTE WITHOUT
REGISTRATION WILL NOT RESULT IN A RECOMMENDATION BY THE STAFF OF THE COMMISSION
THAT ACTION BE TAKEN WITH RESPECT THERETO, OR (C) SUCH OTHER EVIDENCE AS MAY BE
REASONABLY SATISFACTORY TO THE BORROWER THAT THE PROPOSED TRANSFER OF THIS
SUBORDINATED NOTE MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT.
7
8
CONFORMED COPY
This Note shall be governed by and construed and enforced in
accordance with the law of the State of Delaware.
II ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
8
9
Schedule to
Note R-3
CALCULATION OF PRINCIPAL AMOUNT
Date Amount Interest Deferred Payment Unpaid Notation
Borrowed and Constituting Hereunder Principal Made By
Hereunder Principal Balance
Hereunder