-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MEU/8636SDV+UquTIXlSyUYCRlIWFqsAwWvHy5SpjmbgPnWuJp2M2rVG84GElr6o ozdOYZk1H0YMNFuiRSQvUw== 0000950152-99-009963.txt : 19991230 0000950152-99-009963.hdr.sgml : 19991230 ACCESSION NUMBER: 0000950152-99-009963 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19991229 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSTRON CORP CENTRAL INDEX KEY: 0000050716 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 042057203 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-93727 FILM NUMBER: 99782027 BUSINESS ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 BUSINESS PHONE: 7818282500 MAIL ADDRESS: STREET 1: 100 ROYALL STREET CITY: CANTON STATE: MA ZIP: 02021 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSTRON REALTY TRUST CENTRAL INDEX KEY: 0001101874 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 048116049 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-93727-01 FILM NUMBER: 99782028 BUSINESS ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 BUSINESS PHONE: 7818282500 MAIL ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IRT II TRUST CENTRAL INDEX KEY: 0001101875 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 046879407 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-93727-02 FILM NUMBER: 99782029 BUSINESS ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 BUSINESS PHONE: 7818282500 MAIL ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSTRON SCHENCK TESTING SYSTEMS CORP CENTRAL INDEX KEY: 0001101876 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043335122 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-93727-03 FILM NUMBER: 99782030 BUSINESS ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 BUSINESS PHONE: 7818282500 MAIL ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSTRON JAPAN CO LTD CENTRAL INDEX KEY: 0001101877 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 042383267 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-93727-04 FILM NUMBER: 99782031 BUSINESS ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 BUSINESS PHONE: 7818282500 MAIL ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSTRON ASIA LTD CENTRAL INDEX KEY: 0001101878 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 042697765 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-93727-05 FILM NUMBER: 99782032 BUSINESS ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 BUSINESS PHONE: 7818282500 MAIL ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSTRON LAWRENCE CORP CENTRAL INDEX KEY: 0001101937 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 231884645 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-93727-06 FILM NUMBER: 99782033 BUSINESS ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 BUSINESS PHONE: 7818282500 MAIL ADDRESS: STREET 1: 100 ROYALL ST CITY: CANTON STATE: MA ZIP: 02021 S-4 1 INSTRON CORPORATION S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 28, 1999 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ INSTRON CORPORATION (AND ITS SUBSIDIARIES IDENTIFIED ON THE FOLLOWING PAGE) (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MASSACHUSETTS 3829 042057203 (STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
100 ROYALL STREET CANTON, MA 02021 (781) 828-2500 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) JAMES M. MCCONNELL INSTRON CORPORATION 100 ROYALL STREET CANTON, MA 02021 (781) 828-2500 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: CHRISTOPHER M. KELLY THOMAS N. LITTMAN JONES, DAY, REAVIS & POGUE KIRTLAND CAPITAL PARTNERS III, L.P. 901 LAKESIDE AVENUE 2550 SOM CENTER ROAD, SUITE 105 CLEVELAND, OHIO 44114 WILLOUGHBY HILLS, OHIO 44094 216/586-3939 440/585-9010
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable following the effective date of this registration statement. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE - ----------------------------------------------------------------------------------------------------------------------------------- 13 1/4 Senior Subordinated Notes Due 2009................................ $60,000,000 100% $60,000,000 $15,840 ------------------------------------------------------------------------------------------- Subsidiary Guarantees of 13 1/4 Senior Subordinated Notes Due 2009(2)...... N/A N/A N/A N/A ------------------------------------------------------------------------------------------- Total............................... $60,000,000 100% $60,000,000 $15,840 - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f) under the Securities Act of 1933, as amended. (2) Pursuant to Rule 457(n) under the Securities Act of 1933, no registration fee is required with respect to the Subsidiary Guarantees. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 TABLE OF ADDITIONAL REGISTRANTS
ADDRESS, INCLUDING ZIP CODE, STATE OR OTHER AND TELEPHONE JURISDICTION NUMBER, INCLUDING OF PRIMARY STANDARD AREA CODE, OF INCORPORATION INDUSTRIAL IRS REGISTRANT'S OR CLASSIFICATION EMPLOYER PRINCIPAL NAME ORGANIZATION CODE NUMBER ID NO. EXECUTIVE OFFICES ---- -------------- ---------------- ---------- ------------------- Instron Realty Trust.......... Massachusetts 6519 04-8113049 ** IRT-II Trust.................. Massachusetts 6519 04-6879407 ** Instron Schenck Testing Systems Corp................ Massachusetts 3829 04-3335122 ** Instron Japan Company, Ltd.... Massachusetts 3829 04-2383267 ** Instron Asia Limited.......... Massachusetts 3829 04-2697765 ** Instron/Lawrence Corporation................. Pennsylvania 3829 23-1884645 **
- --------------- ** 100 Royall Street, Canton, MA 02021; (781) 828-2500. i 3 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. INSTRON MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND INSTRON IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED DECEMBER 28, 1999 PROSPECTUS $60,000,000 OFFER TO EXCHANGE ALL OUTSTANDING 13 1/4% SENIOR SUBORDINATED NOTES DUE 2009 FOR 13 1/4% SENIOR SUBORDINATED NOTES DUE 2009 OF INSTRON CORPORATION THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., CENTRAL STANDARD TIME, ON , 2000 LOGO ------------------------ THE REGISTERED NOTES - The terms of the exchange notes to be issued are substantially identical to the outstanding notes that Instron issued on September 29, 1999, except for transfer restrictions and registration rights relating to the outstanding notes that will not apply to the exchange notes. - Interest on the notes accrues at the rate of 13 1/4% per year, payable in cash every six months on March 15 and September 15, with the first payment on March 15, 2000. - The notes are not secured by any collateral. - There is no existing market for the notes, and we do not intend to apply for their listing on any securities exchange or to seek approval for quotation through any automated quotation system. MATERIAL TERMS OF THE EXCHANGE OFFER - Expires at 5:00 p.m., Central Standard Time, on , 2000, unless extended. - The exchange offer is not subject to any condition other than that it must not violate applicable law or any applicable interpretation of the Staff of the Securities and Exchange Commission. - All outstanding notes that are validly tendered and not validly withdrawn will be exchanged for equal principal amount of exchange notes which are registered under the Securities Act of 1933. - Tenders of outstanding notes may be withdrawn at any time prior to the expiration of the exchange offer. - Instron will not receive any cash proceeds from the exchange offer. ------------------------ Please consider carefully the "Risk Factors" beginning on page 9 of this prospectus. ------------------------ NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE SECURITIES TO BE DISTRIBUTED IN THE EXCHANGE OFFER, NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ The date of this prospectus is January , 2000 4 TABLE OF CONTENTS
PAGE Prospectus Summary.................... 1 Risk Factors.......................... 8 Special Note Regarding Forward-Looking Statements.......................... 15 The Exchange Offer.................... 16 The Recapitalization.................. 24 Use of Proceeds....................... 24 Capitalization........................ 25 Unaudited Pro Forma Condensed Consolidated Financial Data......... 26 Selected Historical Consolidated Financial Data...................... 31 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 33 Business.............................. 42
PAGE Management............................ 53 Executive Compensation................ 55 Security Ownership.................... 58 Certain Relationships and Related Transactions........................ 60 Description of New Senior Credit Facility............................ 63 Description of Notes.................. 64 Certain United States Federal Income Tax Considerations.................. 100 Plan of Distribution.................. 106 Legal Matters......................... 106 Experts............................... 106 Available Information................. 106 Index to Financial Statements......... F-1
5 PROSPECTUS SUMMARY The following is a summary of the more detailed information appearing elsewhere in this prospectus. This summary is not complete and does not contain all the information you should consider. You should read the entire prospectus carefully, including the "Risk Factors" and the financial statements and related notes. Unless the context requires otherwise: - "we," "us," "our" and "Instron" and similar terms include all of our consolidated subsidiaries; and - the pro forma information contained in this prospectus gives effect to the recapitalization described below, our acquisition of Satec Systems, Inc. and our acquisition of the remaining 49% of our Instron Schenck Testing Systems ("IST") joint venture as if each occurred as of the beginning of the period stated for income statement data, and at the date stated for balance sheet data. THE EXCHANGE OFFER THE EXCHANGE OFFER......... We offer to exchange $60.0 million in principal amount of our 13 1/4% Senior Subordinated Notes due September 15, 2009, which have been registered under the federal securities laws, for $60.0 million principal amount of our outstanding unregistered 13 1/4% Senior Subordinated Notes due September 15, 2009, which we issued on September 29, 1999 in a private offering. You have the right to exchange your outstanding notes for exchange notes with substantially identical terms. We issued the outstanding notes on September 29, 1999 as part of a unit offering. Each unit consisted of $1,000 principal amount of outstanding notes and one warrant to purchase 0.5109 of a share of our common stock. As of the date of this prospectus, the units have separated into outstanding notes and warrants. We are not registering the warrants or our common stock as part of this exchange offer or in a separate offering at this time. REGISTRATION RIGHTS AGREEMENT.................. We issued the outstanding notes on September 29, 1999 to Donaldson, Lufkin & Jenrette Securities Corporation. At that time, Instron signed a registration rights agreement with Donaldson, Lufkin & Jenrette, which requires us to conduct this exchange offer. This exchange offer is intended to satisfy those rights set forth in the registration rights agreement. After the exchange offer is complete, you will no longer be entitled to registration rights with respect to outstanding notes that you do not exchange. IF YOU FAIL TO EXCHANGE YOUR OUTSTANDING NOTES..... If you do not exchange your outstanding notes for exchange notes in the exchange offer, you will continue to be subject to the restrictions on transfer provided in the outstanding notes and the indenture governing those notes. In general, you may not offer or sell your outstanding notes unless they are registered under the federal securities law or are sold in a transaction exempt from or not subject to the registration requirements of the federal securities laws and applicable state securities laws. EXPIRATION DATE............ The exchange offer will expire at 5:00 p.m., Central Standard Time, on 2000, unless we decide to extend the expiration date. See "The Exchange Offer -- Expiration Date; Extensions; Amendments." CONDITIONS TO THE EXCHANGE OFFER.................... The exchange offer is subject to conditions that we may waive. The exchange offer is not conditioned upon any minimum amount of outstand- 1 6 ing notes being tendered for exchange. See "The Exchange Offer -- Conditions." We reserve the right, subject to applicable law, at any time and from time to time: - to extend the exchange offer or to terminate the exchange offer if specified conditions have not been satisfied; and - to amend the terms of the exchange offer in any manner consistent with the registration rights agreement. See "The Exchange Offer -- Expiration Date; Extensions; Amendments." PROCEDURES FOR TENDERING OUTSTANDING NOTES........ If you wish to tender your outstanding notes for exchange, you must: - complete and sign the enclosed Letter of Transmittal by following the related instructions; and - send the Letter of Transmittal, as directed in the instructions, together with any other required documents, to the exchange agent, either: (1) with the outstanding notes to be tendered; or (2) in compliance with the specified procedures for guaranteed delivery of the outstanding notes. Brokers, dealers, commercial banks, trust companies and other nominees may also effect tenders by book-entry transfer. Please do not send your Letter of Transmittal or certificates representing your outstanding notes to us. Those documents should only be sent to the exchange agent. Questions regarding how to tender and requests for information should be directed to the exchange agent. See "The Exchange Offer -- Exchange Agent." SPECIAL PROCEDURES FOR BENEFICIAL OWNERS........ If your outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, we urge you to contact that person promptly if you wish to tender your outstanding notes in accordance with the exchange offer. See "The Exchange Offer -Procedures for Tendering." WITHDRAWAL RIGHTS.......... You may withdraw the tender of your outstanding notes at any time prior to the expiration date of the exchange offer by delivering a written notice of your withdrawal to the exchange agent. You must also follow the withdrawal procedures as described under the heading "The Exchange Offer -- Withdrawal of Tenders." RESALES OF EXCHANGE NOTES...................... We believe that you will be able to offer for resale, resell or otherwise transfer exchange notes issued in the exchange offer without compliance with the registration and prospectus delivery provisions of the federal securities laws, provided that: - you are acquiring the exchange notes in the ordinary course of business; - you are not participating, and have no arrangement or understanding with any person to participate, in the distribution of the exchange notes; and 2 7 - you are not an affiliate of Instron, or if you are an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. As defined in Rule 405 of the Securities Act, an affiliate of Instron is a person that "controls or is controlled by or is under common control with" Instron. Our belief is based on interpretations by the Commission, as set forth in no-action letters issued to third parties unrelated to Instron. The Staff has not considered this exchange offer in the context of a no-action letter, and we cannot assure you that the Staff would make a similar determination with respect to this exchange offer. If our belief is not accurate and you transfer an exchange note without delivering a prospectus meeting the requirements of the federal securities laws or without an exemption from these laws, you may incur liability under the federal securities laws. We do not and will not assume or indemnify you against this liability. Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes that were acquired by that broker-dealer as a result of market-making or other trading activities must agree to deliver a prospectus meeting the requirements of the federal securities laws in connection with any resale of the exchange notes. See "The Exchange Offer -- Resale of the Exchange Notes." EXCHANGE AGENT............. The exchange agent for the exchange offer is Norwest Bank Minnesota, National Association. The address, telephone number and facsimile number of the exchange agent are set forth in "The Exchange Offer -Exchange Agent" and in the Letter of Transmittal. USE OF PROCEEDS............ We will not receive any cash proceeds from the exchange offer. THE EXCHANGE NOTES ISSUER..................... Instron Corporation 100 Royall Street Canton, MA 02021 (781) 828-2500 EXCHANGE NOTES............. $60.0 million in aggregate principal amount of 13 1/4% Senior Subordinated Notes due 2009. MATURITY DATE.............. September 15, 2009. INTEREST RATE AND PAYMENT DATES.................... Interest on the notes will accrue at the rate of 13 1/4% per annum, payable semiannually in cash in arrears on March 15 and September 15 of each year, commencing March 15, 2000. OPTIONAL REDEMPTION........ On or after September 15, 2004, we may redeem some or all of the notes at any time at the redemption prices described in "Description of Notes -- Optional Redemption." Before September 15, 2002, we may redeem up to 35% of the notes with the proceeds of certain offerings of our common equity at the price listed in "Description of Notes -- Optional Redemption." 3 8 MANDATORY REPURCHASE OFFER...................... If we sell certain assets or we experience specific kinds of changes in control, we must offer to repurchase the notes at the prices listed in "Description of Notes -- Repurchase at the Option of Holders." See "Risk Factors -- Financing Change of Control Offer." SUBSIDIARY GUARANTEES...... The notes will be jointly and severally guaranteed on an unsecured senior subordinated basis by our existing and future domestic subsidiaries. Our foreign subsidiaries will not guarantee payment on the notes. For the nine months ended October 2, 1999, our foreign subsidiaries accounted for 234.0% of our EBITDA. RANKING.................... These notes and the subsidiary guarantees are senior subordinated debts. They rank behind all of our and the subsidiary guarantors' current and future indebtedness, other than indebtedness that expressly provides that it is not senior to these notes and the subsidiary guarantees. As of October 2, 1999, the notes were subordinated to approximately $46.5 million of senior debt. In addition, the notes are subordinated to all liabilities, including trade payables, of our foreign subsidiaries, which are not guarantors. On October 2, 1999, these notes were effectively junior to $30.0 million of indebtedness and other liabilities, including trade payables, of these non-guarantor subsidiaries. COVENANTS.................. We will issue the notes under an indenture with Norwest Bank Minnesota, National Association, as trustee. The indenture will contain covenants that place limitations on our ability and the ability of our subsidiaries to: - borrow money; - pay dividends on stock or repurchase stock; - make investments; - use assets as security in other transactions; and - sell certain assets or merge with or into other companies. For more details, see the section "Description of Notes -- Certain Covenants." THE COMPANY We are a world leader in the manufacture, marketing and servicing of materials and structural testing systems, software and accessories. Materials testing focuses on the mechanical properties of materials, including tensile strength, compressive strength, fracture properties and hardness. Structural testing simulates the life cycle of components or complete products in order to verify their design, durability and performance capabilities. Our products are used by research scientists, design engineers and quality control personnel to evaluate the mechanical properties and performance of various materials, components and structures in the following applications: - quality control and specification testing; - research and development of new materials to enhance product performance; and - the search for new applications and markets for existing materials. Our systems are used to test the strength, durability, hardness, impact resistance and other characteristics of practically all materials intended for industrial and consumer use by stretching, compressing, cycling or twisting them. Our reach extends well beyond testing extremely complex materials used in automobiles, airplanes, 4 9 buildings or bridges. It includes testing food, clothing, sporting equipment, children's toys and a wide range of other products. For example, our customers use our systems to test: - the strength and durability of exotic materials used for space exploration; - the exacting quality requirements of prosthetic limbs and other orthopedic equipment; - the strength and durability of seatbelts; - the texture of fruit used in the production of ice cream; and - the quality and formability of sheet metal. As a result, we have a highly diverse base of end users of our systems, including BASF A.G., Ben & Jerry's Homemade, Inc., British Aerospace plc, DaimlerChrysler Corporation, E.I. du Pont de Nemours and Company, General Electric Company, Honda Motor Co., Ltd., Massachusetts Institute of Technology, Minnesota Mining and Manufacturing Company, National Aeronautics & Space Administration, The Procter & Gamble Company and United States Surgical Corporation, among many others. For the nine months ended October 2, 1999, we had total revenue of $151.0 million and EBITDA of $2.3 million. The market we serve for materials testing systems is estimated to be approximately $450 million in 1998 revenue and is estimated to be growing at 4% to 8% annually. Although no independent industry information is available, we believe that the market we serve for structural testing systems is approximately $750 million in 1998 revenue, which together with the materials testing segment of the market we serve totals $1.2 billion, and is estimated to be growing at 8% to 10% annually. We attribute this growth to, among other things: - the search for new materials and new applications of existing materials to create better products; - ongoing total quality management initiatives by manufacturers, including ISO 9000 certification; - the increase in global manufacturing and transfer of materials and products; - manufacturers' need to reduce the cost of, and time required to develop, new products, and increase the reliability of their products; and - increasing regulatory, safety and environmental requirements. THE RECAPITALIZATION On September 29, 1999, we merged with a wholly owned subsidiary of Kirtland in connection with a recapitalization of Instron. The recapitalization was completed through the following transactions: - Kirtland and its affiliates acquired approximately 88.3% of our common stock for $54.2 million in cash; - members of our management retained shares with an aggregate value of approximately $3.6 million, or approximately 5.9% of our common stock, and including retained options an aggregate value of approximately $6.4 million, or approximately 9.9% of our total equity; - three other stockholders retained shares with an aggregate value of approximately $3.5 million, or approximately 5.8% of our common stock; - selling stockholders will receive approximately $153.5 million in cash in connection with our redemption of their equity interests; - we repaid approximately $17.4 million of our indebtedness; - we incurred fees and expenses of approximately $10.2 million in connection with the recapitalization; - we completed an offering of 60,000 units comprised of $60.0 million of the outstanding notes and 60,000 warrants to purchase 30,654 shares of our common stock; and - we entered into an $80.0 million new senior credit facility with National City Bank, under which we borrowed $30.0 million in term loan borrowings and approximately $16.5 million in revolving credit borrowings. 5 10 See "Certain Relationships and Related Transactions." THE EQUITY INVESTOR Kirtland is a privately funded investment group with over $300 million in committed equity capital. Kirtland and its predecessors have been buying and building manufacturing and distribution businesses since 1978. Kirtland currently has a controlling interest in Unifrax Corporation, a manufacturer of ceramic fiber products, as well as controlling interests in a number of other industrial manufacturing companies. RISK FACTORS YOU SHOULD REFER TO THE SECTION ENTITLED "RISK FACTORS" FOR AN EXPLANATION OF SOME RISKS OF INVESTING IN THE SECURITIES. 6 11 SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA (Dollars and shares in thousands) The following table presents our summary historical and unaudited pro forma financial data as of and for the periods shown below. The data, except for bookings of new orders, backlog, and EBITDA, are derived from (1) our audited consolidated financial statements, (2) our unaudited quarterly condensed consolidated financial statements, and (3) our unaudited pro forma condensed consolidated financial statements. Each of these financial statements is contained elsewhere in this prospectus. The unaudited pro forma condensed consolidated statement of income data for the nine-month period ended October 2, 1999 give effect to the recapitalization as if it had occurred on January 1, 1999. Because the information in this table is only a summary, you should read our annual and quarterly financial statements and the related notes, the unaudited pro forma consolidated financial data and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in this prospectus.
ACTUAL --------------------------------------------------------------- PRO FORMA NINE MONTHS ENDED NINE MONTHS YEARS ENDED DECEMBER 31, --------------------------- ENDED -------------------------------- SEPTEMBER 26, OCTOBER 2, OCTOBER 2, 1996 1997 1998 1998 1999 1999 OPERATING RESULTS: Total revenue........................ $153,113 $155,660 $183,029 $114,961 $150,953 $150,953 Income (loss) from operations(1)..... 9,145 12,571 9,646 3,686 (4,154) 8,640 Income (loss) before income taxes(2)........................... 7,385 11,555 20,333 14,476 (4,547) (1,180) Net income (loss).................... 4,582 7,164 11,459 7,828 (4,357) (790) OTHER DATA: EBITDA(3)............................ $ 15,329 $ 18,880 $ 27,671 $ 19,656 $ 2,266 $ 15,060 Depreciation and amortization........ 6,873 6,494 7,106 5,167 6,446 6,446 Capital expenditures(4).............. 4,473 4,176 5,841 5,182 4,116 4,116 Bookings of new orders............... 161,692 150,020 166,515 102,056 153,917 153,917 Backlog.............................. 34,361 28,748 74,477 31,870 72,967 72,967 Ratio of earnings to fixed charges(5)(6)(7)................... 3.8x 5.6x 9.4x 8.3x -- --
AS OF OCTOBER 2, 1999 --------------------- BALANCE SHEET DATA: Working capital............................................. $ 34,220 Total assets................................................ 168,639 Total long-term debt........................................ 90,000 Stockholders' deficit....................................... 13,831
- --------------- (1) In March 1996, we recorded a special items charge to operations to implement a workforce reduction and consolidate some manufacturing operations. We took a pre-tax charge of $1,812 ($1,123 net of taxes) to cover these actions. Income from operations in 1998 and the nine months ended September 26, 1998 reflects a special items charge to operations to consolidate our European operations and write-down the value of non-performing assets. We took a pretax charge of $4,975 ($4,232 net of taxes) in the first quarter of 1998 to cover these actions. In September 1999, we recorded a non-recurring compensation expense of $12,606 ($9,296 net of tax) directly attributable to the recapitalization. Income from operations excludes foreign exchange gain or loss. (2) Income (loss) before income taxes in 1998 and the nine months ended September 26, 1998 reflects a non-operating pre-tax gain of $11,076 ($6,867 net of taxes) recorded in the first quarter of 1998 in connection with our sale of 42 acres of excess land in Canton, Massachusetts. (3) EBITDA represents earnings before interest, taxes, depreciation and amortization. EBITDA is presented because we believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. However, other companies in our industry may calculate EBITDA differently than we do. EBITDA is not a measurement of financial performance under generally accepted accounting principles and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or as an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with generally accepted accounting principles. See the Statement of Cash Flow indicated in our financial statements. (4) Excludes capital expenditures of acquired businesses prior to the date of acquisition. (5) Earnings used in computing the ratio of earnings to fixed charges consist of pre-tax earnings before losses from equity investments and fixed charges. Fixed charges are defined as interest expense related to debt, amortization expense related to deferred financing costs, accretion of debt discount and a portion of rental charges representative of interest. (6) Due to our loss in the nine months ended October 2, 1999, the ratio coverage was less than 1:1. We must generate additional earnings of $187 to achieve a coverage ratio of 1:1. (7) Due to our pro forma loss in the nine month period ended October 2, 1999, the ratio coverage was less than 1:1. We must generate additional pro forma earnings of $871 to achieve a coverage ratio of 1:1. 7 12 RISK FACTORS Before you invest in the exchange notes, you should consider carefully the following factors, in addition to the other information contained in this prospectus. SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THESE NOTES. We now have and, after this offering, we will continue to have a significant amount of indebtedness. The following chart shows certain important credit statistics and is presented assuming we had completed this offering as of the date or at the beginning of the period specified below and applied the proceeds as intended:
AT OCTOBER 2, 1999 (DOLLARS IN THOUSANDS) Total indebtedness.......................................... $109,644 Stockholders' deficit....................................... $ 13,831
Our substantial indebtedness could have important consequences to you. For example, it could: - make it more difficult for us to satisfy our obligations with respect to the exchange notes; - increase our vulnerability to general adverse economic and industry conditions; - require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes; - limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; - adversely affect the value of the securities; - place us at a competitive disadvantage compared to our competitors that have less debt; - limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds. Failing to comply with those covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on us; and - limit our ability to pursue and consummate strategic acquisitions. See "Description of Notes -- Repurchase at the Option of Holders -- Change of Control" and "Description of New Senior Credit Facility." ADDITIONAL BORROWINGS AVAILABLE -- DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND OUR SUBSIDIARIES MAY BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT. We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indenture do not fully prohibit us or our subsidiaries from doing so. Our new senior credit facility has unused commitments of up to $31.9 million less outstanding letters of credit and demand guarantees, after completion of this offering, and all of those borrowings would be senior to the notes and the subsidiary guarantees. As part of our business strategy, we intend to pursue strategic acquisitions in the future and we likely will finance a substantial portion of any acquisitions with additional indebtedness. If new debt is added to our and our subsidiaries' current debt levels, the related risks that we and they now face could increase. See "Capitalization," "Selected Historical Consolidated Financial Data" and "Description of Notes -- Repurchase at the Option of Holders -- Change of Control" and "Description of New Senior Credit Facility." ABILITY TO SERVICE DEBT -- TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL. Our ability to make payments on and to refinance our indebtedness, including the exchange notes, and to fund planned capital expenditures and research and development efforts will depend on our ability to generate 8 13 cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations and anticipated cost savings and operating improvements, we believe our cash flow from operations, available cash and available borrowings under our new senior credit facility will be adequate to meet our future liquidity needs for the foreseeable future. We cannot assure you, however, that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule or that future borrowings will be available to us under our new senior credit facility or elsewhere in an amount sufficient to enable us to pay our indebtedness, including these exchange notes, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness, including the exchange notes, on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including our new senior credit facility and these exchange notes, on commercially reasonable terms or at all. RESTRICTIVE DEBT COVENANTS -- OUR BUSINESS IS RESTRICTED BY THE DEBT COVENANTS CONTAINED IN OUR NEW SENIOR CREDIT FACILITY AND THE INDENTURE GOVERNING THE EXCHANGE NOTES. The indenture governing the exchange notes will limit what we and our restricted subsidiaries may do. The provisions of the indenture will limit our ability to: - incur more debt; - pay dividends, make distributions or repurchase stock; - make some investments; - create liens; - enter into transactions with affiliates; - enter into sale and leaseback transactions; - merge or consolidate; and - transfer and sell assets. There are a number of important exceptions to these covenants, which are more fully described under "Description of Notes." The new senior credit facility contains many similar and more stringent limitations. In addition, it requires us to comply with certain financial ratios and tests. If we breach any of these covenants we would default under the new senior credit facility and, as a result, may be prohibited from making any payments to you. In addition, under certain circumstances, all amounts borrowed under the new senior credit facility, plus interest, may be declared to be due and payable, which would be an event of default under the indenture. See "Description of New Senior Credit Facility." These restrictions in the indenture and the new senior credit facility, in combination with our high level of debt, could limit our ability to respond to market conditions or meet extraordinary capital needs, or could adversely affect our ability to finance our future acquisitions, operations or capital needs, or engage in other business activities that could be in our interest. SUBORDINATION -- YOUR RIGHT TO RECEIVE PAYMENTS ON THE EXCHANGE NOTES IS JUNIOR TO OUR EXISTING INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. FURTHER, THE GUARANTEES OF THE EXCHANGE NOTES ARE JUNIOR TO ALL OF OUR GUARANTORS' EXISTING INDEBTEDNESS AND POSSIBLY TO ALL OF THEIR FUTURE BORROWINGS. The exchange notes and the subsidiary guarantees rank behind all of our and the subsidiary guarantors' existing indebtedness and all of our and their future borrowings, except any indebtedness that expressly provides that it ranks equal with, or subordinated in right of payment to, the exchange notes and the guarantees. As a result, upon any distribution to our creditors or the creditors of the guarantors in a bankruptcy, liquidation or reorganization or similar proceeding relating to us or the guarantors or our or their property, the holders of senior 9 14 debt of Instron and the guarantors will be entitled to be paid in full in cash before any payment may be made with respect to these exchange notes or the subsidiary guarantees. In addition, all payments on the exchange notes and the subsidiary guarantees will be blocked in the event of a payment default on senior debt and may be blocked for up to 179 of 360 consecutive days in the event of certain non-payment defaults on senior debt. In the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to Instron or the guarantors, holders of the exchange notes will participate with trade creditors and all other holders of subordinated indebtedness of Instron and the guarantors in the assets remaining after we and the subsidiary guarantors have paid all of the senior debt. However, because the indenture requires that amounts otherwise payable to holders of the exchange notes in a bankruptcy or similar proceeding be paid to holders of senior debt instead, holders of the exchange notes may receive less, ratably, than holders of trade payables in any such proceeding. In any of these cases, we and the subsidiary guarantors may not have sufficient funds to pay all of our creditors and holders of exchange notes may receive less, ratably, than the holders of senior debt. On October 2, 1999, the outstanding notes and the subsidiary guarantees were subordinated to $46.5 million of senior debt, and approximately $31.8 million, less outstanding letters of credit and demand guarantees, remained as unborrowed commitments of senior debt under our new senior credit facility. NOT ALL SUBSIDIARIES ARE GUARANTORS -- YOUR RIGHT TO RECEIVE PAYMENTS ON THESE NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR SUBSIDIARIES DECLARE BANKRUPTCY, LIQUIDATE, OR REORGANIZE. Some but not all of our subsidiaries guarantee the outstanding notes and will guarantee the exchange notes. In the event of a bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries, holders of their indebtedness and their trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. On October 2, 1999, the notes were effectively junior to $30.0 million of indebtedness and other liabilities, including trade payables, of these non-guarantor subsidiaries. The non-guarantor subsidiaries generated 234.0% of our EBITDA for the nine-month period ended October 2, 1999 and held 33.0% of our consolidated assets as of October 2, 1999. SIGNIFICANT INTERNATIONAL OPERATIONS -- WE ARE SUBJECT TO RISKS RELATING TO OUR FOREIGN OPERATIONS. Foreign operations represent a significant portion of our business. For the nine months ended October 2, 1999, approximately 44% of our total revenue was derived from sales in the United States, approximately 38% from sales in Europe and approximately 18% from sales to the rest of the world. Our reported revenue outside the United States accounted for 54.7% of our total revenue in 1998, 59.4% in 1997 and 61.1% in 1996. Bookings from Asia declined by 30% in 1998 compared to 1997 due to the economic downturn in this region and devaluation of Asian currencies. We expect revenue from foreign markets to continue to represent a significant portion of our total revenue. We own manufacturing facilities in England and lease manufacturing facilities in Germany. We also sell domestically manufactured products to foreign customers. Our foreign operations are subject to risks in addition to the risks of our domestic operations. The risks that relate to our foreign operations include: - political, economic and social conditions in the foreign countries where we conduct operations; - currency risks and exchange controls, including risks related to the introduction of the euro; - potential inflation in the applicable foreign economies; - the impact of import duties on our costs and prices; - foreign taxation of our earnings and payments received by us; and - regulatory changes affecting our international operations. These risks may adversely affect our business. 10 15 CONCENTRATION OF STOCK OWNERSHIP -- KIRTLAND CONTROLS ALL MATTERS SUBMITTED TO STOCKHOLDER VOTES AND THIS CONTROL MAY ADVERSELY AFFECT HOLDERS OF THE SECURITIES. As a result of the recapitalization, Kirtland controls approximately 88.3% of the voting power of our outstanding common stock. Therefore, Kirtland is able to control the vote on all matters submitted to a stockholder vote, including the election of directors, amendments to our articles of organization and our by-laws and approval of significant corporate mergers. See "Certain Relationships and Related Transactions -- The Recapitalization." Some decisions about our operations or financial structure may present conflicts of interests between Kirtland and the holders of the exchange notes. For example, Kirtland may be willing to approve acquisitions, divestitures or transactions undertaken by us that it believes could increase the value of its equity investment in Instron. These kinds of transactions, however, may increase the financial risk to you. ACQUISITION STRATEGY -- WE MAY EXPERIENCE DIFFICULTIES IN IDENTIFYING ACQUISITION CANDIDATES AND INTEGRATING ACQUIRED BUSINESSES. IN ADDITION, OUR ACQUISITION STRATEGY MAY INVOLVE THE INCURRENCE OF ADDITIONAL INDEBTEDNESS OR ISSUANCES OF COMMON STOCK. In 1998, we acquired Satec and purchased the remaining 49% interest in our IST joint venture. As part of our business strategy, we intend to pursue strategic acquisitions in the future. We cannot assure you that we will succeed in identifying acquisition candidates or in consummating any acquisitions. If any acquisitions are consummated, we cannot assure you that these acquisitions will be successfully integrated or operated profitably. Acquisitions can present significant challenges to management due to the increased time and resources required to properly integrate management, employees, accounting controls, personnel and administrative functions. In addition, identifying acquisition candidates and integrating them upon consummation may divert management's attention from the operation of our core business. We may encounter these or other difficulties, and we may not be able to realize the benefits that we hope to achieve from future strategic acquisitions. When we acquired the remaining interest in IST, we assumed several contracts for structural testing systems that resulted in substantially less profit than we had expected and that have taken us longer to complete than we had anticipated. We cannot assure you that we will achieve expected profitability levels or anticipated delivery dates in our structural testing business in the future due to the scale and technical risks involved in some of our customer contracts. In addition, as we pursue our acquisition strategy in the future, we may incur additional indebtedness or issue additional equity. These future incurrences of indebtedness or issuances of equity could have a material adverse effect on your interests in the securities. YEAR 2000 COMPLIANCE -- ANY COMPUTER-RELATED PROBLEMS RELATED TO THE YEAR 2000 MAY ADVERSELY AFFECT OUR BUSINESS. Internal Business Systems We are highly dependent on our computer software in operating our business. Although the impact of Year 2000 issues on our future revenue is difficult to assess, it is a risk that should be considered in evaluating our business. We believe the current versions of our products and our internal information systems are or will be Year 2000 compliant but we cannot make absolute assurances that we have identified all the issues and can resolve them in a timely manner, or that there will not be failures or disruptions to operations that could result in a material adverse effect on our business. We do not expect material liabilities or operational difficulties with respect to our operating systems, although any material failure of these systems could have a material adverse effect on our business. Material failures could result in: - our inability to order components necessary for our products; - the malfunctioning of our manufacturing or service processes; - our inability to properly bill and collect payments from our customers; and - errors or omissions in accounting and financial data. 11 16 Customers and Suppliers We also depend on the proper functioning of the computer systems of third parties, particularly our customers and suppliers. The failure of one of our customers' or suppliers' systems to appropriately handle Year 2000 complications could cause material adverse effects on our business. For more information on our Year 2000 program, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Year 2000." FLUCTUATIONS IN QUARTERLY RESULTS -- OUR QUARTERLY RESULTS HAVE FLUCTUATED SIGNIFICANTLY IN THE PAST AND MAY FLUCTUATE SIGNIFICANTLY IN THE FUTURE. Our quarterly operating results have varied significantly depending on a number of factors. These factors include: - timing of receipt of system orders from, and shipments to, major customers; - bookings and deliveries of our large structural testing system projects; - variations in product mix and product margins; - economic conditions prevailing within geographic markets; - market acceptance of new products and services; - timing and levels of operating expenditures; and - exchange rate fluctuations. Historically, our sales are highest in the fourth quarter of each year due to the ordering pattern of our customers, which favors fourth quarter deliveries before budget authorizations expire. Sales in the first quarter are usually low as it takes time to rebuild in-process inventory levels after the heavy fourth quarter delivery requirements have been satisfied. Also, third quarter sales are generally low due to vacation patterns of both our production workers and customer technical personnel needed for acceptance testing. We may be unable to adjust costs in a timely manner to compensate for a material revenue shortfall because a large portion of our costs is fixed and our expense levels are based in part on our expectations of future revenue. The seasonal factors affecting sales are usually reflected in quarterly operating income. The structural testing systems business that we conduct through IST is characterized by relatively larger contract sizes and longer delivery periods than our materials testing systems business. Accordingly, we believe that the acquisition of IST has increased the fluctuations we experience in our quarterly results. CYCLICALITY -- THE CYCLICAL NATURE OF THE INDUSTRIES WE CURRENTLY SERVE COULD ADVERSELY AFFECT OUR BUSINESS AND ABILITY TO SATISFY OUR OBLIGATIONS UNDER THE NOTES. A substantial percentage of our revenue is derived from customers that are in industries and businesses that are cyclical in nature and subject to changes in general economic conditions, including the automotive and automotive supply industry, which we believe accounted for approximately 20% of our pro forma revenue for the nine months ended October 2, 1999. General economic or industry-specific downturns in cyclical industries could have a material adverse effect on our business. SIGNIFICANT COMPETITION -- WE MAY BE UNABLE TO COMPETE SUCCESSFULLY IN OUR INDUSTRY, WHICH COULD ADVERSELY AFFECT OUR BUSINESS AND OUR ABILITY TO SATISFY OUR OBLIGATIONS UNDER THE EXCHANGE NOTES. We compete with a number of other manufacturers, some of which have greater financial, technical and marketing resources than do we. The intensity of the competition varies by product line and by geographic area. Competition in the United States is the greatest in our industry because we have one major domestic competitor, MTS Systems Corporation. Competition in foreign markets is greatest in Germany and Japan, where there are major local manufacturers. The principal competitive factors are: - engineering excellence; - the quality and technical capability of the equipment; 12 17 - responsiveness to customer needs; - quality of service; and - price. RELIANCE ON KEY PERSONNEL -- OUR FAILURE TO ATTRACT AND RETAIN KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS. Our future success is significantly dependent on our experienced senior management. Although we have entered into agreements with a number of our senior executives, which provide incentives for continuing employment, the loss of the services of any one of these key executives could have a material adverse effect on our business. Additionally, we are dependent on the continuing contributions of our project managers, scientists, and other key professionals. Of particular importance are our employees who maintain close relationships with our customers. TAX CONSIDERATIONS -- THE NOTES WILL BE ISSUED WITH ORIGINAL ISSUE DISCOUNT. The outstanding notes were issued with original issue discount (OID) for United States federal income tax purposes in an amount equal to the excess of the principal amount due at maturity on the notes over their "issue price," which is described in "Certain United States Federal Income Tax Considerations." Each United States holder of a note will be required to include in taxable income for any particular taxable year a portion of the OID in advance of receiving cash to which the OID is attributable. For additional information regarding the OID associated with the notes, as well as some other federal income tax considerations relevant to the purchase, ownership and disposition of the notes, warrants and shares of common stock issuable upon exercise of the warrants, see "Certain United States Federal Income Tax Considerations." FINANCING CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE. Upon the occurrence of certain specific kinds of change of control events, we will be required to offer to repurchase all of the exchange notes. However, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of exchange notes. In addition, restrictions in our new senior credit facility currently prohibit us from making such repurchases and any future credit agreement may contain a similar restriction. Certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, might not constitute a "Change of Control" under the indenture. See "Description of Notes -- Repurchase at the Option of Holders -- Change of Control." FRAUDULENT CONVEYANCE MATTERS -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS. Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by its guarantee: - received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee; and - was insolvent or rendered insolvent by reason of such incurrence; or - was engaged in a business or transaction for which the guarantor's remaining assets constituted unreasonably small capital; or - intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature. In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor. 13 18 The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if: - the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; or - if the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or - it could not pay its debts as they become due. On the basis of historical financial information, recent operating history and other factors, we believe that each guarantor, after giving effect to its guarantee of the outstanding notes, is not insolvent, does not have unreasonably small capital for the business in which it is engaged and has not incurred debts beyond its ability to pay such debts as they mature. There can be no assurance, however, as to what standard a court would apply in making such determinations or that a court would agree with our conclusions in this regard. Each guarantee also contains a provision intended to limit the liability of the guarantor to the maximum amount of liability the guarantor could incur without causing the incurrence of its obligations under the guarantee to be a fraudulent transfer. We cannot assure you, however, that this provision will be effective. NO PRIOR MARKET FOR THE SECURITIES -- YOU CANNOT BE SURE THAT ACTIVE TRADING MARKETS WILL DEVELOP FOR THESE SECURITIES. There is no established trading market for the outstanding notes or the exchange notes. We have been informed by Donaldson, Lufkin & Jenrette that it intends to make a market in these securities. However, it may cease its market-making at any time. In addition, the liquidity of the trading markets in these securities, and the market prices quoted for these securities, may be adversely affected by changes in the overall market for high yield securities and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a result, you cannot be sure that active trading markets will develop for these securities. RESTRICTIONS ON TRANSFER OF OUTSTANDING NOTES -- IF YOU DO NOT EXCHANGE YOUR OUTSTANDING NOTES YOU MAY HAVE DIFFICULTY IN TRANSFERRING THEM AT A LATER TIME. We will issue exchange notes in exchange for the outstanding notes after the exchange agent receives your outstanding notes, the letter of transmittal and all related documents. You should allow adequate time for delivery if you choose to tender your outstanding notes for exchange. Outstanding notes that are not exchanged will remain subject to restrictions on transfer and will not have any rights to registration. If you do participate in the exchange offer for the purpose of participating in the distribution of the exchange notes, you must comply with the registration and prospectus delivery requirements of the Securities Act of 1933 for any resale transaction. Each broker-dealer who holds outstanding notes for its own account due to market-making or other trading activities and who receives exchange notes for its own account must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. If any outstanding notes are not tendered in the exchange or are tendered but not accepted, the trading market for the outstanding notes could be negatively affected due to the limited number of outstanding notes expected to remain outstanding following the completion of the exchange offer. TECHNOLOGICAL CHANGE -- OUR FAILURE TO MAINTAIN OUR POSITION AS A TECHNOLOGY LEADER IN OUR INDUSTRY COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS. We operate in a competitive industry characterized by technological change. If we are not able to maintain our position as a technology leader in the industries in which we compete, our business could be adversely affected. Our ability to maintain our position as a technology leader depends upon many factors, including: - the ability of our competitors to develop new products that are equivalent or superior to our products; - advancements in the development of virtual testing methods using computer modeling; and 14 19 - the timely incorporation of technological advances into our existing products and services and commercial acceptance of future products and services. COMPLIANCE WITH ENVIRONMENTAL REGULATIONS -- WE ARE SUBJECT TO RISKS FROM INCREASED LEGISLATIVE AND REGULATORY AUTHORITY RELATING TO ENVIRONMENTAL ISSUES. We are subject to a wide variety of federal, state, local, and foreign environmental laws and regulations. These laws and regulations control our use, handling, treatment, storage, discharge and disposal of hazardous wastes used or generated in our business. Additionally, we are subject to federal, state, local, and foreign laws and regulations regarding the following matters: - employee health and safety; and - permitting and licensing requirements. If we fail to comply with present or future environmental laws or regulations, we could be subject to future liabilities or our operations could be interrupted. In addition, future environmental laws and regulations could restrict our ability to expand our facilities or could require us to acquire costly equipment or to incur other significant expenses in connection with our business. Although compliance with these laws and regulations has not had any material adverse effects on our business, you should be aware that other problems identified in the future or future changes in environmental requirements could have a material adverse effect on us. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS FORWARD LOOKING STATEMENTS -- OUR FORWARD LOOKING STATEMENTS ARE SUBJECT TO A VARIETY OF FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM CURRENT BELIEFS. A number of statements made in this prospectus are not historical or current facts, but deal with potential future circumstances and developments. Those statements are qualified by the inherent risks and uncertainties surrounding future expectations generally, and also may materially differ from our actual future experience involving any one or more of these matters and subject areas. We have attempted to identify, in context, some of the factors that we currently believe may cause actual future experience and results to differ from our current expectations regarding the relevant matter or subject area. The operation and results of our business also may be subject to the effect of other risks and uncertainties in addition to the relevant qualifying factors identified elsewhere in the foregoing "Risk Factors" section, including, but not limited to: - the impact of fluctuations in exchange rates and the uncertainties of operating in a global economy including fluctuations in the economic conditions of the foreign and domestic markets we serve, which can affect the demand for our products and services; - our ability to successfully manage and integrate the products and operations of recently acquired companies; - our ability to identify and successfully consummate strategic acquisitions; - the impact of year 2000 issues; - the success of the automobile industry, which is the major purchaser of some of our structural testing products; and - general economic conditions. 15 20 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER On September 29, 1999, we issued and sold $60.0 million in principal amount of the outstanding notes to Donaldson, Lufkin & Jenrette. The outstanding notes were sold as part of a unit consisting of $1,000 principal amount of outstanding notes and one warrant to purchase 0.5109 of a share of our common stock. As of the date of this prospectus, the units have separated into outstanding notes and warrants. We are not registering the warrants or our common stock as part of this exchange offer or in a separate offering at this time. Donaldson, Lufkin & Jenrette sold the outstanding notes to a limited number of "Qualified Institutional Buyers," as defined under the Securities Act. In connection with the sale of the outstanding notes, we entered into a registration rights agreement, dated as of September 29, 1999 with Donaldson, Lufkin & Jenrette. Under that agreement, we must, among other things, use our reasonable best efforts to file with the Commission a registration statement under the Securities Act covering the exchange offer and to cause that registration statement to become and remain effective under the Securities Act. Upon the effectiveness of that registration statement, we must also offer each holder of the outstanding notes the opportunity to exchange its securities for an equal principal amount of exchange notes. You are a holder with respect to the exchange offer if you are a person in whose name any outstanding notes are registered on our books or any other person who has obtained a properly completed assignment of outstanding notes from the registered holder. We are making the exchange offer to comply with our obligations under the registration rights agreement. A copy of the registration rights agreement has been filed as an exhibit to the registration statement of which this prospectus is a part. In order to participate in the exchange offer, you must represent to us, among other things, that: - the exchange notes being acquired in accordance with the exchange offer are being obtained in the ordinary course of business of the person receiving the exchange notes; - neither you nor any other person with whom you have any arrangement or understanding is engaging in or intends to engage in a distribution of those exchange notes; - you are not an affiliate of Instron. An affiliate is any person who "controls or is controlled by or is under common control with" Instron; - if you are an affiliate of Instron, you will comply with requirements of the Securities Act applicable to affiliates; and - you are not acting on behalf of any person who could not truthfully make these representations. RESALE OF THE EXCHANGE NOTES Based on a previous interpretation by the Staff of the Commission set forth in no-action letters issued to third parties, including Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated (available June 5, 1991), Mary Kay Cosmetics, Inc. (available June 5, 1991), Warnaco, Inc. (available October 11, 1991), and K-111 Communications Corp. (available May 14, 1993), we believe that the exchange notes issued in the exchange offer may be offered for resale, resold, and otherwise transferred by you, except if you are an affiliate of Instron, without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the representations set forth in " -- Purpose and Effect of the Exchange Offer" apply to you. The Staff has not considered this exchange offer in the context of a no-action letter, and we cannot assure you that the Staff would make a similar determination with respect to the exchange offer. If you tender in the exchange offer with the intention of participating in a distribution of the exchange notes, you cannot rely on the interpretation by the Staff of the Commission as set forth in no-action letters issued to third parties unrelated to Instron and you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. In the event that our belief regarding resale is inaccurate, those who transfer exchange notes in violation of the prospectus delivery 16 21 provisions of the Securities Act and without an exemption from registration under the federal securities laws may incur liability under these laws. We do not and will not assume or indemnify you against this liability. The exchange offer is not being made to, nor will we accept surrenders for exchange from, holders of outstanding notes in any jurisdiction in which the exchange offer or the acceptance of the exchange offer would not be in compliance with the securities or blue sky laws of the particular jurisdiction. Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where the outstanding notes were acquired by that broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. In order to facilitate the disposition of exchange notes by broker-dealers participating in the exchange offer, we have agreed to make a reasonable number of copies of this prospectus, as it may be amended or supplemented from time to time, available for delivery by those broker-dealers to satisfy their prospectus delivery obligations under the Securities Act. Any holder that is a broker-dealer participating in the exchange offer must comply with the procedures set forth for broker-dealers in the enclosed Letter of Transmittal. Under the registration rights agreement, we are not required to amend or supplement the prospectus for a period exceeding 180 days after the expiration date of the exchange offer, except in limited circumstances where we suspend use of the registration statement. We may suspend use of the registration statement if: - an order suspending the effectiveness of the registration statement or preventing the use of any prospectus is entered, or any proceeding is initiated to obtain this type of order; - we receive notice that the qualification or exemption from qualification of the registration statement or any of the exchange notes to be sold by any broker-dealer for offer or sale in any jurisdiction has been suspended, or any proceeding is initiated or threatened to obtain a suspension; - any information becomes known that makes any statement made in the registration statement, prospectus or any document incorporated by reference in either, untrue in any material respect, or that requires changes in, or amendments to any of these documents to correct or clarify the statement; - we determine that a post-effective amendment to the registration statement is appropriate. We have not entered into any arrangement or understanding with any person to distribute the exchange notes to be received in the exchange offer. See "Plan of Distribution." TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this prospectus and in the Letter of Transmittal, we will accept any and all outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., Central Standard Time, on the day the exchange offer expires. As of the date of this prospectus, $60.0 million in principal amount of the notes are outstanding. This prospectus, together with the Letter of Transmittal, is being sent to all registered holders of the outstanding notes on this date. There will be no fixed record date for determining registered holders of the outstanding notes entitled to participate in the exchange offer, however, holders of the outstanding notes must tender their certificates therefor or cause their outstanding notes to be tendered by book-entry transfer prior to the expiration date of the exchange offer to participate. The form and terms of the exchange notes will be the same as the form and terms of the outstanding notes except that the exchange notes will be registered under the Securities Act and therefore will not bear legends restricting their transfer. Following consummation of the exchange offer, all rights under the registration rights agreement accorded to holders of outstanding notes, including the right to receive additional incremental interest on the outstanding notes, to the extent and in the circumstances specified in the registration rights agreement, will terminate. We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement and applicable federal securities laws. Outstanding notes that are not tendered for exchange under the exchange offer will remain outstanding and will be entitled to the rights under the related indenture. Any 17 22 outstanding notes not tendered for exchange will not retain any rights under the registration rights agreement and will remain subject to transfer restrictions. See " -- Consequences of Failure to Exchange." We will be deemed to have accepted validly tendered outstanding notes when, as and if we have given oral or written notice of our acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders for the purposes of receiving the exchange notes from us. If any tendered outstanding notes are not accepted for exchange because of an invalid tender, the occurrence of other events set forth in this prospectus, or otherwise, certificates for any unaccepted outstanding notes will be returned, or, in the case of outstanding notes tendered by book-entry transfer, those unaccepted outstanding notes will be credited to an account maintained with The Depository Trust Company, without expense to the tendering holder of those outstanding notes as promptly as practicable after the expiration date of the exchange offer. See " -- Procedures for Tendering." Those who tender outstanding notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange in accordance with the exchange offer. We will pay all charges and expenses, other than applicable taxes described below, in connection with the exchange offer. See " -- Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The expiration date is 5:00 p.m., Central Standard Time on , 2000, unless we, in our sole discretion, extend the exchange offer, in which case, the expiration date will be the latest date and time to which the exchange offer is extended. We must use our best efforts to consummate the exchange offer on or prior to the 30th day following the date the registration statement is declared effective. To extend the exchange offer, we must notify the exchange agent by oral or written notice prior to 8:00 a.m., Central Standard Time, on the next business day after the previously scheduled expiration date and make a public announcement of the extension. We reserve the right: - to extend the exchange offer or to terminate the exchange offer if any of the conditions set forth below under "-- Conditions" are not satisfied by giving oral or written notice of the extension or termination to the exchange agent; or - to amend the terms of the exchange offer in any manner consistent with the registration rights agreement. Any delay in acceptances, extension, termination, or amendment will be followed as promptly as practicable by oral or written notice of the delay to the registered holders of the outstanding notes. If we amend the exchange offer in a manner that constitutes a material change, we will promptly disclose the amendment by means of a prospectus supplement that will be distributed to the registered holders of the outstanding notes, and we will extend the exchange offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to the registered holders of the outstanding notes, if the exchange offer would otherwise expire during the five to ten business day period. Without limiting the manner in which we may choose to make a public announcement of any delay, extension, amendment, or termination of the exchange offer, we will have no obligation to publish, advertise, or otherwise communicate that public announcement, other than by making a timely release to an appropriate news agency. Upon satisfaction or waiver of all the conditions to the exchange offer, we will accept, promptly after the expiration date of the exchange offer, all outstanding notes properly tendered and will issue the exchange notes promptly after acceptance of the outstanding notes. See " -- Conditions" below. For purposes of the exchange offer, we will be deemed to have accepted properly tendered outstanding notes for exchange when, as and if we have given oral or written notice of our acceptance to the exchange agent. In all cases, issuance of the exchange notes for outstanding notes that are accepted for exchange in accordance with the exchange offer will be made only after timely receipt by the exchange agent of certificates for those outstanding notes or a timely confirmation of book-entry transfer of the outstanding notes into the exchange agent's account at The Depository Trust Company, a properly completed and duly executed Letter of 18 23 Transmittal, and all other required documents; provided, however, that we reserve the absolute right to waive any defects or irregularities in the tender of outstanding notes or in the satisfaction of conditions of the exchange offer by holders of the outstanding notes. If any tendered outstanding notes are not accepted for any reason set forth in the terms and conditions of the exchange offer, if the holder withdraws the previously tendered outstanding notes, or if outstanding notes are submitted for a greater principal amount of outstanding notes than the holder desires to exchange, then the unaccepted, withdrawn or portion of non-exchanged outstanding notes, as appropriate, will be returned as promptly as practicable after the expiration or termination of the exchange offer, or, in the case of outstanding notes tendered by book-entry transfer, those unaccepted, withdrawn or portion of non-exchanged outstanding notes, as appropriate, will be credited to an account maintained with The Depository Trust Company, without expense to the tendering holder of these outstanding notes. CONDITIONS Without regard to other terms of the exchange offer, we will not be required to exchange any exchange notes for any outstanding notes and may terminate the exchange offer before the acceptance of any outstanding notes for exchange, if: - the exchange offer is not registered under the Securities Act of 1933 on the appropriate form; or - the exchange offer fails to comply with all applicable rules and regulations under the Exchange Act. If we determine that any of these conditions are not satisfied, we may refuse to accept any outstanding notes and return all tendered outstanding notes to the tendering holders, or, in the case of outstanding notes tendered by book-entry transfer, credit those outstanding notes to an account maintained with The Depository Trust Company PROCEDURES FOR TENDERING To tender in the exchange offer, you must complete, sign and date an original or facsimile Letter of Transmittal, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver the Letter of Transmittal to the exchange agent prior to the expiration date of the exchange offer. In addition, either: - certificates for the outstanding notes must be received by the exchange agent, along with the Letter of Transmittal; or - a timely confirmation of transfer by book-entry of those outstanding notes, if the book-entry procedure is available, into the exchange agent's account at The Depository Trust Company, as set forth in the procedure for book-entry transfer described below, which the exchange agent must receive prior to the expiration date of the exchange offer; or - you must comply with the guaranteed delivery procedures described below. To be tendered effectively, the exchange agent must receive the Letter of Transmittal and other required documents at the address set forth below under " -- Exchange Agent" prior to the expiration of the exchange offer. If you tender your outstanding notes and do not withdraw them prior to the expiration date of the exchange offer, you will be deemed to have an agreement with us in accordance with the terms and subject to the conditions set forth in this prospectus and in the Letter of Transmittal. THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR RISK. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT YOU USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE OF THE EXCHANGE OFFER. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO US. YOU MAY REQUEST YOUR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR YOU. Any beneficial owner whose outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company, or other nominee and who wishes to tender its outstanding notes should contact the 19 24 registered holder promptly and instruct that registered holder to tender the outstanding notes on the beneficial owner's behalf. If the beneficial owner wishes to tender its outstanding notes on the owner's own behalf, that owner must, prior to completing and executing the Letter of Transmittal and delivering its outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in that owner's name or obtain a properly completed assignment from the registered holder. The transfer of registered ownership of outstanding notes may take considerable time. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an eligible institution, unless the outstanding notes are tendered: - by a registered holder who has not completed the box entitled "Special Payment Instructions" or "Special Delivery Instructions" on the Letter of Transmittal; or - for the account of an eligible institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, each of the following is deemed an eligible institution: - a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc.; - commercial bank; - trust company having an office or correspondent in the United States; or - eligible guarantor institution as provided by Rule 17Ad-15 of the Exchange Act. If the Letter of Transmittal is signed by a person other than the registered holder of any outstanding notes, the outstanding notes must be endorsed or accompanied by a properly completed bond power, signed by the registered holder as his, her or its name appears on the outstanding notes. If trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity sign the Letter of Transmittal or any outstanding notes or bond power, those persons should so indicate when signing, and unless we waive evidence satisfactory to us of their authority to so act this evidence must be submitted with the Letter of Transmittal. We will determine all questions as to the validity, form, eligibility, including time of receipt, acceptance of tendered outstanding notes, and withdrawal of tendered outstanding notes, in our sole discretion. All of these determinations by us will be final and binding. We reserve the absolute right to reject any and all outstanding notes not properly tendered or any outstanding notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular outstanding notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the Letter of Transmittal will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of outstanding notes must be cured within the time we determine. Although we intend to notify holders of outstanding notes of defects or irregularities with respect to tenders of outstanding notes, neither we nor the exchange agent or any other person will incur any liability for failure to give this notification. Tenders of outstanding notes will not be deemed to have been made until defects or irregularities have been cured or waived. Any outstanding notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent to the tendering holders of outstanding notes, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the expiration date of the exchange offer. In addition, we reserve the right, in our sole discretion, to purchase or make offers for any outstanding notes that remain outstanding subsequent to the expiration date of the exchange offer. We also reserve the right, as set forth above under " -- Conditions," to terminate the exchange offer and, to the extent permitted by applicable law and the terms of agreements relating to our outstanding indebtedness, purchase outstanding notes in the open market, in privately negotiated transactions or otherwise. The terms of any purchases or offers could differ from the terms of the exchange offer. If the holder of outstanding notes is a broker-dealer participating in the exchange offer that will receive exchange notes for its own account in exchange for outstanding notes that were acquired as a result of market- 20 25 making activities or other trading activities, that broker-dealer will be required to acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of the exchange notes and otherwise agree to comply with the procedures described above under " -- Resale of the Exchange Notes." That broker-dealer, however, by so acknowledging and delivering a prospectus, will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. In all cases, issuance of exchange notes in accordance with the exchange offer will be made only after timely receipt by the exchange agent of certificates for the outstanding notes or a timely confirmation of book entry transfer of outstanding notes into the exchange agent's account at The Depository Trust Company, a properly completed and duty executed Letter of Transmittal, and all other required documents. If any tendered outstanding notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if outstanding notes are submitted for a greater principal amount of outstanding notes than the holder of outstanding notes desires to exchange, the unaccepted or portion of non-exchanged outstanding notes will be returned as promptly as practicable after the expiration or termination of the exchange offer, or, in the case of outstanding notes tendered by book-entry transfer into the exchange agent's account at The Depository Trust Company in accordance with the book-entry transfer procedures described below, the unaccepted or portion of non-exchanged outstanding notes will be credited to an account maintained with The Depository Trust Company, without expense to the tendering holder of outstanding notes. BOOK-ENTRY TRANSFER The exchange agent will make a request to establish an account with respect to the outstanding notes at The Depository Trust Company for the purposes of the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in The Depository Trust Company's systems may make book-entry delivery of outstanding notes by causing The Depository Trust Company to transfer the outstanding notes into the exchange agent's account at The Depository Trust Company in accordance with The Depository Trust Company's procedures for transfer. However, although delivery of outstanding notes may be effected through book-entry transfer at The Depository Trust Company, the Letter of Transmittal or facsimile of the Letter of Transmittal, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the exchange agent at the address set forth below under " -- Exchange Agent" on or prior to the expiration date of the exchange offer, unless the holder complies with the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their outstanding notes and (1) whose outstanding notes are not immediately available or (2) who cannot deliver their outstanding notes, the Letter of Transmittal, or any other required documents to the exchange agent prior to the expiration date, may effect a tender if: - The tender is made through an eligible institution; - Prior to the expiration date of the exchange offer, the exchange agent receives from that eligible institution a properly completed and duly executed Notice of Guaranteed Delivery, by facsimile transmission, mail or hand delivery, setting forth the name and address of the holder, the certificate number(s) of the outstanding notes and the principal amount of outstanding notes tendered and stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the expiration date of the exchange offer, the Letter of Transmittal, together with the certificate(s) representing the outstanding notes in proper form for transfer or a confirmation of book-entry transfer, as the case may be, and any other documents required by the Letter of Transmittal will be deposited by the eligible institution with the exchange agent; and - The exchange agent receives the properly completed and executed Letter of Transmittal, as well as the certificate(s) representing all tendered outstanding notes in proper form for transfer and other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the expiration date of the exchange offer. 21 26 Upon request to the exchange agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their outstanding notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided, tenders of outstanding notes may be withdrawn at any time prior to 5:00 p.m., Central Standard Time, on the expiration date of the exchange offer. To withdraw a tender of outstanding notes in the exchange offer, a written or facsimile transmission notice of withdrawal must be received by the exchange agent at its address set forth herein prior to 5:00 p.m., Central Standard Time, on the expiration date of the exchange offer. Any notice of withdrawal must: - specify the name of the person having deposited the outstanding notes to be withdrawn; - identify the outstanding notes to be withdrawn; - be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which the outstanding notes were tendered or be accompanied by documents of transfer sufficient to have the exchange agent register the transfer of the outstanding notes in the name of the person withdrawing the tender; and - specify the name in which any outstanding notes are to be registered, if different from that of the person who deposited the outstanding notes to be withdrawn. We will determine all questions as to the validity, form, and eligibility of the notices, and our determination will be final and binding on all parties. Any outstanding notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer, and no exchange notes will be issued with respect to those outstanding notes unless the outstanding notes so withdrawn are validly retendered. Any outstanding notes that have been tendered but that are not accepted for payment will be returned to the holder of those outstanding notes, or in the case of outstanding notes tendered by book-entry transfer, will be credited to an account maintained with The Depository Trust Company, without cost to the holder as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn outstanding notes may be retendered by following one of the procedures described above under " -- Procedures for Tendering" at any time prior to the expiration date of the exchange offer. TERMINATION OF CERTAIN RIGHTS All rights given to holders of outstanding notes under the registration rights agreement will terminate upon the consummation of the exchange offer except with respect to our duty: - to keep the registration statement effective until the closing of the exchange offer and for a period not to exceed 180 days after the expiration date of the exchange offer; and - to provide a reasonable number of copies of the latest version of this prospectus to any broker-dealer that requests copies of this prospectus for use in connection with any resale by that broker-dealer of exchange notes received for its own account in accordance with the exchange offer in exchange for outstanding notes acquired for its own account as a result of market-making or other trading activities, subject to the conditions described above under " -- Resale of the Exchange Notes." EXCHANGE AGENT Norwest Bank Minnesota, National Association has been appointed exchange agent for the exchange offer. Questions and requests for assistance, requests for additional copies of this prospectus or the Letter of 22 27 Transmittal, and requests for copies of the Notice of Guaranteed Delivery with respect to the outstanding notes should be addressed to the exchange agent as follows: BY REGISTERED OR BY HAND DELIVERY OR CERTIFIED MAIL: OVERNIGHT COURIER: IN PERSON: Norwest Bank Minnesota, Norwest Bank Minnesota, Norwest Bank Minnesota, National Association National Association National Association Corporate Trust Operations Corporate Trust Operations Northstar East Bldg. P.O. Box 1517 Norwest Center 608 2nd Ave. S. Minneapolis, MN 55480-1517 Sixth and Marquette 12th Floor Minneapolis, MN 55479-0113 Corporate Trust Services Minneapolis, MN 55479-0113
BY FACSIMILE: (612) 667-4927 CONFIRM BY TELEPHONE (612) 667-9764 FEES AND EXPENSES We will pay the expenses of soliciting tenders in connection with the exchange offer. The principal solicitation is being made by mail; however, additional solicitation may be made by telecopier, telephone, or in person by officers and regular employees of ours or our affiliates. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to broker-dealers or others soliciting acceptances of the exchange offer. We, however, will pay the exchange agent reasonable and customary fees for its services and will reimburse the exchange agent for its reasonable out-of-pocket expenses in connection with the exchange offer. We estimate that our cash expenses in connection with the exchange offer will be approximately $ . These expenses include registration fees, fees and expenses of the exchange agent, accounting and legal fees, and printing costs, among others. We will pay all transfer taxes, if any, applicable to the exchange of the outstanding notes for exchange notes. The tendering holder of outstanding notes, however, will pay applicable taxes if certificates representing outstanding notes not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of outstanding notes tendered, or - if tendered, the certificates representing outstanding notes are registered in the name of any person other than the person signing the Letter of Transmittal; or - if a transfer tax is imposed for any reason other than the exchange of the outstanding notes in the exchange offer. If satisfactory evidence of payment of the transfer taxes or exemption from payment of transfer taxes is not submitted with the Letter of Transmittal, the amount of the transfer taxes will be billed directly to the tendering holder and the exchange notes may not be delivered until the transfer taxes are paid. CONSEQUENCES OF FAILURE TO EXCHANGE Participation in the exchange offer is voluntary. Holders of the outstanding notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. Outstanding notes that are not exchanged for the exchange notes in the exchange offer will not have any rights under the registration rights agreement and will remain restricted securities for purposes of the federal 23 28 securities laws. Accordingly, the outstanding notes may not be offered, sold, pledged, or otherwise transferred except in accordance with applicable securities laws: - to us or any of our subsidiaries; - to a "Qualified Institutional Buyer" within the meaning of Rule 144A under the Securities Act purchasing for its own account or for the account of a qualified institutional buyer in a transaction meeting the requirements of Rule 144A; - in an offshore transaction complying with Rule 904 of Regulation S under the Securities Act; - in accordance with an exemption from registration under the Securities Act provided by Rule 144 thereunder, if available; - to "Institutional Accredited Investors" in a transaction exempt from the registration requirements of the Securities Act; or - in accordance with an effective registration statement under the Securities Act. ACCOUNTING TREATMENT For accounting purposes, we will recognize no gain or loss as a result of the exchange offer. The exchange notes will be recorded at the same carrying value as the outstanding notes, as reflected in our accounting records on the date of the exchange. The expenses of the exchange offer will be amortized over the remaining term of the exchange notes. THE RECAPITALIZATION On September 29, 1999, we merged with a wholly owned subsidiary of Kirtland in connection with a recapitalization of Instron. The recapitalization was completed through the following transactions: - Kirtland and its affiliates acquired approximately 88.3% of our common stock for $54.2 million in cash; - members of our management retained shares with an aggregate value of approximately $3.6 million, or approximately 5.9% of our common stock, and including retained options an aggregate value of approximately $6.4 million, or approximately 9.9% of our total equity; - three other stockholders retained shares with an aggregate value of approximately $3.5 million, or approximately 5.8% of our common stock; - selling stockholders will receive approximately $153.5 million in cash in connection with our redemption of their equity interests; - we repaid approximately $17.4 million of our indebtedness; - we incurred fees and expenses of approximately $10.2 million in connection with the recapitalization; - we completed an offering of 60,000 units comprised of $60.0 million of the outstanding notes and 60,000 warrants to purchase 30,654 shares of our common stock; and - we entered into an $80.0 million new senior credit facility with National City Bank, under which we borrowed $30.0 million in term loan borrowings and approximately $16.5 million in revolving credit borrowings. See "Certain Relationships and Related Transactions." USE OF PROCEEDS We will not receive any cash proceeds from the issuance of the exchange notes. Because we are exchanging the exchange notes for the outstanding notes, which have substantially identical terms, the issuance of the exchange notes will not result in any increase in our indebtedness. 24 29 CAPITALIZATION The following table sets forth as of October 2, 1999 the actual consolidated capitalization of Instron. You should read this table in conjunction with the financial statements and related notes and the pro forma financial statements and related notes appearing elsewhere in this prospectus. See the Unaudited Pro Forma Condensed Consolidated Financial Data contained in this prospectus and "Certain Relationships and Related Transactions."
AS OF OCTOBER 2, 1999 --------------- (IN THOUSANDS) Total debt, including current maturities: Existing short term credit and borrowing facilities....... 3,144 New senior credit facility: Revolving credit borrowings (1)........................ 16,500 Term loan borrowings................................... 30,000 13 1/4% Senior Subordinated Notes due 2009................ 60,000 ------- Total debt........................................ 109,644 ------- Stockholders' deficit: Recapitalized common stock................................ 557 Additional paid in capital................................ 50,179 Accumulated deficit....................................... (58,408) Accumulated other comprehensive loss...................... (6,159) ------- Total stockholders' deficit....................... (13,831) ------- Total capitalization...................................... $95,813 =======
- --------------- (1) As of October 2, 1999, we had $31.8 million of undrawn commitments of senior debt under our new senior credit facility, less approximately $10.2 million of outstanding letters of credit and demand guarantees. 25 30 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA We prepared the following unaudited pro forma condensed consolidated financial data of Instron to give effect to the recapitalization. As a leveraged recapitalization, the historical basis of our assets and liabilities was not affected by the recapitalization. For a discussion of the recapitalization and the related transactions, see "The Recapitalization." The pro forma adjustments presented are based upon available information and assumptions that we believe are reasonable under the circumstances. We derived the historical condensed consolidated statement of income data for the nine months ended October 2, 1999, from our unaudited condensed consolidated financial statements included in this prospectus. We derived the historical condensed consolidated statement of income data for the year ended December 31, 1998 from our audited consolidated financial statements included in this prospectus. The unaudited pro forma condensed consolidated statement of income data of Instron for the periods presented give effect to the following transactions, as if each transaction had occurred as of the beginning of the period presented: (1) the recapitalization, (2) the acquisition of Satec, and (3) the acquisition of the remaining interest in IST. You should read the unaudited pro forma financial data in conjunction with our historical consolidated financial statements and related notes, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the other financial data included elsewhere in this prospectus, as well as the information concerning the recapitalization contained in "The Recapitalization." We are providing the pro forma financial data and related notes to you for informational purposes only. This data and the notes do not necessarily reflect the results of operations or financial position that we would have actually achieved had the events referred to above or in the notes to the unaudited pro forma financial data been consummated as of the dates and for the periods indicated and are not intended to project our financial position or results of operations for any future period. 26 31 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME DATA FOR THE NINE MONTHS ENDED OCTOBER 2, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA FOR THE FOR THE NINE MONTHS NINE MONTHS ENDED RECAPITALIZATION ENDED OCTOBER 2, 1999 ADJUSTMENTS OCTOBER 2, 1999 Revenue: Sales......................................... $125,431 $125,431 Service....................................... 25,522 25,522 -------- -------- Total Revenue......................... 150,953 150,953 -------- -------- Cost of Revenue: Sales......................................... 75,117 75,117 Service....................................... 17,587 17,587 -------- -------- Total Cost of Revenue................. 92,704 92,704 -------- -------- Gross Profit.......................... 58,249 58,249 -------- -------- Operating expenses: Selling and administrative.................... 41,558 $ 375(a) 41,370 (563)(b) Research and development...................... 8,239 8,239 Recapitalization compensation expense......... 12,606 (12,606)(d) -- -------- -------- -------- Total operating (income) expenses............. 62,403 (12,794) 49,609 -------- -------- -------- Income (loss) from operations................. (4,154) 12,794 8,640 -------- -------- -------- Other (income) expense: Interest Expense.............................. 1,097 9,427(c) 10,524 Interest Income............................... (730) (730) Foreign exchange losses....................... 26 26 -------- -------- -------- Total other expenses.......................... 393 9,427 9,820 -------- -------- -------- Income (loss) before income taxes............... (4,547) 3,367 (1,180) Provision (benefit) for income taxes............ (190) (3,510)(e) (390) 3,310(d) -------- -------- -------- Net income (loss)............................... $ (4,357) $ 3,567 $ (790) ======== ======== ======== Weighted average number of basic common shares........................................ 6,866 557 ======== ======== Loss per share -- basic......................... $ (0.63) $ (1.42)(h) ======== ======== Weighted average number of diluted common shares........................................ 6,866 557 ======== ======== Loss per share -- diluted....................... $ (0.63) $ (1.42)(h) ======== ======== Dividends declared.............................. $ 0.04 --(g) ======== ========
27 32 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME DATA FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA FOR THE YEAR FOR THE YEAR ENDED PRO FORMA ENDED DECEMBER 31, ACQUISITION INCLUDING RECAPITALIZATION DECEMBER 31, 1998 ADJUSTMENTS(f) ACQUISITIONS ADJUSTMENTS 1998 Revenue: Sales..................... $152,879 $33,283 $186,162 $186,162 Service................... 30,150 3,436 33,586 33,586 -------- ------- -------- -------- Total Revenue.......... 183,029 36,719 219,748 219,748 -------- ------- -------- -------- Cost of Revenue: Sales..................... 91,410 22,094 113,504 113,504 Service................... 19,644 2,369 22,013 22,013 -------- ------- -------- -------- Total Cost of Revenue.............. 111,054 24,463 135,517 135,517 -------- ------- -------- -------- Gross Profit........... 71,975 12,256 84,231 84,231 -------- ------- -------- -------- Operating expenses: Selling and administrative............ 48,869 10,046 58,915 $ 500(a) 58,665 (750)(b) Research and development.... 8,485 3,315 11,800 11,800 Special items charge........ 4,975 4,975 4,975 -------- ------- -------- --------- -------- Total operating (income) expenses.... 62,329 13,361 75,690 (250) 75,440 -------- ------- -------- --------- -------- Income (loss) from operations........... 9,646 (1,105) 8,541 250 8,791 -------- ------- -------- --------- -------- Other (income) expense Gain on sale of land...... (11,076) (11,076) (11,076) Interest expense.......... 1,175 740 1,915 12,116(c) 14,031 Interest income........... (943) (943) (943) Foreign exchange losses... 157 37 194 194 -------- ------- -------- --------- -------- Total other (income) expenses............... (10,687) 777 (9,910) 12,116 2,206 -------- ------- -------- --------- -------- Income (loss) before income taxes....................... 20,333 (1,882) 18,451 (11,866) 6,585 Provision (benefit) for income taxes................ 8,874 (715) 8,159 (4,510)(e) 3,649 -------- ------- -------- --------- -------- Net income (loss)........... $ 11,459 $(1,167) $ 10,292 $ (7,356) $ 2,936 ======== ======= ======== ========= ======== Weighted average number of basic common shares....... 6,668 557 ======== ======== Earnings per share -- basic............ $ 1.72 $ 5.27(h) ======== ======== Weighted average number of diluted common shares..... 7,066 562 ======== ======== Earnings per share-diluted............. $ 1.62 $ 5.22(h) ======== ======== Dividends declared.......... $ 0.16 -- (g) ======== ========
28 33 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME DATA (DOLLARS AND SHARES IN THOUSANDS)
PRO FORMA ---------------------------- TWELVE NINE MONTHS ENDED MONTHS ENDED DECEMBER 31, OCTOBER 2, 1998 1999 ------------ ------------ (a) Reflects the annual fee payable to Kirtland for management and financial consulting services provided to us...................................................... $ 500 $ 375 (b) Estimated cost savings, principally related to directors' fees, legal costs and administrative support, as a direct result of the recapitalization.............. $ (750) $ (563) (c) Reflects the following: 1. Interest resulting from revolving loan borrowings of $30,000 under the $80,000 new senior credit facility at an assumed interest rate of LIBOR plus 3.0% (8.4%)(Actual borrowings at October 2, 1999 were approximately $19,600. The additional borrowings of $11,400 represent the funding of working capital requirements and recapitalization related fees.)...... $ 2,520 $1,890 2. Interest resulting from term loan borrowings of $30,000 under the $80,000 new senior credit facility at an assumed interest rate of LIBOR plus 3.0% (8.4%)................................................ 2,520 1,890 3. Interest resulting from the issuance of the outstanding notes with a face value of $60,000 at an interest rate of 13 1/4%.............................. 7,950 5,963 4. Interest resulting from accretion of original issue discount on the notes, related to the assumed value of the warrants.......................................... 225 169 5. Amortization of debt issuance costs of $6,400 associated with the new senior credit facility and the notes................................................. 816 612 6. Elimination of historical interest expense or interest expense pro forma for acquisitions under existing borrowings............................................ (1,915) (1,097) -------- ------ Total.................................................. $ 12,116 $9,427 ======== ======
Debt issuance costs have been apportioned between the notes, the revolving loan portion of the new senior credit facility and the term loan portion of the new senior credit facility. Cost allocated to the notes are amortized over a ten year period and costs allocated to the revolving loan and term loan portions under the new senior credit facility are amortized over five and one half years. (d) Upon consummation of the recapitalization on September 29, 1999, the Company recorded a pre-tax non-recurring charge of $12,606 ($9,296 net of tax) for compensation expense directly attributable to the recapitalization. The October 2, 1999 unaudited Pro Forma Condensed Consolidated Statement of Income Data has been adjusted to exclude this non-recurring charge and related tax benefit.
PRO FORMA ---------------------------- TWELVE NINE MONTHS ENDED MONTHS ENDED DECEMBER 31, OCTOBER 2, 1998 1999 (e) Reflects the tax effect of pro forma adjustments (a), (b), and (c), assuming an effective tax rate of 38%..... $(4,510) $(3,510)
29 34 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME DATA -- CONTINUED (DOLLARS AND SHARES IN THOUSANDS) (f) Represents the pre-acquisition results for Satec for the period January 1, 1998 to August 4, 1998 and the pre-acquisition results for the remaining interest in IST for the period January 1, 1998 to September 27, 1998. (g) Currently, Instron does not expect to declare dividends. (h) Pro forma basic and diluted earnings per share have been calculated giving effect to the new capital structure of Instron. Pro forma weighted average number of basic common shares includes shares of our common stock outstanding, assuming the recapitalization was consummated at the beginning of the period presented. Pro forma weighted average number of diluted common shares includes shares of our common stock outstanding plus the effect of any dilutive potential common shares that were outstanding during the period, assuming the recapitalization was consummated at the beginning of the period presented. Potential common shares include rollover options held by management and warrants issued upon the recapitalization. The following is a reconciliation of the pro forma basic and dilutive potential shares of our common stock outstanding.
NINE MONTHS ENDED YEAR ENDED OCTOBER 2, DECEMBER 31, 1998 1999 Weighted average number of basic common shares outstanding........................................... 557 557 Dilutive potential common shares...................... 5 -- ---- ---- Weighted average number of dilutive common shares outstanding......................................... 562 557 ==== ==== The dilutive potential common shares have been excluded from the calculation of weighted average number of diluted common shares outstanding for the nine months ended October 2, 1999, as their inclusion would have an antidilutive effect on loss per share.
30 35 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA The following table sets forth selected consolidated historical, financial and other data of Instron for the five years ended December 31, 1998, which have been derived from, and should be read in conjunction with, the consolidated financial statements of Instron included in this prospectus, including the Notes to Consolidated Financial Statements and Management's Discussions and Analysis of Financial Condition and Results of Operations. The selected consolidated data for the nine months ended September 26, 1998 and October 2, 1999 have been derived from, and should be read in conjunction with, Instron's unaudited condensed consolidated financial statements included in this prospectus. Data for the nine months ended October 2, 1999 is not necessarily indicative of the results to be expected for the full year.
NINE MONTHS ENDED YEARS ENDED DECEMBER 31, -------------------------- ---------------------------------------------------- SEPTEMBER 26, OCTOBER 2, 1994 1995 1996 1997 1998 1998 1999 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATING RESULTS: Total revenue...................... $136,192 $150,571 $153,113 $155,660 $183,029 $114,961 $150,953 Research & development............. 8,062 8,782 8,616 6,959 8,485 5,191 8,239 Income (loss) from operations(1)... 8,082 8,921 9,145 12,571 9,646 3,686 (4,154) Income (loss) before income taxes(2)......................... 6,979 7,684 7,385 11,555 20,333 14,476 (4,547) Net income......................... 4,537 4,995 4,582 7,164 11,459 7,828 (4,357) OTHER DATA: Depreciation and amortization...... $ 5,815 $ 6,784 $ 6,873 $ 6,494 $ 7,106 $ 5,167 $ 6,446 Bookings of new orders............. 138,947 155,092 161,692 150,020 166,515 102,056 153,917 Backlog............................ 32,687 36,136 34,361 28,748 74,477 31,870 72,967 EBITDA(4).......................... 13,855 15,891 15,329 18,880 27,671 19,656 2,266 Capital expenditures............... 4,286 4,510 4,473 4,176 5,841 5,182 4,116 Cash flow from operating activities....................... 9,143 6,361 9,824 16,989 5,276 (4,641) 16,222 Cash flow from investing activities....................... (5,029) (8,325) (12,163) (6,227) (6,764) (5,027) (5,409) Cash flow from financing activities....................... (5,278) 1,790 3,120 (10,619) 6,115 9,582 (8,889) Ratio of earnings to fixed charges(3)(5).................... 3.9x 3.8x 3.8x 5.6x 9.4x 8.3x -- FINANCIAL POSITION: Working capital.................... $ 33,849 $ 38,259 $ 44,094 $ 41,942 $ 55,241 $ 43,476 $ 34,220 Total assets....................... 102,294 113,334 121,833 118,985 158,254 138,731 168,639 Total long-term debt............... 11,018 11,225 17,409 7,600 13,216 12,737 90,000 Stockholders' equity (deficit)..... 51,926 56,102 62,401 66,254 79,584 75,918 (13,831) PER SHARE OF COMMON STOCK: Net income per basic share......... $ .72 $ .79 $ .72 $ 1.11 $ 1.72 $ 1.19 $ (0.63) Net income per diluted share....... .72 .78 .70 1.05 1.62 1.10 (0.63) Dividends declared................. .12 .15 .16 .16 .16 .12 .04 Book value......................... 8.26 8.85 9.68 9.82 11.46 10.95 (24.83)
(footnotes on following page) 31 36 (1) In March 1996, we recorded a special items charge to operations to implement a workforce reduction and consolidate some manufacturing operations. We took a pre-tax charge of $1,812 ($1,123 net of taxes) to cover these actions. Income from operations in 1998 reflects a special items charge to operations to consolidate our European operations and write-down the value of non-performing assets. We took a pretax charge of $4,975 ($4,232 net of taxes) to cover these actions. In September 1999, we recorded a non-recurring compensation expense of $12,606 ($9,296 net of tax) directly attributable to the recapitalization. Income from operations excludes foreign exchange gain or loss. (2) Income before taxes in 1998 reflects non-operating pre-tax gain of $11,076 ($6,867 net of taxes recorded) in connection with our sale of 42 acres of excess land in Canton, Massachusetts. (3) Earnings used in computing the ratio of earnings to fixed charges consist of pre-tax earnings before losses from equity investments and fixed charges. Fixed charges are defined as interest expense related to debt, amortization expense related to deferred financing costs and a portion of rental charges representative of interest. (4) EBITDA represents earnings before interest, taxes, depreciation and amortization. EBITDA is presented because we believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. However, other companies in our industry may calculate EBITDA differently than we do. EBITDA is not a measurement of financial performance under generally accepted accounting principles and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or as an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with generally accepted accounting principles. See the Statement of Cash Flow indicated in our financial statements. (5) Due to our loss in the nine months ended October 2, 1999, the ratio coverage was less than 1:1. We must generate additional earnings of $187 to achieve a coverage ratio of 1:1. 32 37 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW We are a world leader in the manufacture, marketing and servicing of materials and structural testing systems, software and accessories. Materials testing focuses on the mechanical properties of material, including tensile strength, compressive strength, fracture properties and hardness, in order to qualify or determine the capabilities of the material. Structural testing simulates the life cycle of components or complete products in order to verify their design and performance capabilities. Our products are used by research scientists, design engineers and quality control personnel to evaluate the mechanical properties and performance of various materials, components and structures in the following applications: - quality control and specification testing; - research and development of new materials to enhance product performance; and - the search for new applications and markets for existing materials. We recognize revenue from product sales at the time of shipment. For services, we recognize revenue at the time the service is performed and ratably over the contract period for service maintenance contracts. Bookings for a period recognize the receipt of a firm committed order from a customer that includes a full detailed product specification and agreed to terms and conditions. Backlog as of a specific date is the total of all outstanding customer orders received and counted as bookings that have yet to be shipped and recognized as sales. Prior to the acquisition of IST, we generally experienced a close correlation between backlog at the end of a specific quarter and our shipments for the subsequent quarter. IST's structures business is characterized by relatively larger contract sizes and longer delivery periods, and because our current backlog now includes IST, we believe that our total backlog at the end of a quarter is no longer a predictable indicator of shipments for the next quarter. RECENT ACQUISITIONS Satec. We acquired substantially all the assets of Satec in August 1998 for approximately $12.6 million in cash. Satec is a manufacturer of a range of materials testing equipment sold primarily in the United States with annual revenue of approximately $18.0 million at time of acquisition. We accounted for this acquisition under the purchase method of accounting. We have included Satec's operating results in our consolidated results of operations from the date of acquisition. Satec's reported revenue was approximately $8.8 million and net income was $356,000 for the last five months of 1998. IST. Prior to September 27, 1998, we were a 51% owner of IST, a joint venture formed in November 1996 with another partner. We accounted for the joint venture using the equity method of accounting. Our revenue from IST was approximately $11.4 million for the first nine months of 1998, $6.9 million for the twelve months of 1997 and $519,000 for the last two months of 1996, and our net losses associated with IST for the same periods were $902,000, $876,000 and $69,000. These revenues include the shipment of systems from Instron to IST under the terms of a manufacturing and supply agreement at substantially reduced gross margins compared to our normal margins, and commission income earned by Instron for selling IST products. The losses include these low margin orders contributed to the joint venture as well as the time and effort necessary to consolidate the operations and technology of the two contributing partners. On September 27, 1998, we exercised our option to purchase the remaining 49% of IST for $2.7 million in cash. The full results of operations from the IST business have been included in our consolidated results since that date. IST had revenue of approximately $18.4 million and net income of $78,000 for the fourth quarter of 1998. We believe these acquisitions enhance our ability to compete effectively in the materials and structural testing industry by broadening our product range and application capability. In addition, we believe that we can improve some aspects of the operating results of the above acquisitions by reducing manufacturing costs and other administrative expenses. 33 38 Other. Financial comparisons of our results of fiscal 1997 and 1996 are impacted by the sale of our Laboratory MicroSystems division to Axiom Systems in April 1997. Laboratory MicroSystems' revenue was approximately $1.2 million in the first quarter of 1997 and $5.6 million in 1996. Laboratory MicroSystems had no significant impact on our net income in either year. THE RECAPITALIZATION On September 29, 1999 we completed a recapitalization of Instron. In the recapitalization, Kirtland and its affiliates acquired approximately 88.3% of our common stock. Members of our management retained approximately 5.9% of our common stock and three other stockholders retained approximately 5.8% of our common stock. We also entered into an $80.0 million new senior credit facility, repaid approximately $17.4 million of existing debt and incurred approximately $10.2 million in fees and expenses. See "The Recapitalization." RESULTS OF OPERATIONS The following table sets forth selected financial and operating data and the percentage relationship of the listed items to our total revenue for the periods indicated:
NINE MONTHS ENDED YEARS ENDED DECEMBER 31, -------------------------------------- ----------------------------------------------------------- SEPTEMBER 26, OCTOBER 2, 1996 1997 1998 1998 1999 (DOLLARS IN THOUSANDS) Total revenue........ $153,113 100.0% $155,660 100.0% $183,029 100.0% $114,961 100.0% $150,953 100.0% Total cost of revenue............ 88,642 57.9 91,489 58.8 111,054 60.7 68,767 59.8 92,704 61.4 -------- -------- -------- -------- -------- Gross profit......... 64,471 42.1 64,171 41.2 71,975 39.3 46,194 40.2 58,249 38.6 Operating expenses: Selling and administrative... 44,898 29.3 44,641 28.7 48,869 26.7 32,342 28.1 41,558 27.5 Research and development...... 8,616 5.6 6,959 4.5 8,485 4.6 5,191 4.5 8,239 5.5 Special items charge........... 1,812 1.2 -- -- 4,975 2.7 4,975 4.3 -- Recapitalization compensation expense.......... -- -- -- -- -- -- -- -- 12,606 8.4 -------- -------- -------- -------- -------- Total operating expenses........... 55,326 36.1 51,600 33.1 62,329 34.1 42,508 36.9 62,403 41.3 -------- -------- -------- -------- -------- Income (loss) from operations......... 9,145 6.0 12,571 8.1 9,646 5.3 3,686 3.2 (4,154) (2.8) -------- -------- -------- -------- -------- Other (income) expenses: Gain on sale of land............. -- -- -- -- (11,076) (6.1) (11,076) (9.6) -- -- Interest expense... 1,548 1.0 1,465 0.9 1,175 0.6 819 0.7 1,097 .07 Interest income.... (477) (0.3) (634) (0.4) (943) (0.5) (806) (0.7) (730) 0.5 Foreign exchange (gains) losses... 689 0.4 185 0.1 157 0.1 273 0.2 26 0.0 -------- -------- -------- -------- -------- Total other expenses........... 1,760 1.1 1,016 0.7 (10,687) (5.8) (10,790) (9.4) 393 .3 Income before income taxes.............. 7,385 4.8 11,555 7.4 20,333 11.1 14,476 12.6 (4,547) (3.0) Provision for income taxes.............. 2,803 1.8 4,391 2.8 8,874 4.8 6,648 5.8 (190) (0.1) -------- -------- -------- -------- -------- Net income........... $ 4,582 3.0 $ 7,164 4.6 $ 11,459 6.3 $ 7,828 6.8 $ (4,357) (2.9) ======== ======== ======== ======== ======== EBITDA............... $ 15,329 10.01 $ 18,880 12.1 $ 27,671 15.12 $ 19,656 17.1 $ 2,266 1.5 ======== ======== ======== ======== ========
34 39 NINE MONTHS ENDED OCTOBER 2, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 26, 1998 Total Revenue. Total revenue for the nine months ended October 2, 1999, increased by 31.3% from the same period in 1998. This increase is due primarily to the inclusion of Satec and IST products and services. If revenue attributable to Satec and IST were excluded for both the first nine months of 1999 and the first nine months of 1998, total revenue for the first nine months of 1999 would have been $100.5 million compared to $100.6 million for the same period in 1998. Foreign sales accounted for approximately 56% of the consolidated first nine months revenue compared to 53% in 1998. Bookings of New Orders. Bookings for the first nine months of 1999 increased by 50.8% from the corresponding period in 1998. The increase is due primarily to the inclusion of Satec and IST in 1999 and higher activity in all our major markets, including the Far East. Backlog. The Company's order backlog was $73.0 million at October 2, 1999, compared to $63.5 million at July 3, 1999 and compared to $74.5 million at year-end 1998. Prior to the acquisition of IST, we generally experienced a close correlation between backlog at the end of a specific quarter and our shipments for the subsequent quarter. IST's structures business is characterized by relatively larger contract values and longer delivery periods and because our current backlog now includes IST, we believe that our total backlog at the end of a quarter is no longer a predictable indicator of shipments for the next quarter. If order backlog attributable to Satec and IST was excluded from both the third and second quarters of 1999 and 1998, order backlog would have been $29.1 million at the end of the third quarter of 1999, compared to $28.0 million for the second quarter of 1999 and compared to $29.5 million at year-end 1998. Gross Profit. Gross profit as a percentage of revenue decreased to 38.6% compared with 40.2% in the first nine months of 1998. This decrease is primarily due to lower than expected margins on IST shipments. Selling and Administrative Expenses. Total selling and administrative expenses, for the first nine months of 1999, increased by 28.4% compared to the same period in 1998 due primarily to the inclusion of Satec and IST in 1999. As a percentage of revenue, selling and administrative expenses were 27.5% compared to 28.1% for the same period last year. Research and Development Expenses. Research and development expenses, for the first nine months of 1999, increased by 58.7% compared with the same period in 1998. This increase is primarily due to the inclusion of Satec and IST in 1999. In addition, software development costs of $1.7 million were capitalized during the first nine months of 1999 compared with $787,000 in the first nine months of last year. This increase is due primarily to the capitalization of costs associated with an integrated software suite for our Structures business. On a pro forma basis, as if Satec and IST were wholly owned in 1998 and development costs software were reported as period expenses, research and development costs would have increased by 11.0%. This increase reflects our current investment in upgrading our core product platforms. Operating Expenses. Operating expenses in the first nine months of 1998 included a special items charge of $5.0 million, to reflect the cost of consolidating European operations and to write down the value of certain non- performing assets. The special items charge includes termination benefits, the costs to shut down and exit a manufacturing facility, other asset impairments and other related costs. We closed down a manufacturing plant in Germany, relocated sales and service personnel to another location in Germany and moved the manufacturing operation to the United Kingdom. During the first nine months of 1999, we paid $1.9 million for termination benefits and related costs. Operating Income (Loss). Losses from operations for the first three quarters of 1999 include recapitalization compensation expense of $12.6 million arising from the merger agreement between Instron and Kirtland. Without one-time charges, income from operations for the first three quarters would have been $8.5 million compared to $8.7 million for the same period last year. This decline in income from operations is due primarily to losses from our structures business. Net Interest Expense. During the first nine months of 1999, we recorded net interest expense of $367,000 compared with interest expense of $13,000 for the same period in 1998. This net increase was due to an increase in interest expense resulting from higher average borrowings (related to the purchase of Satec and IST) and to lower interest income received on notes receivable. 35 40 Foreign Exchange Gains and Losses. Foreign exchange losses of $26,000 for the first nine months of 1999 resulted primarily from movements of the British pound against certain European currencies. In the first nine months of 1998, we had foreign exchange losses of $273,000. Other. A non-operating gain of $11.1 million was recorded in the first quarter of 1998 on the sale of excess land in Canton, Massachusetts. Income Taxes. The consolidated effective tax rate of 4.2% for the first nine months of 1999 reflects the impact of the Recapitalization charge upon U.S. based income and the likelihood that we will not be able to fully utilize foreign tax credits in 1999. This compares to the consolidated effective tax rate of 45.9% for the first nine months of 1998 which is higher than our normal effective tax rate due to non-deductible expenses relating to the 1998 special items charge. Net Income (Loss). Net loss for the first nine months of 1999 was $4.4 million compared to net income of $7.8 million for the same period last year. This decrease is due primarily to expenses related to the recapitalization. EBITDA. EBITDA for the first nine months of 1999, after adjusting for the one time recapitalization compensation expense of $12.6 million, was $14.9 million. This represents an increase of 9.7% when compared to EBITDA for the first nine months of 1998 of $13.6 million, after being adjusted to exclude the special items charge of $4.9 million and the gain on the sale of land of $11.1 million. YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997; AND YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 Total Revenue. Total revenue of approximately $183.0 million in fiscal 1998 increased by 17.6% from revenue of approximately $155.7 million in fiscal 1997 due primarily to the acquisitions of Satec and IST. Total revenue in fiscal 1997 increased by 1.7% from revenue of approximately $153.1 million in fiscal 1996. If revenue attributable to IST, Satec and Laboratory MicroSystems were excluded from both 1998 and 1997, total revenue for 1998 would have been $144.4 million compared to $147.6 million in 1997, a decrease of 2.1%. This decrease is largely due to the impact of the economic downturn in the Asian markets. Bookings of New Orders. Bookings of new orders were approximately $166.5 million in fiscal 1998. Bookings on a pro forma basis, including the annual bookings of IST and Satec, would have been approximately $212.7 million in 1998 compared to $220.1 million in 1997, a decrease of 3.4%. This decrease is due largely to the impact of the economic downturn in the Asian markets. Backlog. Our backlog of orders was approximately $74.5 million at December 31, 1998, an increase of 159.1% from the $28.7 million at December 31, 1997. The increase was due primarily to the inclusion of the IST and Satec backlogs in 1998. The year end 1997 backlog decreased by 16.3% from 1996. Gross Profit. The gross profit margins for the three years ended December 31, 1998 were 42.1%, 41.2% and 39.3% for 1996, 1997 and 1998, respectively. The trend of decreasing margins is due principally to the impact of supplying IST with structures systems at lower than normal profit margins. Gross margins excluding IST; Satec and Laboratory MicroSystems were 42.8% in 1996, 42.7% in 1997 and 44.3% in 1998. This improvement in 1998 is due in part to improved service margins and the benefit of actions previously taken to reduce manufacturing costs. Selling and Administrative Expenses. The 1998 selling and administrative expenses of approximately $48.9 million increased by 9.5% from 1997 due principally to the inclusion of expenses relating to Satec and IST. As a percentage of revenue, selling and administrative expenses decreased to 26.7% in 1998, compared to 28.7% in 1997 and 29.3% in 1996. Research and Development Expenses. Research and development expenses increased by 21.9% in 1998 and decreased by 19.2% in 1997. The increase in 1998 is due primarily to the inclusion of the development efforts of Satec and IST. The decrease in 1997 compared to 1996 resulted from certain Instron engineering resources 36 41 ($2.0 million in 1997) being used to develop new products for IST in accordance with the joint venture agreement, which were reimbursed by IST. During the three years ended December 31, 1998, we capitalized certain software development costs. (See Note 1 of Notes to 1998 Consolidated Financial Statements). If research and development expenses were restated, for comparison purposes, by including capitalized software development costs as period expenses, by adjusting engineering expenses for the effect of Satec and IST and the disposition of Laboratory MicroSystems as previously discussed, research and development expenses of the ongoing business would have increased by 7.5% in 1998. As a percentage of total revenue, research and development expenditures, on a comparable basis, represented 7.0% in 1998, 6.4% in 1997 and 6.4% in 1996. Operating Income. Operating income decreased by 23.3% to approximately $9.6 million in 1998, compared to approximately $12.6 million in 1997 and approximately $9.1 million in 1996. As a percentage of total revenue, operating income represented 5.3% in 1998, 8.1% in 1997 and 6.8% in 1996. Operating income for 1998 includes a special items charge of approximately $5.0 million for the cost of consolidating European operations and to write down the value of non-performing assets. We have closed down a manufacturing plant in Germany, relocated sales and service personnel to another Instron location in Germany, and moved the manufacturing operations to the United Kingdom. The majority of these actions were completed in the fourth quarter, and substantially all cash disbursements were made by the end of the first quarter of 1999. Before the effect of the special items charge, operating income in 1998 was approximately $14.6 million or 8.0% of total revenue and increased by 16.3% compared to 1997 due primarily to certain improved product and service margins and the positive contribution of Satec and IST in the fourth quarter. Net Interest Expense. Net interest expense decreased by 72.0% in 1998 and by 22.0% in 1997. The net decrease in both 1998 and 1997 was due to reduced interest expense resulting from lower average borrowings and was further reduced by interest income received on notes receivable and temporary bank deposits. Foreign exchange losses of $157,000 in 1998 resulted from the strengthening of the British pound against certain European currencies. Foreign exchange losses of $185,000 in 1997 resulted from the strengthening of the U.S. dollar against certain Asian currencies. Income Taxes. Income before taxes was 11.1% of total revenue in 1998, compared to 7.4% in 1997 and 4.8% in 1996. Excluding the special items charge and the non-operating gain on the sale of the land in 1998, as well as the special items charge in 1996, income before taxes as a percentage of total revenue was 7.8% in 1998, 7.4% in 1997 and 6.0% in 1996. The consolidated effective tax rate was 43.6% in 1998 compared to 38.0% in 1997 and 1996. This higher effective tax rate is due to certain non-deductible expenses relating to the special items charge. A detailed reconciliation of our effective tax rate and the United States statutory tax rate appears in Note 6 of Notes to Consolidated Financial Statements. Net Income. Instron reported net income of approximately $11.5 million, or $1.62 per diluted share of common stock, for the year ended December 31, 1998, compared with approximately $7.2 million, or $1.05 per diluted share, in 1997. Net income in 1998 included a special items charge to operations of approximately $5.0 million ($4.2 million net of taxes) and a non-operating gain on the sale of land of approximately $11.1 million ($6.9 million net of taxes). If these special items are excluded, net income in 1998 was approximately $8.8 million, or $1.25 per diluted share, an increase of 23.2% from 1997, due primarily to improved product and service margins, the positive contribution of Satec and IST in the fourth quarter, and a decline in net interest expense. Net income in 1996 included a special items charge to operations of $1.8 million ($1.1 million net of taxes). Excluding the effect of the special items charge in 1996, net income increased by 25.6% in 1997 due primarily to increased revenue of the on-going business, a decline in interest expense and lower foreign exchange losses. EBITDA. EBITDA for the year ended December 31, 1998 of approximately $27.7 million increased from $18.9 million for the year ended December 31, 1997. The increase was due primarily to high electromechanical shipments and the inclusion of Satec and IST products and services. EBITDA increased to $18.9 million in 1997 from approximately $15.3 million for the year ended December 31, 1996. 37 42 LIQUIDITY AND CAPITAL RESOURCES In the first nine months of 1999, we generated cash flows from operating activities of $ 16.2 million, due primarily to a $5.0 million decrease in accounts receivable and $6.4 million increase in accounts payable and accrued expenses. These operating funds were primarily used to fund capital expenditures of $4.1 million, software development costs of $1.7 million and partially pay off, prior to the merger, existing lines of credit and borrowings. In connection with the recapitalization, we entered into the new senior credit facility consisting of a $30 million term loan facility and a $50 million revolving credit facility. In addition, we incurred $60 million of debt through the sale of the outstanding 13 1/4% senior subordinated notes. Principal and interest under the Senior Credit Facility and interest payments on the Senior Subordinated Notes represent significant liquidity requirements for us. As of October 2, 1999, we had $31.9 million of available credit under the $50 million Revolving Credit Facility. See "Description of New Senior Credit Facility." With respect to the $30 million borrowed under the term loan facility, we are required to make scheduled repayments in twenty two quarterly installments of principal with interest thereon on the first day of each January, April, July and October commencing January 1, 2000. The senior subordinated notes will mature in 2009, and bear interest at 13 1/4%. The revolving credit facility matures in April 2005; with all amounts then outstanding becoming due. As a result of the substantial indebtedness incurred in connection with the recapitalization, it is expected that our interest expense will be significantly higher and will have a greater proportionate impact on net income in comparison to periods before the recapitalization. Our operating activities generated cash of $5.3 million in 1998 and $17.0 million in 1997. Investing activities used $6.8 million in 1998 and $6.2 million in 1997, while financing activities provided $6.1 million in 1998 and used $10.6 million in 1997. Our primary source of funds in 1998 and 1997 was net cash generated by operations, supplemented in 1998 by the net proceeds of the sale of 42 acres of excess land in Canton, Massachusetts for $13.5 million in cash. The net cash generated by operations in 1998 consisted primarily of net income, as adjusted for the non-cash effect of depreciation and amortization expense, which was partially offset by an increase in accounts receivable. At December 31, 1998, accounts receivable were $65.8 million compared to $48.2 million at year end 1997 which reflects higher fourth quarter revenue in 1998, and the consolidation of Satec and IST balance sheets. Inventories of $36.1 million increased by $12.1 million due to the consolidation of Satec and IST. The inventory turnover ratio increased to 2.97x from 2.87x at the end of 1997. Our principal investment activities during 1998 included the purchase of Satec for $12.6 million, the buyout of the remaining 49% of IST for $2.7 million, capital expenditures of $5.8 million, and the development of software products for $1.5 million. We plan to make capital expenditures of approximately $6.3 million in fiscal 1999, principally for manufacturing equipment and information systems, and develop and enhance our software products. Our total debt outstanding at year-end 1998 was $19.6 million compared to $13.7 million at the end of 1997. The ratio of total debt to debt plus equity at year-end 1998 increased to 19.8% from 17.1% in 1997. The increase in debt was primarily due to funding acquisitions in 1998. Our principal source of liquidity is cash flow generated from operations and borrowings under the $50.0 million revolving portion of our new $80.0 million senior credit facility. See "Description of New Senior Credit Facility." Our principal use of liquidity will be to meet debt service requirements, finance our capital expenditures, implement our business strategy, including potential acquisitions, fund research and development efforts and provide working capital. We expect that capital expenditures in 1999 will be approximately $6.3 million, of which approximately $3.5 million will be used for maintenance purposes. The balance of the 1999 capital expenditures will be used for equipment purchases development and enhancements of our software 38 43 products. Our debt service obligations could have important consequences to you as a holder of the notes. See "Risk Factors -- Substantial Leverage." Our ability to make payments on and to refinance our indebtedness, including these notes, and to fund planned capital expenditures and research and development efforts will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Given our present capital structure, we believe our present capital resources and anticipated operating cash flows are sufficient to meet our cash requirements to finance operations, fund interest payments, repay loan installments and finance capital expenditures for the foreseeable future. We cannot assure you, however, that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule or that future borrowings will be available to us under our new senior credit facility or elsewhere in an amount sufficient to enable us to pay our indebtedness, including these notes, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness, including these notes, on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including our new senior credit facility or these notes, on commercially reasonable terms or at all. SEASONALITY Historically, our sales are highest in the fourth quarter of each year due to the ordering pattern of our customers, which favors fourth quarter deliveries before budget authorizations expire. Our sales in the first quarter are usually low as it takes time to rebuild in-process inventory levels after the heavy fourth quarter delivery requirements have been satisfied. Also, third quarter sales are generally low due to vacation patterns of both our production workers and customer technical personnel needed for acceptance testing. The seasonal factors affecting sales are usually reflected in quarterly net income. EURO CURRENCY ISSUE On January 1, 1999, eleven of the fifteen member countries of the European Union established fixed conversion rates between their existing currencies ("legacy currencies") and one common currency -- the euro. The euro now trades on currency exchanges and may be used in business transactions. Beginning in January 2002, new euro-denominated bills and coins will be issued, and legacy currencies will be withdrawn from circulation. Our operating subsidiaries affected by the euro conversion have established plans to address the systems and business issues raised by the euro currency conversion. These issues include, among others: - the need to adapt computer and other business systems and equipment to accommodate euro-denominated transactions; and - the competitive impact of cross-border price transparency, which may make it more difficult for businesses to charge different prices for the same products on a country-by-country basis, particularly once the euro currency is issued in 2002. We anticipate that the euro conversion will not have a material adverse impact on our financial condition or results of operations. YEAR 2000 We support the exchange of information relating to the Year 2000 issue and designate the information following below as the Year 2000 Readiness Disclosure within the meaning of the Year 2000 Information and Readiness Disclosure Act. Information set forth herein regarding the Year 2000 compliance of non-Instron products and services are "republications" under the Year 2000 Information and Readiness Disclosure Act and are based on information supplied by other companies about the products and services they offer. We have not 39 44 independently verified the contents of these republications and take no responsibility for the accuracy or completeness of information contained in such republications. The term "Year 2000 issue" is a general term used to describe various business-related problems that may result from the improper processing by computer systems of dates after 1999. The Year 2000 issue affects virtually all companies and all organizations. We have identified our Year 2000 non-compliance risks in four categories: - internal business systems; - internal electronic equipment and embedded chip technology; - external non-compliance by our suppliers; and - software systems products supplied by us to our customers. INTERNAL BUSINESS SYSTEMS We have an active, ongoing program to insure that our business systems will be Year 2000 compliant. We began this program to identify and correct Year 2000 issues in 1996. In accordance with this program, we are following a four-step process to address the Year 2000 issue. The first stage consisted of auditing our major business systems and telecommunication switches. This stage identified a couple of minor issues but due to the installation of a new enterprise resource planning system in 1996 at our two primary manufacturing sites, the exposure was minimal and was corrected by August 1999. The second stage, begun in September 1997, is an audit of all departmental systems and network operating systems. This audit has been completed and formed the basis for the third stage which identified the corrective actions required, and outlined the necessary plan of action. The final stage, which is nearly complete, includes the implementation and testing of all required modifications. Accordingly, we are confident that our internal business systems will be made Year 2000 compliant in a timely manner. We have made capital expenditures of approximately $0.6 million in 1999 to upgrade computing, networking and telecommunications systems as part of our plan to address the Year 2000 issue. Although the costs associated with identifying and implementing the necessary plan of action are not expected to be material to our financial position, there can be no assurance to this effect. We have initiated an audit of the business systems of our two recent acquisitions, Satec and IST. So far, there has been no indication of any major Year 2000 issue that cannot be resolved in a timely manner. INTERNAL ELECTRONIC EQUIPMENT AND EMBEDDED CHIP TECHNOLOGY The audit process has identified certain telecommunication equipment that needs to be upgraded to address the Year 2000 issue. We plan to replace this equipment in the third quarter of 1999, and are finalizing the review of office and facilities equipment such as machine tools, photocopiers, security systems and other systems which may be impacted by the Year 2000 issue. We estimate that the total cost of completing any modifications, upgrades or replacements of this equipment will not have a material adverse effect on our business. This estimate is being monitored and will be revised as additional information becomes available. SUPPLIERS We have nearly completed a communication program with key suppliers of computers, equipment, parts and material used, operated and maintained by Instron. This program is intended to identify and, to the extent possible, resolve issues with suppliers involving the Year 2000 issue. However, we have limited or no control over the actions of these third-party suppliers. Any failure of these suppliers to resolve Year 2000 issues with their systems in a timely manner could have a material adverse effect on our business. 40 45 INSTRON SUPPLIED SYSTEMS AND SOFTWARE TO CUSTOMERS We believe that we have substantially identified and resolved all potential Year 2000 issues with all of the software products that we are currently developing and marketing. Existing software on installed machines may not be Year 2000 compliant and communication programs have been initiated to advise customers on how to upgrade or replace their existing systems. Management believes that it is not possible to determine with complete certainty that all Year 2000 issues affecting our products have been identified due to the complexity of these systems and the fact that these products interact with other third-party vendor products and operate on computer systems which are not under our control. Any such failures to identify or remediate Year 2000 issues affecting our systems and software products could have a material adverse effect on our business. The information presented above sets forth the key steps taken by Instron to address the Year 2000 issue. We cannot make absolute assurances that we have identified all the issues, can resolve them in a timely manner, and that there will be no failures or disruptions to operations which could result in a material adverse effect on our business. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK We are exposed to market risk related to changes in foreign currency exchange rates. We occasionally enter into foreign exchange contracts to manage and reduce the impact of changes in foreign currency exchange rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes. The exposures are associated with certain accounts receivable denominated in local currencies and certain foreign revenue transactions. At December 31, 1998, the face amount of our outstanding forward currency contracts to buy and sell U.S. dollars, Japanese yen and certain European currencies was $6.3 million. A 10% fluctuation in exchange rates for these currencies would change the fair value by approximately $0.3 million. However, any change in the fair value of the contracts would be offset by changes in the underlying value of the transactions being hedged. The hypothetical movement disclosed above was estimated by calculating the fair value of the forward currency contracts at December 31, 1998, and comparing that with those calculated using hypothetical forward currency exchange rates. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The statement is effective for fiscal years beginning after June 15, 1999. Management is currently evaluating the effects of this change on its recording of derivatives and hedging activities. We will adopt SFAS No. 133 for our fiscal year ending December 31, 2000. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-1 "Internal Use Software," which provides guidance on the accounting for the costs of software developed or obtained for internal use. SOP 98-1 is effective for fiscal years beginning after December 15, 1998. Management does not expect the statement to have a material impact on our financial position or results of operations. 41 46 BUSINESS THE COMPANY We are a world leader in the manufacture, marketing and servicing of materials and structural testing systems, software and accessories. Materials testing focuses on the mechanical properties of materials, including tensile strength, compressive strength, fracture properties and hardness. Structural testing simulates the life cycle of components or complete products in order to verify their design, durability and performance capabilities. Our products are used by research scientists, design engineers and quality control personnel to evaluate the mechanical properties and performance of various materials, components and structures in the following applications: - quality control and specification testing; - research and development of new materials to enhance product performance; and - the search for new applications and markets for existing materials. Our systems are used to test the strength, durability, hardness, impact resistance and other characteristics of practically all materials intended for industrial and consumer use by stretching, compressing, cycling or twisting them. Our reach extends well beyond testing extremely complex materials used in automobiles, airplanes, buildings or bridges. It includes testing food, clothing, sporting equipment, children's toys and a wide range of other products. For example, our customers use our systems to test: - the strength and durability of exotic materials used for space exploration; - the exacting quality requirements of prosthetic limbs and other orthopedic equipment; - the strength and durability of seatbelts; - the texture of fruit used in the production of ice cream; and - the quality and formability of sheet metal. As a result, we have a highly diverse base of end users of our systems, including BASF A.G., Ben & Jerry's Homemade, Inc., British Aerospace plc, DaimlerChrysler Corporation, E.I. du Pont de Nemours and Company, General Electric Company, Honda Motor Co., Ltd., Massachusetts Institute of Technology, Minnesota Mining and Manufacturing Company, National Aeronautics & Space Administration, The Procter & Gamble Company and United States Surgical Corporation, among many others. For the nine months ended October 2, 1999, we had total revenue of $151.0 million and EBITDA of $2.3 million. The market we serve for materials testing systems is estimated to be approximately $450 million in 1998 revenue and is estimated to be growing at 4% to 8% annually. Although no independent industry information is available, we believe that the market we serve for structural testing systems is approximately $750 million in 1998 revenue, which together with the materials testing segment of the market we serve totals $1.2 billion, and is estimated to be growing at 8% to 10% annually. We attribute this growth to, among other things: - the search for new materials and new applications of existing materials to create better products; - ongoing total quality management initiatives by manufacturers, including ISO 9000 certification; - the increase in global manufacturing and transfer of materials and products; - manufacturers' need to reduce the cost of, and time required to develop, new products, and increase the reliability of their products; and - increasing regulatory, safety and environmental requirements. COMPETITIVE STRENGTHS LEADING MARKET POSITION. In 1998, we believe we held the leading market position in the worldwide materials testing market with an approximate one-third market share as measured by revenue. We compete with 42 47 numerous other manufacturers in the materials testing equipment market worldwide. While we believe that three others each have materials testing annual revenue in excess of $40 million, most of the other competitors are local manufacturers with less than $10 million in annual revenue. We attribute our leading worldwide position in materials testing to our advanced technology, global service and distribution network, breadth of product offerings, name recognition and strong reputation for providing solutions to testing needs, and supporting the largest installed base in the industry. Although industry information is limited, we believe we are one of the largest participants in the worldwide structural testing market. EXTENSIVE INSTALLED BASE. We believe we have the largest installed base of materials testing equipment in the world, and, with the acquisition of IST, one of the largest installed bases of structural testing equipment in the world. We believe that the Instron name enjoys strong name recognition among our customers. As a result, a substantial majority of our 1998 pro forma total revenue was derived from sales to existing customers. In addition, approximately 30% of our total revenue for the nine months ended October 2, 1999 was derived from the servicing of, and sale of accessories for, our installed equipment base. By building upon our extensive installed base, we have developed strong service capabilities to meet our customers' needs on a worldwide basis. GLOBAL REACH. We have created a sales and service network that enables us to support our customers globally. We have sales and service offices in 14 United States cities and 17 foreign countries, including Brazil, Canada, China, France, Germany, Italy, Japan, Korea, Singapore, and the United Kingdom. We offer our primary software and operating systems in six different languages because we recognize the importance of serving a global market. Our global presence is an important competitive factor for many reasons, including: - we are able to provide our global customers uniform testing equipment and related support services in order to ensure worldwide consistency in their test results; - our customers demand skilled, local support staff to assist them by providing ongoing support and ensuring that our products meet their specialized needs; and - it allows us to market an application solution developed for one customer to other customers around the world. TECHNICAL EXPERTISE. Our ability to provide our customers with comprehensive solutions to their physical testing needs is based upon more than 50 years of technical experience focused on materials testing, a reputation for superior design, consistent quality, advanced technology and excellent customer support. We employ over 100 highly trained engineers in sales positions and an additional 240 product development and support staff who work closely with customers to create new materials and structural testing solutions. We believe our investment in engineering develops relationships with our customers that result in a high degree of loyalty and significant repeat business. Our experience over many decades has allowed us to develop a significant knowledge base. In addition, we offer an extensive portfolio of accessories that enable us to support a wide range of customer applications. We believe this provides a significant competitive advantage because existing and potential competitors may find it difficult to develop a comparable knowledge base and accessory portfolio. UNIVERSAL PRODUCT DESIGN. We have developed a modular approach to the development and manufacturing of our products. This approach allows us to configure standard mechanical components, electronic controllers, software and accessories to meet the needs of the majority of our customers' requirements. As a result, we have been able to address a diverse range of customer needs through different configurations of our standard systems rather than through customization. This approach provides benefits including: - leveraging our research and development activities across virtually all of our product lines; - lowering manufacturing costs by generating a higher volume of standard components; and - reducing the variety of products that require support by our sales and service force. DIVERSE CUSTOMER BASE. Our customer base is well diversified both geographically and by end user application and industry. For the nine months ended October 2, 1999, approximately 44% of our total revenue was derived from sales in the United States, approximately 38% from sales in Europe and approximately 18% from sales to the rest of the world. The end user markets we serve include aerospace, automotive, 43 48 biotechnology, consumer products, food production, metals, packaging, plastics, textiles, and numerous others. As a result, no one customer accounted for more than 5% of 1998 pro forma total revenue. BUSINESS STRATEGY Our goal is to enhance our position as a leading provider of materials and structural testing systems. Our strategies to achieve this goal include: STRENGTHEN OUR CORE BUSINESS. We will continue to introduce new products and further develop existing product platforms by efficiently leveraging our design and engineering capabilities. For example, we recently developed several new products and upgraded others, including: - a new generation controller and software platform that supports our complex systems business; - a major redesign of our hardness product line that has improved the accuracy and consistency of hardness testing results; and - a new product aimed at the emerging asphalt testing business. GROW SERVICE BUSINESS. We intend to expand our service business by continuing to leverage our installed base of equipment, our technical expertise, our global reach and the market recognition of our brand names. Including acquisitions, revenue from our service business has grown over the past five years at a compound annual rate of 12%. Our strategy to continue to grow this business includes: - expanding our worldwide equipment calibration capability to support ISO 9000 and other quality requirements; - developing new service products, including consulting and training programs; and - establishing direct marketing and sales support for our service business. CONTINUE TO ENHANCE COST POSITION. We continually seek ways to further enhance our cost position. We intend to continue to lower manufacturing costs by, in part, efficiently incorporating the operations of acquired businesses into our manufacturing capacity wherever possible. In addition, in 1997, we started an initiative to rationalize and consolidate our manufacturing operations. On October 17, 1998, we transferred manufacturing operations from our Ludwigshafen plant in Germany to our lower-cost facilities in the United Kingdom, for which we incurred a restructuring charge of $2.8 million and are now achieving cost savings, which we expect will be approximately $1.0 million annually. MAKE STRATEGIC, SYNERGISTIC ACQUISITIONS. Since 1993, we have consummated five acquisitions and a joint venture with an aggregate of $94 million of revenue when acquired. Through these transactions we have strengthened and broadened our expertise and product offerings in materials and structural testing. We will continue to pursue strategic acquisitions and joint ventures that: - can be assimilated into our existing infrastructure; - leverage our existing worldwide sales, service and application support network; - can be incorporated into our manufacturing capabilities; - broaden our product and service offerings; - enable us to upgrade acquired companies' products and installed bases using our technology on an ongoing basis; and - enable us to upgrade our installed base with the technology of companies we acquire. For example, in August 1998, we acquired Satec, a leading supplier of materials testing equipment to the metals, aerospace and automotive industries, with annual revenue of approximately $18 million. We are integrating Satec's domestic sales and service organization and are utilizing our international sales network to increase Satec's revenue. We are also incorporating our advanced controllers and software into Satec's product offerings. 44 49 PRINCIPAL MARKETS Our principal markets are industries, academic institutions, and governments -- organizations that seek to understand the characterization and properties of materials and products. INDUSTRY. Most manufacturing industries use either materials or structural testing systems as a part of their research and development and quality-control activities. Industrial research focuses upon developing new materials, substitute materials, or new uses for existing materials that reduce manufacturing or operating costs and improve product quality and durability. The following examples show how some customers use our products in industries that typically have high levels of materials and structural testing activity: - Automotive Industry. Automotive companies use our catapult structural testing systems built by IST to simulate real-life automobile crashes. These simulated crashes are of vital importance in evaluating and improving safety devices in vehicles. In addition, automotive companies use our products extensively in designing virtually all of a vehicle's materials, parts, sub-assemblies and assemblies, from steering components, struts and shock absorbers to seatbelts, light switches and door latches. These components are stretched, pulled, twisted, squeezed, and vibrated using our products to ensure that high quality levels are maintained. - Sports and Recreation. Sports equipment manufacturers use our products to test the hardness of golf balls and baseball bats, to measure the impact resistance of bicycle helmets and elbow pads and to determine the durability of mountain bike components. In addition, manufacturers of snowboards use our impact testing systems to gain a better understanding of how snowboards will behave on ski slopes. Specifically, these systems simulate rock and ice impacts during a snowboarder's jumps and turns. - Aerospace. Aerospace companies use our products to repeatedly deform and break exotic metals, composites and ceramics to simulate in-use conditions of these materials in stressful situations like rocket launches and the re-entry of satellites and space shuttles into the Earth's atmosphere. - Civil Engineering. Engineers use our products to test the tensile properties of iron, steel and other metals and to measure the fatigue and crack resistance of these materials. The test results help engineers determine how these metals will be used in real world structures like bridges and buildings. Engineers also use our products to compress asphalt and concrete at a variety of temperatures and humidity levels to determine how these materials will endure years of use in roads and highways. - Biotechnology. The joining of engineers and medicine in biotechnology is producing a stream of innovations that range from new implants and orthopedic surgical techniques to replacements for human organs. Our high quality test systems are helping to make these advances possible by allowing our customers to comply with stringent FDA requirements. ACADEMIC INSTITUTIONS. Academic institutions use our products for research and instruction in materials science and other applications. For example, researchers at universities use our products for a variety of research programs from testing the bonding properties of dental materials to measuring the effects of food texture on taste. We place particular emphasis on academic institutions because we believe that scientists and engineers trained on Instron equipment will then influence additional sales of our products later in their careers in the public or private sector. GOVERNMENTS. Government and governmental agency use of our products is generally concentrated in the following areas: - Defense, Space and Civil Engineering Programs. Research programs sponsored by governments support the development of materials and technology for such programs as advanced space stations, better armor on fighting vehicles, safer bridges and longer lasting road surfaces. - Determination and Enforcement of Safety Standards and Other Legal Requirements. Our systems are used by worldwide agencies to, among other things, monitor the quality and performance of safety belts, airbags, welds in nuclear power stations and prosthetic devices. 45 50 PRINCIPAL PRODUCTS GENERAL We offer a comprehensive range of general-purpose materials testing systems, application software and accessories. Our products generally fall within one of two basic categories of testing instruments. These categories are referred to as "static" and "dynamic," and differ mainly in the means that they use to apply force to a test specimen. For example, a static system testing a cloth specimen may gradually apply more and more force to the cloth by pulling on it from two sides until the cloth tears. The system would measure the precise force applied to the cloth throughout the test. That same cloth may be tested by one of the dynamic systems by repeatedly applying force to the cloth over and over again by stretching it from two points to simulate the wear and tear that the cloth would endure if used as a seat belt or as an article of clothing. Many tests can be carried out equally well with either a static or dynamic test machine. However, if the test requires extremely rapid rates of applying force, or subjects the test material to rapidly fluctuating force, then a dynamic test machine is appropriate. Our product offerings vary in: - the force capacity of the machines, with smaller machines designed for testing small samples at relatively low levels of force, to large machines that can apply tons of force to samples; - the complexity of the drive system that the instrument uses to apply force to test samples; and - the sophistication of the control electronics, the computer system, and the software used to administer tests and analyze data. Beyond the distinctions between static and dynamic testing machines, we divide our testing products into five general product lines based on the market segments served and the applications of the machines. ELECTROMECHANICAL INSTRUMENTS Electromechanical test instruments are static systems that typically stretch or compress the material being tested. These instruments consist of a frame, which supports the sample to be tested and the mechanical moving parts that are used to apply force to the sample, and electronic components to control the test and analyze the test data. The term "electromechanical" is derived from this use of mechanical moving parts controlled by electronic components. These systems continuously measure the precise force being applied to test materials and the effect of this force on the material. They also analyze the results of the test, and either print, graph or electronically display them. Often referred to as universal testers, with applications in almost every industry, uses of our electromechanical instruments include: - testing the texture of food products; - measuring the strength properties of ceramics at extremely high temperatures; - ensuring that building material can bear heavy snow loads or sustain high winds; and - ensuring that plastic components have the necessary strength to replace metal. Our electromechanical product offerings include the cost effective Series 4400 product line and the high-performance Series 5500 product line. The Series 5500 systems are usually used for research and development and are equipped with sophisticated software and many accessories. Our electromechanical instruments are also used for quality-control applications, which usually require fewer accessories and less breadth of application capability than do research and development applications. The prices of our electromechanical systems generally range from $15,000 to $150,000. Static systems and related accessories accounted for approximately 52.6% of our reported revenue in 1998. SERVOHYDRAULIC SYSTEMS Servohydraulic systems are dynamic testing instruments that allow repeated deformation of the material being tested to simulate in-use conditions over an extended period of time. The moving parts of these systems that apply force to the test material are controlled using hydraulics. The term "servohydraulic" derives from this 46 51 control system. These instruments also contain electronic components that control the test and analyze the test data. Software, computer control, and data analysis are features routinely added to basic servohydraulic systems. The computer may be used to command the application of force to simulate real-life use conditions. It is also used to store and analyze data and display parameters of performance and endurance for test materials or test components. We utilize our engineering expertise to customize our servohydraulic systems to fit the needs of our customers' particular test applications. Machines can be configured not only to stretch or compress the material being tested, but also to simultaneously twist it or subject it to other forms of complex testing. Our servohydraulic systems are used, among other things, to ensure that: - turbine blades meet their performance requirements; - artificial knee joints can withstand the forces associated with walking and jumping; and - bullet proof vests are effective. The prices of our servohydraulic systems generally range from $40,000 to $500,000 with the exception of our structural testing systems discussed below. Servohydraulic testing systems accounted for approximately 22.6% of our reported revenue in 1998. STRUCTURAL TESTING (SIMULATION) Our IST division designs and builds dynamic testing systems that are used to determine the integrity of complete structures, like automobiles. These systems are used to simulate real-life conditions while testing a wide range of automotive components, from suspension and steering systems to entire vehicles. They typically consist of several components designed to push and pull the structure at different points, and sensors that collect and transmit the resulting data to a central processing unit. These testing instruments are called "structural" or "simulation" systems because they often test complete structures by simulating the conditions that the structure may be forced to endure in real life. For example, engineers use our systems to: - validate the ability of automobile steering systems to withstand axial and radial forces; and - simulate the effectiveness of seatbelts and other restraints. The prices of our structural testing systems generally range from $400,000 to several million dollars. These systems accounted for approximately 15.8% of our reported revenue in 1998. HARDNESS SYSTEMS A hardness testing instrument works by forcing an "indentor" into the test material's surface. The depth of penetration or the size of the impression is the measure of the material's hardness. For example, our hardness systems are used to test the properties of metals that will be made into coins, railway tracks, aircraft and automobiles. We are a leader in "Rockwell" testing, the most widely used technique. Our high-end Series 2000 Rockwell testing machine incorporates advanced control features from our electromechanical instruments and we believe it is the most advanced testing machine in the hardness testing market. Hardness machines are calibrated by using a block of material with a predetermined hardness value. We also manufacture and sell these sample blocks as part of our hardness testing business. The prices of our hardness testing machines range from $2,000 to $20,000. Hardness systems and related accessories accounted for approximately 7.0% of our reported revenue in 1998. IMPACT TESTING Impact testing instruments measure fracture properties of test materials or the energy absorbed by material after an impact event. 47 52 Our "Wolpert" and "Satec" impact testing products are used primarily in metals applications. Wolpert testers are high-end products that offer sophisticated data acquisition electronics and software; Satec testers are simpler and less costly. These systems test materials by applying precise force and measuring the results using electronic instrumentation and software. Our impact products also include much more sophisticated "Dynatup" instrumented impact testers for determining fracture and energy absorbing properties of polymers and components. Among the uses of our impact products are: - testing helmets to ensure they will meet the demands of actual use; and - determining the "sweet spot" of golf clubs and tennis racquets. The prices of our impact testing instruments range from $5,000 to $150,000. Impact testing systems and related accessories accounted for approximately 2.0% of our reported revenue in 1998. SERVICE We have approximately 239 field service engineers that offer a wide range of services to our customers in support of our product lines. These service offerings include calibration, extended warranties, software support, upgrade contracts, training and telephone support. Among our business strategies for the future is the expansion of our service business. See "-- Business Strategy -- Grow Service Business." Our service business accounted for approximately 16.0% of our reported revenue in 1998. The service revenue is included in the percentage amounts for our static and dynamic systems set forth above. OTHER PRODUCTS AND ACCESSORIES We manufacture and sell a wide range of other products and accessories. The products include durometers, impact testers, and asphalt binder testers. Typical accessories include: - application software to control tests and record results; - grips that are used to hold test specimens in place; - optical/video extensometers that measure precisely the deformation of the material being tested without actually contracting it; - robotic devices that automatically feed test specimens to our systems; and - environmental control accessories that allow researchers to vary temperature and humidity. Accessories can be included with the initial purchase or subsequently purchased in order to expand the capability of the original machine. We also have license agreements with third parties for the exclusive sale of certain products, including software, in the material and structural testing industry. These other products and accessories for static and dynamic equipment purchased separately from the original sale of equipment are included in the percentage amounts for static and dynamic systems set forth above. MANUFACTURING AND PROPERTIES We have established a worldwide manufacturing "Center of Excellence" for each major product line, while still maintaining customization capabilities and sales support close to customers. This allows us to concentrate production volumes in specific factories in order to optimize our customer response capabilities while reducing inventories and costs. Our manufacturing facilities focus on the final assembly and testing of complete systems. We pursue a strategy of outsourcing sub-assembly processes where feasible. We maintain two primary machine shops, which supply key components for our product lines. In general, we have no critical proprietary manufacturing processes. Annual capital expenditure supports the maintenance of our current facilities, the replacement of machine tools and our cost reduction programs. 48 53 The table below provides summary information on each of our manufacturing facilities.
SIZE LOCATION OWNED/LEASED (SQ. FT.) PRINCIPAL USES Canton, MA Owned 155,000 Corporate Headquarters, Research & Development and Manufacturing Binghamton, NY Leased 35,000 Manufacturing Grove City, PA Owned 53,500 Manufacturing Darmstadt, Germany Leased 70,000 Research & Development and Manufacturing High Wycombe, UK Owned 120,000 European Headquarters, Research & Development and Manufacturing
Canton, MA. Our Canton, MA facility serves as our world headquarters, as well as the worldwide "Center of Excellence" for electromechanical and most hardness and impact equipment. It serves as the customization center for servohydraulic testing instruments for North America and assembles structural testing equipment for IST primarily for the Americas. Operations consist of custom engineering, final assembly and testing, with a very small machine shop supporting engineering and customization requirements. The facility operates assembly lines for electromechanical, impact and hardness machines. The site is located on 24 acres of land that we own with a 155,000 square foot facility, approximately 47,000 square feet of which is dedicated to manufacturing. Binghamton, NY. Our Binghamton, NY site is a leased 35,000 square foot facility with all but 4,000 square feet focused on production. The operation is dedicated to machining components as a satellite to the Canton operation. The Binghamton facility has 15 major machine tools, as well as a standard complement of small manual drills, lathes, etc. Our lease expires on August 31, 2006, and we have the right to renew for an additional 5-year term. Grove City, PA. Our Grove City, PA facility, which is located approximately 40 miles from Pittsburgh, served as Satec's headquarters before its acquisition. The facility currently manufactures Satec products, including electromechanical, servohydraulic and temperature chambers, through a vertically integrated manufacturing process. The site includes machining, welding, sheet metal shear, punch and bend, and electronic assembly, as well as final assembly and testing capabilities. The 53,500 square foot facility is located on over 100 acres of land that we own, with 18,000 square feet of office space. Darmstadt, Germany. Located approximately 30 miles from Frankfurt, Germany, our Darmstadt facility, which is the primary engineering, assembly, and test facility for IST, is leased from Carl Schenck AG and is located in their large central manufacturing compound. The lease, executed in April 1998, is for an initial 5-year term, and gives us the right to renew for an additional 5-year term. IST's manufacturing and office space consists of 70,000 square feet. This facility is fully equipped for the system integration and testing of major structural testing systems and provides most of its output to Europe and Asia. High Wycombe, UK. Our High Wycombe, UK facility is located approximately 30 miles northwest of London's Heathrow Airport. It serves as our worldwide "Center of Excellence" for servohydraulic equipment, pendulum impact machines and other key components and accessories. It is also our European center for customization of electromechanical and some hardness equipment. The facility primarily performs final assembly and testing with a significant machine shop located on site. The site consists of 7 acres of land that we own and an approximately 120,000 square foot facility. In addition to the properties discussed above, we have 35 sales offices and demonstration centers located throughout the United States and in 17 foreign countries. We believe that all of our properties are adequate and suitable for our present needs. 49 54 RESEARCH AND DEVELOPMENT We maintain major research-and-development staffs at our U.S. and U.K. manufacturing facilities. These development staffs often work directly with industrial and government researchers and the materials-science departments of universities to create leading-edge solutions to materials-testing applications. We are a pioneer in the development and application of electronic-measurement and drive-systems techniques in materials testing systems. We have continuously designed, developed, and marketed state-of-the-art testing systems, software, and accessories, including digitally controlled static and dynamic testing systems. In 1998, we expensed approximately $8.5 million on research and development activities, compared with $7.0 million in 1997, and $8.6 million in 1996. We also capitalized software development costs of approximately $1.5 million in 1998, $637,000 in 1997 and $1.1 million in 1996. During these years, our engineering resources have been utilized to develop new products for IST in accordance with the joint venture agreement. The costs associated with these development efforts were reimbursed by IST. If our research and development expenses were restated, for comparison purposes, by including software development costs as period expenses, and by adjusting engineering expenses for the effect of IST and Satec and the disposition of Laboratory MicroSystems, our research and development expenses of the ongoing business would have increased by 7.5% in 1998. In recent years, we have focused our research-and-development expenditures on: - creating new product platforms for static and dynamic product lines; - developing new hardness testing machines; - developing new software and enhancements; and - redesigning products to reduce manufacturing costs. SALES AND MARKETING We believe that our global distribution and service network is a key competitive advantage in serving a diverse array of customers worldwide with a broad range of applications. In order to achieve optimal focus on the needs of our customers, we employ a variety of sales channels, including direct sales, agents, distributors, telesales, and a developing Internet channel. We employ over 100 highly trained engineers in sales positions who are typically responsible for over 90% of our product revenue and pursue business on a geographic basis. Materials testing has three sales divisions located in North America, Europe, and Asia Pacific/Latin America. Each sales division is responsible for recruiting, training, sales management, sales strategy, service management, compensation, and determining best practices in that region. This local management is of particular importance outside North America, where market conditions, local suppliers, and regional differences tend to proliferate. The purchasing cycle for a materials testing system in a typical laboratory is several years with the laboratory manager the key decision maker in any purchase decision. Given this relatively long sales cycle and our well-diversified customer base, both geographically and by end user, we use marketing mailings, seminars, advertisements, and trade shows to promote our products. Direct sales professionals focus on the sales leads that are generated in order to tailor systems to meet a potential customer's specific market need. Over the course of over 50 years, we believe we have built the largest installed base of materials testing equipment in the world, and, with the acquisition of IST, one of the largest installed bases of structural testing equipment in the world, as well as a wide array of accessories for a broad range of applications. With this extensive base of application-specific knowledge, customers often contact us for new purchases without any solicitation by our sales engineers. We estimate that orders from existing customers represent approximately 80% of our annual reported 1998 revenue in the United States and over 50% of our annual reported 1998 revenue outside the United States. COMPETITIVE CONDITIONS We compete with a number of other manufacturers, some of whom have greater financial, technical and marketing resources than we do. The intensity of the competition varies by product line and by geographic area. Competition in the United States is greatest in the dynamic line where we have one major domestic competitor, 50 55 MTS Systems Corporation. Competition in foreign markets is greatest in Germany and Japan, where there are major local manufacturers. The principal competitive factors are: - engineering excellence; - the quality and technical capability of the equipment; - responsiveness to customer needs; - quality of service; and - price. RAW MATERIALS Although we are dependent upon a limited number of suppliers for certain components, we have not experienced significant problems in procurement or delivery of any essential materials, parts or components. Substantially all purchasing is accomplished on a competitive basis while maintaining a level of inventory sufficient to provide support of customer-servicing requirements and meet scheduled delivery dates. PATENTS AND TRADEMARKS We have several patents in the United States and in foreign countries. However, we rely principally on our engineering and technological capabilities rather than on these patents to maintain our position in the industry. The trademarks "Dynatup," "Shore," "Rockwell" and "Instron" and the device mark are registered trademarks of Instron. Under current law, these trademarks may be renewed indefinitely as long as they are maintained in use. ENVIRONMENTAL CONSIDERATIONS Compliance with federal, state, local and foreign laws and regulations relating to protection of the environment has not had, and we do not expect it to have, any material adverse effects on us. NUMBER OF EMPLOYEES At October 2, 1999 we employed 1,435 people worldwide. FOREIGN OPERATIONS Foreign operations represent a significant portion of our business. For the nine months ended October 2, 1999, approximately 44% of our total revenue was derived from sales in the United States, approximately 38% from sales in Europe and approximately 18% from sales to the rest of the world. Our revenue outside the United States accounted for 55% of our total revenue in 1998, 59% in 1997 and 61% in 1996. Bookings from Asia declined by 30% in 1998 compared to 1997 due to the economic downturn in this region. In addition, because of the devaluation of Asian currencies, our revenue from this region was substantially reduced in 1998. We expect revenue from foreign markets to continue to represent a significant portion of our total revenue. We own manufacturing facilities in England and lease manufacturing facilities in Germany. We also sell domestically manufactured products to foreign customers. Our foreign operations are subject to risks in addition to the risks of our domestic operations. The risks that relate to our foreign operations include: - political, economic and social conditions in the foreign countries where we conduct operations; - currency risks and exchange controls, including risks related to the introduction of the euro; - potential inflation in the applicable foreign economies; - the impact of import duties on our costs and prices; - foreign taxation of our earnings and payments received by us; and - regulatory changes affecting our international operations. 51 56 These risks may adversely affect our business. Financial information concerning domestic and foreign operations appears in Notes 1 and 2 in the "Notes to Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," included as part of this prospectus. LEGAL PROCEEDINGS We are party to various litigation matters arising in the ordinary course of business. We cannot estimate with certainty the ultimate legal and financial liability with respect to this litigation, but we believe, based on our examination of these matters, experience to date and discussions with counsel, that any ultimate liability will not be material to our business or results of operations. 52 57 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth information with respect to persons who are currently members of the Board of Directors or executive officers of Instron.
YEARS OF NAME AGE POSITION SERVICE James M. McConnell................... 58 Director, President and Chief 9 Executive Officer Linton A. Moulding................... 46 Chief Financial Officer and Vice 14 President Joseph E. Amaral..................... 52 Vice President, General Manager, 21 North America Operations John R. Barrett...................... 45 Treasurer and Vice President of 11 Corporate Development Jonathan L. Burr..................... 51 Vice President, Corporate Director of 20 Human Resources Yahya Gharagozlou.................... 43 Vice President, Corporate Technical 18 Director Arthur D. Hindman.................... 56 Vice President, General Manager, Asia 20 Pacific / Latin America William J. Milliken.................. 45 Vice President, Corporate Director of 2 Manufacturing Norman L. A. Smith................... 53 Vice President and Managing Director 17 of Instron Limited Raymond A. Lancaster................. 53 Director -- Thomas N. Littman.................... 36 Director -- Dennis J. Moore...................... 61 Director 5 John F. Turben....................... 64 Director --
James M. McConnell joined Instron in 1990 as President and Chief Executive Officer. From 1987 to 1990, he was President and Chief Executive Officer of Automatic Switch Company, and from 1986 to 1987, he was President of Rosemont, Inc. (both are wholly owned subsidiaries of Emerson Electric Co.). He has been a Director of Instron since April 1990. Mr. McConnell is also a director of ESCO Electronics Corporation. Linton A. Moulding joined Instron in 1985. He has held positions as Corporate Controller, Director of U.S. Operations, Corporate Vice President of Manufacturing and Vice President of Finance and Treasurer. In 1993, he was elected Chief Financial Officer of Instron. Joseph E. Amaral joined Instron in 1978. Since 1985, Mr. Amaral has held positions as Corporate Technology Manager, Corporate Product Planning Manager, and Vice President, Corporate Technical Director. In March 1995, he was elected Vice President, General Manager of North America Operations. John R. Barrett joined Instron in 1988 as Assistant Treasurer. From 1979 to 1988, he held various financial management positions with Computervision Corporation. In 1993, he was elected Treasurer of Instron. In 1998, he was elected Treasurer and Vice President of Corporate Development. 53 58 Jonathan L. Burr joined Instron in 1979. He has held positions as Personnel Administrator, Director of Personnel and Corporate Director of Human Resources. In 1993 he was elected Vice President, Corporate Director of Human Resources. Mr. Burr is the son of George S. Burr, who was Vice Chairman of the Board of Directors before the recapitalization. Yahya Gharagozlou joined Instron in 1981. He has held positions as Corporate Product Manager for Software, Marketing Manager and Director of Engineering. In 1996, he was elected Vice President, Corporate Technical Director. Arthur D. Hindman joined Instron in 1979. Since 1979, Mr. Hindman has held positions as Manager, Marketing Administration, International Sales Manager, and General Manager, Asia/Latin America. In 1993, he was elected Vice President and General Manager, Asia Pacific/Latin America. Mr. Hindman is the son of Harold Hindman, who was Chairman of the Board of Directors before the recapitalization. William J. Milliken joined Instron in 1997 as Vice President, Corporate Director of Manufacturing. From 1988 to 1997, he was Director of Manufacturing for Otis Elevator Company's Asia division. From 1978 to 1988 he held various financial and manufacturing management positions within General Motors Corporation. Norman L. A. Smith joined Instron Limited in 1982 as Marketing Director Designate and assumed the position of Director in 1983. In January 1996, he was promoted to Deputy Managing Director and was elected Vice President of Instron and Managing Director of Instron Limited in November 1996. Raymond A. Lancaster joined Instron in 1999 as a director in connection with the recapitalization. Mr. Lancaster joined Kirtland as a Managing Partner in 1995. Prior to joining Kirtland, Mr. Lancaster was a General Partner of Key Equity Partners and was responsible for KeyCorp's Private Equity Group. Mr. Lancaster is a member of Kirtland's Advisory Board and is a Director of Fairmount Minerals, Ltd., Management Reports, Inc., PVC Container Corporation, Shore Bridge Corp., STERIS Corporation and Stonebridge Industries, Inc. Thomas N. Littman joined Instron in 1999 as a director in connection with the recapitalization. Mr. Littman joined Kirtland as a Partner in 1995 after working as an Associate with the law firm of Jones, Day, Reavis & Pogue. He serves as Director of R Tape Corp. and Stonebridge Industries, Inc. Dennis J. Moore joined Instron as a director in 1994. Mr. Moore is Chairman and Chief Executive Officer of ESCO Electronics Corporation, a diversified producer of defense systems and commercial products. From 1990 to 1992 he was President and Chief Operating Officer of ESCO. John F. Turben joined Instron in 1999 as a director in connection with the recapitalization. Mr. Turben founded the predecessor to Kirtland Capital Partners in 1977. He is a Managing Partner of Kirtland and serves as Chairman of The Hickory Group, Ltd., PVC Container Corporation and Harrington and Richardson 1871, Inc. He is a Director of NACCO Industries, Inc., Unifrax Corporation, TruSeal Technologies Inc., Stonebridge Industries, Inc. and a Manager and Vice Chairman of Gries Financial LLC. DIRECTOR COMPENSATION Directors receive reasonable and customary compensation in connection with their service on our Board of Directors. 54 59 EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth compensation awarded to, earned by or paid to our Chief Executive Officer and our other four most highly compensated executive officers during each of the years ended December 31, 1998, 1997 and 1996. We have not granted stock appreciation rights to any of our executive officers for these periods.
LONG TERM COMPENSATION AWARDS ANNUAL COMPENSATION ------------------------------ -------------------- SECURITIES NAME AND PRINCIPAL ANNUAL RESTRICTED STOCK UNDERLYING ALL OTHER POSITIONS YEAR SALARY BONUS AWARDS(1) OPTIONS(#) COMPENSATION(2) James M. McConnell...... 1998 $325,769 $214,176 -- -- $4,800 President and Chief 1997 280,000 208,447 $612,500(3) -- 4,750 Executive Officer 1996 279,808 134,200 -- 50,000 4,500 Linton A. Moulding...... 1998 165,769 66,585 -- -- 4,777 Chief Financial Officer 1997 149,346 67,165 306,250(3) -- 4,750 1996 132,808 32,560 -- 15,000 4,500 Joseph E. Amaral........ 1998 155,500 56,221 -- -- 4,800 Vice President and 1997 142,808 58,200 306,250(3) -- 4,750 General Manager North 1996 137,846 41,145 -- 15,000 4,500 America Operations William J. Milliken..... 1998 155,769 53,544 -- -- 865 Vice President, 1997(4) 28,846 24,283 351,063(5) -- -- Corporate Director of Manufacturing Yahya Gharagozlou....... 1998 149,808 54,096 -- -- 4,800 Vice President, 1997 124,115 53,166 306,250(3) -- 4,545 Corporate Technical 1996 101,384 22,375 -- -- 3,334 Director
- --------------- (1) Amounts shown represent dollar value of the restricted stock on the date of grant. (2) Amount shown represents matching contributions made under our 401(k) Plan. (3) We awarded Mr. McConnell 50,000 shares and we awarded Messrs. Moulding, Amaral and Gharagozlou 25,000 shares of common stock in the form of restricted stock on May 14, 1997, valued at $12.25 per share based on the closing stock price on the date of the grant. Based on the December 31, 1998 closing stock price of $17.25, Mr. McConnell's shares of restricted stock had an aggregate value of $862,500 and Messrs. Moulding, Amaral and Gharagozlou's shares of restricted stock had an aggregate value of $431,250. As a result of the recapitalization, 25,340 shares of restricted stock will be converted into restricted stock of the surviving corporation. As amended, the restricted stock award agreements governing these shares will provide for vesting of the restricted stock on May 14, 2004, or earlier depending on our financial results. Prior to the recapitalization, dividends on the restricted stock awards were paid at the same rate as paid to all stockholders. (4) Mr. Milliken joined Instron in October 1997, as Vice President, Corporate Director of Manufacturing. Salary for 1997 in the table reflects a partial year. (5) We awarded Mr. Milliken 20,500 shares of common stock in the form of restricted stock on October 29, 1997 valued at $17.125 per share based on the closing stock price on the date of the grant. Based on the December 31, 1998 closing stock price of $17.25, Mr. Milliken's shares of restricted stock had an aggregate value of $353,625. The restricted stock vests after seven years, or sooner if certain financial targets are met, or upon a change in control. Dividends on the restricted stock awards are paid at the same rate as paid to all stockholders. 55 60 SEVERANCE AND OTHER AGREEMENTS During the past six years, we entered into Executive Severance Agreements with ten of our current executive officers and five additional key employees. The severance agreements, other than Mr. McConnell's, were amended in connection with the recapitalization. Each agreement, other than Mr. McConnell's, provides that the employee will receive severance benefits if he is terminated by Instron (other than for cause or by reason of his death, disability or retirement), or by the employee for "Good Reason" (as defined in the severance agreements) within 24 months after a "Change in Control" (as defined in the severance agreements). Mr. McConnell's severance agreement provides that he will receive severance benefits if his employment is terminated for any reason within 24 months after a Change in Control. The severance agreements generally provide for the following severance benefits: - a lump-sum payment equal to 200% of the employee's "base amount" (as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended); and - subject to specified limitations, the provision of a "gross-up" payment to an executive officer if he becomes subject to an excise tax as a result of receiving change-in-control severance benefits (including the value of accelerated vesting of options and restricted stock). PENSION PLANS The following table sets forth a range of estimated annual retirement benefits under Instron's U.S. Employees' Pension Plan for persons in the compensation and years of service classification specified.
ESTIMATED ANNUAL BENEFIT ---------------------------------------------------------- AVERAGE ANNUAL 30 OR MORE COMPENSATION(1) 10 YEARS 15 YEARS 20 YEARS 25 YEARS YEARS $125,000............................... $ 20,833 $31,250 $41,667 $52,083 $ 62,500 150,000............................... 25,000 37,500 50,000 62,500 75,000 175,000............................... 29,167 43,750 58,333 72,917 87,500 200,000............................... 33,333 50,000 66,667 83,333 100,000
- --------------- (1) Section 401(a)(17) of the Internal Revenue Code limits the compensation taken into account in calculating an employee's retirement benefit. The limit for compensation paid in 1998 was $160,000. Our calculation of retirement benefits under our pension plan is based on average annual compensation, which includes salary and performance compensation, for the highest five full consecutive twelve-month periods out of the last ten full consecutive twelve-month periods preceding retirement or termination of employment. Under our pension plan, as of December 31, 1998, the employees listed in the Summary Compensation Table were credited with the years of service shown in the following chart: Joseph E. Amaral............................................ 21 years Yahya Gharagozlou........................................... 14 years William J. Milliken......................................... 1 year Linton A. Moulding.......................................... 14 years James M. McConnell.......................................... 9 years
The estimated annual benefit for years of service in the table above is computed on the basis of payment of a straight line life annuity at the normal retirement age of 65. The amounts in the table do not reflect plan offsets for benefits provided under Instron's former Employee' Profit Sharing Retirement Plan nor the required Pension Plan offsets for social security payments. 56 61 STOCK OPTION PLANS The tables included in this offering memorandum reflect stock award information with respect to executive officers. Upon the consummation of the recapitalization, we will not grant any further stock awards and will grant options rights to reflect the executive's future contributions to the business. See "Certain Relationships and Related Transactions -- The Recapitalization -- Grant of New Options to Management." The following table sets forth information regarding options exercised in 1998 and options held at December 31, 1998 by our executive officers named in the Summary Compensation Table. During the fiscal year ended December 31, 1998, no officer named in the Summary Compensation Table received any stock options. AGGREGATE EXERCISES AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS AT FISCAL YEAR END(#) AT FISCAL YEAR END (1) SHARES ACQUIRED VALUE ------------------------------ ---------------------------- NAME ON EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE James M. McConnell... 193,422 1,740,798 124,500 37,500 $679,563 $160,938 Linton A. Moulding... 4,250 21,250 41,250 11,250 227,344 48,281 Joseph E. Amaral..... -- -- 44,069 11,250 245,974 48,281 William J. Milliken........... -- -- -- -- -- -- Yahya Gharagozlou.... -- -- 19,500 11,000 94,125 47,344
- --------------- (1) Represents the total gain that would be realized if all options, for which the December 31, 1998 stock price of $17.25 was greater than the exercise price, were exercised. 57 62 SECURITY OWNERSHIP The following table sets forth information regarding the ownership of Instron common stock by: - the stockholders we know to be beneficial owners of more than five percent (5%) of the outstanding shares of Instron common stock; - each of our directors; - each of our executive officers; - all directors and executive officers of Instron as a group; and - other persons as required. The table shows the beneficial ownership interests of the parties listed above as of the date of this prospectus. Unless otherwise indicated, we believe that each of the stockholders listed has sole voting and investment power with respect to their beneficially owned shares of common stock.
SHARES BENEFICIALLY OWNED ------------------------- NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT(2) Kirtland Partners Ltd.(3)................................... 492,480 84.56% 2550 SOM Center Road Suite 105 Willoughby Hills, Ohio 44094 George S. Burr.............................................. 12,000 2.06 Helen L. Burr............................................... 4,000 * The Harold Hindman Trust--1969(4)........................... 16,000 2.75 James M. McConnell(5)....................................... 19,585 3.36 Linton A. Moulding(6)....................................... 11,409 1.96 Joseph E. Amaral (7)........................................ 3,000 * Kenneth L. Andersen(8)...................................... 3,567 * John R. Barrett (9)......................................... 458 * Jonathan L. Burr(10)........................................ 8,329 1.43 The Jonathan L. Burr Trust--1965(11)........................ 4,000 * Yahya Gharagozlou(12)....................................... 1,062 * Arthur D. Hindman(13)....................................... 2,552 * William J. Milliken......................................... 2,189 * Norman L. Smith............................................. 1,800 * Raymond A. Lancaster(3)..................................... -- -- Thomas N. Littman........................................... -- -- Dennis J. Moore............................................. -- -- John F. Turben(3)........................................... -- -- All Directors and executive officers as a group (14 persons)(14).............................................. 58,042 9.97
- --------------- * Less than 1%. (1) Unless otherwise set forth above, the address of the listed stockholders is c/o Instron Corporation, 100 Royall Street, Canton, Massachusetts 02021. (2) These percentages are based on the number of outstanding shares of Instron common stock upon the consummation of the recapitalization on a fully diluted basis (assuming the exercise of all retained options and excluding any effect of the warrants issued in connection with the outstanding notes). The calculation 58 63 of these percentages of a fully diluted basis results in some percentages in this table varying from disclosures elsewhere in this prospectus. (3) Kirtland Partners Ltd. is the general partner of Kirtland Capital Partners III L.P. and the managing member of each of Kirtland Capital Company III LLC and ISN Investments Ltd. As such, Kirtland Partners Ltd. will exercise complete control over the shares of Instron common stock held by each entity, including voting control and investment decisions with respect to all the shares. Each of John F. Turben, Raymond A. Lancaster, John G. Nestor and William R. Robertson is an executive officer, manager and member of Kirtland Partners Ltd., and as a result of these positions, may be deemed to have beneficial ownership of the shares of Instron common stock held by these entities. Messrs. Turben, Lancaster, Nestor and Robinson disclaim beneficial ownership of all shares of common stock held by Kirtland. (4) The Harold Hindman Trust -- 1969 is a trust of which Harold Hindman and Robert N. Shapiro are the trustees and Harold Hindman is the sole beneficiary, but with respect to which Harold Hindman has sole voting and dispositive power over the shares. (5) The number shown includes 2,400 shares of restricted common stock. (6) The number shown includes 8,700 shares that Mr. Moulding has the right to acquire upon the exercise of retained options and 2,709 shares owned as a joint tenant with his wife, Jane Elizabeth Moulding. (7) The number shown is the number of shares that Mr. Amaral has the right to acquire upon the exercise of his retained options. (8) The number shown includes (a) 268 shares of restricted common stock and (b) 3,300 shares that Mr. Andersen has the right to acquire upon the exercise of his retained options. (9) The number shown represents shares of restricted common stock. (10) The number shown includes (a) 329 shares of restricted common stock and (b) 8,000 shares that Mr. Burr has the right to acquire upon the exercise of his retained options. (11) The Jonathan L. Burr Trust -- 1965 is a trust of which Preston Saunders, Robert C. Pomeroy and Mary-Kathleen O'Connell are the trustees and Jonathan L. Burr is the sole beneficiary, but with respect to which Jonathan L. Burr has shared voting power (with Robert S. Burr, Susan Burr Carlo and Leslie B. Barresi) and sole dispositive power over the shares. (12) The number shown includes 1,062 shares of restricted common stock. (13) The number shown includes (a) 552 shares of restricted common stock and (b) 2,000 shares that Mr. Hindman has the right to acquire upon the exercise of his retained options. (14) The number shown includes (a) 5,068 shares of restricted common stock and (b) 25,000 shares that executive officers have the right to acquire upon the exercise of retained options. 59 64 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS THE RECAPITALIZATION On May 6, 1999, we entered into a merger agreement with Kirtland and ISN Acquisition Corporation to effect a recapitalization of Instron. The parties amended the merger agreement on August 5, 1999 by Amendment No. 1 to, among other things, permit the closing of the recapitalization to occur in September rather than August. In the recapitalization, which was consummated on September 29, 1999, Kirtland and its affiliates acquired approximately 88.3% of our outstanding common stock. Members of our management retained approximately 5.9% of our outstanding common stock and three other stockholders retained an approximate 5.8% equity interest in Instron. Kirtland and its affiliates contributed approximately $54.2 million in cash to Instron in the recapitalization. Management. The members of management who participated in the recapitalization agreed with Kirtland to exchange, in a series of transactions, an aggregate of 165,210 shares of our common stock they owned prior to the recapitalization (of which 25,340 shares were restricted) that resulted in their ownership of 32,951 shares of our common stock after the recapitalization (of which 5,068 shares are restricted). The shares of restricted stock are governed by the Instron Corporation 1992 Stock Incentive Plan and amended restricted stock award agreements. The amended restricted stock award agreements provide for vesting of the restricted stock on May 14, 2004, or earlier depending on our financial results, and amend the definitions of "cause" and "good reason." In addition, options to purchase up to an aggregate of 125,000 shares of our common stock held by members of management were converted into options to purchase up to an aggregate of 25,000 shares of our common stock following the recapitalization. Each of these retained options is fully vested and exercisable. The retained options represented approximately 4.3% of our common stock, assuming the exercise of all retained options. Other Stockholders. Three other stockholders agreed with Kirtland to exchange, in a series of transactions, an aggregate of 160,000 shares of our common stock they owned prior to the recapitalization that resulted in their ownership of 32,000 shares of our common stock after the recapitalization. Cash payments to members of management and the other stockholders. Members of management and the three other stockholders did not convert all the shares and options to purchase shares of our common stock that they owned prior to the recapitalization. In the recapitalization, members of management and the three other stockholders were entitled to receive $22.00 per share in cash for their unconverted shares of our common stock, including shares of restricted common stock owned by some members of management. They were also entitled to receive cash based on the number of shares of our common stock underlying their unconverted options and the difference between the applicable per share exercise price of the options and $22.00. Members of management and three other stockholders received cash payments, directly or indirectly, upon consummation of the recapitalization. The members of management, James M. McConnell, Joseph E. Amaral, Kenneth L. Andersen, John R. Barrett, Jonathan L. Burr, The Jonathan L. Burr Trust -- 1965, Yahya Gharagozlou, Arthur D. Hindman, William J. Milliken, Linton A. Moulding and Norman L. Smith, received an aggregate of approximately $14.9 million and retained equity, including options and restricted stock, with a value of approximately $6.4 million. The three other stockholders, George S. Burr, Helen L. Burr, and The Harold Hindman Trust -- 1969 (includes cash for shares owned of record by Harold Hindman, a trustee and the sole beneficiary of The Harold Hindman Trust -- 1969), received an aggregate of $15.9 million and retained equity with a value of approximately $3.5 million. The value of retained equity is based upon a value of $22.00 per share adjusted for the reverse stock split that took place upon consummation of the recapitalization. We believe that the members of management used a substantial portion of the payments they received to repay debt incurred in connection with prior exercises of options and to pay tax obligations associated with the exercise of options and the vesting of restricted stock. Grant of New Options to Management. In the recapitalization, we adopted the Instron Corporation 1999 Stock Option Plan and reserved for issuance under this plan 10% of the aggregate number of shares of common stock outstanding on a fully diluted basis immediately following the recapitalization. We granted to members of 60 65 management options to purchase, in the aggregate, 40% of the shares reserved under the plan following the recapitalization. Each option is exercisable at the fair market value per share determined in good faith by our Board of Directors. Confidentiality and Noncompetition Agreements with Members of Management. In order to induce Kirtland to enter into the recapitalization, at the effective time of the recapitalization each of the members of management entered into a confidentiality and noncompetition agreement with us. Under the agreement, each member of management will maintain the confidentiality of business information and will not engage in competition for so long as he is employed with us or any of our subsidiaries and thereafter until the first anniversary of the date on which he last worked for us. Severance Agreements with Members of Management. Each member of management, other than Mr. McConnell, amended his existing executive severance agreement upon the closing of the recapitalization to modify the definition of "good reason." As amended, the severance agreements provide that a termination constitutes "good reason" if we fail to maintain the executive in a position with responsibilities associated with a vice president level or higher, or if the executive's title is reduced to below a vice president or, except for John R. Barrett, the executive is no longer a member of our executive committee. The amended severance agreements do not apply to any termination that occurs after the second anniversary of the recapitalization, or to any change in control after the recapitalization. Deferred Compensation Agreement with James M. McConnell. At the effective time of the recapitalization, we entered into a deferred compensation agreement with Mr. McConnell to replace his existing executive severance agreement. Under this agreement, we credited $1.2 million to a nonforfeitable deferred compensation account. We will credit interest on the value of the account in arrears on the last business day of each quarter at a rate of interest equal to the composite "prime rate" as quoted for that day. The account will be paid in five annual installments commencing on the fifth anniversary of the recapitalization. Commencement of payments will be accelerated in the event of Mr. McConnell's disability, death or termination without cause. Upon a change in control, the account will be paid to Mr. McConnell in a lump sum. In the event that any payment under the deferred compensation agreement would be an "excess parachute payment" within the meaning of the Code, then we may propose that the payments to be made under the agreement be reduced so that no portion of the payment, if so reduced, constitutes an excess parachute payment. If Mr. McConnell agrees to any such reduction, interest credited to the account will be reduced so that no portion of the interest to be paid, as so reduced, constitutes an excess parachute payment. If Mr. McConnell does not agree to this reduction, then we may accelerate payments to Mr. McConnell so that no payment to Mr. McConnell will constitute an excess parachute payment. Mr. McConnell is entitled to receive an additional "gross-up payment" to the extent necessary to offset any federal, state and local income tax, employment tax and excise tax upon the excess parachute payment. Voting Agreement. Under a voting agreement, dated as of May 6, 1999, members of management, three other stockholders, and some of their affiliates agreed with ISN Acquisition Corporation to vote all of the shares of our common stock owned by them in favor of the recapitalization. These individuals also agreed (1) not to dispose of any common stock, or deposit any common stock into a voting trust or enter into a voting agreement or arrangement with respect to voting any voting shares, (2) to waive their appraisal rights, and (3) at Kirtland's request, to take further lawful actions as may be necessary or desirable to consummate the recapitalization. The common stock subject to these voting agreements represents approximately 22.4% of our outstanding common stock. The voting agreement terminated upon the consummation of the recapitalization. Fees and Expenses. In connection with the recapitalization, we agreed to pay for the reasonable fees and expenses of legal counsel for members of our management up to an aggregate of $85,000. We also agreed to pay for the reasonable fees and expenses of three other stockholders' legal counsel up to an aggregate of $40,000. Indemnification and Insurance. The merger agreement contains standard indemnification provisions for our former or current directors, officers, employees, fiduciaries or agents. In addition, before the recapitalization, we purchased an extended reporting period endorsement under our then-existing directors' and officers' liability insurance coverage for our directors and officers. 61 66 Special Committee. The members of the Special Committee of our Board of Directors were treated in the recapitalization as public stockholders with respect to their shares of our common stock. Upon consummation of the recapitalization, Mr. Young received $550,000 as cash merger consideration and Mr. Moore received $55,000 as cash merger consideration. The third member of the Special Committee, Mr. Smith, did not own any shares of our common stock. None of the members of the Special Committee held or now hold any options to purchase our common stock. STOCKHOLDERS AGREEMENT Upon consummation of the recapitalization, all of our stockholders entered into a stockholders agreement. The stockholders agreement provides that our stockholders may not transfer their shares of common stock except under specified circumstances. Under the stockholders agreement, we have a right of first refusal in the event that any stockholder wishes to sell shares of our common stock, or, in the event that we do not exercise our right of first refusal, the nontransferring stockholders, other than any management stockholder who is no longer an employee, will have the opportunity to purchase the shares. The stockholders agreement also provides that the stockholders will have the opportunity to participate in some sales of our common stock by Kirtland, and Kirtland has the right to cause the other stockholders to participate in some of these sales. In addition, the stockholders agreement provides for certain "puts" and "calls" upon the termination of a management stockholder's employment with Instron, and provides that if Kirtland purchases shares of our common stock following the closing of the Recapitalization, the stockholders have the right to purchase their pro rata share of the number of shares to be issued to Kirtland. REGISTRATION RIGHTS AGREEMENT Upon consummation of the recapitalization, Kirtland and its affiliates, members of our management and Instron entered into a registration rights agreement. Under this registration rights agreement, the parties have the right to participate, or "piggy-back," in equity offerings initiated by us that are registered under the Securities Act, subject, in the case of members of our management, to the approval of the underwriters involved with any equity offering and other customary terms and conditions. ADVISORY SERVICES AGREEMENT At the closing of the recapitalization, Kirtland and Instron entered into an advisory services agreement under which Kirtland will provide management consulting and financial advisory services to Instron for an annual fee in the amount of $500,000. The advisory services agreement includes customary indemnification provisions in favor of Kirtland. Also at the closing of the recapitalization, we paid Kirtland a financing fee of $750,000 and reimbursed Kirtland for its out-of-pocket expenses as compensation for its services as financial advisor. 62 67 DESCRIPTION OF NEW SENIOR CREDIT FACILITY General. As part of the recapitalization, we entered into a new senior credit facility with National City Bank, as agent, providing for a revolving credit facility of up to $50.0 million (subject to an available borrowing base) and a term loan facility of $30.0 million, maturing in five and one-half years, unless terminated sooner upon certain events of default. If terminated upon an event of default, all outstanding advances under the new credit facility may be required to be immediately repaid. The revolving portion of the new senior credit facility can be used to complete permitted acquisitions or for working capital and other general corporate purposes. Borrowings under the new senior credit facility will bear interest, at our option, at either the higher of the federal funds rate plus 0.5% and the prime rate, or a LIBOR rate, in each case plus an applicable margin. Our ability to borrow under the new senior credit facility will be subject to our compliance with the covenants described below. Guarantees and Security. All of our obligations under the new senior credit facility are and will be secured by a first priority lien on substantially all of the properties and assets of Instron and our existing and future domestic subsidiaries. In addition, our obligations under the new senior credit facility are and will be secured by a first priority pledge of and security interest in all of the outstanding capital stock of our existing domestic subsidiaries and future domestic subsidiaries and a pledge of 65% of the outstanding capital stock of some foreign subsidiaries. Certain of our foreign subsidiaries have also granted a lien on substantially all of their properties and assets. Financial Covenants. The new senior credit facility requires that we meet and maintain certain financial ratios and tests, including: - a minimum consolidated net worth and minimum consolidated EBITDA; - a maximum consolidated leverage ratio (total debt to EBITDA) and senior leverage ratio (senior debt to EBITDA); - a minimum consolidated interest coverage ratio (EBITDA to interest expense); and - a minimum consolidated fixed charge coverage ratio (EBITDA to interest expense plus other fixed charges). Other Covenants. The new senior credit facility also contains covenants that limit the ability of us and our operating subsidiaries to take various actions, including: - incurring additional indebtedness and liens and entering into some leases; - fundamentally changing corporate structure, including mergers, consolidations and liquidations; - acquiring and disposing of property; - making principal payments on indebtedness (including these notes) prior to maturity, dividends and capital stock purchases; - making investments; - making capital expenditures; - making some modifications to organizational documents; - changing fiscal periods; - entering into sale and leaseback transactions; - entering into affiliate transactions; - entering into agreements restricting distributions; - amending the acquisition documents; - granting negative pledges; and - making a material change in the nature of our business. Events of Default. The new senior credit facility contains customary events of default with respect to us and our operating subsidiaries, including defaults with respect to other indebtedness. 63 68 DESCRIPTION OF NOTES THE UNITS The outstanding notes were issued in connection with a unit offering on September 29, 1999. Each unit consisted of one $1,000 principal amount note and one warrant to purchase 0.5109 of a share of common stock, par value $0.01 per share, of Instron. The outstanding notes and the warrants began to trade separately when the registration statement with respect to the registered exchange offer for the outstanding notes, of which this prospectus is a part, was declared effective under the Securities Act. THE EXCHANGE NOTES You can find the definitions of some terms used in this description under the subheading "Certain Definitions." In this description, the word "Company" refers only to Instron Corporation and not to any of its subsidiaries. The Company will issue the Notes under an Indenture (the "Indenture") by and among itself, the Guarantors and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"). The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following description is a summary of the material provisions of the Indenture and the Registration Rights Agreement. It does not restate those agreements in their entirety. We urge you to read the Indenture because it, and not this description, defines your rights as a holder of the Notes. Copies of the Indenture are available as set forth below under "-- Additional Information." Certain defined terms used in this description but not defined below under "-- Certain Definitions" have the meanings assigned to them in the Indenture. BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES THE NOTES The Notes will be: - general unsecured obligations of the Company; - subordinated in right of payment to all existing and future Senior Debt of the Company; - pari passu in right of payment with any future senior subordinated Indebtedness of the Company; and - unconditionally guaranteed by the Guarantors. THE GUARANTEES The Notes will be guaranteed by all of the existing and future Domestic Subsidiaries of the Company. Each Guarantee of the Notes will be: - a general unsecured obligation of the Guarantor; - subordinated in right of payment to all existing and future Senior Debt of the Guarantor; and - pari passu in right of payment with any future senior subordinated Indebtedness of the Guarantor. Not all of our subsidiaries guarantee the Notes. In the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor subsidiaries, these non-guarantor subsidiaries will pay the holders of their debts and their trade creditors before they will be able to distribute any of their assets to us. The non-guarantor subsidiaries generated 234.0% of our EBITDA for the nine-month period ended October 2, 1999 and held 33.0% of our consolidated assets as of October 2, 1999. See note 8 to our Unaudited Consolidated Financial Statements included at the back of this prospectus for more detail about the division of our consolidated revenues and assets between our guarantor and non-guarantor subsidiaries. As of the date of this prospectus, all of our subsidiaries are "Restricted Subsidiaries." However, under the circumstances described below under the subheading "-- Certain Covenants -- Designation of Restricted and Unrestricted Subsidiaries," we will be permitted to designate certain of our subsidiaries as "Unrestricted 64 69 Subsidiaries." Our Unrestricted Subsidiaries will not be subject to many of the restrictive covenants in the Indenture. Our Unrestricted Subsidiaries will not guarantee the Notes. PRINCIPAL, MATURITY AND INTEREST The Indenture provides for the issuance by the Company of Notes with a maximum aggregate principal amount of $150.0 million, of which $60.0 million was issued on September 29, 1999. The Company may issue additional notes (the "Additional Notes") from time to time after this offering. Any offering of Additional Notes is subject to the covenant described below under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock." The Notes and any Additional Notes subsequently issued under the Indenture would be treated as a single class for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. The Company will issue Notes in denominations of $1,000 and integral multiples of $1,000. Initially, the Notes will be issued in the form of one or more global Notes. See "-- Book Entry, Delivery and Form." The Notes will mature on September 15, 2009. Interest on the Notes will accrue at the rate of 13 1/4% per annum and will be payable semi-annually in arrears on March 15 and September 15, commencing on March 15, 2000. The Company will make each interest payment to the Holders of record on the immediately preceding March 1 and September 1. Interest on the Notes will accrue from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. METHODS OF RECEIVING PAYMENTS ON THE NOTES If a Holder has given wire transfer instructions to the Company, the Company will pay all principal, interest and premium and Liquidated Damages, if any, on that Holder's Notes in accordance with those instructions. All other payments on Notes will be made at the office or agency of the Paying Agent and Registrar within the City and State of New York unless the Company elects to make interest payments by check mailed to the Holders at their addresses set forth in the register of Holders. PAYING AGENT AND REGISTRAR FOR THE NOTES The Trustee will initially act as Paying Agent and Registrar. The Company may change the Paying Agent or Registrar without prior notice to the Holders, and the Company or any of its Subsidiaries may act as Paying Agent or Registrar. TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. SUBSIDIARY GUARANTEES The Guarantors will jointly and severally guarantee the Company's obligations under the Notes. Each Subsidiary Guarantee will be subordinated to the prior payment in full of all Senior Debt of that Guarantor. The obligations of each Guarantor under its Subsidiary Guarantee will be limited as necessary to prevent that Subsidiary Guarantee from constituting a fraudulent conveyance under applicable law. See "Risk Factors -- Fraudulent Conveyance Matters." 65 70 A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not the Guarantor is the surviving Person), another Person, other than the Company or another Guarantor, unless: (1) immediately after giving effect to that transaction, no Default or Event of Default exists; and (2) either: (a) the Person acquiring the property in a sale or disposition or the Person formed by or surviving any such consolidation or merger assumes all the obligations of that Guarantor under the Indenture, its Subsidiary Guarantee and the Registration Rights Agreement pursuant to a supplemental indenture and appropriate Collateral Documents satisfactory to the Trustee; or (b) the Net Proceeds of such sale or other disposition are applied in accordance with the "Asset Sale" provisions of the Indenture. The Subsidiary Guarantee of a Guarantor will be released: (1) in connection with a sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to the transaction) a Subsidiary of the Company, if the Guarantor applies the Net Proceeds of that sale or other disposition in accordance with the "Asset Sale" provisions of the Indenture; (2) in connection with any sale of all of the Capital Stock of a Guarantor to a Person that is not (either before or after giving effect to the transaction) a Subsidiary of the Company, if the Company applies the Net Proceeds of that sale in accordance with the "Asset Sale" provisions of the Indenture; or (3) if the Company properly designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary. See "-- Repurchase at the Option of Holders -- Asset Sales." OPTIONAL REDEMPTION At any time prior to September 15, 2002, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price of 113.250% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of one or more Qualified Equity Offerings; provided that: (1) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the redemption (excluding Notes held by the Company and its Subsidiaries); and (2) the redemption must occur within 45 days of the date of the closing of the Qualified Equity Offering. Except pursuant to the preceding paragraph, the Notes will not be redeemable at the Company's option prior to September 15, 2004. On or after September 15, 2004, the Company may redeem all or, from time to time, a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on September 15 of the years indicated below:
YEAR PERCENTAGE 2004........................................................ 106.625% 2005........................................................ 104.417% 2006........................................................ 102.208% 2007 and thereafter......................................... 100.000%
66 71 MANDATORY REDEMPTION The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. SUBORDINATION The payment of principal, interest and premium and Liquidated Damages, if any, on the Notes will be subordinated to the prior payment in full of all Senior Debt of the Company, including Senior Debt incurred after the date of the Indenture. The holders of Senior Debt will be entitled to receive payment in full of all Obligations due in respect of Senior Debt (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Debt) before the Holders of Notes will be entitled to receive any payment with respect to the Notes (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from the trust described under "-- Legal Defeasance and Covenant Defeasance"), in the event of any distribution to creditors of the Company: (1) in a liquidation or dissolution of the Company; (2) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property; (3) in an assignment for the benefit of creditors; or (4) in any marshaling of the Company's assets and liabilities. The Company also may not make any payment in respect of the Notes (except in Permitted Junior Securities or from the trust described under "-- Legal Defeasance and Covenant Defeasance") if: (1) a payment default on Designated Senior Debt occurs and is continuing beyond any applicable grace period ; or (2) any other default occurs and is continuing on any series of Designated Senior Debt that permits holders of that series of Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of that default (a "Payment Blockage Notice") from the Company or the holders of any Designated Senior Debt. Payments on the Notes may and shall be resumed: (1) in the case of a payment default, upon the date on which that default is cured or waived; and (2) in case of a nonpayment default, the earlier of the date on which the nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated. No new Payment Blockage Notice may be delivered unless and until: (1) 360 days have elapsed since the delivery of the immediately prior Payment Blockage Notice; and (2) all scheduled payments of principal, interest and premium and Liquidated Damages, if any, on the Notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless the default shall have been cured or waived for a period of not less than 90 days. If the Trustee or any Holder of the Notes receives a payment in respect of the Notes (except in Permitted Junior Securities or from the trust described under "-- Legal Defeasance and Covenant Defeasance") when: (1) the payment is prohibited by these subordination provisions; and (2) the Trustee or the Holder has actual knowledge that the payment is prohibited; 67 72 the Trustee or the Holder, as the case may be, shall hold the payment in trust for the benefit of the holders of Senior Debt. Upon the proper written request of the holders of Senior Debt, the Trustee or the Holder, as the case may be, shall deliver the amounts in trust to the holders of Senior Debt or their proper representative. The Company must promptly notify holders of Senior Debt if payment of the Notes is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a bankruptcy, liquidation or reorganization of the Company, Holders of Notes may recover less ratably than creditors of the Company who are holders of Senior Debt. See "Risk Factors -- Subordination." REPURCHASE AT THE OPTION OF HOLDERS CHANGE OF CONTROL If a Change of Control occurs, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of that Holder's Notes pursuant to a Change of Control Offer on the terms set forth in the Indenture. In the Change of Control Offer, the Company will offer a Change of Control Payment in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the date of purchase. Within ten days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the Change of Control Payment Date specified in the notice, which date shall be no earlier than 30 days and no later than 60 days from the date the notice is mailed, pursuant to the procedures required by the Indenture and described in the notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent the laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of the Indenture by virtue of such conflict. On the Change of Control Payment Date, the Company will, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer; (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for those Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note will be in a principal amount of $1,000 or an integral multiple thereof. Prior to complying with any of the provisions of this "Change of Control" covenant, but in any event within 90 days following a Change of Control, the Company will either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this covenant. However, if the Company is required to make a Change of Control Offer, the Company cannot assure you that it will have the financial resources to repay its Senior Debt or that it will be able to obtain the consent of the holders of Senior Debt. In addition, the exercise by the holders of Notes of their right to require the Company to repurchase the Notes upon a Change of Control could cause a default under the Senior Debt, even if the Change of Control itself does not, due to the financial effect of the repurchase on the Company, which could cause an acceleration of the Senior Debt and a foreclosure with respect to any collateral 68 73 securing it in the event the Senior Debt was not paid. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The provisions described above that require the Company to make a Change of Control Offer following a Change of Control will be applicable regardless of whether any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under the Change of Control Offer. "Change of Control" means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a Principal; (2) the adoption of a plan relating to the liquidation or dissolution of the Company; (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares; or (4) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who: (1) was a member of the Board of Directors on the date of the Indenture; or (2) was nominated for election or elected to the Board of Directors with the approval of a majority of the Continuing Directors who were members of the Board at the time of the nomination or election. "Principals" means Kirtland Capital Partners III L.P. and its Affiliates, George S. Burr, Helen L. Burr, the Harold Hindman Trust -- 1969, James M. McConnell, Joseph E. Amaral, Kenneth L. Andersen, John R. Barrett, Jonathan L. Burr, the Jonathan L. Burr Trust -- 1965, Yahya Gharagozlou, Arthur D. Hindman, William J. Milliken, Linton A. Moulding, Jane Elizabeth Moulding, Norman L. Smith and any other employee stockholder of the Company as of the date of the Indenture. "Related Party" means: (1) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Principal; or (2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or the other Persons referred to in the immediately preceding clause (1). The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the properties or assets of the Company and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the Company to repurchase any Notes as a result of a sale, lease, transfer, 69 74 conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another Person or group may be uncertain. ASSET SALES The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; (2) the fair market value is determined by the Company's Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee; and (3) except in the case of an Asset Swap, at least 75% of the consideration therefor received by the Company or its Restricted Subsidiary is in the form of cash, Cash Equivalents or Productive Assets. For purposes of this provision, each of the following shall be deemed to be cash: (a) any liabilities (as shown on the Company's or that Restricted Subsidiary's most recent balance sheet), of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are expressly assumed by the transferee of any such assets; and (b) any securities, notes or other obligations received by the Company or any Restricted Subsidiary from the transferee that are within 60 days after the consummation of the Asset Sale converted by the Company or its Restricted Subsidiary into cash (to the extent of the cash received in that conversion). Within 365 days after the receipt of any Net Proceeds from an Asset Sale, including any cash received in an Asset Swap, the Company may apply the Net Proceeds at its option: (1) to repay Senior Debt and, if the Senior Debt repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; (2) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business or to make a Permitted Investment in a joint venture that is a Permitted Business; (3) to purchase Notes in open market transactions; provided that the Company shall be deemed to have applied Net Proceeds in satisfaction of the requirements of this covenant pursuant to this clause (3) in an amount equal to the lesser of: (a) the purchase price in the open market transactions; and (b) 100% of the principal amount of the Notes repurchased; (4) to make a capital expenditure; or (5) to acquire Productive Assets. Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will make an Asset Sale Offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after 70 75 consummation of an Asset Sale Offer, the Company may use the Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into an Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and other pari passu Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent the laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sales provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the Indenture by virtue of these conflicts. The agreements governing the Company's outstanding Senior Debt currently prohibit the Company from purchasing any Notes, and also provides that some change of control or asset sale events with respect to the Company would constitute a default under these agreements. Any future credit agreements or other agreements relating to Senior Debt to which the Company becomes a party may contain similar restrictions and provisions. In the event a Change of Control or Asset Sale occurs at a time when the Company is prohibited from purchasing Notes, the Company could seek the consent of its senior lenders to the purchase of Notes or could attempt to refinance the borrowings that contain the prohibition. If the Company does not obtain this consent or repay the borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company's failure to purchase tendered Notes would constitute an Event of Default under the Indenture, which would, in turn, constitute a default under this Senior Debt. In these circumstances, the subordination provisions in the Indenture would likely restrict payments to the Holders of Notes. SELECTION AND NOTICE If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes for redemption as follows: (1) if the Notes are listed, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (2) if the Notes are not so listed, on a pro rata basis, by lot or by another method that the Trustee deems fair and appropriate. No Notes of $1,000 or less may be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. CERTAIN COVENANTS RESTRICTED PAYMENTS The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in (a) Equity Interests 71 76 (other than Disqualified Stock) of the Company or (b) to the Company or a Restricted Subsidiary of the Company); (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees, except (a) a payment of interest or principal at the Stated Maturity thereof or (b) any payment with respect to Indebtedness owed solely to the Company or a Restricted Subsidiary of the Company; or (4) make any Restricted Investment (all the payments and other actions set forth in clauses (1) through (4) above being collectively referred to as "Restricted Payments"), The restrictions of the preceding paragraph will not apply if at the time of and after giving effect to the Restricted Payment: (1) no Default or Event of Default has occurred and is continuing or would occur as a consequence thereof; and (2) the Company would, at the time of the Restricted Payment and after giving pro forma effect thereto as if the Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness under the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock;" and (3) the Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of the Indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (5), (6) and (7) of the next succeeding paragraph), is less than the sum, without duplication, of: (a) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of the Restricted Payment (or, if the Consolidated Net Income for this period is a deficit, less 100% of the deficit), plus (b) 100% of the aggregate net cash proceeds received by the Company since the date of the Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for the Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company), plus (c) to the extent that any Restricted Investment that was made after the date of the Indenture is sold for cash or otherwise liquidated or repaid for cash, the cash proceeds with respect to the Restricted Investment (less the cost of disposition, if any), plus (d) 100% of any dividends received by the Company or a Restricted Subsidiary after the date of the Indenture from an Unrestricted Subsidiary of the Company, to the extent that the dividends were not otherwise included in Consolidated Net Income of the Company for that period, plus (e) to the extent that any Unrestricted Subsidiary of the Company is redesignated as a Restricted Subsidiary after the date of the Indenture, the fair market value of the Company's Investment in that Subsidiary as of the date of the redesignation. 72 77 The preceding provisions will not prohibit, and these items will not be considered Restricted Payments: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Restricted Subsidiary or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, Subordinated Indebtedness or Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(b) of the preceding paragraph; (3) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any Guarantor with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (4) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis; (5) so long as no Default has occurred and is continuing or would be caused thereby, (a) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any current or former employee, officer, director or consultant of the Company (or any of its Restricted Subsidiaries) under any management equity subscription agreement, stock option agreement or other employee or management plan or agreement or employment benefit plan, and (b) any payment made that is related to or in respect of any Subordinated Management Notes; provided that the aggregate price paid for all repurchased, redeemed, acquired or retired Equity Interests, together with the aggregate amount of payments made that are related to or in respect of Subordinated Management Notes, shall not exceed $1.0 million in any calendar year (provided that in any calendar year this amount shall be increased by the amount available for use, but not used, under this clause (5) in the immediately preceding year); (6) repurchases of Capital Stock deemed to occur upon the exercise and of stock options if the Capital Stock represents a portion of the exercise price thereof; and (7) so long as no Default has occurred and is continuing or would be caused thereby, other Restricted Payments in an aggregate amount not to exceed $2.0 million. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or by the Company or a Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds 5.0% of Total Assets. Not later than 30 days after the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that the Restricted Payment is permitted and setting forth the basis upon which the calculations required by this "Restricted Payments" covenant were computed, together with a copy of any fairness opinion or appraisal required by the Indenture. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue 73 78 Disqualified Stock, and the Company's Restricted Subsidiaries may incur Indebtedness or issue preferred stock, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which the additional Indebtedness is incurred or the Disqualified Stock or preferred stock is issued would have been at least 2.0 to 1.0 if the incurrence or issuance occurs on or before the third anniversary of the date of the Indenture and at least 2.25 to 1.0 if the incurrence or issuance occurs at any time thereafter, in each case determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the preferred stock or Disqualified Stock had been issued, as the case may be, at the beginning of the four-quarter period. The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (1) the incurrence by the Company and any Restricted Subsidiary of additional term or revolving credit Indebtedness and letters of credit under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the face amount thereof) not to exceed $80.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied by the Company or any of its Restricted Subsidiaries to repay any Indebtedness under a Credit Facility and effect a corresponding commitment reduction thereunder in the case of revolving credit Indebtedness pursuant to the covenant described above under the caption "-- Repurchase at the Option of Holders -- Asset Sales;" (2) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (3) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Subsidiary Guarantees to be issued on the date of the Indenture and the Exchange Notes and the related Subsidiary Guarantees to be issued pursuant to the Registration Rights Agreement; (4) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or a Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (4), not to exceed 5.0% of Total Assets at any time outstanding; provided, that the aggregate amount of Indebtedness at any one time outstanding pursuant to this clause (4), clause (12) and clause (14) of this paragraph shall not exceed $15.0 million; (5) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by the Indenture to be incurred under the first paragraph of this covenant or clauses (2), (3), (4), (5) or (14) of this paragraph; (6) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that: (a) if the Company or any Guarantor is the obligor on the Indebtedness, the Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Subsidiary Guarantee, in the case of a Guarantor; and (b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof; shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred solely (a) for the purpose of fixing or hedging interest rate risk with respect to any floating rate 74 79 Indebtedness that is permitted by the terms of this Indenture to be outstanding or (b) for the purpose of fixing or hedging the risks associated with fluctuations in foreign currency exchange rates; (8) the guarantee by the Company or any of its Restricted Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this covenant; (9) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment or accrual of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant; provided, in each case, that the amount thereof is included in Fixed Charges of the Company as accrued; (10) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt or issuance of preferred stock, provided, however, that if any of the Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, this event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (10); (11) the issuance by the Company or any of its Restricted Subsidiaries of Subordinated Management Notes not to exceed $1.0 million in any calendar year (provided that in any calendar year such amount shall be increased by the amount available for issuance, but not issued, under this clause (11) in any preceding calendar year); (12) the incurrence by any Foreign Subsidiary of the Company of Indebtedness for working capital purposes not to exceed $5.0 million; (13) the incurrence of Indebtedness (including letters of credit) in respect of workers' compensation claims, self-insurance obligations, warranties, performance, surety, bid or similar advance payment bonds and completion guarantees provided by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with past practices; and (14) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness or the issuance of Disqualified Stock in an aggregate principal amount (or accreted value or liquidation preference, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred or Disqualified Stock issued pursuant to this clause (14), not to exceed $7.5 million. For purposes of determining compliance with this "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (14) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company will be permitted to classify the item of Indebtedness on the date of its incurrence in any manner that complies with this covenant. Indebtedness under Credit Facilities outstanding on the date on which Notes are first issued and authenticated under the Indenture shall be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt. NO SENIOR SUBORDINATED DEBT The Company will not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of the Company and senior in any respect in right of payment to the Notes. No Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Debt of the Guarantor and senior in any respect in right of payment to that Guarantor's Subsidiary Guarantee. 75 80 LIENS The Company will not and will not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind securing Indebtedness that is pari passu or subordinated in right of payment to the Notes (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, unless all payments due under the Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured until the time that those obligations are no longer secured by a Lien. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Company or any of its Restricted Subsidiaries; (2) make loans or advances to the Company or any of its Restricted Subsidiaries; or (3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (1) Existing Indebtedness and the Credit Agreement, each as in effect on the date of the Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in such Existing Indebtedness or the Credit Agreement, each as in effect on the date of the Indenture; (2) the Indenture, the Notes, the Exchange Notes and the Subsidiary Guarantees; (3) applicable law, regulation or order; (4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of the acquisition (except to the extent the Indebtedness was incurred in connection with or in contemplation of the acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, the Indebtedness was permitted by the terms of the Indenture to be incurred; (5) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (6) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property so acquired of the nature described in clause (3) of the preceding paragraph; (7) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition; (8) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing the Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (9) Liens securing Indebtedness that limit the right of the debtor to dispose of the assets subject to the Lien; 76 81 (10) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, assets sale agreements, stock sale agreements and other similar agreements; (11) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; (12) Indebtedness incurred after the date of the Indenture in accordance with the terms of the Indenture; provided, that the restrictions contained in the agreements governing this new Indebtedness are, in the good faith judgment of the Board of Directors of the Company, not materially less favorable, taken as a whole, to the holders of the Notes than those contained in the agreements governing Indebtedness outstanding on the date of the Indenture; (13) customary provisions in agreements with respect to Permitted Joint Ventures; and (14) any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (13) above; provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Board of Directors, no more restrictive, taken as a whole, with respect to the dividend and other payment restrictions than those contained in the dividend or other payment restrictions before the amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing. MERGER, CONSOLIDATION OR SALE OF ASSETS The Company may not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless: (1) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any consolidation or merger (if other than the Company) or to which a sale, assignment, transfer, conveyance or other disposition was made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (2) the Person formed by or surviving any consolidation or merger (if other than the Company) or the Person to which a sale, assignment, transfer, conveyance or other disposition was made assumes all the obligations of the Company under the Notes, the Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee; (3) immediately after the transaction no Default or Event of Default exists; and (4) the Company or the Person formed by or surviving any consolidation or merger (if other than the Company), or to which the sale, assignment, transfer, conveyance or other disposition was made will, on the date of the transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, (a) have a Fixed Charge Coverage Ratio at least equal to 1.75 to 1.0 and equal to or greater than the Fixed Charge Coverage Ratio of the Company immediately before the transaction or (b) be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock." In addition, the Company may not, directly or indirectly, lease all or substantially all of its and its Restricted Subsidiaries' properties or assets, in one or more related transactions, to any other Person. This "Merger, Consolidation or Sale of Assets" covenant will not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of the Guarantors. 77 82 TRANSACTIONS WITH AFFILIATES The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless: (1) the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or its Restricted Subsidiary with an unrelated Person; and (2) the Company delivers to the Trustee: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that the Affiliate Transaction complies with this covenant and that the Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion issued by an accounting, appraisal or investment banking firm of national standing that the Affiliate Transaction complies with clause (1) of the first paragraph of this covenant. The following items shall not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph: (1) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or its Restricted Subsidiary; (2) transactions between or among the Company and/or its Restricted Subsidiaries; (3) transactions with a Person that is an Affiliate of the Company solely because the Company owns an Equity Interest in that Person; (4) payment of reasonable directors fees; (5) sales of Equity Interests (other than Disqualified Stock) to Affiliates of the Company; (6) Restricted Payments that are permitted by the provisions of the Indenture described above under the caption "-- Restricted Payments"; (7) the Advisory Services Agreement between the Company and Kirtland Partners Ltd. as in effect on the date of the Indenture; (8) providing indemnity to current or former officers, directors, employees or consultants of the Company or any of its Subsidiaries as determined in good faith by the Board of Directors of the Company; (9) performance of obligations of the Company or any of its Restricted Subsidiaries under the terms of any agreement to which the Company or the Restricted Subsidiary is a party as of the date of the Indenture of which is described above under the caption "Certain Relationships and Related Transactions" as in effect on the date of the Indenture; (10) the grant of stock options, restricted stock or similar rights to acquire common stock of the Company to the Company's or its Subsidiaries' employees, officers, directors and consultants pursuant to plans approved by the Board of Directors of the Company; (11) loans or advances to the Company's or its Subsidiaries' employees or consultants otherwise permitted by the Indenture and not to exceed an aggregate of $1 million at any one time; 78 83 (12) the payment of all fees and expenses related to the Recapitalization as described above under the caption "The Recapitalization"; and (13) transactions with customers, joint venture partners, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and consistent with past practice in compliance with the terms of the Indenture and which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors of the Company. ADDITIONAL SUBSIDIARY GUARANTEES If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the date of the Indenture, then that newly acquired or created Domestic Subsidiary must become a Guarantor and execute a supplemental indenture and deliver an Opinion of Counsel to the Trustee within 10 Business Days of the date on which it was acquired or created; provided that any Domestic Subsidiary that has been properly designated as Unrestricted Subsidiary in accordance with the Indenture shall not be required to become Guarantor for so long as it continues to constitute an Unrestricted Subsidiary. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an Investment made as of the time of such designation and will either reduce the amount available for Restricted Payments under the first paragraph of the covenant described above under the caption "-- Restricted Payments" or reduce the amount available for future Investments under one or more clauses of the definition of Permitted Investments, as the Company shall determine. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default. BUSINESS ACTIVITIES The Company will not, and will not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to the extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. PAYMENTS FOR CONSENT The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless the consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to the consent, waiver or agreement. REPORTS Whether or not required by the Commission, so long as any Notes are outstanding, the Company will furnish to the Holders of Notes, on or before the fifth day following the date the report would be due under the Commission's rules and regulations: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants; and 79 84 (2) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, following the consummation of the exchange offer contemplated by the Registration Rights Agreement, whether or not required by the Commission, the Company will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company and the Subsidiary Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. EVENTS OF DEFAULT AND REMEDIES Each of the following is an Event of Default: (1) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes, whether or not prohibited by the subordination provisions of the Indenture; (2) default in payment when due of the principal of, or premium, if any, on the Notes, whether or not prohibited by the subordination provisions of the Indenture; (3) failure by the Company or any of its Subsidiaries to comply with the provisions described under the captions "-- Repurchase at the Option of Holders -- Change of Control" or "-- Certain Covenants -- Merger, Consolidation or Sale of Assets;" (4) failure by the Company or any of its Subsidiaries for 60 days after written notice from the Trustee or Holders of at least 25% of the outstanding principal balance of the Notes to comply with any of the other agreements in the Indenture; (5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether the Indebtedness or guarantee now exists, or is created after the date of the Indenture, if that default: (a) is caused by a failure to pay principal of, or interest or premium, if any, on the Indebtedness before the expiration of the grace period provided in the Indebtedness on the date of the default (a "Payment Default"); or (b) results in the acceleration of the Indebtedness before its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more; (6) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; and (7) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (8) specified events of bankruptcy or insolvency with respect to the Company or any of its Restricted Subsidiaries. In the case of an Event of Default arising from events of bankruptcy or insolvency, with respect to the Company, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable 80 85 immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; provided, however, that so long as any Indebtedness permitted to be incurred under the Indenture as part of the Credit Facilities is outstanding, no acceleration shall be effective until the earlier of (1) five business days after the giving of written notice to the Company and the administrative agent under the Credit Facilities of the acceleration or (2) acceleration of any Indebtedness under the Credit Facilities. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or Liquidated Damages) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or Liquidated Damages on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture. Upon becoming aware of any Default or Event of Default, the Company is required to deliver to the Trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, AFFILIATES AND STOCKHOLDERS No director, officer, employee, Affiliate, incorporator or stockholder of the Company or any Guarantor, solely by reason of this status, shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Indenture, the Subsidiary Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all this liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes and all obligations of the Guarantors discharged with respect to their Subsidiary Guarantees ("Legal Defeasance") except for: (1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Liquidated Damages, if any, on the Notes when the payments are due from the trust referred to below; (2) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust; (3) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's and the Guarantor's obligations in connection therewith; and (4) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company and the Guarantors released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with those covenants shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. 81 86 In order to exercise either Legal Defeasance or Covenant Defeasance: (1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient (through the payment of principal, interest and Liquidated Damages, if any), to pay the principal of, or interest and premium and Liquidated Damages, if any, on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (2) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon the Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of the Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Legal Defeasance had not occurred; (3) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of the Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Covenant Defeasance had not occurred; (4) no Default or Event of Default shall have occurred and be continuing either: (a) on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit); or (b) insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (5) the Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (6) the Company must have delivered to the Trustee an Opinion of Counsel to the effect that, assuming no intervening bankruptcy of the Company or any Guarantor between the date of deposit and the 91st day following the deposit and assuming that no Holder is an "insider" of the Company under applicable bankruptcy law, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (7) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (8) the Company must deliver to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next three succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). 82 87 Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described above under the caption "-- Repurchase at the Option of Holders"); (3) reduce the rate of or change the time for payment of interest on any Note; (4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Liquidated Damages, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (5) make any Note payable in money other than that stated in the Notes; (6) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Liquidated Damages, if any, on the Notes; (7) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under the caption "-- Repurchase at the Option of Holders"); (8) release any Guarantor from any of its obligations under its Subsidiary Guarantee or the Indenture, except in accordance with the terms of the Indenture; or (9) make any change in the preceding amendment and waiver provisions. In addition, any amendment to, or waiver of, the provisions of the Indenture relating to subordination that adversely affects the rights of the Holders of the Notes will require the consent of the Holders of at least 66% in aggregate principal amount of Notes then outstanding. Notwithstanding the preceding, without the consent of any Holder of Notes, the Company, the Guarantors and the Trustee may amend or supplement the Indenture or the Notes: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes; (3) to provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company's assets; (4) to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder; or (5) to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. SATISFACTION AND DISCHARGE The Indenture will be discharged and will cease to be of further effect as to all Notes issued thereunder, when: (1) either: (a) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or 83 88 (b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Liquidated Damages, if any, and accrued interest to the date of maturity or redemption; (2) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound; (3) the Company or any Guarantor has paid or caused to be paid all sums payable by it under the Indenture; and (4) the Company has delivered irrevocable instructions to the Trustee under the Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be. In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. CONCERNING THE TRUSTEE If the Trustee becomes a creditor of the Company or any Guarantor, the Indenture limits its right to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate the conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur and be continuing, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless the Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all of these terms, as well as any other capitalized terms used herein for which no definition is provided. "Acquired Debt" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time the other Person is merged with or into or became a Subsidiary of the specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, the other Person merging with or into, or becoming a Subsidiary of, the specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by the specified Person. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with the specified Person. For purposes of this definition, "control," as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the Person, whether through the ownership of voting 84 89 securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have correlative meanings. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights, other than sales of inventory in the ordinary course of business consistent with past practices; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "-- Repurchase at the Option of Holders -- Change of Control" and/or the provisions described above under the caption "-- Certain Covenants -- Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant; and (2) the issuance of Equity Interests by any of the Company's Restricted Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries (other than the issuance of director qualifying shares or similar required issuances). Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (1) any single transaction or series of related transactions that involves assets having a fair market value of less than $2.0 million; (2) a transfer of assets between or among the Company and its Restricted Subsidiaries, (3) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (4) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business; (5) the sale or other disposition of cash or Cash Equivalents; (6) a Restricted Payment or Permitted Investment that is permitted by the covenant described above under the caption "-- Certain Covenants -- Restricted Payments"; and (7) the licensing or sublicensing of intellectual property or other general intangibles and licenses, leases or subleases of other property in the ordinary course of business and which do not materially interfere with the business of the Company and its Subsidiaries. "Asset Swap" means an exchange of assets by the Company or a Restricted Subsidiary of the Company for: (1) one or more Permitted Businesses; (2) a controlling equity interest in any Person whose assets consist primarily of one or more Permitted Businesses; (3) cash; and/or (4) Productive Assets. "Beneficial Owner" has the meaning assigned to the term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether the right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning. "Board of Directors" means: (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the Board of Directors of the general partner of the partnership; and 85 90 (3) with respect to any other Person, the board or committee of the Person serving a similar function. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better; (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each case maturing within six months after the date of acquisition; and (6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition. "Commission" means the United States Securities and Exchange Commission. "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of that Person for that period plus: (1) an amount equal to any extraordinary loss plus any net loss realized by that Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent those losses were deducted in computing Consolidated Net Income; plus (2) provision for taxes based on income or profits of that Person and its Restricted Subsidiaries for that period, to the extent that the provision for taxes was deducted in computing Consolidated Net Income; plus (3) consolidated interest expense of that Person and its Restricted Subsidiaries for that period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing Consolidated Net Income; plus 86 91 (4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of that Person and its Restricted Subsidiaries for that period to the extent that the depreciation, amortization and other non-cash expenses were deducted in computing Consolidated Net Income; minus (5) non-cash items increasing Consolidated Net Income for that period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute Consolidated Cash Flow of the Company only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by that Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of that Person and its Restricted Subsidiaries for that period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary thereof; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; (4) the cumulative effect of a change in accounting principles shall be excluded; (5) any nonrecurring fees, expenses and costs relating to the Recapitalization incurred on or prior to date of this Indenture, including, without limitation, any fees and expenses incurred in connection with the Credit Agreement, any compensation expense incurred in connection with the cancellation, retirement or acceleration of vesting of stock options or restricted stock, modifications of existing employment agreements and expenses related to early extinguishments of debt, shall be excluded; and (6) the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not distributed to the specified Person or one of its Subsidiaries. "Credit Agreement" means that certain Credit Agreement, dated as of September 29, 1999, by and among the Company, certain of its Subsidiaries and National City Bank, as agent, providing for up to $50.0 million of revolving credit borrowings and $30.0 million of term loan borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time. "Credit Facilities" means, one or more debt facilities (including, without limitation, the Credit Agreement), commercial paper facilities or indentures, in each case with banks or other lenders (or trustees therefor) providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), 87 92 letters of credit or debt securities, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Designated Senior Debt" means: (1) any Indebtedness outstanding under the Credit Agreement; and (2) after payment in full of all Obligations under the Credit Agreement, any other Senior Debt permitted under the Indenture the principal amount of which is $15.0 million or more and that has been designated by the Company as "Designated Senior Debt." "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, (1) any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase the Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of the Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption "-- Certain Covenants -- Restricted Payments" and (2) shares of common stock of the Company beneficially owned by any member of the Company's management or any immediate family member thereof shall not constitute Disqualified Stock. "Domestic Subsidiary" means any Subsidiary that guarantees or otherwise provides direct credit support for any Indebtedness of the Company; provided that a person organized and existing outside the United States shall not be considered a Domestic Subsidiary solely by virtue of direct borrowing obligations under Credit Facilities guaranteed by the Company. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the date of the Indenture, until such amounts are repaid and commitments are permanently reduced. "Fixed Charges" means, with respect to any specified Person and its Restricted Subsidiaries for any period, the sum, without duplication, of: (1) the consolidated interest expense of that Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of original issue discount (other than original issue discount solely attributable to the Notes in connection with the issuance of the Warrants), non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and the net effect of all payments made or received pursuant to Hedging Obligations except expenses incurred with respect to fixing or hedging the risks associated with fluctuations in foreign currency exchange rates, but excluding amortization of debt issuance costs; plus (2) the consolidated interest of that Person and its Restricted Subsidiaries that was capitalized during such period; plus (3) any interest expense on Indebtedness of another Person that is Guaranteed by that Person or one of its Restricted Subsidiaries or secured by a Lien on assets of that Person or one of its Restricted Subsidiaries, whether or not the Guarantee or Lien is called upon; plus 88 93 (4) the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of that Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined effective federal, state and local statutory tax rate of that Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Fixed Charge Coverage Ratio" means with respect to any specified Person and its Restricted Subsidiaries for any period, the ratio of the Consolidated Cash Flow of that Person and its Restricted Subsidiaries for such period to the Fixed Charges of that Person and its Restricted Subsidiaries for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio: (1) acquisitions and dispositions that have been made by the specified Person or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to the reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated on a pro forma basis in accordance with Regulation S-X under the Securities Act (giving effect to any Pro Forma Cost Savings), but without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income; (2) if since the beginning of the reference period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of that period) shall have made any acquisitions and dispositions including through mergers or consolidations and including any related financing transactions that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto (as described in paragraph (1) above) for the reference period as if the acquisition or disposition had occurred at the beginning of the applicable four-quarter period; (3) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded; and (4) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Subsidiaries following the Calculation Date. "Foreign Subsidiary" means any Restricted Subsidiary of the Company that is not a Domestic Subsidiary or that is engaged in trade or business outside of the United States. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of the Indenture. "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of 89 94 assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "Guarantors" means each of: (1) Instron Asia Limited; Instron Japan Company, Ltd.; Instron/Lawrence Corporation; Instron Realty Trust; Instron Schenck Testing Systems Corp.; and IRT-II Trust; and (2) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture; and their respective successors and assigns. "Hedging Obligations" means, with respect to any specified Person, the obligations of that Person under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; (2) other agreements or arrangements designed solely to protect that Person against fluctuations in interest rates; and (3) agreements entered into solely for the purpose of fixing or hedging the risks associated with fluctuations in foreign currency exchange rates. "Indebtedness" means, with respect to any specified Person, any indebtedness of that Person, whether or not contingent, in respect of: (1) borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) banker's acceptances; (4) representing Capital Lease Obligations; (5) the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not the Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person if and to the extent such Indebtedness would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. The term "Indebtedness" shall not include amounts owing to any insurance company in connection with the financing of insurance premiums permitted by the insurance company in the ordinary course of business. The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and (2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Investments" means, with respect to any Person, all direct or indirect investments by that Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, that Person is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition 90 95 equal to the fair market value of the Equity Interests of that Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "-- Certain Covenants -- Restricted Payments." The acquisition by the Company or any Subsidiary of the Company of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Company or that Subsidiary in the third Person in an amount equal to the fair market value of the Investment held by the acquired Person in the third Person in an amount determined as provided in the final paragraph of the covenant described above under the caption "-- Certain Covenants -- Restricted Payments." "Kirtland" means Kirtland Capital Partners III L.P. and its Affiliates. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Liquidated Damages" has the meaning set forth under the caption "-- Registration Rights; Liquidated Damages." "Net Income" means, with respect to any specified Person, the net income (loss) of that Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) any gain or loss, together with any related provision for taxes on the gain or loss, realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by that Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of that Person or any of its Restricted Subsidiaries; and (2) any extraordinary gain or loss, together with any related provision for taxes on the extraordinary gain or loss. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of all costs relating to that Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness, other than Senior Debt, secured by a Lien on the asset or assets that were the subject of the Asset Sale and any reserve for adjustment in respect of the sale price of the asset or assets or for any indemnification obligations assumed in connection with the Asset Sale, established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness: (1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender, provided, however, that the Company or any of its Restricted Subsidiaries may act as a guarantor with respect to any Non- Recourse Debt, provided that such Guarantee (i) shall be deemed an incurrence of Indebtedness not otherwise permitted by clause (10) of the covenant described above under "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock" and (ii) is a Restricted Investment that must be permitted by the covenant described above under "-- Certain Covenants -- Restricted Payments"; (2) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and 91 96 (3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Notes" means the exchange notes offered by this prospectus, "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Permitted Business" means the business conducted by the Company and its Subsidiaries on the date of this offering memorandum and businesses reasonably related thereto or supportive thereof. "Permitted Investments" means: (1) any Investment in the Company or in a Restricted Subsidiary of the Company; (2) any Investment in Cash Equivalents; (3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of the Investment: (a) the Person becomes a Restricted Subsidiary of the Company or a Permitted Joint Venture of the Company that is engaged in a Permitted Business; or (b) the Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company or a Permitted Joint Venture of the Company that is engaged in a Permitted Business; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "-- Repurchase at the Option of Holders -- Asset Sales"; (5) any acquisition of assets to the extent acquired in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (6) Hedging Obligations; (7) Investments existing on the date of the Indenture and any amendment, modification, restatement, extension, renewal, refunding, replacement, refinancing, in whole or in part, thereof; (8) extensions of trade credit or advances to customers on commercially reasonable terms, each in the ordinary course of business; (9) loans or advances to employees, officers, directors or consultants otherwise permitted by the Indenture and in the ordinary course of business not to exceed an aggregate of $1.0 million at any one time; and (10) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (10) that are at any time outstanding not to exceed the greater of $10.0 million and 10.0% of Total Assets as of the date of such Investment. In the event that an item meets the criteria of more than one of the categories of Permitted Investments described in clauses (1) through (10) above, the Company may, in its sole discretion, classify or reclassify that item in any manner that complies with the Indenture and that item will be treated as having been made pursuant to only one of such clauses. "Permitted Joint Venture" means, with respect to any Person: (1) any corporation, association, or other business entity engaged in a Permitted Business of which 50% of the Voting Stock is at the time of determination owned or controlled, directly or indirectly, by that Person or one or more of the Restricted Subsidiaries of that Person or a combination thereof (collectively, a "Group"), or 92 97 (2) any corporation, association or other business entity engaged in a Permitted Business as to which the Group, at the time of initial Investment, has a contractual right to acquire 50% of the Voting Stock, provided that the Investment shall cease to be a Permitted Joint Venture if the Group fails to acquire 50% of the Voting Stock within six months of the initial Investment. "Permitted Junior Securities" means: (1) Equity Interests in the Company or any Guarantor; or (2) debt securities that are subordinated to all Senior Debt and any debt securities issued in exchange for Senior Debt to substantially the same extent as, or to a greater extent than, the Notes and the Subsidiary Guarantees are subordinated to Senior Debt under the Indenture. "Permitted Liens" means: (1) Liens in favor of the Company or the Guarantors; (2) Liens on property of a Person existing at the time the Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that the Liens were in existence prior to the contemplation of the merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary; (3) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, provided that the Liens were in existence prior to the contemplation of the acquisition; (4) Liens existing on the date of the Indenture; (5) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries; (6) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (7) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made thereunder; and (8) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of the Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of all expenses and premiums incurred in connection therewith); (2) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, the Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (3) the Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. 93 98 "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Pro Forma Cost Savings" means the reduction in costs that occurred during the four-quarter reference period or subsequent to the reference period and on or prior to the Calculation Date that were (1) directly attributable to an acquisition and calculated on a basis that is consistent with Article 11 of Regulation S-X under the Securities Act as in effect on the date of the Indenture or (2) that have actually been implemented as of the applicable Calculation Date by the business that was the subject of any acquisition within six months of the date of the acquisition, that are supportable and quantifiable by the underlying accounting records of the business, and are described, as provided below, in an Officer's Certificate, as if, in the case of each of clause (1) and (2), all the reductions in costs had been effected as of the beginning of the period. Pro Forma Cost Savings described in clause (2) above shall be set forth in reasonable specificity in a certificate delivered to the Trustee from the Company's Chief Financial Officer and, in the case of Pro Forma Cost Savings in excess of $5.0 million per four-quarter period, this certificate shall be accompanied by a supporting opinion from an accounting firm of national standing. "Productive Assets" means any long term assets that are used or useful in a Permitted Business. "Qualified Equity Offering" means a primary offering of Capital Stock, or rights, warrants or options to acquire Capital Stock of the Company (other than Disqualified Stock) to Persons who are not Affiliates of the Company for net proceeds to the Company of at least $15.0 million. "Recapitalization" means the transactions described under the caption "The Recapitalization" or related thereto. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Senior Debt" means: (1) all Indebtedness of the Company or any Guarantor outstanding under Credit Facilities and all Hedging Obligations with respect thereto; (2) any other Indebtedness of the Company or any Guarantor permitted to be incurred under the terms of the Indenture, unless the instrument under which the Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or any Subsidiary Guarantee; and (3) all Obligations with respect to the items listed in the preceding clauses (1) and (2). Notwithstanding anything to the contrary in the preceding, Senior Debt will not include: (1) any liability for federal, state, local or other taxes owed or owing by the Company; (2) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates; (3) any trade payables; or (4) the portion of any Indebtedness that is incurred in violation of the Indenture. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as the Regulation is in effect on the date hereof. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing the Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any of the interest or principal prior to the date originally scheduled for the payment thereof. "Subordinated Management Notes" means notes evidencing subordinated obligations of the Company or any of its Restricted Subsidiaries issued to current or former employees, directors, officers or consultants of the 94 99 Company or any of its Restricted Subsidiaries in lieu of cash payments for any Equity Interest of the Company being repurchased from such persons that: (1) provide that for so long as a Default under the Notes has occurred and is continuing, no payment shall be made with respect to any Obligations under such Subordinated Management Notes; and (2) are subordinated in full to the prior payment in cash of all amounts due in respect of the Notes. "Subsidiary" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is that Person or a Subsidiary of that Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). "Total Assets" means the total assets of the Company and its Restricted Subsidiaries on a consolidated basis determined in accordance with GAAP, as shown on the most recently available consolidated balance sheet of the Company and its Restricted Subsidiaries. "Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that the Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or its Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve that Person's financial condition or to cause that Person to achieve any specified levels of operating results; and (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to the designation and an Officers' Certificate certifying that the designation complied with the preceding conditions and was permitted by the covenant described above under the caption "-- Certain Covenants -- Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of the Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if the Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock," the Company shall be in default of that covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that the designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of the Unrestricted Subsidiary and the designation shall only be permitted if (1) the Indebtedness is permitted under the covenant described under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis as if the designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following the designation. 95 100 "Voting Stock" of any Person as of any date means the Capital Stock of that Person that is at the time entitled to vote in the election of the Board of Directors of that Person. "Warrants" means the warrants to purchase 30,654 shares of the Company's common stock issued with the Notes on September 29, 1999 as part of a units offering. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between the date and the making of the payment; by (2) the then outstanding principal amount of the Indebtedness. ADDITIONAL INFORMATION Anyone who receives this prospectus may obtain a copy of the Indenture without charge by writing to Instron Corporation, 100 Royall Street, Canton, Massachusetts 02021, Attention: Chief Financial Officer. BOOK-ENTRY, DELIVERY AND FORM Except as set forth below, Notes will be issued in registered, global form in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. The Notes initially will be represented by one or more Notes in registered, global form without interest coupons (the "Global Notes"). The Global Notes will be deposited upon issuance with the Trustee as custodian for The Depository Trust Company ("DTC"), in New York, New York, and registered in the name of DTC or its nominee, in each case for credit to an account of a direct or indirect participant in DTC as described below. Except as set forth below, the Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for Notes in certificated form except in the limited circumstances described below. See "-- Exchange of Book-Entry Notes for Certificated Notes." Except in the limited circumstances described below, owners of beneficial interests in the Global Notes will not be entitled to receive physical delivery of Notes in certificated form. DEPOSITORY PROCEDURES The following description of the operations and procedures of DTC, Euroclear and Cedel are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. The Company takes no responsibility for these operations and procedures and urges investors to contact the system or their participants directly to discuss these matters. DTC has advised the Company that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the Initial Purchaser), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants. 96 101 DTC has also advised the Company that, pursuant to procedures established by it: (1) upon deposit of the Global Notes, DTC will credit the accounts of Participants designated by the Initial Purchaser with portions of the principal amount of the Global Notes; and (2) ownership of these interests in the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interest in the Global Notes). Investors in the Global Notes who are Participants in DTC's system may hold their interests therein directly through DTC. Investors in the Global Notes who are not Participants may hold their interests therein indirectly through organizations (including Euroclear and Cedel) which are Participants in those systems. All interests in a Global Note, including those held through Euroclear or Cedel, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Cedel may also be subject to the procedures and requirements of such systems. The laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to these Persons will be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge these interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of these interests, may be affected by the lack of a physical certificate evidencing these interests. EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR "HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. Payments in respect of the principal of, and interest and premium and Liquidated Damages, if any, on a Global Note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Company, and the Trustee will treat the Persons in whose names the Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving payments and for all other purposes. Consequently, neither the Company, the Trustee, nor any agent of the Company or the Trustee has or will have any responsibility or liability for: (1) any aspect of DTC's records or any Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interest in the Global Notes or for maintaining, supervising or reviewing any of DTC's records or any Participant's or Indirect Participant's records relating to the beneficial ownership interests in the Global Notes; or (2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. DTC has advised the Company that its current practice, upon receipt of any payment in respect of securities such as the Notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee, or the Company. None of the Company, or the Trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the Notes, and the Company and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes. Subject to compliance with any transfer restrictions applicable to the Notes, cross-market transfers between the Participants in DTC, on the one hand, and Euroclear or Cedel participants, on the other hand, will be effected through DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case may be, by its respective depositary; however, these cross-market transactions will require delivery of instructions to Euroclear 97 102 or Cedel, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Cedel, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the Global Note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Cedel participants may not deliver instructions directly to the depositories for Euroclear or Cedel. DTC has advised the Company that it will take any action permitted to be taken by a Holder of Notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of the portion of the aggregate principal amount of the Notes as to which the Participant or Participants has or have given such direction. However, if there is an Event of Default under the Notes, DTC reserves the right to exchange the Global Notes for Notes in certificated form, and to distribute such Notes to its Participants. Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among participants in DTC, Euroclear and Cedel, they are under no obligation to perform or to continue to perform these procedures, and may discontinue these procedures at any time. None of the Company, the Trustee, or any of their respective agents will have any responsibility for the performance by DTC, Euroclear or Cedel or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES A Global Note is exchangeable for definitive Notes in registered certificated form ("Certificated Notes") if: (1) DTC (a) notifies the Company that it is unwilling or unable to continue as depositary for the Global Notes and the Company fails to appoint a successor depositary or (b) has ceased to be a clearing agency registered under the Exchange Act; (2) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Certificated Notes; or (3) there shall have occurred and be continuing a Default or Event of Default with respect to the Notes. In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the Trustee, as applicable, by or on behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures) and will bear the applicable restrictive legend referred to in "Notice to Investors," unless that legend is not required by applicable law. EXCHANGE OF CERTIFICATED NOTES FOR GLOBAL NOTES Certificated Notes may not be exchanged for beneficial interests in any Global Note unless the transferor first delivers to the Trustee a written certificate (in the form provided in the Indenture) to the effect that the transfer will comply with the appropriate transfer restrictions applicable to the Notes SAME DAY SETTLEMENT AND PAYMENT The Company will make, or cause to be made, payments in respect of the Notes represented by the Global Notes (including principal, premium, if any, interest and Liquidated Damages, if any) by wire transfer of immediately available funds to the accounts specified by the Global Note Holder. The Company will make all payments of principal, interest and premium and Liquidated Damages, if any, with respect to Certificated Notes by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each such Holder's registered address. The Notes represented by the Global Notes are expected to be eligible to trade in the PORTAL market and to trade in DTC's Same-Day Funds 98 103 Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by DTC to be settled in immediately available funds. The Company expects that secondary trading in any Certificated Securities will also be settled in immediately available funds. Because of time zone differences, the securities account of a Euroclear or Cedel participant purchasing an interest in a Global Security from a Participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Cedel participant, during the securities settlement processing day (which must be a business day for Euroclear and Cedel) immediately following the settlement date of DTC. DTC has advised the Company that cash received in Euroclear or Cedel as a result of sales of interests in a Global Note by or through a Euroclear or Cedel participant to a Participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Cedel cash account only as of the business day for Euroclear or Cedel following DTC's settlement date. 99 104 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a discussion of the material U.S. federal income tax consequences of the ownership and disposition of units to you if you are initial purchasers of the units who purchase the units at their issue price, which is generally the first price at which a substantial amount of units is sold to persons other than bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers. This discussion is based on the Internal Revenue Code, U.S. Treasury Department regulations promulgated thereunder, administrative pronouncements, judicial decisions, and interpretations of the foregoing, changes to any of which subsequent to the date of this offering memorandum may affect the tax consequences described herein, possibly with retroactive effect. The following discusses only units held as capital assets within the meaning of Section 1221 of the Code. It does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances or if you are subject to special rules, including, without limitation, certain financial institutions, insurance companies, tax-exempt entities, dealers in securities or currencies, traders in securities electing to mark to market, or if you have acquired units as part of a straddle, hedge, conversion transaction or other integrated investment. You should consult your tax advisors with regard to the application of U.S. federal tax laws to your particular situation, including the information reporting and backup withholding rules discussed below, as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction. As used herein, the term non-U.S. holder means a beneficial owner of a unit that is not a U.S. holder for U.S. federal income tax purposes. A U.S. holder is: - a citizen or resident of the United States; - a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof; - an estate the income of which is subject to U.S. federal income taxation regardless of its source; or - a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust; or (ii) the trust was in existence on August 20, 1996, was treated as a United States Person within the meaning of the Code (a "U.S. Person") prior to that date, and elected to continue to be treated as a United States Person. ALLOCATION OF THE ISSUE PRICE BETWEEN THE NOTE AND THE WARRANT Each unit is comprised of a note and a warrant. Consequently, the issue price of a unit for U.S. federal income tax purposes must be allocated between the note and the warrant based on their respective fair market values at the time of issuance and a holder's basis in each of the note and the warrant will be equal to the amount allocated to such note and such warrant. Based on our estimate of the fair market value of a warrant, we intend to treat approximately $962.5 of the issue price of a unit as allocable to the note (which amount we will therefore treat as the issue price of the note for U.S. federal income tax purposes) and approximately $37.5 as allocable to the warrant. We intend to file or cause to be filed information returns with the IRS based on such allocation. Our allocation of the issue price is binding on you for U.S. federal income tax purposes unless you disclose the use of a different allocation on your U.S. federal income tax return for the year in which the unit was acquired. However, our allocation is not binding on the IRS, and there can be no assurance that the IRS will not challenge such allocation. The remainder of this discussion assumes that our allocation will be respected for tax purposes. TAX CONSEQUENCES TO U.S. HOLDERS ORIGINAL ISSUE DISCOUNT ON THE NOTES. A debt obligation that has an issue price that is less than its stated redemption price at maturity ("SRPM") by more than a de minimis amount will be treated as issued with original issue discount ("OID") for U.S. federal income tax purposes. The SRPM of a note is the sum of all 100 105 payments to be made on the note that are not "qualified stated interest" payments. "Qualified stated interest" generally means stated interest that is unconditionally payable at least annually at a single fixed rate (or at certain qualifying variable rates). The semi-annual interest payments on the notes should constitute qualified stated interest. Accordingly, the SRPM of the notes should equal their principal amount. The issue price of a note is less than its SRPM by more than a de minimis amount if the difference between the SRPM of the note and its issue price is at least 0.25 percent of the SRPM multiplied by the number of complete years to maturity. If the notes are issued with OID in excess of a de minimis amount, U.S. holders must generally include OID in gross income (as interest) for U.S. federal income tax purposes on an annual basis under a constant yield method without regard to the holder's method of accounting for tax purposes. As a result, U.S. holders generally will be required to include OID in income in advance of the receipt of some or all of the related cash payments. The amount of OID includible in income by a U.S. holder of a note is the sum of the "daily portions" of OID with respect to the note for each day during the holder's taxable year on which it held such note. The daily portion is determined by allocating to each day in any "accrual period" a pro rata portion of the OID allocable to that accrual period. The accrual period for a note may be of any length and may vary in length over the term of the note, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs on the first day or the final day of an accrual period. In general, the amount of OID allocable to an accrual period is an amount equal to the excess (if any) of (a) the product of the note's "adjusted issue price" at the beginning of such accrual period and its yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) over (b) the sum of any qualified stated interest allocable to the accrual period. The following rules apply to determine OID allocable to an accrual period: - if an interval between payments of qualified stated interest contains more than one accrual period, the amount of qualified stated interest payable at the end of the interval is allocated on a pro rata basis to each accrual period in the interval and the adjusted issue price at the beginning of each accrual period in the interval must be increased by the amount of any qualified stated interest that has accrued prior to the beginning of the first day of the accrual period but is not payable until the end of the interval; - if the accrual period is the final accrual period, the amount of OID allocable to the final accrual period is the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price of the note at the beginning of the final accrual period; and - if all accrual periods are of equal length, except for an initial short accrual period, the amount of OID allocable to the initial short accrual period may be computed under any reasonable method. The adjusted issue price of a note at the beginning of any accrual period is equal to its issue price increased by the accrued OID for each prior accrual period and reduced by any prior payments made on such note that were not qualified stated interest payments. Under these rules, U.S. holders of notes with OID will be required to include in income increasingly greater amounts of OID in successive accrual periods. OPTIONAL REDEMPTION OF THE NOTES. The notes are redeemable at our option in whole or in part and subject to certain conditions. For purposes of computing the notes' yield to maturity, we will be deemed to exercise our option to redeem the notes if such deemed exercise could produce (utilizing the redemption price on any date on which the option could be exercised as the SRPM) a lower yield on the notes than the stated yield to maturity. Our option to redeem the notes prior to their stated maturity date should not affect the computation of the amount of OID on the notes. SALE, EXCHANGE OR DISPOSITION OF THE NOTES. Upon the sale, exchange or other disposition of a note, you generally will recognize capital gain or loss equal to the difference between the amount of cash and the fair market value of property received by you (except to the extent attributable to accrued interest, which will be treated as interest) and your adjusted tax basis in the note (i.e., its adjusted issue price). Such capital gain or loss 101 106 generally will be long-term capital gain or loss if the U.S. holder has held the note for more than one year at the time of the sale, exchange or other disposition. EXCHANGE NOTES. The exchange of the notes for exchange notes as described herein will not constitute a "significant modification" of the notes for U.S. federal income tax purposes and, accordingly, the exchange notes received will be treated as a continuation of the original notes in the hands of the U.S. holder. As a result, there will be no U.S. federal income tax consequences to a U.S. holder on the exchange of a note for an exchange note. WARRANTS. Although the matter is not free from doubt, and the form of the warrants may be respected for United States federal income tax purposes, it is possible that the warrants will be treated for United States federal income tax purposes as warrant shares due to, among other things, their nominal exercise price and lack of any meaningful contingency. Although it is unclear whether the warrants will be treated as warrants or stock for United States federal income tax purposes, the following discussion, except as otherwise indicated, assumes that the warrants would be characterized as warrants. A U.S. holder will generally not recognize any gain or loss upon exercise of any warrants (except with respect to any cash received in lieu of a fractional warrant share). A U.S. holder will have an initial tax basis in the warrant shares received on exercise of the warrants equal to the sum of its tax basis in the warrants and the aggregate cash exercise price, if any, paid in respect of such exercise. Generally, the holding period of shares received upon the exercise of warrants commences on the day after the warrants are exercised, although it is possible that, in a cashless exercise of a warrant, the holding period of such shares would include the holding period of the warrant. If a warrant expires without being exercised, then a U.S. holder will recognize a capital loss in an amount equal to its tax basis in the warrant. Upon the sale or exchange of a warrant, a U.S. holder will generally recognize a capital gain or loss equal to the difference, if any, between the amount realized on such sale or exchange and the U.S. holder's tax basis in such warrant. Such capital gain or loss will be long-term capital gain or loss if, at the time of such sale or exchange, the warrant has been held for more than one year. Under Section 305 of the Internal Revenue Code, a U.S. holder of a warrant may be deemed to have received a constructive distribution from Instron, which may result in the inclusion of ordinary dividend income, in the event of certain adjustments to the number of warrant shares to be issued on exercise of a warrant. Because the exercise price of the warrants may constitute a nominal amount, the IRS may consider a warrant to be constructively exercised for United States federal income tax purposes on the day on which the warrant first becomes exercisable or possibly on the day of issuance. In that event, (i) no gain or loss will be recognized to a U.S. holder upon either such deemed exercise or actual exercise of the warrant; (ii) the adjusted tax basis of the warrant shares deemed received will be equal to the adjusted tax basis of the warrant until the warrant is actually exercised at which time the adjusted tax basis of warrant shares would be increased by the exercise price paid; (iii) the holding period of the warrant shares deemed received will begin on the day after the day of constructive exercise; and (iv) the United States federal income tax consequences of the ownership and disposition of the warrant shares deemed received will be the same as if the warrant deemed exercised actually was warrant shares. BACKUP WITHHOLDING AND INFORMATION REPORTING. Backup withholding of U.S. federal income tax at a rate of 31% may apply to payments made in respect of a note (including OID), payments of the proceeds from the sale of a note, dividends received with respect to warrant shares and payments of the proceeds from the sale of warrant shares, to a U.S. holder who is not an exempt recipient and who fails to provide a correct taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend or interest income. Generally, individuals are not exempt recipients, whereas corporations and certain other entities are exempt recipients. In general, information reporting requirements will apply to certain payments made in respect of the note or a warrant share of a U.S. holder, unless the holder is an exempt recipient or otherwise establishes an exemption. 102 107 Any amounts withheld from a payment to a U.S. holder under the backup withholding rules generally will be allowed as a credit against that holder's federal income tax liability and may entitle that holder to a refund, provided that the required information is furnished in a timely manner to the IRS. TAX CONSEQUENCES TO NON-U.S. HOLDERS PAYMENTS OF INTEREST ON THE NOTES. Subject to the discussion below concerning backup withholding, payments of interest on the notes by us or our paying agent to any non-U.S. holder will not be subject to U.S. federal withholding tax, provided that: - the interest is not effectively connected with the conduct by that holder of a trade or business in the United States; - the holder does not own, actually or constructively, 10% or more of the total combined voting power of all classes of our stock entitled to vote; - the holder is not a "controlled foreign corporation" with respect to which we are a "related person" (in each case within the meaning of the Code); and - the certification requirement, as described below, has been fulfilled with respect to the beneficial owner. The certification requirement referred to above will be fulfilled if the beneficial owner of a note certifies on IRS Form W-8, Form W-8 BEN or other appropriate successor form, under penalties of perjury, that it is not a U.S. Person and provides its name and address, and (i) that beneficial owner files the Form W-8, Form W-8 BEN or other appropriate successor form with the withholding agent or (ii), in the case of a note held by a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business and is holding the note on behalf of the beneficial owner, that financial institution files with the withholding agent a statement that it has received the Form W-8, Form W-8 BEN or other appropriate successor form from the non-U.S. holder and furnishes the withholding agent with a copy thereof. With respect to notes held by a foreign partnership, under current law, the Form W-8 may be provided by the foreign partnership. However, unless a foreign partnership has entered into a withholding agreement with the IRS, for interest paid with respect to a note after December 31, 2000, the foreign partnership will generally be required (and may be permitted earlier), in addition to providing an intermediary Form W-8 (Form W-8IMY), to attach an appropriate certification by each partner. Prospective investors, including foreign partnerships and their partners, should consult their tax advisors regarding possible additional reporting requirements. The gross amount of payments of interest that do not qualify for the exception from withholding described above and that are not effectively connected with the conduct of a U.S. trade or business will be subject to U.S. withholding tax at a rate of 30% unless a treaty applies to reduce or eliminate withholding and the non-U.S. holder properly certifies to its entitlement to the treaty benefits on IRS Form 1001, Form W-8BEN or other appropriate successor form. DIVIDENDS ON WARRANT SHARES. Dividends paid to a non-U.S. holder of warrant shares generally will be subject to withholding tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. Currently, for purposes of determining whether tax is to be withheld at a rate of 30% or at a reduced treaty rate, we ordinarily will presume that dividends paid on or before December 31, 2000 to an address in a foreign country are paid to a resident of such country absent knowledge that such presumption is not warranted. After December 31, 2000, a non-U.S. holder will be required to properly certify its entitlement to the treaty benefits on IRS Form W-8BEN or other appropriate successor form. EFFECTIVELY CONNECTED INTEREST OR DIVIDEND INCOME. Interest on a note or dividends with respect to the warrant shares that are effectively connected with the conduct of a trade or business in the United States by a non-U.S. holder, although exempt from withholding tax, may be subject to the U.S. income tax at graduated rates as if such interest or dividends were earned by a U.S. holder. The non-U.S. holder will be exempt from withholding tax if it properly certifies on IRS Form 4224, Form W-8ECI or other appropriate successor form that the income is effectively connected with the conduct of a U.S. trade or business. 103 108 SALE, EXCHANGE OR DISPOSITION OF THE NOTES, WARRANTS OR WARRANT SHARES. Subject to the discussion below concerning backup withholding, a non-U.S. holder of a note, warrant or warrant shares will not be subject to U.S. federal income tax on gain realized on the sale, exchange or other disposition of that note, warrant or warrant shares unless: - that holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition, and some other conditions are met; - that gain is effectively connected with the conduct by the holder of a trade or business in the United States; - the holder is subject to the special rules applicable to some former citizens and residents of the United States; or - in the case of the sale, exchange or other disposition of a warrant or warrant share, the warrant or warrant share was a United States real property interest as defined in Section 897(c)(1) of the Internal Revenue Code ("USRPI") at any time during the five year period prior to the sale, exchange or other disposition or at any time during the time that the non-U.S. holder held such warrant or warrant share, whichever time was shorter. A warrant or warrant share would be a USRPI only if, during the time period specified above, our company had been a United States real property holding corporation as defined in Section 897(c)(2) of the Internal Revenue Code ("USRPHC"). We believe that our company is not, has not been and will not become a USRPHC for U.S. federal income tax purposes. If, at the time of the disposition of a warrant or warrant shares, the Common Stock is considered to be regularly traded on an established securities market, these USRPI rules would only apply to a non-U.S. holder who directly or constructively had owned more than 5% of such series of common stock during the relevant time period. EXCHANGE NOTES. The exchange of notes for exchange notes as described herein will not constitute a "significant modification" of the notes for U.S. federal income tax purposes and, accordingly, the exchange notes received will be treated as a continuation of the original notes in the hands of the non-U.S. holder. As a result, there will be no U.S. federal income tax consequences to a non-U.S. holder on the exchange of a note for an exchange note. BACKUP WITHHOLDING AND INFORMATION REPORTING. Where required, we will report annually to the IRS and to a non-U.S. holder the amount of any interest or dividends paid to the non-U.S. holder and any tax withheld with respect to that interest or dividends. Under current U.S. federal income tax law, backup withholding at a rate of 31% will not apply to payments of interest to a non-U.S. holder by us or our paying agent on a note if the certifications described above under "Non-U.S. Holders--Payment of Interest" are received, provided that we or the paying agent, as the case may be, does not have actual knowledge that the payee is a U.S. Person. Backup withholding generally will not apply to dividends paid on or before December 31, 2000 to a non-U.S. holder at an address outside the United States, provided we or our paying agent does not have actual knowledge that the payee is a U.S. Person. After December 31, 2000, however, a non-U.S. holder will be subject to backup withholding unless the applicable certification requirements are met. Under current Treasury regulations, payments on the sale, exchange or other disposition of a note, warrant or warrant share made to or through a foreign office of a broker generally will not be subject to backup withholding or information reporting. However, if that broker is for U.S. federal income tax purposes a U.S. person, a controlled foreign corporation, a foreign person that derives 50% or more of its gross income from the conduct of a U.S. trade or business for a specified three-year period or (generally in the case of payments made after December 31, 2000) a foreign partnership with some connections to the United States, then information reporting will be required unless the broker has in its records documentary evidence that the beneficial owner is not a U.S. Person and some other conditions are met or the beneficial owner otherwise establishes an exemption. Backup withholding may apply to any payment that the broker is required to report if the broker has actual knowledge that the payee is a U.S. Person. Payments to or through the U.S. office of a broker will be subject to 104 109 backup withholding and information reporting unless the beneficial owner certifies, under penalties of perjury, that it is not a U.S. Person or otherwise establishes an exemption. New Treasury regulations which are generally effective for payments after December 31, 2000 provide presumptions under which a non-U.S. holder will be subject to backup withholding and information reporting unless the holder certifies as to its non-U.S. status or otherwise establishes an exemption. In addition, the new Treasury regulations change some procedural requirements relating to establishing a holder's non-U.S. status. Any amounts withheld from a payment to a non-U.S. holder under the backup withholding rules generally will be allowed as a credit against that holder's U.S. federal income tax liability and may entitle that holder to a refund, provided that the required information is furnished in a timely manner to the IRS. 105 110 PLAN OF DISTRIBUTION Except as described below, a broker-dealer may not participate in the exchange offer in connection with a distribution of the exchange notes. Each broker-dealer that receives exchange notes for its own account in accordance with the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received for its own account in exchange for outstanding notes where those outstanding notes were acquired as a result of market-making activities or other trading activities. We have agreed that for a period of 90 days after the expiration date of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any resale. We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account in accordance with the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of those methods or resale, at market prices prevailing at the time of resale, at prices related to the prevailing market prices, or negotiated prices. Any resale may be made directly to purchasers or through brokers or dealers who may receive compensation in the form of commission or concessions from any broker-dealer and/or to the purchasers of any exchange notes. Any broker or dealer that participates in a distribution of the exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act of 1933, and any profit on the resale of exchange notes and any commissions or concessions received by those persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. We have agreed to pay all expenses incident to the exchange offer other than commissions or concessions of any brokers or dealers and expenses of counsel for the holders of the exchange notes and will indemnify the holders of the exchange notes, including any broker-dealers, against some liabilities, including some liabilities under the Securities Act. LEGAL MATTERS The validity of the exchange notes will be passed upon for Instron by Jones, Day, Reavis & Pogue, Cleveland, Ohio. EXPERTS The financial statements as of December 31, 1998 and 1997 and for each of the three years in the period ended December 31, 1998 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. AVAILABLE INFORMATION We have filed with the Commission a registration statement on Form S-4 pursuant to the Securities Act and the rules and regulations promulgated under the securities laws covering the exchange offer contemplated by this prospectus. This prospectus does not contain all the information set forth in the registration statement. For further information with respect to us and the exchange offer, see the registration statement. We are not currently subject to the periodic reporting and other informational requirements of the Exchange Act. We have agreed that, whether or not it is required to do so by the rules and regulations of the Commission, for so long as any of the notes remain outstanding, we will furnish to the holders of the notes and file with the Commission, copies of the financial and other information that would be contained in the annual reports and quarterly reports that we would be required to file with the Commission if we were subject to the requirements of the Exchange Act. We will also make these reports available to prospective purchasers of the exchange notes, and to securities analysts and broker-dealers upon their request. 106 111 INDEX TO FINANCIAL STATEMENTS
PAGE ---- UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Statements of Operations for the nine months ended October 2, 1999 and September 26, 1998........... F-2 Consolidated Balance Sheets as of October 2, 1999 and December 31, 1998...................................... F-3 Consolidated Statements of Cash Flows for the nine months ended October 2, 1999 and September 26, 1998........... F-4 Consolidated Statements of Comprehensive Income for the nine months ended October 2, 1999 and September 26, 1998................................................... F-6 Notes to Consolidated Financial Statements................ F-7 AUDITED CONSOLIDATED FINANCIAL STATEMENTS: Report of Independent Accountants......................... F-12 Consolidated Statements of Operations for the years ended December 31, 1998, 1997 and 1996....................... F-13 Consolidated Balance Sheets as of December 31, 1998 and 1997................................................... F-14 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996....................... F-15 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1997 and 1998........... F-16 Notes to Consolidated Financial Statements................ F-17 FINANCIAL STATEMENT SCHEDULE: Report of Independent Accountants......................... F-28 Consolidated Valuation Accounts for the years ended December 31, 1998, 1997 and 1996....................... F-29
F-1 112 INSTRON CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED -------------------------------- OCTOBER 2, SEPTEMBER 26, 1999 1998 ------------ --------------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUE: Sales..................................................... $125,431 $ 94,552 Service................................................... 25,522 20,409 -------- -------- Total revenue..................................... 150,953 114,961 -------- -------- Cost of revenue: Sales..................................................... 75,117 55,145 Service................................................... 17,587 13,622 -------- -------- Total cost of revenue............................. 92,704 68,767 -------- -------- Gross profit...................................... 58,249 46,194 -------- -------- Operating expenses: Selling and administrative................................ 41,558 32,342 Research and development.................................. 8,239 5,191 Special items charge...................................... -- 4,975 Recapitalization compensation expense..................... 12,606 -- -------- -------- Total operating expenses.......................... 62,403 42,508 -------- -------- Income (loss) from operations..................... (4,154) 3,686 -------- -------- Other (income) expense: Interest (income) expense................................. 367 13 Foreign exchange losses................................... 26 273 Gain on sale of land...................................... -- (11,076) -------- -------- Total other (income) expenses..................... 393 (10,790) -------- -------- Income (loss) before income taxes........................... (4,547) 14,476 Provision (benefit) for income taxes........................ (190) 6,648 -------- -------- Net income (loss)........................................... $ (4,357) $ 7,828 ======== ======== Weighted average number of basic common shares.............. 6,866 6,589 ======== ======== Earnings (loss) per share -- basic.......................... $ (0.63) $ 1.19 ======== ======== Weighted average number of diluted common shares............ 6,866 7,087 ======== ======== Earnings (loss) per share -- diluted........................ $ (0.63) $ 1.10 ======== ========
See accompanying Notes to Consolidated Financial Statements F-2 113 INSTRON CORPORATION CONSOLIDATED BALANCE SHEETS
OCTOBER 2, 1999 DECEMBER 31,1998 --------------- ---------------- (UNAUDITED) (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents................................. $ 9,118 $ 7,209 Accounts receivable (net of allowance for doubtful accounts of $726 in 1999 and $800 in 1998)............. 60,683 65,766 Inventories............................................... 37,865 36,121 Accrued and deferred income taxes......................... 6,744 3,060 Prepaid expenses and other current assets................. 3,045 2,223 -------- -------- Total current assets.............................. 117,455 114,379 -------- -------- Property, plant and equipment, net.......................... 24,073 24,001 Goodwill.................................................... 11,258 12,384 Deferred income taxes....................................... 1,866 904 Other assets................................................ 5,345 6,586 Deferred financing costs.................................... 8,642 -- -------- -------- Total assets...................................... $168,639 $158,254 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Short term borrowings..................................... $ 19,644 $ 6,416 Accounts payable.......................................... 13,007 15,807 Accrued liabilities....................................... 33,413 23,051 Accrued employee compensation and benefits................ 5,648 6,798 Advance payments received on contracts.................... 11,523 7,066 -------- -------- Total current liabilities......................... 83,235 59,138 Long-term debt: Senior term loan.......................................... 30,000 -- 13 1/4% Senior subordinated notes due 2009................ 60,000 -- Other long term debt...................................... -- 13,216 -------- -------- 90,000 13,216 Pension and other long-term liabilities..................... 9,235 6,316 -------- -------- Total liabilities................................. 182,470 78,670 Commitments and Contingencies............................... -- -- Stockholders' equity (deficit): Common stock, $1.00 par value, 10,000,000 shares authorized; 0 and 7,051,968 shares issued, respectively........................................... -- 7,052 Recapitalized common stock, $0.01 par value; 1,000,000 shares authorized; 557,431 and 0 shares issued, respectively........................................... 557 -- Additional paid in capital................................ 50,179 8,727 Deferred compensation..................................... -- (2,662) Retained earnings (accumulated deficit)................... (58,408) 72,496 Accumulated other comprehensive loss...................... (6,159) (4,699) -------- -------- (13,831) 80,914 Less: Treasury stock...................................... -- 1,330 -------- -------- Total stockholders' equity (deficit).............. (13,831) 79,584 -------- -------- Total liabilities and stockholders' equity (deficit)....................................... $168,639 $158,254 ======== ========
See Accompanying Notes to Consolidated Financial Statements F-3 114 INSTRON CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED ----------------------------- OCTOBER 2, SEPTEMBER 26, 1999 1998 ---------- ------------- (UNAUDITED) (IN THOUSANDS) Cash flows from operating activities: Net income (loss)......................................... $ (4,357) $ 7,828 Adjustments to reconcile net income to net cash provided by operating activities: (Gain) on the sale of property, plant and equipment.... -- (6,868) Depreciation and amortization.......................... 6,446 5,167 Non-cash recapitalization related costs................ 3,874 -- Provision for losses on accounts receivable............ 103 23 Deferred taxes......................................... (962) (138) Changes in assets and liabilities, excluding the effects from purchase of business: Income tax receivable................................ (3,684) -- (Increase) decrease in accounts receivable........... 5,015 (477) (Increase) decrease in inventories................... (1,739) (4,887) (Increase) decrease in prepaid expenses and other current assets...................................... (799) 1,504 Increase (decrease) in accounts payable and accrued expenses............................................ 6,412 (7,904) Increase in other long-term liabilities.............. 1,719 1,015 Other, net........................................... 4,194 96 -------- ------- Net cash provided (used) by operating activities..... 16,222 (4,641) Cash flows from investing activities: Proceeds from the sale of property, plant and equipment... 131 13,566 Capital expenditures...................................... (4,116) (5,182) Purchase of business...................................... -- (12,628) Capitalized software costs................................ (1,698) (787) Other, net................................................ 274 4 -------- ------- Net cash used by investing activities.................. (5,409) (5,027) -------- ------- Cash flows from financing activities: Net borrowings (payments) of lines of credit and borrowing arrangements prior to recapitalization................. (16,488) 9,070 Borrowings under new revolving line of credit............. 16,500 -- Issuance of senior subordinated notes..................... 60,000 -- Issuance of senior term loan.............................. 30,000 -- Net borrowings, Revolver line of credit................... -- -- Debt financing fees....................................... (6,391) -- Recapitalization related fees............................. (3,761) -- Issuance of recapitalized common stock.................... 54,173 -- Cash dividends paid....................................... (268) (794) Proceeds from exercise of stock options................... 387 1,922 Purchase of treasury stock, common stock and options outstanding............................................ (143,041) (616) -------- ------- Net cash provided (used) in financing activities....... (8,889) 9,582 -------- -------
F-4 115 INSTRON CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
NINE MONTHS ENDED ----------------------------- OCTOBER 2, SEPTEMBER 26, 1999 1998 ---------- ------------- (UNAUDITED) (IN THOUSANDS) Effect of exchange rate changes on cash..................... $ (15) $ (7) -------- ------- Net increase (decrease) in cash and cash equivalents........ 1,909 (93) Cash and cash equivalents at beginning of year.............. 7,209 2,566 -------- ------- Cash and cash equivalents at end of period.................. $ 9,118 $ 2,473 ======== ======= Supplemental disclosures of cash flow information: Cash paid during the year for: Interest (net of amount capitalized)................... $ 778 $ 1,009 Income taxes........................................... 3,024 6,196 Conversion of common stock to preferred stock............... 325 -- Conversion of preferred stock to common stock............... 325 -- Issuance of common stock warrants........................... 2,250 -- Retirement of treasury stock................................ 1,330 -- Supplemental disclosures of non-cash investing and financing activities: Liabilities incurred or assumed in business acquisitions........................................... $ 1,878
See Accompanying Notes to Consolidated Financial Statements F-5 116 INSTRON CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
NINE MONTHS ENDED --------------------------- OCTOBER 2, SEPTEMBER 26, 1999 1998 ---------- ------------- (UNAUDITED) (IN THOUSANDS) Net income (loss)........................................... $(4,357) $7,828 Other comprehensive income (loss): Foreign currency translation adjustments.................. (1,460) 628 ------- ------ Comprehensive income (loss)............................ $(5,817) $8,456 ======= ======
See Accompanying Notes to Consolidated Financial Statements F-6 117 INSTRON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 2, 1999 (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain reclassifications were made to the prior year amounts to conform with the 1999 presentation. For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 1998. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that effect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. The consolidated results for the third quarter and the first nine months of 1999 include the results of Satec, which was acquired in August 1998, the results of IST due to Instron acquiring the remaining 49% of IST in the fourth quarter of 1998 and the execution of the Recapitalization and Merger with Kirtland Capital Partners III, L.P. In the opinion of management, all adjustments (which include only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine month period ended October 2, 1999, are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. 2. EARNINGS PER SHARE Basic earnings per share is computed by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares, plus the dilutive effect of any potential common shares outstanding using the "treasury stock method." The dilutive potential common shares have been excluded from the calculation of weighted average number of dilutive common shares outstanding for the three months and nine months ended October 2, 1999, as their inclusion would have an antidilutive effect on loss per share. The following is a reconciliation of the basic and diluted EPS calculations:
FOR THE NINE MONTHS ENDED ------------------------------------- OCTOBER 2, 1999 SEPTEMBER 26, 1998 --------------- ------------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) Net income........................................... $(4,357) $7,828 ======= ====== Weighted average number of basic common shares outstanding................................... 6,866 6,589 Dilutive potential common shares (a)............ -- 498 ------- ------ Weighted average of common and dilutive shares........................................ 6,866 7,087 ======= ====== Basic earnings per share............................. $ (0.63) $ 1.19 ======= ====== Diluted earnings per share........................... $ (0.63) $ 1.10 ======= ======
F-7 118 INSTRON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED OCTOBER 2, 1999 (UNAUDITED) - --------------- (a) As of October 2, 1999, the Company had options outstanding to purchase 50,860 shares of recapitalized common stock and warrants outstanding to purchase 30,654 shares of recapitalized common stock. These potential common shares have been excluded from the diluted earnings per share computation as their inclusion would have an antidilutive effect on loss per share. 3. INVENTORIES
OCTOBER 2, 1999 DECEMBER 31, 1998 --------------- ----------------- (IN THOUSANDS) Raw Materials........................................ $13,573 $13,257 Work-in-process...................................... 16,154 16,560 Finished goods....................................... 8,138 6,304 ------- ------- $37,865 $36,121 ======= =======
Inventories are valued at the lower of cost or market (net realizable value). The last-in, first-out (LIFO) method of determining cost is principally used for inventories in the United States and the Asian branches. The Company uses the first-in, first-out (FIFO) method for all other inventories. Inventories valued at LIFO amounted to $7,497,000 and $9,056,000 at October 2, 1999 and December 31, 1998, respectively. The excess of current cost over stated LIFO value was $5,637,000 at October 2, 1999 and $5,205,000 at December 31, 1998. 4. SPECIAL ITEMS CHARGE During the first quarter of 1998 the Company recorded a special items charge to operations to undertake a consolidation of its European operations and write-down the value of certain non-performing assets. A pre-tax charge of $5.0 million was taken in the quarter ended March 28, 1998 to cover these actions. The special items charge includes termination benefits, the costs to exit a manufacturing facility, other asset impairments and other related costs. The Company closed down a manufacturing plant in Germany, relocated sales and service support personnel to another location in Germany and moved the manufacturing operation to the United Kingdom. During fiscal year 1998 and the first nine months of 1999, the Company has paid $1.4 million for termination benefits and related costs and $1.9 million for the costs of this action. In addition, the Company wrote-off $1.0 million of non-performing assets in 1998 primarily relating to its interest in Lightspeed Simulation Systems. The remaining balance of liability related to the special items charge at October 2, 1999 totaled approximately $.7 million and relates to the Company's obligation under a long-term lease agreement in Germany, partially offset by estimated income under a sub-lease arrangement. 5. SALE OF LAND On March 27, 1998, the Company completed the sale of 42 acres of its 66-acre site off Route 128 in Canton, Massachusetts for $13.5 million. As a result of this transaction, a non-operating pre-tax gain of $11.1 million was recorded in the first quarter of 1998. 6. RECAPITALIZATION On May 6, 1999, Instron Corporation (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Kirtland Capital Partners III L.P. ("Kirtland") and ISN Acquisition Corporation, a corporation newly formed by Kirtland ("MergerCo"), pursuant to which Kirtland and certain affiliates, together with members of the Company's management and certain members of the Company's Board of Directors who are also stockholders (collectively, the "Rollover Stockholders"), have acquired the Company. F-8 119 INSTRON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED OCTOBER 2, 1999 (UNAUDITED) On September 3, 1999, the Company's stockholders approved the Agreement and Plan of Merger dated as of May 6, 1999, as amended. The Company completed its merger by and among Instron Corporation, ISN Acquisition Corporation and Kirtland Capital Partners III L.P. on September 29, 1999. The merger and related transactions were treated as a Recapitalization (the "Recapitalization") for financial reporting purposes. Accordingly, the historical basis of the Company's assets and liabilities was not affected by these transactions. Under the Merger Agreement, the MergerCo merged with and into the Company with the Company continuing as the surviving corporation (the "Merger"). Pursuant to the Merger, each outstanding share of the Company's common stock (except for shares held by the Company, its subsidiaries and MergerCo), have been converted into the right to receive a cash payment of $22.00, without interest. Certain shares of the Company's common stock held by the Rollover Stockholders have been converted into shares of stock of the surviving corporation. As of October 2, 1999, the Company has incurred compensation expenses of $12.6 million related to the Recapitalization. In addition, the Company incurred costs of $12.4 million which relate to the Merger Agreement and the Recapitalization. Of these costs, $3.8 million was attributable to the cost of equity, $6.3 million, including the value of warrants issued, was attributable to the placement of the 13 1/4% Senior Subordinated Notes and $2.3 million was attributable to the Senior Credit Facility. The costs associated with the Senior Subordinated Notes and Senior Credit Facility will be amortized over a period of ten (10) years and five and one-half (5 1/2) years, respectively. The following is a summary of financing fees related to the Recapitalization:
$60 MILLION $80 MILLION 13 1/4 SUBORDINATED SENIOR CREDIT NOTES FACILITY EQUITY ------------------- ------------- ------ Financing fees........................ $4,046 $2,347 $3,761 Value of warrants issued.............. 2,250 -- -- -------- -------- ------ Total costs........................... $6,296 $2,347 $3,761 Amortization period................... 10 years 5 1/2 years
F-9 120 INSTRON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED OCTOBER 2, 1999 (UNAUDITED) The following is a summary of changes in stockholders' equity (deficit):
RETAINED ACCUMULATED RECAPITALIZED ADDITIONAL EARNINGS OTHER PREFERRED COMMON COMMON PAID IN DEFERRED (ACCUMULATED COMPENSATION SERIES B STOCK STOCK CAPITAL COMPENSATION DEFICIT) LOSS --------- ------- ------------- ---------- ------------ ------------ ------------ BALANCE AT DECEMBER 31, 1998.... $ 7,052 $ 8,728 $(2,662) $ 72,496 $(4,699) Net income.................... 1,593 Other comprehensive income (loss)...................... (1,813) Comprehensive income (loss)..... Cash dividends declared ($.04 per share).................... (268) 13,132 shares issued under employee stock option plans... 13 127 Compensation expense recognized under the 1992 Stock Incentive Plan.......................... 122 ----- ------- ---- -------- ------- --------- ------- BALANCE AT APRIL 3, 1999........ 7,065 8,855 (2,540) 73,822 (6,512) Net income.................... 1,863 Other comprehensive (loss).... (730) Comprehensive income............ 21,610 shares issued under employee stock option plans... 22 225 Compensation expense recognized under the 1992 Stock Incentive Plan.......................... 122 ----- ------- ---- -------- ------- --------- ------- BALANCE AT JULY 3, 1999......... 7,087 9,080 (2,419) 75,685 (7,242) Net Income.................... (7,813) Other comprehensive income (loss)...................... 1,083 Comprehensive income (loss)..... Compensation expense recognized under 1992 Stock Incentive Plan.......................... 122 RECAPITALIZATION RELATED TRANSACTIONS: Retirement of treasury stock....................... (108) (1,222) Recognition of unearned compensation................ 2,297 Conversion of common stock to preferred stock............. $ 325 (325) Repurchase of common stock.... (6,654) (10,108) (126,279) Conversion of preferred stock to recapitalized common stock....................... (325) $ 65 260 Purchase of recapitalized common stock................ 492 53,680 Issuance of detachable warrants.................... 2,250 Fees related to recapitalization............ (3,761) ----- ------- ---- -------- ------- --------- ------- BALANCE AT OCTOBER 2, 1999...... -- -- $557 $ 50,179 -- $ (58,408) $(6,159) ===== ======= ==== ======== ======= ========= ======= TOTAL TREASURY EQUITY STOCK (DEFICIT) -------- --------- BALANCE AT DECEMBER 31, 1998.... $(1,330) $ 79,584 Net income.................... 1,593 Other comprehensive income (loss)...................... (1,813) --------- Comprehensive income (loss)..... (220) Cash dividends declared ($.04 per share).................... (268) 13,132 shares issued under employee stock option plans... 140 Compensation expense recognized under the 1992 Stock Incentive Plan.......................... 122 ------- --------- BALANCE AT APRIL 3, 1999........ (1,330) 79,358 Net income.................... 1,863 Other comprehensive (loss).... (730) --------- Comprehensive income............ 1,133 21,610 shares issued under employee stock option plans... 247 Compensation expense recognized under the 1992 Stock Incentive Plan.......................... 122 ------- --------- BALANCE AT JULY 3, 1999......... (1,330) 80,860 Net Income.................... (7,813) Other comprehensive income (loss)...................... 1,083 --------- Comprehensive income (loss)..... (6,730) Compensation expense recognized under 1992 Stock Incentive Plan.......................... 122 RECAPITALIZATION RELATED TRANSACTIONS: Retirement of treasury stock....................... 1,330 Recognition of unearned compensation................ 2,297 Conversion of common stock to preferred stock............. Repurchase of common stock.... (143,041) Conversion of preferred stock to recapitalized common stock....................... Purchase of recapitalized common stock................ 54,172 Issuance of detachable warrants.................... 2,250 Fees related to recapitalization............ (3,761) ------- --------- BALANCE AT OCTOBER 2, 1999...... -- $ (13,831) ======= =========
F-10 121 INSTRON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued October 2, 1999 (Unaudited) 7. DEBT In connection with the Merger, the Company entered into a Credit and Security Agreement (the "Senior Credit Facility") consisting of a $30 million term loan facility (the "Term Loan Facility") and a $50 million revolving credit facility, (the "Revolving Credit Facility"). The Senior Credit Facility contains customary covenants that limit our ability to take various actions and require that we meet and maintain certain financial ratios and tests, including: (a) a minimum consolidated net worth and minimum consolidated EBITDA; (b) a maximum consolidated leverage ratio (total debt to EBITDA) and senior leverage ratio (senior debt to EBITDA); (c) a minimum consolidated interest coverage ratio (EBITA to interest expense); and (d) a minimum consolidated fixed charge coverage ratio (EBITDA to interest expense plus other fixed charges). In addition, the Company incurred $60 million of debt through the sale of its 13 1/4% Senior Subordinated Notes and Warrants (the "Senior Subordinated Notes"). The Warrants, when exercised, will entitle the holder thereof to receive 0.5109 of a fully paid and non-assessable share of common stock, par value $0.01 per share at an exercise price of $0.01 per share, subject to adjustment. As of the date of closing, September 29, 1999, the holders of the Warrants were entitled to purchase 30,654 fully paid and nonassessable shares of common stock or approximately 5.0% of the Company's common stock on a fully diluted basis. The Warrants are exercisable on or prior to September 15, 2009. The value of the Warrants on the date of the Recapitalization was $2.3 million and this value will be amortized to interest expense over 10 years. Principal and interest under the Senior Credit Facility and interest payments on the Senior Subordinated Notes represent significant liquidity requirements for the Company. As of October 2, 1999, the Company had $31.9 million of available credit under the $50 million Revolving Credit Facility. With respect to the $30 million borrowed under the Term Loan Facility, the company is required to make scheduled repayments in twenty two (22) quarterly installments of principal with interest thereon on the first day of each January, April, July and October commencing January 1, 2000. The Senior Subordinated Notes will mature in 2009, and bear interest at 13 1/4%. The Revolving Credit Facility matures in April 2005; with all amounts then outstanding becoming due. F-11 122 INSTRON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued October 2, 1999 (Unaudited) 8. GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION Some of our wholly owned subsidiaries will not be guarantors of our senior subordinated notes. Summarized below is selected financial information for the guarantor subsidiaries and the non-guarantor subsidiaries as of October 2, 1999 and for the nine-month period then ended:
COMBINED COMPANY COMBINED AND GUARANTOR NON-GUARANTOR SUBSIDIARIES SUBSIDIARIES TOTAL ---------------- ------------- -------- (IN THOUSANDS) Balance Sheet Data as of October 2, 1999: Current Assets........................ $ 73,595 $43,860 $117,455 Total Assets.......................... 112,918 55,721 168,639 Total Liabilities..................... 152,455 30,015 182,470 Stockholders' Equity (deficit)........ (39,442) 25,611 (13,831) Statement of Income Data for the nine months ended October 2, 1999: Total Revenue......................... 90,148 60,805 150,953 Other Data for the nine months ended October 2, 1999: EBITDA................................ (3,037) 5,303 2,266
F-12 123 REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF INSTRON CORPORATION: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders' equity and cash flows present fairly, in all material respects, the financial position of Instron Corporation and its subsidiaries (the "Company") at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. By: /s/ PRICEWATERHOUSECOOPERS LLP ------------------------------------ PricewaterhouseCoopers LLP Boston, Massachusetts February 18, 1999 F-13 124 INSTRON CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, ----------------------------------------------- 1998 1997 1996 ------------- ------------- ------------- IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA REVENUE: Sales............................................... $ 152,879 $ 129,679 $ 128,804 Service............................................. 30,150 25,981 24,309 ---------- ---------- ---------- Total revenue............................... 183,029 155,660 153,113 ---------- ---------- ---------- COST OF REVENUE: Sales............................................... 91,410 74,126 72,556 Service............................................. 19,644 17,363 16,086 ---------- ---------- ---------- Total cost of revenue....................... 111,054 91,489 88,642 ---------- ---------- ---------- Gross profit..................................... 71,975 64,171 64,471 ---------- ---------- ---------- OPERATING EXPENSES: Selling and administrative.......................... 48,869 44,641 44,898 Research and development............................ 8,485 6,959 8,616 Special items charge................................ 4,975 0 1,812 ---------- ---------- ---------- Total operating expenses.................... 62,329 51,600 55,326 Income from operations........................... 9,646 12,571 9,145 ---------- ---------- ---------- OTHER (INCOME) EXPENSE: Gain on sale of land................................ (11,076) 0 0 Interest expense.................................... 1,175 1,465 1,548 Interest income..................................... (943) (634) (477) Foreign exchange losses............................. 157 185 689 ---------- ---------- ---------- Total other expenses........................ (10,687) 1,016 1,760 ---------- ---------- ---------- Income before income taxes............................ 20,333 11,555 7,385 Provision for income taxes............................ 8,874 4,391 2,803 ---------- ---------- ---------- Net income............................................ $ 11,459 $ 7,164 $ 4,582 ========== ========== ========== Weighted average number of basic common shares........ 6,667,914 6,455,527 6,396,202 Earnings per share -- basic........................... $ 1.72 $ 1.11 $ .72 ========== ========== ========== Weighted average number of diluted common shares...... 7,066,257 6,791,801 6,524,467 Earnings per share -- diluted......................... $ 1.62 $ 1.05 $ .70 ========== ========== ==========
See accompanying notes to consolidated financial statements. F-14 125 INSTRON CORPORATION CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ------------------------ 1998 1997 ---------- ---------- IN THOUSANDS, EXCEPT PER SHARE DATA ASSETS Current assets: Cash and cash equivalents................................. $ 7,209 $ 2,566 Accounts receivable, net of allowance for doubtful accounts of $800 in 1998 and $1,071 in 1997............ 65,766 48,226 Inventories............................................... 36,121 24,024 Deferred income taxes..................................... 3,060 3,314 Prepaid expenses and other current assets................. 2,223 3,767 -------- -------- Total current assets.............................. 114,379 81,897 Property, plant and equipment: Land and buildings........................................ 21,254 21,796 Machinery and equipment................................... 45,217 39,627 Accumulated depreciation.................................. (42,470) (40,216) -------- -------- Property, plant and equipment, net........................ 24,001 21,207 Goodwill.................................................. 12,384 6,423 Deferred income taxes..................................... 904 806 Other assets.............................................. 6,586 8,652 -------- -------- Total assets...................................... $158,254 $118,985 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings..................................... $ 6,416 $ 6,059 Accounts payable.......................................... 15,807 11,095 Accrued liabilities....................................... 22,958 14,083 Accrued employee compensation and benefits................ 6,798 6,220 Accrued income taxes...................................... 93 957 Advance payments received on contracts.................... 7,066 1,541 -------- -------- Total current liabilities......................... 59,138 39,955 Long-term debt.............................................. 13,216 7,600 Pension and other long-term liabilities..................... 6,316 5,176 -------- -------- Total liabilities................................. 78,670 52,731 -------- -------- Commitments and contingencies (Note 5) Stockholders' equity: Preferred stock, $1 par value; 1,000,000 shares authorized; none issued................................ -- -- Common stock, $1 par value; 10,000,000 shares authorized; 7,051,968 and 6,823,698 shares issued, respectively.... 7,052 6,824 Additional paid in capital................................ 8,727 6,972 Deferred compensation..................................... (2,662) (3,235) Retained earnings......................................... 72,496 62,097 Accumulated other comprehensive income (loss)............. (4,699) (5,690) -------- -------- 80,914 66,968 Less: Treasury stock at cost; 108,262 and 74,952 shares, respectively........................................... 1,330 714 -------- -------- Total stockholders' equity........................ 79,584 66,254 -------- -------- Total liabilities and stockholders' equity........ $158,254 $118,985 ======== ========
See accompanying notes to consolidated financial statements. F-15 126 INSTRON CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, ------------------------------ 1998 1997 1996 -------- -------- -------- IN THOUSANDS CASH FLOWS FROM OPERATING ACTIVITIES Net income.................................................. $ 11,459 $ 7,164 $ 4,582 Adjustments to reconcile net income to net cash provided by operating activities: Gain on the sale of property, plant and equipment, net.................................................. (11,076) (88) (5) Depreciation and amortization.......................... 7,106 6,494 6,873 Provision for losses on accounts receivable............ 73 27 358 Deferred income taxes.................................. (580) 306 299 Changes in assets and liabilities, excluding the effects from purchase of businesses: (Increase) decrease in accounts receivable........... (6,312) (1,335) 1,297 (Increase) decrease in inventories................... 165 2,563 (521) (Increase) decrease in prepaid expenses and other current assets.................................... 2,055 (2,028) 151 Increase (decrease) in accounts payable and accrued expenses.......................................... 3,097 3,477 (3,894) Other................................................ (711) 409 684 -------- -------- -------- Net cash provided by operating activities............ 5,276 16,989 9,824 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures........................................ (5,841) (4,176) (4,473) Joint venture investment.................................... 0 0 (6,926) Purchase of businesses, net of cash acquired................ (13,086) (2,010) 0 Proceeds from the sale of property, plant and equipment..... 13,684 376 224 Capitalized software costs.................................. (1,490) (637) (1,144) Other....................................................... (31) 220 156 -------- -------- -------- Net cash used by investing activities................ (6,764) (6,227) (12,163) CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings under revolving credit and term loan facility.................................................. 5,609 (9,730) 6,068 Net short-term borrowings................................... 199 (173) (2,785) Cash dividends paid......................................... (1,060) (1,064) (1,024) Proceeds from stock option exercises........................ 1,983 348 861 Treasury stock purchases.................................... (616) 0 0 -------- -------- -------- Net cash provided (used) by financing activities..... 6,115 (10,619) 3,120 -------- -------- -------- Effect of exchange rate changes on cash..................... 16 (118) 116 -------- -------- -------- Net increase in cash and cash equivalents................... 4,643 25 897 Cash and cash equivalents at beginning of year.............. 2,566 2,541 1,644 -------- -------- -------- Cash and cash equivalents at end of year.................... $ 7,209 $ 2,566 $ 2,541 ======== ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest............................................... $ 1,430 $ 1,671 $ 1,730 Income taxes........................................... 9,145 3,041 2,286 SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES Fair value of assets acquired............................... $ 28,229 $ 2,649 $ 0 Cash paid................................................... 15,312 2,010 0 Liabilities incurred or assumed in business acquisitions.... 12,917 $ 639 $ 0 ======== ======== ======== Note receivable on sale of business......................... $ 0 $ 3,000 $ 0 ======== ======== ========
See accompanying notes to consolidated financial statements. F-16 127 INSTRON CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ACCUMULATED TOTAL ADDITIONAL OTHER STOCK- COMMON PAID IN DEFERRED RETAINED COMPREHENSIVE TREASURY HOLDERS' STOCK CAPITAL COMPENSATION EARNINGS INCOME (LOSS) STOCK EQUITY ------ ---------- ------------ -------- ------------- -------- -------- IN THOUSANDS, EXCEPT SHARE DATA BALANCE AT DECEMBER 31, 1995....... $6,415 $ 2,538 $ 0 $ 52,439 $(4,576) $ (714) $56,102 Net income....................... 4,582 4,582 Other comprehensive income (loss)......................... 1,660 1,660 ------- Comprehensive income............... 6,242 Cash dividends declared ($.16 per share)........................... (1,024) (1,024) 104,366 shares issued under employee stock option plans...... 105 976 1,081 ------ ------- ------- -------- ------- ------- ------- BALANCE AT DECEMBER 31, 1996....... 6,520 3,514 0 55,997 (2,916) (714) 62,401 Net income....................... 7,164 7,164 Other comprehensive income (loss)......................... (2,774) (2,774) ------- Comprehensive income............... 4,390 Cash dividends declared ($.16 per share)........................... (1,064) (1,064) 33,511 shares issued under employee stock option plans............... 34 314 348 Restricted stock grants issued during the year.................. 270 3,144 (3,414) 0 Compensation expense recognized under the 1992 Stock Incentive Plan............................. 179 179 ------ ------- ------- -------- ------- ------- ------- BALANCE AT DECEMBER 31, 1997....... 6,824 6,972 (3,235) 62,097 (5,690) (714) 66,254 Net income....................... 11,459 11,459 Other comprehensive income (loss)......................... 991 991 ------- Comprehensive income............... 12,450 Cash dividends declared ($.16 per share)........................... (1,060) (1,060) 228,270 shares issued, net, under employee stock option plans...... 228 1,755 1,983 Purchase of 33,310 treasury shares........................... (616) (616) Compensation expense recognized under the 1992 Stock Incentive Plan............................. 573 573 ------ ------- ------- -------- ------- ------- ------- BALANCE AT DECEMBER 31, 1998....... $7,052 $ 8,727 $(2,662) $ 72,496 $(4,699) $(1,330) $79,584 ====== ======= ======= ======== ======= ======= =======
See accompanying notes to consolidated financial statements. F-17 128 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of all domestic and foreign subsidiaries. Significant intercompany transactions and balances are eliminated. Certain reclassifications were made to prior years' amounts to conform with the 1998 presentation. USE OF ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that effect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. FOREIGN CURRENCY TRANSLATION. Assets and liabilities of the Company's principal foreign operations are translated at exchange rates prevailing at the end of the period. Income statement items are translated using average quarterly exchange rates. Translation adjustments are recorded directly in stockholders' equity and are included in income only if the underlying foreign investment is sold or liquidated. FOREIGN EXCHANGE RISK MANAGEMENT. The Company regularly enters into forward contracts primarily denominated in Japanese yen and certain European currencies to hedge firm sales and purchase commitments. Forward currency contracts have maturities of less than one year. These contracts are used to reduce the Company's risk associated with exchange rate movements, as gains and losses on these contracts are intended to offset exchange losses and gains on underlying exposures. The Company does not engage in currency speculation. The Company's policy is to defer gains and losses on these contracts until the corresponding losses and gains are recognized on the items being hedged. Both the contract gains and losses and the gains and losses on the items being hedged are included in selling and administrative expenses. The unrealized losses were not material in 1998 and 1997 as the fair value of these contracts were approximately equal to the fair value of the underlying exposures. At December 31, 1998, the face amount of outstanding forward currency contracts to sell U.S. dollars for non U.S. currencies was $3.2 million, Japanese yen for German deutschemarks was $1.9 million and French francs for British pounds was $0.7 million. At December 31, 1998, the face amount of outstanding forward currency contracts to buy German deutschemarks for U.S. dollars was $2.4 million, German deutschemarks for Japanese yen $1.9 million, Great British pounds for U.S. dollars was $0.9 million, British pounds for French francs was $0.7 million and British pounds for German deutschemarks was $0.4 million. CASH AND CASH EQUIVALENTS. The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. CONCENTRATION OF CREDIT RISK. Financial instruments which potentially subject the Company to a concentration of credit risk principally consist of cash, cash equivalents and trade receivables. The Company places its temporary cash investments with major banks throughout the world, in high quality, liquid instruments. The Company sells to a broad range of customers throughout the world and performs ongoing credit evaluations to minimize the risk of loss. The Company makes use of various devices such as letters of credit to protect its interests, principally on sales to foreign customers. In addition, the Company has certain receivables, payables, borrowings and other assets and liabilities denominated in foreign currencies, which are not hedged and therefore are subject to exchange rate fluctuations. INVENTORIES. Inventories are valued at the lower of cost or market (net realizable value). The last-in, first-out (LIFO) method of determining cost is used for certain inventories in the United States and Asian branches. The Company uses the first-in, first-out (FIFO) method for all other locations. GOODWILL AND INTANGIBLE ASSETS. Intangible assets are stated at cost and amortized using the straight-line method over the assets estimated useful lives which range from 8 to 10 years. The Company evaluates the possible impairment of long-lived assets, including intangible assets, whenever events or circumstances indicate F-18 129 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED the carrying value of the assets may not be recoverable. Impairment of purchased technology amounts and goodwill is measured on the basis of whether anticipated future undiscounted operating cash flows expected from the acquired business will recover the recorded respective, intangible asset balances over the remaining amortization period. At December 31, 1998, no amounts have been determined impaired. Amortization of goodwill and other intangibles was $2,295,000, $1,974,000 and $2,254,000 in 1998, 1997 and 1996, respectively. PROPERTY, PLANT AND EQUIPMENT. Depreciation is computed principally using the straight-line method over the estimated useful lives of 10 to 25 years for land improvements, 10 to 40 years for buildings and improvements and 3 to 15 years for machinery and equipment. Maintenance and repairs are expensed as incurred. Depreciation expense was $4,239,000, $4,341,000 and $4,619,000 for the years ended December 31, 1998, 1997 and 1996, respectively. Upon retirement or disposition, the cost and related accumulated depreciation of the assets disposed of are removed from the accounts, with any resulting gain or loss included in operations. On March 27, 1998, the Company sold 42 acres of excess land in Canton, Massachusetts for $13.5 million. SOFTWARE DEVELOPMENT COSTS. Certain software development costs are capitalized and then amortized over future periods. Amortization of capitalized software costs is computed on a product-by-product basis over the estimated economic life of the product, generally three years. Unamortized software costs included in other assets were $2,272,000, $1,574,000 and $2,473,000 at December 31, 1998, 1997 and 1996, respectively. Software development costs of $1,490,000, $637,000 and $1,144,000 were capitalized during 1998, 1997 and 1996, respectively. The amounts amortized and charged to expense in 1998, 1997 and 1996 were $792,000, $725,000, and $1,350,000, respectively. REVENUE RECOGNITION. Revenue from product sales are recognized at time of shipment. Revenue from services are recognized as services are performed and ratably over the contract period for service maintenance contracts. INCOME TAXES. Deferred income taxes are provided using the liability method, which estimates future tax effects of differences between financial statement carrying amounts and the tax basis of existing assets and liabilities. Tax credits are recorded as a reduction in income taxes. Provisions are made for the U.S. income tax liability on earnings of foreign subsidiaries, except for locations where the Company has designated earnings to be permanently invested. Such earnings amounted to approximately $22,803,000 at year-end 1998. EARNINGS PER SHARE. Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares plus the dilutive effect of common share equivalents outstanding using the "treasury stock method." The following is a reconciliation of the basic and diluted EPS calculations:
1998 1997 1996 ---------- --------- --------- IN THOUSANDS, EXCEPT PER SHARE DATA Net Income.............................................. $11,459 $7,164 $4,582 ======= ====== ====== Weighted average number of common shares outstanding -- basic............................. 6,668 6,456 6,396 Dilutive effect of stock options outstanding....... 398 336 128 ------- ------ ------ Weighted average of common and dilutive shares -- diluted................................ 7,066 6,792 6,524 ======= ====== ====== BASIC EARNINGS PER SHARE........................... $ 1.72 $ 1.11 $ 0.72 ======= ====== ====== DILUTED EARNINGS PER SHARE......................... $ 1.62 $ 1.05 0.70 ======= ====== ======
F-19 130 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED At December 1998, 4,500 Options were not included in the calculation of diluted earnings per share as they were antidilutive. FAIR VALUE. The Company's financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables and debt. The carrying amounts of these instruments approximates fair value. COMPREHENSIVE INCOME (LOSS). In June 1997, the Financial Accounting Standards Board issued SFAS 130, "Reporting Comprehensive Income," which is effective for periods beginning after December 15, 1997. The statement establishes standards for reporting and displaying comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. The statement requires that all components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company has adopted SFAS 130 in the accompanying financial statements. PENSION PLAN. In February 1998, the Financial Accounting Standards Board issued SFAS 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," which is effective for periods beginning after December 15, 1997. The statement standardizes employer disclosure requirements about pension and other postretirement benefit plans by requiring additional information on changes in the benefit obligations and fair values of plan assets and eliminating certain disclosures that are no longer useful. It does not change the measurement or recognition of those plans. The Company has adopted SFAS 132 in the accompanying financial statements. 2. INDUSTRY SEGMENT AND FOREIGN OPERATIONS SFAS 131 establishes standards for reporting information about operating segments in annual financial statements of public business enterprises. It also establishes standards for related disclosures about products and service, geographic areas, and major customers. The Company evaluated its business activities that are regularly reviewed by the Chief Executive Officer for which discrete financial information is available. As a results of this evaluation, the Company determined that it has two operating segments: Materials Testing and Structural Testing. Instron's materials testing business manufactures and markets material testing instruments (electromechanical, servohydraulic, hardness and impact), software and accessories. The structural testing business manufactures and markets systems for simulating real-life testing of components and products. The economic characteristics, production processes, core technology, types and classes of customers, method of distribution and regulatory environments are similar for both of these operating segments which operate within the material testing industry. As a result of these similarities, both segments have been aggregated into one reporting segment for financial statement purposes. F-20 131 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The following table summarizes the Company's operations by significant geographic location for the years ended December 31:
1998 1997 1996 -------- -------- -------- IN THOUSANDS REVENUE, INCLUDING INTERAREA SALES United States.................................... $102,860 $ 76,314 $ 70,924 Germany.......................................... 26,293 14,484 15,619 Other Europe..................................... 54,395 52,393 49,294 Asia/Latin America............................... 31,335 40,004 39,077 Other international.............................. 3,552 3,868 3,404 Eliminations..................................... (35,406) (31,403) (25,205) -------- -------- -------- Total revenue............................ $183,029 $155,660 $153,113 ======== ======== ======== IDENTIFIABLE ASSETS AT YEAR-END United States.................................... $ 64,903 $ 38,384 $ 38,654 Germany.......................................... 22,983 6,771 8,180 Other Europe..................................... 38,546 35,903 37,091 Asia/Latin America............................... 18,232 18,645 19,149 Other international.............................. 1,965 2,072 2,499 Corporate........................................ 13,335 18,066 16,938 Eliminations..................................... (1,710) (856) (678) -------- -------- -------- Total assets............................. $158,254 $118,985 $121,833 ======== ======== ========
Total assets in the United Kingdom in 1998, 1997 and 1996 were $24,227,000, $24,883,000 and $24,475,000, respectively. Sales between geographic areas in 1998, 1997 and 1996, respectively, consisted primarily of $20,023,000, $13,091,000 and $11,337,000 from the United States and $15,204,000, $18,168,000 and $13,706,000 from European operations. Transfers between geographic areas are at manufacturing cost plus a markup factor. 3. INVENTORIES Inventories at December 31 were as follows:
1998 1997 ------- ------- IN THOUSANDS Raw materials............................................... $13,257 $12,742 Work in process............................................. 16,560 5,156 Finished goods.............................................. 6,304 6,126 ------- ------- Total inventory................................... $36,121 $24,024 ======= =======
Inventories valued at LIFO amounted to $9,056,000 and $9,395,000 at December 31, 1998 and 1997, respectively. The excess of current cost over stated LIFO value was $5,205,000 at December 31, 1998 and $5,247,000 at December 31, 1997. 4. BORROWING ARRANGEMENTS The Company maintains a multicurrency revolving credit and term loan facility that provides for borrowings of up to $35,000,000 through April 2000. Borrowings outstanding as of April 2000 convert to a term loan payable in sixteen equal quarterly installments. Interest on borrowings under the agreement is based upon either base rates, money market rates, or other short-term borrowing rates. Facility fees under this agreement are 1/4 of F-21 132 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED 1% per annum. The Company has met the various covenants in the agreement, the most restrictive of which requires a minimum level of tangible net worth. At December 31, 1998 and 1997, respectively, outstanding domestic borrowings of $8,375,000 and $7,600,000 with a weighted average interest rate of 6.10% and 6.61%, and outstanding European borrowings of $4,841,000 in 1998 with a weighted average interest rate of 4.75%, were classified as long-term debt. Long-term debt maturing under the credit agreement in each of the five years subsequent to December 31, 1998, assuming outstanding borrowings at December 31, 1998 are unchanged at April 2000, is $2,478,000 in 2000, $3,304,000 in 2001, 2002 and 2003. The Company's subsidiaries have other overdraft and borrowing facilities allowing advances up to approximately $32,000,000. At December 31, 1998, the outstanding portion of these facilities was $6,416,000, due currently. Bank guarantees outstanding at December 31, 1998, for which the Company is contingently liable, amounted to $10,976,000 and relate principally to performance contracts. 5. OPERATING LEASE COMMITMENTS Rental expense amounted to $3,998,000, $3,697,000 and $3,348,000 for the years ended December 31, 1998, 1997 and 1996, respectively. As of December 31, 1998, minimum annual commitments under noncancellable operating leases with terms of more than one year are:
LATER 1999 2000 2001 2002 2003 YEARS ------ ------ ------ ------ ---- ------ IN THOUSANDS $3,842 $3,094 $2,483 $1,245 $601 $1,033
6. INCOME TAXES The significant components of the Company's deferred tax assets and liabilities at December 31, are as follows:
1998 1997 ------ ------ IN THOUSANDS Employee benefits........................................... $4,634 $3,986 Inventories................................................. 3,280 2,734 Accrued expenses............................................ 1,305 632 ------ ------ Total deferred assets............................. 9,219 7,352 ------ ------ Accrued expenses............................................ (246) (360) Fixed assets................................................ (1,517) (1,400) Capitalized software costs and intangibles.................. (3,002) (982) ------ ------ Total deferred liabilities........................ (4,765) (2,742) ------ ------ Valuation reserve........................................... (490) (490) ------ ------ Total net deferred assets......................... $3,964 $4,120 ====== ======
A valuation reserve has been established where, based upon available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The valuation allowance relates primarily to foreign tax benefits. F-22 133 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The components of income before income taxes consisted of the following:
1998 1997 1996 ------- ------- ------ IN THOUSANDS Domestic............................................... $17,775 $ 5,664 $2,996 Foreign................................................ 2,558 5,891 4,389 ------- ------- ------ Total........................................ $20,333 $11,555 $7,385 ======= ======= ======
Income tax provisions (credits) were as follows:
1998 1997 1996 ------ ------ ------ IN THOUSANDS Currently payable: Federal................................................ $6,441 $1,701 $ 609 Foreign................................................ 1,896 2,090 1,486 State.................................................. 381 172 314 ------ ------ ------ 8,718 3,963 2,409 ------ ------ ------ Deferred, net: Federal & State........................................ 139 518 215 Foreign................................................ 17 (90) 179 ------ ------ ------ 156 428 394 ------ ------ ------ Total provision for income taxes............... $8,874 $4,391 $2,803 ====== ====== ======
The provisions for income taxes varied from the United States statutory rate of 35% for 1998 and 34% for 1997 and 1996 principally because of the tax effect of the following:
1998 1997 1996 ------ ------ ------ IN THOUSANDS Tax provision at United States statutory rate............ $7,117 $3,929 $2,511 Effect of earnings of foreign operations subject to different tax rates.................................... 1,019 (2) 199 State taxes, net of federal income tax benefit........... 247 114 208 Benefit of Foreign Sales Corporation..................... (76) (68) (195) Goodwill and amortization................................ -- 356 97 All other, net........................................... 567 62 (17) ------ ------ ------ Total tax provision............................ $8,874 $4,391 $2,803 ====== ====== ======
7. EMPLOYEE PENSION AND RETIREMENT PLANS The Company maintains qualified noncontributory defined benefit pension plans covering United States employees and employees of Instron's United Kingdom subsidiary. The benefits are based on years of service and final average compensation at the date of retirement. The Company's general policy is to fund the pension plans to the extent such contributions are deductible under standards established by the Internal Revenue Service in the U.S. and the Inland Revenue in the U.K. Plan assets in the U.S. consist of mutual funds which invest primarily in common stocks, corporate bonds, U.S. government notes and temporary cash investments. In the U.K., plan assets are invested in funds whose assets consist primarily of common stocks, bonds and other securities. Employees of the Japan subsidiary receive lump sum payments as a multiple of annual salary at retirement or termination, based on years of service. These Japanese benefits are unfunded. F-23 134 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED Net periodic pension costs include the following components:
1998 1997 1996 ----------------------- ------------------------ ------------------------ U.S. U.K. JAPAN U.S. U.K. JAPAN U.S. U.K. JAPAN ------ ------ ----- ------- ------ ----- ------- ------ ----- IN THOUSANDS Service cost........................... $1,122 $1,749 $222 $ 961 $1,357 $231 $ 936 $1,158 $257 Interest cost.......................... 1,911 2,278 171 1,799 1,990 201 1,648 1,690 206 Expected return on plan assets......... (2,077) (2,971) 0 (1,914) (2,742) 0 (1,682) (2,576) 0 Amortization of transition asset (liability).......................... (9) (76) 18 (9) (75) 19 (9) ( 72) 21 Amortization of prior service cost..... 44 (73) 0 44 (89) 0 44 (91) 0 Amortization of unrecognized (gain) loss................................. 2 0 0 1 (59) 0 1 130 0 Settlement gain........................ 0 0 (118) 0 0 0 0 0 0 ------ ------ ---- ------- ------ ---- ------- ------ ---- Net periodic pension cost.......... $ 993 $ 907 $293 $ 882 $ 382 $451 $ 938 $ 239 $484 ====== ====== ==== ======= ====== ==== ======= ====== ====
Assumptions used in the accounting for the Company's U.S., U.K., and Japan plans at December 31 were:
1998 1997 1996 -------------------------- -------------------------- -------------------------- U.S. U.K. JAPAN U.S. U.K. JAPAN U.S. U.K. JAPAN ------- ------- ------ ------- ------- ------ ------- ------- ------ Weighted average discount rate......................... 6.75% 5.5% 4.0% 7.0% 6.5% 5.0% 7.5% 8.0% 6.0% Rates of increase in compensation levels........ 4.25 4.0 3.0 4.5 4.75 4.0 5.0 5.5 5.0 Expected long-term rate of return on assets........... 9.0 7.25 0.0 9.0 8.75 0.0 9.0 9.5 0.0
The following is a reconciliation of the Projected Benefit Obligation as of December 31:
1998 1997 1996 -------------------------- -------------------------- -------------------------- U.S. U.K. JAPAN U.S. U.K. JAPAN U.S. U.K. JAPAN ------- ------- ------ ------- ------- ------ ------- ------- ------ IN THOUSANDS Projected benefit obligation at prior year end............ $26,209 $33,222 $3,221 $23,246 $24,681 $3,404 $21,134 $20,167 $3,327 Service cost................. 1,122 1,749 222 961 1,357 231 936 1,159 257 Interest cost................ 1,911 2,278 171 1,799 1,990 201 1,648 1,690 206 Actuarial (gain) loss........ 1,170 1,160 (102) 989 7,019 (205) 201 287 4 Benefits paid................ (871) (1,437) 0 (786) (1,288) (10) (673) (1,246) (4) Plan amendments.............. 0 262 0 0 287 0 0 94 0 Settlement................... 0 0 (872) 0 0 0 0 244 0 Foreign currency gain (loss)..................... 0 180 400 0 (824) (400) 0 2,286 (386) ------- ------- ------ ------- ------- ------ ------- ------- ------ Projected Benefit Obligation at year end................ $29,541 $37,414 $3,040 $26,209 $33,222 $3,221 $23,246 $24,681 $3,404 ======= ======= ====== ======= ======= ====== ======= ======= ======
The following is a reconciliation of the beginning and ending balances of the fair value of Plan assets at December 31:
1998 1997 1996 -------------------------- -------------------------- -------------------------- U.S. U.K. JAPAN U.S. U.K. JAPAN U.S. U.K. JAPAN ------- ------- ------ ------- ------- ------ ------- ------- ------ IN THOUSANDS Fair value of plan assets at prior year end............... $26,650 $33,522 $ 0 $24,865 $29,748 $ 0 $21,556 $24,466 $ 0 Actual return on plan assets..................... 3,667 5,475 0 2,546 4,812 0 2,655 2,576 0 Employer contributions....... 24 1,334 551 25 1,288 10 1,327 1,195 4 Benefits paid................ (871) (1,437) (551) (786) (1,288) (10) (673) (1,246) (4) Foreign currency gain (loss)..................... 0 184 0 0 (1,038) 0 2,757 0 ------- ------- ------ ------- ------- ------ ------- ------- ------ Fair value of plan assets at year end................... $29,470 $39,078 $ 0 $26,650 $33,522 $ 0 $24,865 $29,748 $ 0 ======= ======= ====== ======= ======= ====== ======= ======= ======
F-24 135 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The funded status of the Company's U.S., U.K. and Japan plans and amounts recognized in the Consolidated Balance Sheet at December 31 were:
1998 1997 1996 -------------------------- -------------------------- -------------------------- U.S. U.K. JAPAN U.S. U.K. JAPAN U.S. U.K. JAPAN ------- ------- ------ ------- ------- ------ ------- ------- ------ IN THOUSANDS Projected benefit obligation in excess of (less than) plan assets....................... $ 71 $(1,664) $3,040 $ (441) $ (300) $3,221 $(1,619) $(5,067) $3,404 Unrecognized asset (liability) at transition................. 48 465 (243) 57 538 (229) 66 637 (278) Unrecognized prior service cost....................... (461) 737 (505) 1,066 0 (549) 1,498 0 Unrecognized gain (loss)..... 4,104 163 648 3,683 (1,177) 259 4,038 4,011 77 ------- ------- ------ ------- ------- ------ ------- ------- ------ Pension liability included assets in Consolidated Balance Sheet.............. $ 3,762 $ (299) $3,445 $ 2,794 $ 127 $3,251 $ 1,936 $ 1,079 $3,203 ======= ======= ====== ======= ======= ====== ======= ======= ======
The expense of all pension plans for 1998, 1997 and 1996 was $2,193,000, $1,715,000, and $1,661,000, respectively. The Company also sponsors a Savings and Security Plan for all U.S. employees. The plan (in accordance with section 401(k) of the Internal Revenue Code) offers participating employees a program of regular savings and investment, funded by their own contributions and those of the Company. The amount charged to operating expense for this plan was $582,000, $530,000 and $523,000 in 1998, 1997 and 1996, respectively. 8. STOCK OPTION PLANS The Company accounts for stock-based compensation using the intrinsic value method. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. The Company has two stock options plans currently in effect under which future grants may be issued: the 1992 Stock Incentive Plan and the 1979 Non-Qualified Plan. A total of 1,391,500 shares has been authorized by the Company for grants of options or shares. Stock Options granted during 1998, 1997 and 1996 generally have a maximum term of eight years and vest equally over four years. A summary of the Company's stock option activity for the years ended December 31 follows:
WEIGHTED NUMBER AVERAGE OF OPTIONS EXERCISE PRICES ---------- --------------- Outstanding at December 31, 1995............................ 881,450 $10.80 Granted, 1996............................................... 225,750 13.51 Exercised, 1996............................................. (112,726) 9.91 Terminated, 1996............................................ (15,750) 12.59 -------- Outstanding at December 31, 1996............................ 978,724 11.49 Granted, 1997............................................... 5,000 12.25 Exercised, 1997............................................. (37,385) 11.02 Terminated, 1997............................................ (13,000) 12.43 -------- Outstanding at December 31, 1997............................ 933,339 11.51 Granted, 1998............................................... 77,250 16.71 Exercised, 1998............................................. (260,848) 9.92 Terminated, 1998............................................ (24,937) 13.90 -------- Outstanding at December 31, 1998............................ 724,804 $12.55 ========
F-25 136 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED At December 31, 1998, 1997 and 1996, respectively, there were 502,735, 656,902 and 526,045 options exercisable with a weighted average exercise price of $11.84, $10.94 and $10.58. Exercise prices for options outstanding as of December 31, 1998, ranged from $10.00 to $19.625. The weighted average remaining contractual life of those options is 4.3 years. The weighted average fair value at date of grant for options granted during 1998, 1997 and 1996 was $7.39, $5.04 and $5.79 per option, respectively. The fair value of these options at date of grant was estimated using the Black-Scholes model with the following weighted average assumptions for 1998, 1997 and 1996, respectively: risk-free interest rates of 5.07%, 5.70% and 6.50%; dividend yields of 0.97%, 1.31% and 1.19%; volatility factors of the expected market price of the Company's common stock of .35, .31 and .30; and a weighted average expected life of the options of 7.9, 8.0 and 7.8 years. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant date for awards in 1998, 1997 and 1996, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:
1998 1997 1996 ------- ------ ------ Net income -- pro forma................................. $10,871 $6,691 $4,105 Earnings per share -- basic............................. $ 1.63 $ 1.04 $ .64 Earnings per share -- diluted........................... $ 1.54 $ .99 $ .63
The pro forma effect on net income for 1997 and 1996 is not representative of the pro forma effect on net income in future years because it does not take into consideration pro forma compensation expense related to grants made prior to 1995. On May 14, 1997 and October 29, 1997, respectively, the Company issued 250,000 and 20,500 shares of restricted stock to key employees, which resulted in $3,414,000 of non-cash deferred compensation to be recognized as operating expense over a seven year period. Vesting is accelerated upon change in control or if certain performance criteria are met. 9. ACQUISITIONS On August 4, 1998, the Company acquired substantially all the assets of Satec Systems, Inc. of Grove City, Pennsylvania, for approximately $12.6 million in cash. Satec is a manufacturer of a range of materials testing equipment sold primarily in the United States with annual sales of approximately $18.0 million. This acquisition has been accounted for under the purchase method of accounting and, accordingly, the acquired assets and liabilities have been recorded at their estimated fair values at the date of acquisition. In conjunction with this acquisition the Company recorded $7.2 million of goodwill which is being amortized over ten years. The operating results of Satec have been included in the Company's consolidated results of operations from the date of acquisition. On September 27, 1998, the Company acquired the remaining 49% interest in Instron Schenck Testing Systems ("IST") from Carl Schenck A.G. of Darmstadt, Germany for $2.7 million in cash. The book value of net assets acquired were equal to the consideration paid. IST has become a world-class structures testing business with sales of more than $55 million in 1998. This additional investment has been accounted for under the purchase method of accounting and, accordingly, the acquired assets and liabilities have been recorded at their estimated fair values at the date of acquisition. The operations of IST for the fourth quarter of 1998 have been consolidated into the Company's results of operations from the date of acquisition. Prior to this acquisition the Company accounted for its 51% interest in IST under the equity method of accounting. 10. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair F-26 137 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The statement is effective for fiscal years beginning after June 15, 1999. Management is currently evaluating the effects of this change on its recording of derivatives and hedging activities. The Company will adopt SFAS No. 133 for its fiscal year ending December 31, 2000. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-1, "Internal Use Software," which provides guidance on the accounting for the costs of software developed or obtained for internal use. SOP 98-1 is effective for fiscal years beginning after December 15, 1998. This statement does not have a material impact on the Company's financial position or results of operations. In June 1997, the Financial Accounting Standards Board issued SFAS 130, "Reporting Comprehensive Income," which is effective for periods beginning after December 15, 1997. The statement establishes standards for reporting and displaying comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. The statement requires that all components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company has adopted SFAS 130 in the accompanying financial statements. In February 1998, the Financial Accounting Standards Board issued SFAS 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," which is effective for periods beginning after December 15, 1997. The statement standardizes employer disclosure requirements about pension and other postretirement benefit plans by requiring additional information on changes in the benefit obligations and fair values of plan assets and eliminating certain disclosures that are no longer useful. It does not change the measurement or recognition of those plans. The Company has adopted SFAS 132 in the accompanying financial statements. 11. SPECIAL ITEMS CHARGES During the first quarter of 1998, the Company recorded a special items charge to operations to undertake a consolidation of its European operations and write-down the value of certain non-performing assets. A pre-tax charge of $5.0 million was taken in the quarter ended March 28, 1998 to cover these actions. The special items charge includes termination benefits, the costs to exit a manufacturing facility, other asset impairments and other related costs. The Company has closed down a manufacturing plant in Germany, relocated sales and service support personnel to another Instron location in Germany and has moved the manufacturing operation to the United Kingdom. During 1998 the Company paid $1.4 million for termination benefits and related costs and $1.6 million for the costs to shutdown and exit a manufacturing facility in Germany. In addition, the Company wrote-off $1.0 million of non-performing assets in 1998, primarily relating to its interest in Lightspeed Simulation Systems. The balance of the Special Items reserve relates primarily to the Company's obligation under a long-term lease agreement in Germany, partially offset by estimated income under a sub-lease arrangement. In March 1996, the Company recognized a $1,812,000 special items charge to implement a work force reduction and consolidate certain manufacturing operations. F-27 138 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED SUPPLEMENTARY FINANCIAL INFORMATION QUARTERLY FINANCIAL DATA (QUARTERLY DATA UNAUDITED)
QUARTER QUARTER QUARTER QUARTER 1 2 3 4 YEAR ------- ------- ------- ------- -------- IN THOUSANDS, EXCEPT PER SHARE DATA 1998: Total revenue................................. $33,869 $37,761 $43,331 $68,068 $183,029 Gross profit.................................. 13,742 15,734 16,718 25,781 71,975 Income before income taxes.................... 8,159 2,914 3,403 5,857 20,333 Net income.................................... 3,911 1,807 2,110 3,631 11,459 Earnings per share -- basic*.................. 0.60 0.27 0.32 0.54 1.72 Earnings per share -- diluted................. 0.55 0.25 0.30 0.52 1.62 ------- ------- ------- ------- -------- 1997: Total revenue................................. $36,023 $37,124 $35,996 $46,517 $155,660 Gross profit.................................. 14,706 15,127 15,008 19,330 64,171 Income before income taxes.................... 1,482 2,376 2,966 4,731 11,555 Net income.................................... 919 1,470 1,842 2,933 7,164 Earnings per share -- basic................... 0.14 0.23 0.29 0.45 1.11 Earnings per share -- diluted*................ 0.14 0.22 0.26 0.42 1.05 ------- ------- ------- ------- --------
* The sum of the quarterly earnings per share does not equal the amount reported for the year, as per share amounts are calculated independently and are based on the weighted average common shares outstanding for each period. F-28 139 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENTS SCHEDULE TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF INSTRON CORPORATION: Our audits of the consolidated financial statements referred to in our report dated February 18, 1999 included in this Registration Statement on Form S-4 also included an audit of the financial statements schedule Consolidated Valuation Accounts which appears in this Registration Statement on Form S-4. In our opinion, this financial statements schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PricewaterhouseCoopers LLP -------------------------------------- PricewaterhouseCoopers LLP Boston, Massachusetts February 18, 1999 F-29 140 INSTRON CORPORATION CONSOLIDATED VALUATION ACCOUNTS
(A) EFFECT OF BALANCE AT ADDITION FOREIGN BEGINNING CHARGED TO CURRENCY (B) BALANCE AT DESCRIPTION OF YEAR OPERATIONS TRANSLATION DEDUCTIONS END OF YEAR ----------- ---------- ---------- ------------ ---------- ----------- Allowance for doubtful accounts: Year ended December 31, 1998 $1,071,000 $146,000 $(43,000) $374,000 $ 800,000 ---------- -------- -------- -------- ---------- Year ended December 31, 1997 $1,107,000 $ 27,000 $(56,000) $ 7,000 $1,071,000 ---------- -------- -------- -------- ---------- Year ended December 31, 1996 $1,040,000 $358,000 $ 27,000 $318,000 $1,107,000
- --------------- (A) Included in "Additions Charged to Operations" for the year ended December 31, 1998, is 73,000 for allowance for doubtful accounts recorded in conjunction with the acquisitions of Satec and IST. (B) Uncollected receivables written off, net of recoveries an deduction due to the disposal of LMS in 1997. F-30 141 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JANUARY , 2000 LOGO $60,000,000 INSTRON CORPORATION OFFER TO EXCHANGE ALL OUTSTANDING 13 1/4% SENIOR SUBORDINATED NOTES DUE 2009 FOR 13 1/4% SENIOR SUBORDINATED NOTES DUE 2009 ------------------------------------------ PROSPECTUS ------------------------------------------ - -------------------------------------------------------------------------------- We have not authorized any dealer, salesperson or other person to give you written information other than this prospectus or to make representations as to matters not stated in this prospectus. You must not rely on unauthorized information. This prospectus is not an offer to sell these securities or our solicitation of your offer to buy these securities in any jurisdiction where that would not be permitted or legal. Neither the delivery of this prospectus nor any sales made hereunder after the date of this prospectus shall create an implication that the information contained herein or the affairs of Instron have not changed since the date hereof. - -------------------------------------------------------------------------------- 142 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 67 of Chapter 156B of the Massachusetts General Laws provides that indemnification of directors and officers of a Massachusetts corporation may be provided to the extent specified or authorized by its articles of organization or a by-law provision adopted by the stockholders. Under Article 6(a) of the Restated Articles of Organization of the Registrant, the Registrant shall, except as limited by law or as provided in Article 6(a), indemnify any director or officer who was or is threatened to be made party to, or is involved in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Registrant, or is or was serving at the request of the Registrant as a director, officer, employee or agent of another organization or who serves at the Registrant's request in any capacity with respect to any employee benefit plan (an "Indemnified Party"). Except as limited by law or as provided in Article 6(a), indemnification shall be provided whether the basis of such Proceeding is alleged action in an official capacity as an Indemnified Party or in any other capacity while serving as an Indemnified Party, against all expense, liability, and loss (including attorneys' fees, judgments, fines, excise taxes or penalties and amounts paid or to be paid in settlement with respect to the Proceeding) actually and reasonably incurred or suffered by such person in connection therewith. Any such indemnification shall be provided although the Indemnified Party is no longer an officer, director, employee or agent of the Registrant or of such other organization or no longer serves with respect to any such employee benefit plan. No indemnification shall be provided under Article 6(a) for any person with respect to any matter as to which he or she shall have been adjudicated in any Proceeding not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Registrant or to the extent that such matter relates to service with respect to an employee benefit plan, in the best interest of the participants or beneficiaries of such employee benefit plan. If authorized by the board of directors or the stockholders, the Registrant may pay indemnification in advance of final disposition of a Proceeding upon receipt of an undertaking by such Indemnified Party to repay such payment if he or she shall be adjudicated to be not entitled to indemnification, which undertaking may be accepted without reference to the financial ability of such Indemnified Party to make repayment. Article 6(a) also permits the Registrant to indemnify any employees or other agents of the Registrant to an extent greater than that required by law only if and to the extent the board of directors may, in their discretion, so determine. The indemnification and advancement of expenses provided under Article 6(a) are not exclusive of any other rights to which any such indemnified person may be entitled under any law. Nothing in Article 6(a) affects any rights to indemnification to which corporate personnel other than the persons designated in Article 6(a) may be entitled by contract, by vote of the board of directors, or otherwise under law. ITEM 21. EXHIBITS.
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1 Agreement and Plan of Merger, dated as of May 6, 1999, among Kirtland Capital Partners III L.P., ISN Acquisition Corporation and Instron Corporation (incorporated herein by reference to Appendix A of the Definitive Proxy Statement on Schedule 14A of Instron Corporation, filed on July 22, 1999). 2.2 Amendment No. 1 to the Agreement and Plan of Merger, dated as of August 5, 1999, among Kirtland Capital Partners III L.P., ISN Acquisition Corporation and Instron Corporation (incorporated herein by reference to Appendix B of the Revised Letter to Shareholders, filed as Definitive Additional Materials on Schedule 14A of Instron Corporation on August 6, 1999). *3.1(i) Restated Articles of Organization of Instron Corporation. *3.1(ii) Amended and Restated By-Laws of Instron Corporation.
II-1 143
EXHIBIT NUMBER DESCRIPTION - ------- ----------- *4.1 Indenture, dated as of September 29, 1999, between Instron Corporation and Norwest Bank Minnesota, National Association as Trustee. *4.2 Debt Registration Rights Agreement, dated as of September 29, 1999, by and among Instron Corporation, the Subsidiary Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation. *4.3 Warrant Registration Rights Agreement, dated as of September 29, 1999, by and between Instron Corporation and Donaldson, Lufkin & Jenrette Securities Corporation. *4.4 Warrant Agreement, dated as of September 29, 1999, between Instron Corporation and Norwest Bank Minnesota, National Association as Warrant Agent. *4.5 Form of Exchange Note (included in Exhibit 4.1). *4.6 Form of Warrant (included in Exhibit 4.6). +5.1 Opinion of Jones, Day, Reavis & Pogue regarding validity of the exchange notes. *10.1 Credit and Security Agreement, dated as of September 29, 1999, among Instron Corporation, Instron, Ltd., Instron Schenck Testing Systems, GMBH and Instron Wolpert GMBH as Borrowers and the Banks which are Signatories and National City Bank as Administrative Agent. 10.2 Letter Agreement dated as of May 6, 1999 by and among Kirtland and the Management Investors (incorporated herein by reference to Exhibit (c)(2) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.3 Letter Agreement dated as of May 6, 1999 by and among Kirtland, Instron Corporation and the Other Investors (incorporated herein by reference to Exhibit (c)(3) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.4 Voting Agreement dated as of May 6, 1999 by and among Kirtland, MergerCo, the Management Investors and certain of their affiliates, and the Other Investors and certain of their affiliates (incorporated herein by reference to Exhibit (c)(4) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.5 Form of Stockholders Agreement by and among Instron Corporation and all of its stockholders (incorporated herein by reference to Exhibit (c)(5) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.6 Form of Amendment to Restricted Stock Award Agreement (incorporated herein by reference to Exhibit (c)(6) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.7 Form of Instron Corporation 1999 Stock Option Plan (incorporated herein by reference to Exhibit (c)(7) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.8 Form of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit (c)(8) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.9 Form of Nonqualified Stock Option Agreement (incorporated herein by reference to Exhibit (c)(9) to Schedule 13E-3 on Instron Corporation, filed on May 26, 1999). 10.10 Form of Amendment to Instron Corporation 1992 Stock Incentive Plan (incorporated herein by reference to Exhibit (c)(10) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.11 Form of Amendment to Nonqualified Stock Option Agreement (incorporated herein by reference to Exhibit (c)(11) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.12 Form of Amendment to Incentive Stock Option Agreement (incorporated herein by reference to Exhibit (c)(12) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). *12 Statement regarding computation of earnings to fixed charges. *21 Subsidiaries of Instron Corporation (incorporated herein by reference to Exhibit 21 to the Annual Report on Form 10-K of Instron Corporation, filed on April 9, 1999). +23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1).
II-2 144
EXHIBIT NUMBER DESCRIPTION - ------- ----------- *23.2 Consent of PricewaterhouseCoopers LLP. *24 Powers of Attorney. *25 Statement of Eligibility of Trustee under the Trust Indenture Act of 1939 on Form T-1. *27 Financial Data Schedule. *99.1 Letter of Transmittal. *99.2 Notice of Guaranteed Delivery.
- --------------- * filed herewith. + to be filed by amendment. ITEM 22. UNDERTAKINGS. (1) The undersigned registrant hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (x) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (y) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (z) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof; (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; (d) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form; and (e) The registrant undertakes that every prospectus: (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 20, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the II-3 145 event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (4) The undersigned hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the date of the registration statement through the date of responding to the request. (5) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-4 146 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this resignation statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of Massachusetts on December 28, 1999. INSTRON CORPORATION By: /s/ LINTON A. MOULDING ------------------------------------ Linton A. Moulding Chief Financial Officer and Vice President Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated as of December 28, 1999.
SIGNATURES TITLE ---------- ----- * Director, President and Chief Executive - ------------------------------------------ Officer (Principal Executive Officer) James M. McConnell /s/ LINTON A. MOULDING Chief Financial Officer and Vice President - ------------------------------------------ (Principal Financial and Accounting Linton A. Moulding Officer) * Director - ------------------------------------------ Raymond A. Lancaster * Director - ------------------------------------------ James M. McConnell * Director - ------------------------------------------ Thomas N. Littman Director - ------------------------------------------ John F. Turben * Director - ------------------------------------------ Dennis J. Moore
* The undersigned by signing his name hereto, does sign and execute this Registration Statement pursuant to the Powers of Attorney executed by the above-named officers and directors of the company and which have been filed with the Securities and exchange Commission on behalf of such officers and directors. By: /s/ LINTON A. MOULDING December 28, 1999 -------------------------------------- Linton A. Moulding, Attorney-in-Fact for the Officers and Directors signing in the capacities indicated
II-5 147 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this resignation statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of Massachusetts on December 28, 1999. INSTRON SCHENCK TESTING SYSTEMS CORP. By: /s/ YAYHA GHARAGOZLOU ------------------------------------ Yayha Gharagozlou Director Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated as of December 28, 1999.
SIGNATURES TITLE ---------- ----- /s/ YAYHA GHARAGOZOLOU Director - ------------------------------------------ (Principal Executive Officer and Principal Yayha Gharagozolou Financial and Accounting Officer)
II-6 148 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this resignation statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of Massachusetts on December 28, 1999. INSTRON/LAWRENCE CORPORATION By: /s/ LINTON A. MOULDING ------------------------------------ Linton A. Moulding Director Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated as of December 28, 1999.
SIGNATURES TITLE ---------- ----- * Director - ------------------------------------------ (Principal Executive Officer) James M. McConnell /s/ LINTON A. MOULDING Director - ------------------------------------------ (Principal Financial and Accounting Linton A. Moulding Officer)
* The undersigned by signing his name hereto, does sign and execute this Registration Statement pursuant to the Powers of Attorney executed by the above-named officers and directors of the company and which have been filed with the Securities and exchange Commission on behalf of such officers and directors. By: /s/ LINTON A. MOULDING December 28, 1999 -------------------------------------- Linton A. Moulding, Attorney-in-Fact for the Officers and Directors signing in the capacities indicated
II-7 149 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this resignation statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of Massachusetts on December 28, 1999. INSTRON REALTY TRUST By: /s/ LINTON A. MOULDING ------------------------------------ Linton A. Moulding Trustee Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated as of December 28, 1999.
SIGNATURES TITLE ---------- ----- * Trustee - ------------------------------------------ (Principal Executive Officer) James M. McConnell /s/ LINTON A. MOULDING Trustee - ------------------------------------------ (Principal Financial and Accounting Linton A. Moulding Officer)
* The undersigned by signing his name hereto, does sign and execute this Registration Statement pursuant to the Power of Attorney executed by the above-named Trustee of the registrant and which has been filed with the Securities and exchange Commission on behalf of such Trustee. By: /s/ LINTON A. MOULDING December 28, 1999 -------------------------------------- Linton A. Moulding, Attorney-in-Fact for the Trustee signing in the capacities indicated
II-8 150 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this resignation statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of Massachusetts on December 28, 1999. IRT-II TRUST By: /s/ LINTON A. MOULDING ------------------------------------ Linton A. Moulding Trustee Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated as of December 28, 1999.
SIGNATURES TITLE ---------- ----- * Trustee - ------------------------------------------ (Principal Executive Officer) James M. McConnell /s/ LINTON A. MOULDING Trustee - ------------------------------------------ (Principal Financial and Accounting Linton A. Moulding Officer)
* The undersigned by signing his name hereto, does sign and execute this Registration Statement pursuant to the Power of Attorney executed by the above-named Trustee of the registrant and which has been filed with the Securities and exchange Commission on behalf of such Trustee. By: /s/ LINTON A. MOULDING December 28, 1999 -------------------------------------- Linton A. Moulding, Attorney-in-Fact for the Trustee signing in the capacities indicated
II-9 151 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this resignation statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of Massachusetts on December 28, 1999. INSTRON JAPAN COMPANY, LTD. By: /s/ JAMES M. MCCONNELL ------------------------------------ James M. McConnell Director Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated as of December 28, 1999.
SIGNATURES TITLE ---------- ----- /s/ JAMES M. MCCONNELL Director - ------------------------------------------ (Principal Executive Officer) James M. McConnell * Director - ------------------------------------------ (Principal Financial and Accounting Sjomua Izumi Officer) * Director - ------------------------------------------ Arthur D. Hindman * Director - ------------------------------------------ Yasuhisa Okamoto
* The undersigned by signing his name hereto, does sign and execute this Registration Statement pursuant to the Powers of Attorney executed by the above-named officers and directors of the company and which have been filed with the Securities and exchange Commission on behalf of such officers and directors. By: /s/ LINTON A. MOULDING December 28, 1999 -------------------------------------- Linton A. Moulding, Attorney-in-Fact for the Officers and Directors signing in the capacities indicated
II-10 152 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this resignation statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Canton, Commonwealth of Massachusetts on December 28, 1999. INSTRON ASIA LIMITED By: /s/ ARTHUR D. HINDMAN ------------------------------------ Arthur D. Hindman Director and President Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated as of December 28, 1999.
SIGNATURES TITLE ---------- ----- * Director and President (Principal Executive Officer) - -------------------------------------------- Arthur D. Hindman * Director (Principal Financial and Accounting Officer) - -------------------------------------------- Robert C. Marini
* The undersigned by signing his name hereto, does sign and execute this Registration Statement pursuant to the Powers of Attorney executed by the above-named officers and directors of the company and which have been filed with the Securities and exchange Commission on behalf of such officers and directors. By: /s/ LINTON A. MOULDING December 28, 1999 -------------------------------------- Linton A. Moulding, Attorney-in-Fact for the Officers and Directors signing in the capacities indicated
II-11 153 EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1 Agreement and Plan of Merger, dated as of May 6, 1999, among Kirtland Capital Partners III L.P., ISN Acquisition Corporation and Instron Corporation (incorporated herein by reference to Appendix A of the Definitive Proxy Statement on Schedule 14A of Instron Corporation, filed on July 22, 1999). 2.2 Amendment No. 1 to the Agreement and Plan of Merger, dated as of August 5, 1999, among Kirtland Capital Partners III L.P., ISN Acquisition Corporation and Instron Corporation (incorporated herein by reference to Appendix B of the Revised Letter to Shareholders, filed as Definitive Additional Materials on Schedule 14A of Instron Corporation on August 6, 1999). *3.1(i) Restated Articles of Organization of Instron Corporation. *3.1(ii) Amended and Restated By-Laws of Instron Corporation. *4.1 Indenture, dated as of September 29, 1999, between Instron Corporation and Norwest Bank Minnesota, National Association as Trustee. *4.2 Debt Registration Rights Agreement, dated as of September 29, 1999, by and among Instron Corporation, the Subsidiary Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation. *4.3 Warrant Registration Rights Agreement, dated as of September 29, 1999, by and between Instron Corporation and Donaldson, Lufkin & Jenrette Securities Corporation. *4.4 Warrant Agreement, dated as of September 29, 1999, between Instron Corporation and Norwest Bank Minnesota, National Association as Warrant Agent. *4.5 Form of Exchange Note (included in Exhibit 4.1). *4.6 Form of Warrant (included in Exhibit 4.4). +5.1 Opinion of Jones, Day, Reavis & Pogue regarding validity of the exchange notes. *10.1 Credit and Security Agreement, dated as of September 29, 1999, among Instron Corporation, Instron, Ltd., Instron Schenck Testing Systems, GMBH and Instron Wolpert GMBH as Borrowers and the Banks which are Signatories and National City Bank as Administrative Agent. 10.2 Letter Agreement dated as of May 6, 1999 by and among Kirtland and the Management Investors (incorporated herein by reference to Exhibit (c)(2) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.3 Letter Agreement dated as of May 6, 1999 by and among Kirtland, Instron Corporation and the Other Investors (incorporated herein by reference to Exhibit (c)(3) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.4 Voting Agreement dated as of May 6, 1999 by and among Kirtland, MergerCo, the Management Investors and certain of their affiliates, and the Other Investors and certain of their affiliates (incorporated herein by reference to Exhibit (c)(4) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.5 Form of Stockholders Agreement by and among Instron Corporation and all of its stockholders (incorporated herein by reference to Exhibit (c)(5) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.6 Form of Amendment to Restricted Stock Award Agreement (incorporated herein by reference to Exhibit (c)(6) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.7 Form of Instron Corporation 1999 Stock Option Plan (incorporated herein by reference to Exhibit (c)(7) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.8 Form of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit (c)(8) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999).
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EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.9 Form of Nonqualified Stock Option Agreement (incorporated herein by reference to Exhibit (c)(9) to Schedule 13E-3 on Instron Corporation, filed on May 26, 1999). 10.10 Form of Amendment to Instron Corporation 1992 Stock Incentive Plan (incorporated herein by reference to Exhibit (c)(10) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.11 Form of Amendment to Nonqualified Stock Option Agreement (incorporated herein by reference to Exhibit (c)(11) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). 10.12 Form of Amendment to Incentive Stock Option Agreement (incorporated herein by reference to Exhibit (c)(12) to Schedule 13E-3 of Instron Corporation, filed on May 26, 1999). *12 Statement regarding computation of earnings to fixed charges. *21 Subsidiaries of Instron Corporation (incorporated herein by reference to Exhibit 21 to the Annual Report on Form 10-K of Instron Corporation, filed on April 9, 1999). +23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1). *23.2 Consent of PricewaterhouseCoopers LLP. *24 Powers of Attorney. *25 Statement of Eligibility of Trustee under the Trust Indenture Act of 1939 on Form T-1. *27 Financial Data Schedule. *99.1 Letter of Transmittal. *99.2 Notice of Guaranteed Delivery.
- --------------- * filed herewith. + to be filed by amendment. II-13 EX-3.1.I 2 EXHIBIT 3.1(I) 1 EXHIBIT 3.1(i) THE COMMONWEALTH OF MASSACHUSETTS WILLIAM FRANCIS GALVIN SECRETARY OF THE COMMONWEALTH ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108-1512 RESTATED ARTICLES OF ORGANIZATION (GENERAL LAWS, CHAPTER 156B, SECTION 74) We, James McConnell, President, and Jill E. Peebles, Clerk, of Instron Corporation, located at 100 Royall Street, Canton, Massachusetts 02021, do hereby certify that the following Restatement of the Articles of Organization was duly adopted at a meeting held on September __, 1999 by a vote of the directors/or 557,431 shares of Common Stock of 557,431 shares outstanding. ARTICLE I The name of the corporation is Instron Corporation. ARTICLE II The purpose of the corporation is to engage in the following activities: (a) To carry on a manufacturing, contracting, merchandising, and research business, and in general, to carry on any business or other activity that may be lawfully carried on by a corporation organized under Chapter 156B of the Massachusetts General Laws. (b) In general, to carry on any business or other activity that may lawfully be carried on by a corporation organized under Chapter 156B of the Massachusetts General Laws. ARTICLE III Total number of shares and par value of each class of stock authorized by the corporation:
WITHOUT PAR VALUE WITH PAR VALUE TYPE NUMBER OF TYPE NUMBER OF PAR VALUE SHARES SHARES Common: None Common: 1,000,000 $.01 Preferred: None Preferred: None N/A
ARTICLE IV 2 The Common Stock of the corporation is described as follows and has the following preferences, voting powers, qualifications, and special or relative rights or privileges: Common Stock. (1) Voting. The holders of shares of Common Stock shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders for each share of Common Stock held of record by such holder as of the record date for such meeting. (2) Dividends; Liquidation. The holders of each share of Common Stock shall be entitled to receive dividends as and when declared by the Board of Directors out of any funds legally available for payments of such dividends. Each share of Common Stock, of any class, shall rank equally with all other shares of Common Stock, of any class, as to the payment of dividends and other distributions upon liquidation or otherwise. ARTICLE V There are no restrictions imposed by the Articles of Organization upon the transfer of shares of stock of any class. ARTICLE VI Article 6(a). Indemnification. (1) Directors. (A) Except as limited by law or as provided in paragraph (B) and (C) of this Article, the Corporation shall indemnify any Director or officer who was or is threatened to be made party to, or is involved in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a Director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another organization or who serves at the Corporation's request in any capacity with respect to any employee benefit plan (an "Indemnified Party"). Except as limited by law or as provided in paragraph (B) and (C) of this Article, indemnification shall be provided whether the basis of such Proceeding is alleged action in an official capacity as an Indemnified Party or in any other capacity while serving as an Indemnified Party, against all expense, liability, and loss (including attorneys' fees, judgments, fines, excise taxes or penalties and amounts paid or to be paid in settlement with respect to the Proceeding) actually and reasonably incurred or suffered by such person in connection therewith. Any such indemnification shall be provided although the Indemnified Party is no longer an officer, director, employee or agent of the Corporation or of such other organization or no longer serves with respect to any such employee benefit plan. (B) No indemnification shall be provided for any person with respect to any matter as to which he or she shall have been adjudicated in any Proceeding not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Corporation or to the extent that such matter relates to service with respect to an employee benefit plan, in the best interest of the participants or beneficiaries of such employee benefit plan. (C) If authorized by the Board of Directors or the stockholders, the Corporation may pay indemnification in advance of final disposition of a Proceeding upon receipt of an 3 undertaking by such Indemnified Party to repay such payment if he or she shall be adjudicated to be not entitled to indemnification, which undertaking may be accepted without reference to the financial ability of such Indemnified Party to make repayment. (2) Employees and Agents. The Corporation may indemnify any employees or other agents of the Corporation to an extent greater than that required by law only if and to the extent the Board of Directors may, in their discretion, so determine. (3) Indemnification Not Exclusive. The indemnification and advancement of expenses provided under this Article shall not be deemed exclusive of any other rights to which any such indemnified person may be entitled under any law. Nothing in this Article shall affect any rights to indemnification to which corporate personnel other than the persons designated in this Article may be entitled by contract, by vote of the Board of Directors, or otherwise under law. Article 6(b). Stockholders' Meetings. Meetings of stockholders of this Corporation may be held anywhere in the United States. The place of such meetings shall be determined in the manner provided in the By-laws. Article 6(c). Limitation of Liability of Directors. No Director of this Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision or law imposing such liability; provided however, that this Article shall not eliminate or limit any liability of a Director (1) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 61 or 62 of the Massachusetts Business Corporation Law, or (4) with respect to any transaction from which the Director derived an improper personal benefit. Nothing in this Article 6(c) shall eliminate or limit the liability of a Director for any act or omission occurring prior to the date upon which this Article 6(c) becomes effective. Article 6(d). Amendment of By-laws. The By-laws of the Corporation may provide that the Board of Directors, as well as the stockholders, may make, amend or repeal the By-laws in whole or in part to the extent permitted by law, subject to the limitations contained in the By-laws. Article 6(e). Acting as a Partner. This Corporation may be a partner in any business enterprise that it would have the power to conduct by itself. Article 6(f). Certain Voting Requirements. Any amendment of these Articles of Organization, any sale, lease or exchange of all or substantially all of the property and assets of the Corporation, including its goodwill, any agreement or merger or consolidation in which the Corporation is a constituent corporation in respect of which stockholder approval is required by the provision of Section 78 of the Massachusetts Business Corporation Law, or any voluntary dissolution of the Corporation shall be authorized and approved by the stockholders of the Corporation by the vote of at least a majority of each class of stock of the Corporation outstanding and entitled to vote thereon; provided, that where the provisions of Section 71 or 4 Section 78 or the Massachusetts Business Corporation Law require the separate vote of at least a majority of any class or series of stock of the Corporation, the separate vote of at least a majority of such class or series shall also be required for such authorization and approval. Article 6(g). Business Combinations. Until such time as this Article 6(g) shall be repealed or these Articles of Organization be amended to provide otherwise, the Corporation elects not to be governed by the provisions of Chapter 110F of the Massachusetts General Laws. ARTICLE VII The effective date of the restated Articles of Organization of the corporation shall be the date approved and filed by the Secretary of the Commonwealth. ARTICLE VIII (a) The street address of the principal office of the corporation in Massachusetts is 100 Royall Street, Canton, Massachusetts 02021. (b) The name, residential address and post office address of each director and officer of the corporation is as follows:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS ---- ------------------- ------------------- James A. McConnell, 8 Pine Hill Drive 8 Pine Hill Drive President Needham, MA 02492 Needham, MA 02492 John R. Barrett, Treasurer 9 Town Line Road 9 Town Line Road Burlington, MA 01803 Burlington, MA 01803 Jill E. Peebles, Clerk 180 Cannon Forge Drive 180 Cannon Forge Drive Foxboro, MA 02035 Foxboro, MA 02035 Raymond A. Lancaster, 20 Greentree Road 20 Greentree Road Director Chagrin Falls, OH 44022 Chagrin Falls, OH 44022 Thomas N. Littman, Director 6248 North Huntington Drive 6248 North Huntington Drive Solon, OH 44139 Solon, OH 44139 James A. McConnell, 8 Pine Hill Drive 8 Pine Hill Drive Director Needham, MA 02492 Needham, MA 02492 John F. Turben, Director 8966 Booth Road 8966 Booth Road Kirtland Hills, OH 44060 Kirtland Hills, OH 44060
(c) The fiscal year of the corporation shall end on the last day of the month of December. 5 We further certify that the foregoing Restated Articles of Organization affect no amendments to the Articles of Organization of the corporation as heretofore amended, except amendments to Articles II, III, IV and VI. SIGNED UNDER THE PENALTIES OF PERJURY, THIS __ DAY OF SEPTEMBER, 1999. /s/ James A. McConnell - ---------------------------------- James A. McConnell, President /s/ Jill E. Peebles - ---------------------------------- Jill E. Peebles, Clerk EX-3.1.II 3 EXHIBIT 3.1(II) 1 Exhibit 3.1 (ii) AMENDED AND RESTATED BY-LAWS OF INSTRON CORPORATION ARTICLE I ARTICLES OF ORGANIZATION The name and purposes of the Corporation shall be as set forth in the Articles of Organization. These By-laws, the powers of the Corporation and of its Directors and stockholders, or of any class of stockholders if there is more than one class of stock, and all matters concerning the conduct and regulation of the business and affairs of the Corporation, shall be subject to the provisions in regard thereto, if any, as are set forth in the Articles of Organization as in effect from time to time. ARTICLE II STOCKHOLDERS 2.1 Annual Meeting. The annual meeting of stockholders shall be held at the hour, date and place as may be designated by the Board of Directors, the Chairman of the Board, if one is elected, or the President, which time, date and place may subsequently be changed at any time by the Board of Directors, but in no case later than six months after the end of the fiscal year. The purposes for which the annual meeting is to be held, in addition to those prescribed by law, the Articles of Organization or these By-laws, may be specified by the Board of Directors, the Chairman of the Board, if one is elected, or the President. 2.2 Special Meetings. Special meetings of stockholders may be called by the President, the Chairman of the Board, if one is elected, or the Board of Directors, to be held at such date, time and place as may be stated in the notice of the meeting. Special meetings shall be called by the Clerk, or in the case of the death, absence, incapacity or refusal of the Clerk, by any other officer, upon written application of one or more stockholders who hold at least (i) 50% in interest of the capital stock entitled to vote at such meeting or (ii) such lesser percentage, if any, as shall be determined to be the maximum percentage that the Corporation is permitted by applicable law to establish for the call of such a meeting. Application to a court pursuant to Section 34(a) of Chapter 156B of the General Laws of the Commonwealth of Massachusetts requesting the call of a special meeting of stockholders because none of the offices is able and willing to call such a meeting may be made only by stockholders who hold at least (i) 50% in interest of the capital stock entitled to vote at such meeting or (ii) such lesser percentage, if any, as shall be determined to be the maximum percentage which the Corporation is permitted by applicable law to establish for the call of such meeting. In the case of a special meeting to be called by the Clerk upon such written application of stockholders, if the Board of Directors fails or declines to determine the place, date and time of any such special meeting within seven business days of such application having been delivered to the Clerk, the Clerk (or such other officer) shall at the time of calling such special meeting also designate the place, date and time 2 of such special meeting as well as the record date for determining the stockholders having the right to notice of and to vote at such meeting. 2.3 Notice of Meetings. A written notice of the hour, date and place of all meetings of stockholders (other than adjournments governed by Section 2.9 of these By-laws) stating the purposes of the meeting shall be given by the Clerk or an Assistant Clerk (or other person authorized by these By-laws or by law) at least seven days before the meeting to each stockholder entitled to vote thereat and to each stockholder who, under the Articles of Organization or under these By-laws, is entitled to such notice, by leaving such notice with him or her or at his or her residence or usual place of business, or by mailing it, postage prepaid, and addressed to such stockholder at his address as it appears in the records of the Corporation. Notice need not be given to a stockholder if a written waiver of notice, executed before or after the meeting by such stockholder or his or her attorney thereunto authorized, is filed with the records of the meeting. 2.4 Quorum. The holders of a majority in interest of all stock issued, outstanding and entitled to vote at a meeting shall constitute a quorum, but if a quorum is not present, the stockholders present may, by majority vote, adjourn the meeting from time to time and the meeting may be held as adjourned without further notice. 2.5 Voting and Proxies. Stockholders shall have one vote for each share of stock entitled to vote owned by them of record according to the books of the Corporation and a proportionate vote for a fractional share, unless otherwise provided by law or the Articles of Organization. Stockholders may vote either in person or by written proxy dated not more than six months before the meeting named therein. Proxies shall be filed with the Clerk of the meeting, or of any adjournment thereof, before being voted. Except as otherwise limited therein, proxies shall entitle the persons authorized thereby to vote at any adjournment of such meeting but shall not be valid after final adjournment of such meeting. A proxy coupled with an interest sufficient in law to support an irrevocable proxy, including without limitation, an interest in the shares of the Corporation generally, may be made irrevocable if it so provides, need not specify the meeting to which it relates, and shall be valid and enforceable until the interest terminates, or for such shorter period as may be specified in the proxy. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of the proxy the Corporation receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. 2.6 Action at Meeting. When a quorum is present, any matter before the meeting shall be decided by vote of the holders of a majority of the shares of stock voting on such matter, except where a larger vote is required by law, the Articles of Organization or these By-laws. Any election by stockholders shall be determined by a plurality of the votes cast, except where a larger vote is required by law, the Articles of Organization or these By-laws. No ballot shall be required for any election unless requested by a stockholder entitled to vote in the election. The Corporation shall not directly or indirectly vote any shares of its own stock. 2.7 Action by Written Consent. Any action to be taken by stockholders may be taken without a meeting if all stockholders entitled to vote on the matter consent to the action -2- 3 by a writing filed with the records of the meetings of stockholders. Such consent shall be treated for all purposes as a vote at a meeting. 2.8 Rescheduling of Meetings; Adjournments. The Board of Directors may postpone and reschedule any previously scheduled annual or special meeting of stockholders, and any record date with respect thereto, regardless of whether any notice or public disclosure with respect to any such meeting has been sent or made pursuant to Section 2.8 or Section 3.14 hereof or otherwise. When any meeting is convened, the presiding officer may adjourn the meeting for a period of time not to exceed 30 days if (a) no quorum is present for the transaction of business, (b) the Board of Directors determines that adjournment is necessary or appropriate to enable the stockholders to consider fully information that the Board of Directors determines has not been made sufficiently or timely available to stockholders, or (c) the Board of Directors determines that adjournment is otherwise in the best interests of the Corporation. The presiding officer in such event shall announce the adjournment and the date, time and place of reconvening and shall cause notice thereof to be posted at the place of meeting designated in the notice which was originally sent to the stockholders, and if such date is more than 30 days after the original date of the meeting, the Clerk shall give notice thereof in the manner provided in Section 2.3 hereof. ARTICLE III DIRECTORS 3.1 Powers. The business of the Corporation shall be managed by a Board of Directors who may exercise all the powers of the Corporation except as otherwise provided by law, the Articles of Organization or these By-laws. In the event of a vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, may exercise the powers of the full Board of Directors until the vacancy is filled. 3.2 Election and Qualification. A Board of Directors consisting of at least three members, the number to be fixed from time to time by resolution adopted by the affirmative vote of a majority of the entire Board of Directors, shall be elected by the stockholders at the annual meeting in accordance with the Articles of Organization. No Director need be a stockholder. 3.3 Vacancies. Any vacancy in the Board of Directors, however occurring, including a vacancy resulting from the enlargement of the Board of Directors by the Board of Directors or stockholders, may be filled only by the Board of Directors. Any Director elected to fill a vacancy shall hold office for the entire unexpired term of the class to which he was elected whether or not such term extends beyond the date or dates of, any annual meeting or meetings of stockholders succeeding the date of his election. 3.4 Changing the Number of Directors. The number of members of the Board of Directors may be increased at any meeting of the stockholders by the vote of the holders of at least 50% of the shares of each class of stock entitled to vote in the election of Directors and may be increased or decreased by resolution adopted at any meeting of the Board of Directors. -3- 4 3.5 Tenure. Directors shall hold office until their successors are chosen and qualified. Any Director may resign by delivering his written resignation to the Corporation at its principal office or to the President, Clerk or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. 3.6 Removal. A Director may be removed from office with or without cause (a) by vote of the holders of at least a majority of the shares of each class of stock entitled to vote in the election of Directors, or (b) by vote of a majority of the Directors then in office. A Director may be removed for cause only after reasonable notice and opportunity to be heard before the body proposing to remove him. 3.7 Meetings. Regular meetings of the Board of Directors may be held without notice at such time, date and place as the Board of Directors may from time to time determine. A regular meeting of the Board of Directors may be held without notice at the same place as the annual meeting of stockholders, or the special meeting held in lieu thereof, following such meeting of stockholders. Special meetings of the Board of Directors may be called, orally or in writing, by the Chairman of the Board, if one is elected, the President, the Treasurer or two or more Directors, designating the time, date and place thereof. 3.8 Notice of Meetings. Notice of the time, date and place of all special meetings of the Board of Directors shall be given to each Director by the Clerk or Assistant Clerk, or in case of the death, absence, incapacity or refusal of such persons, by the officer or one of the Directors calling the meeting. Notice shall be given to each Director in person or by telephone or facsimile sent to his business or home address at least twenty-four hours in advance of the meeting, or by written notice mailed to his business or home address at least forty-eight hours in advance of the meeting. Notice need not be given to any Director if a written waiver of notice, executed by him before of after the meeting, is filed with the records of the meeting, or to any Director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting. 3.9 Quorum. At any meeting of the Board of Directors, a majority of the Directors then in office shall constitute a quorum. Less than a quorum may adjourn any meeting from time to time and the meeting may be held as adjourned without further notice. 3.10 Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, a majority of the Directors present may take any action on behalf of the Board of Directors, unless a larger number is required by law, the Articles of Organization or these By-Laws. 3.11 Action by Consent. Any action by the Board of Directors may be taken without a meeting if a written consent thereto is signed by all the Directors and filed with the records of the meetings of the Board of Directors. Such consent shall be treated for all purposes as a vote of the Board of Directors at a meeting. -4- 5 3.12 Telephonic Meetings Permitted. Members of the Board of Directors or any committee designated thereby may participate in a meeting of such Board of Directors or of such committee, as the case may be, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting. 3.13 Committees. The Board of Directors, by vote of a majority of the Directors then in office, may elect from its number an Executive Committee or other committees and may delegate thereto some or all of its powers except those which by law, the Articles of Organization, or these By-laws may not be delegated. Except as the Board of Directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the Board of Directors or in such rules, its business shall be conducted so far as possible in the same manner as is provided by these By-laws for the Board of Directors. All members of such committees shall hold such offices at the pleasure of the Board of Directors. The Board of Directors may abolish any such committee at any time. Any committee to which the Board of Directors delegates any of its powers or duties shall keep records of its meetings and shall report its action to the Board of Directors. The Board of Directors shall have the power to rescind any action of any committee, but no such rescission shall have retroactive effect. 3.14 Compensation. The Board of Directors may establish the compensation and expense reimbursement policies for Directors in exchange for membership on the Board of Directors and on committees of the Board of Directors, attendance at meetings of the Board of Directors or committees of the Board of Directors, and for other services by Directors to the Corporation or any of its subsidiaries. ARTICLE IV OFFICERS 4.1 Enumeration. The officers of the Corporation shall consist of a President, a Treasurer, a Clerk, and such other officers, including a Chairman of the Board of Directors or one or more Vice Presidents, Assistant Treasurers, or Assistant Clerks, as the Board of Directors may determine. 4.2 Election. The President, Treasurer and Clerk shall be elected annually by the Board of Directors at their first meeting following the annual meeting of stockholders. Other officers may be chosen by the Board of Directors at such meeting or at any other meeting. 4.3 Qualification. No officer need be a stockholder or Director. Any two or more offices may be held by any person. The Clerk shall be a resident of Massachusetts unless the Corporation has a resident agent appointed for the purpose of service of process. Any officer may be required by the Board of Directors to give bond for the faithful performance of his or her duties in such amount and with such sureties as the Board of Directors may determine. 4.4 Tenure. Except as otherwise provided by law, the Articles of Organization or these By-laws, the President, Treasurer and Clerk shall hold office until the next annual meeting of stockholders and until their respective successors are chosen and qualified; -5- 6 and all other officers shall hold office until the next annual meeting of stockholders and until their successors are chosen and qualified, or for such shorter term as the Board of Directors may fix at the time such officers are chosen. Any officer may resign by delivering his or her written resignation to the Corporation at its principal office or to the President or Clerk, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. 4.5 Removal. The Board of Directors may remove any officer with or without cause by a vote of a majority of the entire number of Directors then in office; provided, that an officer may be removed for cause only after reasonable notice and opportunity to be heard by the Board of Directors. 4.6 Vacancies. Any vacancy in any office, however occurring, may be filled for the unexpired portion of the term by the Board of Directors. 4.7 President and Vice President. The President shall be the Chief Executive Officer of the Corporation unless otherwise designated by the Board of Directors. If the Chairman or Vice Chairman is not elected or is absent, and unless otherwise provided by the Board of Directors, the President shall preside when present at all meetings of stockholders and of the Board of Directors. Any Vice President shall have such powers and shall perform such duties as the Board of Directors may from time to time designate. 4.8 Treasurer and Assistant Treasurers. The Treasurer shall, subject to the direction of the Board of Directors, have general charge of the financial affairs of the Corporation and shall cause to be kept accurate books of account. He or she shall have custody of all funds, securities, and valuable documents of the Corporation, except as the Board of Directors may otherwise provide. Any Assistant Treasurer shall have such powers and perform such duties as the Board of Directors may from time to time designate. 4.9 Clerk and Assistant Clerks. The Clerk shall keep a record of the meetings of stockholders. In case a Clerk is not elected or is absent, the Clerk or an Assistant Clerk shall keep a record of the meetings of the Board of Directors. In the absence of the Clerk from any meeting of stockholders, an Assistant Clerk if one be elected, otherwise a Temporary Clerk designated by the person presiding at the meeting, shall perform the duties of the Clerk. 4.10 Chief Executive Officer. The Chief Executive Officer shall have, subject to the direction of the Board of Directors, general supervision and control of the business of the Corporation. 4.11 Chairman and Vice Chairman. The Chairman of the Board of Directors shall preside when present at all meetings of stockholders and of the Board of Directors and shall have such other powers and duties as the Board of Directors may from time to time designate. The Vice Chairman of the Board of Directors, if one is elected, shall in the Chairman's absence preside when present at all meetings of stockholders and of the Board of Directors and shall have such other duties as the Board of Directors may from time to time designate. 4.12 Other Powers and Duties. Subject to these By-laws, each officer of the Corporation shall have, in addition to the duties and powers specifically set forth in these By- -6- 7 laws, such duties and powers as are customarily incident to such office, and such duties and powers as may be designated from time to time by the Board of Directors. 4.13 Compensation. The compensation of all officers and agents of the Corporation who are also members of the Board of Directors shall be fixed by the Board of Directors or by a committee of the Board of Directors. The Board of Directors may fix, or delegate the power to fix, the compensation of the other officers and agents of the Corporation to the Chief Executive Officer or any other officer of the Corporation. ARTICLE V CAPITAL STOCK 5.1 Certificates of Stock. Each stockholder shall be entitled to a certificate representing the capital stock of the Corporation in such form as may from time to time be prescribed by the Board of Directors. Such certificate shall be signed by the Chairman of the Board, if one is elected, the President or a Vice President and by the Treasurer or an Assistant Treasurer. Such signatures may be facsimiles if the certificate is signed by a transfer agent, or by a registrar, other than a Director, officer or employee of the Corporation. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer at the time of its issue. Every certificate for shares of stock which are subject to any restriction on transfer and every certificate issued when the Corporation is authorized to issue more than one class of series of stock shall contain such legend with respect thereto as is required by law. 5.2 Transfers. Subject to the restrictions, if any, noted on the stock certificates, shares of stock may be transferred on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate therefor properly endorsed or accompanied by a written assignment and power of attorney properly executed, with transfer stamps (if necessary) affixed, and with such proof of authenticity of signature as the Corporation or its transfer agent may reasonably require. 5.3 Record Holders. Except as may be otherwise required by law, the Articles of Organization or these By-laws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the Corporation in accordance with the requirements of these By-laws. It shall be the duty of each stockholder to notify the Corporation of his post office address. 5.4 Record Date. The Board of Directors may fix in advance a time of not more than sixty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend or the making of any distribution to stockholders, or the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of and to vote at such meeting and any adjournment thereof, or the right to receive such dividend or distribution or the right to give such consent or dissent. In such case, only stockholders of record on such record -7- 8 date shall have such right, notwithstanding any transfer of stock on the books of the Corporation after the record date. Without fixing such record date the Board of Directors may for any of such purposes close the transfer books for all or any part of such period. 5.5 Replacement of Certificates. In case of the alleged loss, destruction or mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof, upon such terms as the Board of Directors may prescribe. 5.6 Pre-emptive Rights. Except as otherwise provided in the Articles of Organization, no stockholder shall have any preemptive rights to subscribe to stock of the Corporation. 5.7 Issuance of Stock. The Board of Directors may issue from time to time the whole or any part of the capital stock of the Corporation now or hereafter authorized, to such persons or organizations, for such consideration, whether cash, property, services, for a debt, note or expenses, and on such terms as the Board of Directors may determine, including, without limitation, the granting of options, warrants, convertible or other rights to persons or organizations, including Directors, officers or employees of the Corporation or of a parent or subsidiary Corporation, to subscribe to said capital stock, with or without a general or specific plan relating thereto. ARTICLE VI MISCELLANEOUS 6.1 Fiscal Year. Except as otherwise determined by the Board of Directors, the fiscal year of the Corporation shall end on December 31. 6.2 Seal. The Corporation may have a seal that shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal, if any, may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 6.3 Execution of Instruments. All deeds, leases, transfers, contracts, bonds, notes and other obligations authorized to be executed by an officer of the Corporation in its behalf shall be signed by the President or the Treasurer except as the Board of Directors may generally or in particular cases otherwise determine. 6.4 Voting of Securities. Unless otherwise provided by the Board of Directors, the President or Treasurer may waive notice of and act on behalf of this Corporation, or appoint another person or persons to act as proxy or attorney in fact for this Corporation with or without discretionary power and/or power of substitution, at any meeting of stockholders or shareholders of any other corporation or organization, any of whose securities are held by this Corporation. 6.5 Resident Agent. The Board of Directors may appoint a resident agent upon whom legal process may be served in any action or proceeding against the Corporation. Said resident agent shall be either an individual who is a resident of and has a business address -8- 9 in Massachusetts, or a Corporation under the laws of any other state of the United States, which has qualified to do business in, and has an office in, Massachusetts. 6.6 Corporate Records. The original, or attested copies of, the Articles of Organization, By-laws, and records of all meetings of the incorporators and stockholders, and the stock and transfer records, which shall contain the names of all stockholders and the record address and the amount of stock held by each, shall be kept in Massachusetts at the principal office of the Corporation, or at an office of its transfer agent, Clerk or resident agent, and shall be open at all reasonable times to the inspection of any stockholder for any proper purpose, but not to secure a list of stockholders for the purpose of selling said list or copies thereof or of using the same for a purpose other than in the interest of the applicant, as a stockholder, relative to the affairs of the Corporation. 6.7 Charitable Contributions. The Board of Directors may authorize from time to time donations to be made by the Corporation, irrespective of corporate benefit, in such amount as it may determine to be reasonable for the public welfare or for community fund, hospital, charitable, religious, educational, scientific, civic or similar purposes, and in time of war or other national emergency in aid thereof. 6.8 Articles of Organization. All references in these By-laws to the Articles of Organization shall be deemed to refer to the Articles of Organization of the Corporation, as amended and in effect from time to time. 6.9 Control Share Acquisition. Until such time as this Section 6.9 shall be repealed or these By-laws shall otherwise be amended to provide otherwise, in each case in accordance with Section 6.10 of these By-laws, the provisions of Chapter 110D of the Massachusetts General Laws ("Chapter 110D") shall not apply to "control share acquisitions" of the Corporation within the meaning of Chapter 110D. 6.10 Amendments. These By-laws may be amended or repealed by vote of the stockholders at any annual or special meeting or by the Board of Directors at any regular or special meeting, provided that: (a) The Board of Directors may not amend or repeal any provisions of these By-laws which by law, the Articles of Organization or these By-laws requires action by the stockholders; and (b) Any amendment or repeal of these By-laws by the Board of Directors and any by-law adopted by the Board of Directors may be amended or repealed by the stockholders. Notice stating the substance of such making, amendment or repeal of the By-laws shall be provided to all stockholders entitled to vote on amending these By-laws no later than the time of giving notice of the next stockholders meeting. The vote of the Board of Directors or the vote of the holders of at least seventy-five percent of the outstanding shares of each class of stock entitled to vote shall be required to amend or repeal Sections 4.2, 4.3, 4.4, 4.5 or 4.6 or Section 6.10 of these By-laws. -9- EX-4.1 4 EXHIBIT 4.1 1 EXHIBIT 4.1 INSTRON CORPORATION 13-1/4% SENIOR SUBORDINATED NOTES DUE 2009 INDENTURE Dated as of September 29, 1999 Norwest Bank Minnesota, National Association Trustee 2 CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section 310(a)(1)................................................................... 7.10 (a)(2)................................................................... 7.10 (a)(3)................................................................... N.A. (a)(4)................................................................... N.A. (a)(5)................................................................... 7.10 (b)...................................................................... 7.10 (c)...................................................................... N.A. 311(a)...................................................................... 7.11 (b)...................................................................... 7.11 (c)...................................................................... N.A. 312(a)...................................................................... 2.05 (b)...................................................................... 13.03 (c)...................................................................... 13.03 313(a)...................................................................... 7.06 (b)(2)................................................................... 7.07 (c)...................................................................... 7.06;13.02 (d)...................................................................... 7.06 314(a)...................................................................... 4.03;13.05 (c)(3)................................................................... N.A. (e)...................................................................... 13.05 (f)...................................................................... N.A. 315(a)...................................................................... 7.01 (b)...................................................................... 7.05,12.02 (c)...................................................................... 7.01 (d)...................................................................... 7.01 (e)...................................................................... 6.11 316(a) (last sentence)...................................................... 2.09 (a)(1)(A)................................................................ 6.05 (a)(1)(B)................................................................ 6.04 (a)(2)................................................................... N.A. (b)...................................................................... 6.07 (c)...................................................................... 2.12 317(a)(1)................................................................... 6.08 (a)(2)................................................................... 6.09 (b)...................................................................... 2.04 318(a)...................................................................... N.A. (b)...................................................................... N.A. (c)...................................................................... 13.01
N.A. means not applicable. * This Cross Reference Table is not part of the Indenture. 3 TABLE OF CONTENTS
Page ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions................................................................................... 1 Section 1.02. Other Definitions............................................................................. 16 Section 1.03. Incorporation by Reference of Trust Indenture Act............................................. 16 Section 1.04. Rules of Construction......................................................................... 17 ARTICLE 2. THE NOTES Section 2.01. Form and Dating............................................................................... 17 Section 2.02. Execution and Authentication.................................................................. 18 Section 2.03. Registrar and Paying Agent.................................................................... 18 Section 2.04. Paying Agent to Hold Money in Trust........................................................... 19 Section 2.05. Holder Lists.................................................................................. 19 Section 2.06. Transfer and Exchange......................................................................... 19 Section 2.07. Replacement Notes............................................................................. 30 Section 2.08. Outstanding Notes............................................................................. 31 Section 2.09. Treasury Notes................................................................................ 31 Section 2.10. Temporary Notes............................................................................... 31 Section 2.11. Cancellation.................................................................................. 31 Section 2.12. Defaulted Interest............................................................................ 32 ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee............................................................................ 32 Section 3.02. Selection of Notes to Be Redeemed............................................................. 32 Section 3.03. Notice of Redemption.......................................................................... 33 Section 3.04. Effect of Notice of Redemption................................................................ 33 Section 3.05. Deposit of Redemption Price................................................................... 33 Section 3.06. Notes Redeemed in Part........................................................................ 34 Section 3.07. Optional Redemption........................................................................... 34 Section 3.08. Mandatory Redemption.......................................................................... 34 Section 3.09. Offer to Purchase by Application of Excess Proceeds........................................... 34 ARTICLE 4. COVENANTS Section 4.01. Payment of Notes.............................................................................. 36 Section 4.02. Maintenance of Office or Agency............................................................... 36 Section 4.03. Reports....................................................................................... 37 Section 4.04. Compliance Certificate........................................................................ 37 Section 4.05. Taxes......................................................................................... 38 Section 4.06. Stay, Extension and Usury Laws................................................................ 38 Section 4.07. Restricted Payments........................................................................... 38 Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries................................ 40 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.................................... 41
i 4 Section 4.10. Asset Sales................................................................................... 44 Section 4.11. Transactions with Affiliates.................................................................. 45 Section 4.12. Liens......................................................................................... 45 Section 4.13. Business Activities........................................................................... 46 Section 4.14. Corporate Existence........................................................................... 46 Section 4.15. Offer to Repurchase Upon Change of Control.................................................... 46 Section 4.16. No Senior Subordinated Debt................................................................... 47 Section 4.17. Payments for Consent.......................................................................... 47 Section 4.18. Additional Note Guarantees.................................................................... 47 Section 4.19. Designation of Restricted and Unrestricted Subsidiaries....................................... 48 ARTICLE 5. SUCCESSORS Section 5.01. Merger, Consolidation, or Sale of Assets...................................................... 48 Section 5.02. Successor Corporation Substituted............................................................. 48 ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01. Events of Default............................................................................. 49 Section 6.02. Acceleration.................................................................................. 50 Section 6.03. Other Remedies................................................................................ 51 Section 6.04. Waiver of Past Defaults....................................................................... 51 Section 6.05. Control by Majority........................................................................... 51 Section 6.06. Limitation on Suits........................................................................... 51 Section 6.07. Rights of Holders of Notes to Receive Payment................................................. 52 Section 6.08. Collection Suit by Trustee.................................................................... 52 Section 6.09. Trustee May File Proofs of Claim.............................................................. 52 Section 6.10. Priorities.................................................................................... 52 Section 6.11. Undertaking for Costs......................................................................... 53 ARTICLE 7. TRUSTEE Section 7.01. Duties of Trustee............................................................................. 53 Section 7.02. Rights of Trustee............................................................................. 54 Section 7.03. Individual Rights of Trustee.................................................................. 54 Section 7.04. Trustee's Disclaimer.......................................................................... 55 Section 7.05. Notice of Defaults............................................................................ 55 Section 7.06. Reports by Trustee to Holders of the Notes.................................................... 55 Section 7.07. Compensation and Indemnity.................................................................... 55 Section 7.08. Replacement of Trustee........................................................................ 56 Section 7.09. Successor Trustee by Merger, etc.............................................................. 57 Section 7.10. Eligibility; Disqualification................................................................. 57 Section 7.11. Preferential Collection of Claims Against Company............................................. 57 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...................................... 57 Section 8.02. Legal Defeasance and Discharge................................................................ 57 Section 8.03. Covenant Defeasance........................................................................... 58 Section 8.04. Conditions to Legal or Covenant Defeasance.................................................... 58
ii 5 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. 59 Section 8.06. Repayment to Company.......................................................................... 60 Section 8.07. Reinstatement................................................................................. 60 ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes........................................................... 60 Section 9.02. With Consent of Holders of Notes.............................................................. 61 Section 9.03. Compliance with Trust Indenture Act........................................................... 62 Section 9.04. Revocation and Effect of Consents............................................................. 63 Section 9.05. Notation on or Exchange of Notes.............................................................. 63 Section 9.06. Trustee to Sign Amendments, etc............................................................... 63 ARTICLE 10. SUBORDINATION Section 10.01. Agreement to Subordinate................................................................... 63 Section 10.02. Liquidation; Dissolution; Bankruptcy....................................................... 63 Section 10.03. Default on Designated Senior Debt.......................................................... 64 Section 10.04. Acceleration of Securities................................................................. 64 Section 10.05. When Distribution Must Be Paid Over........................................................ 65 Section 10.06. Notice by Company.......................................................................... 65 Section 10.07. Subrogation................................................................................ 65 Section 10.08. Relative Rights............................................................................ 65 Section 10.09. Subordination May Not Be Impaired by Company............................................... 66 Section 10.10. Distribution or Notice to Representative................................................... 66 Section 10.11. Rights of Trustee and Paying Agent......................................................... 66 Section 10.12. Authorization to Effect Subordination...................................................... 66 Section 10.13. Amendments................................................................................. 67 ARTICLE 11. NOTE GUARANTEES Section 11.01. Guarantee.................................................................................. 67 Section 11.02. Subordination of Note Guarantee............................................................ 68 Section 11.03. Limitation on Guarantor Liability.......................................................... 68 Section 11.04. Execution and Delivery of Note Guarantee................................................... 68 Section 11.05. Guarantors May Consolidate, etc., on Certain Terms......................................... 69 Section 11.06. Releases Following Sale of Assets.......................................................... 69 ARTICLE 12. SATISFACTION AND DISCHARGE Section 12.01. Satisfaction and Discharge................................................................. 70 Section 12.02. Application of Trust Money................................................................. 71 ARTICLE 13. MISCELLANEOUS Section 13.01. Trust Indenture Act Controls............................................................... 71 Section 13.02. Notices.................................................................................... 71 Section 13.03. Communication by Holders of Notes with Other Holders of Notes.............................. 72 Section 13.04. Certificate and Opinion as to Conditions Precedent......................................... 72 Section 13.05. Statements Required in Certificate or Opinion.............................................. 73
iii 6 Section 13.06. Rules by Trustee and Agents................................................................ 73 Section 13.07. No Personal Liability of Directors, Officers, Employees and Stockholders................... 73 Section 13.08. Governing Law.............................................................................. 73 Section 13.09. No Adverse Interpretation of Other Agreements.............................................. 73 Section 13.10. Successors................................................................................. 74 Section 13.11. Severability............................................................................... 74 Section 13.12. Counterpart Originals...................................................................... 74 Section 13.13. Table of Contents, Headings, etc........................................................... 74 Section 13.14. Limitation on Trust Liability.............................................................. 74
EXHIBITS Exhibit A1 FORM OF NOTE Exhibit A2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF NOTE GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE iv 7 INDENTURE dated as of September 29, 1999 among Instron Corporation, a Massachusetts corporation (the "Company"), the Guarantors (as defined) and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 13-1/4% Senior Subordinated Notes due 2009 (the "Senior Subordinated Notes") and the new 13-1/4% Senior Subordinated Notes due 2009 (the "New Senior Subordinated Notes" and, together with the Senior Subordinated Notes, the "Notes"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. "144A Global Note" means a global note substantially in the form of Exhibit A/A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien encumbering any assets acquired by such specified Person. "Additional Notes" means up to $50.0 million aggregate principal amount of Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the Initial Notes. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Cedel that apply to such transfer or exchange. "Asset Sale" means: (a) the sale, lease, conveyance or other disposition of any assets or rights, other than sales of inventory in the ordinary course of business consistent with past practices; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole shall be governed by the provisions of Section 4.15 hereof and/or the provisions described in Section 5.01 hereof and not by the provisions of Section 4.10 hereof; and (b) the issuance of Equity Interests by any of the Company's Restricted Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries (other than the issuance of director qualifying shares or similar required 1 8 issuances). Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (i) any single transaction or series of related transactions that involves assets having a fair market value of less than $2.0 million; (ii) a transfer of assets between or among the Company and its Restricted Subsidiaries, (iii) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (iv) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business; (v) the sale or other disposition of cash or Cash Equivalents; (vi) a Restricted Payment or Permitted Investment that is permitted by Section 4.07 hereof; and (vii) the licensing or sublicensing of intellectual property or other general intangibles and licenses, leases or subleases of other property in the ordinary course of business and which do not materially interfere with the business of the Company and its Subsidiaries. "Asset Swap" means an exchange of assets by the Company or a Restricted Subsidiary of the Company for (i) one or more Permitted Businesses, (ii) a controlling equity interest in any Person whose assets consist primarily of one or more Permitted Businesses, (iii) cash and/or (iv) Productive Assets. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Beneficial Owner" has the meaning assigned to the term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether the right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "beneficially owns" and "beneficially owned" shall have a corresponding meaning. "Board of Directors" means (i) with respect to a corporation, the board of directors of the corporation; (ii) with respect to a partnership, the Board of Directors of the general partner of the partnership; and (iii) with respect to any other Person, the board or committee of the Person serving a similar function. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not 2 9 exceeding one year and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each case maturing within six months after the date of acquisition, and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i) through (v) of this definition. "Cedel" means Cedel Bank, SA. "Change of Control" means the occurrence of any of the following: (i) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a Principal; (ii) the adoption of a plan relating to the liquidation or dissolution of the Company; (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined herein), other than the Principals and their Related Parties, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares; or (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Company" means Instron Corporation, and any and all successors thereto. "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of that Person for that period plus (i) an amount equal to any extraordinary loss plus any net loss realized by that Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent those losses were deducted in computing Consolidated Net Income, plus (ii) provision for taxes based on income or profits of that Person and its Restricted Subsidiaries for that period, to the extent that the provision for taxes was deducted in computing Consolidated Net Income, plus (iii) consolidated interest expense of that Person and its Restricted Subsidiaries for that period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of that Person and its Restricted Subsidiaries for that period to the extent that the depreciation, amortization and other non-cash expenses were deducted in computing Consolidated Net Income, minus (v) non-cash items increasing Consolidated Net Income for that period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute Consolidated Cash Flow of the Company only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by that Restricted 3 10 Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of that Person and its Restricted Subsidiaries for that period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, (iv) the cumulative effect of a change in accounting principles shall be excluded, (v) any nonrecurring fees, expenses and costs relating to the Recapitalization incurred on or prior to date of this Indenture, including, without limitation, any fees and expenses incurred in connection with the Credit Agreement, any compensation expense incurred in connection with the cancellation, retirement or acceleration of vesting of stock options or restricted stock, modifications of existing employment agreements and expenses related to early extinguishments of debt, shall be excluded and (vi) the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not distributed to the specified Person or one of its Subsidiaries. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of this Indenture or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means that certain Credit Agreement, dated as of the date of this Indenture, by and among the Company, certain of its Subsidiaries and National City Bank, as agent, providing for up to $50.0 million of revolving credit borrowings and $30.0 million of term loan borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time. "Credit Facilities" means, one or more debt facilities (including, without limitation, the Credit Agreement), commercial paper facilities or indentures, in each case with banks or other lenders (or trustees therefor) providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), letters of credit or debt securities, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. 4 11 "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A1 hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Designated Senior Debt" means (i) any Indebtedness outstanding under the Credit Agreement and (ii) after payment in full of all Obligations under the Credit Agreement, any other Senior Debt permitted hereunder the principal amount of which is $15.0 million or more and that has been designated by the Company as "Designated Senior Debt." "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, (i) any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase the Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of the Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof and (ii) shares of common stock of the Company beneficially owned by any member of the Company's management or any immediate family member thereof shall not constitute Disqualified Stock. "Domestic Subsidiary" means any Subsidiary that guarantees or otherwise provides direct credit support for any Indebtedness of the Company; provided that a person organized and existing outside the United States shall not be considered a Domestic Subsidiary solely by virtue of direct borrowing obligations under Credit Facilities guaranteed by the Company. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement. 5 12 "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the date of this Indenture, until such amounts are repaid and commitments are permanently reduced. "Fixed Charges" means, with respect to any specified Person and its Restricted Subsidiaries for any period, the sum, without duplication, of (i) the consolidated interest expense of that Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of original issue discount (other than original issue discount solely attributable to the Notes in connection with the issuance of the Warrants), non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and the net effect of all payments made or received pursuant to Hedging Obligations except expenses incurred with respect to fixing or hedging the risks associated with fluctuations in foreign currency exchange rates, but excluding amortization of debt issuance costs, plus (ii) the consolidated interest of that Person and its Restricted Subsidiaries that was capitalized during such period, plus (iii) any interest expense on Indebtedness of another Person that is Guaranteed by that Person or one of its Restricted Subsidiaries or secured by a Lien on assets of that Person or one of its Restricted Subsidiaries, whether or not the Guarantee or Lien is called upon, plus (iv) the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of that Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined effective federal, state and local statutory tax rate of that Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Fixed Charge Coverage Ratio" means, with respect to any specified Person and its Restricted Subsidiaries for any period, the ratio of the Consolidated Cash Flow of that Person and its Restricted Subsidiaries for such period to the Fixed Charges of that Person and its Restricted Subsidiaries for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio, (i) acquisitions and dispositions that have been made by the specified Person or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to the reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated on a pro forma basis in accordance with Regulation S-X under the Securities Act (giving effect to any Pro Forma Cost Savings), but without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income; (ii) if since the beginning of the reference period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of that period) shall have made any acquisitions and dispositions including through mergers or consolidations and including any related financing transactions that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto (as described in (i) above) for the reference period as if the acquisition or disposition had occurred at the beginning of the applicable 6 13 four-quarter period; (iii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded; and (iv) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Subsidiaries following the Calculation Date. "Foreign Subsidiary" means any Restricted Subsidiary of the Company that is not a Domestic Subsidiary or that is engaged in trade or business outside of the United States. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Guarantors" means each of (i) Instron Asia Limited; Instron Japan Company, Ltd.; Instron/Lawrence Corporation; Instron Realty Trust; IRT-II Trust; and Instron Schenck Testing Systems Corp.; and (ii) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture; and their respective successors and assigns. "Hedging Obligations" means, with respect to any specified Person, the obligations of that Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, (ii) other agreements or arrangements designed solely to protect that Person against fluctuations in interest rates and (iii) agreements entered into solely for the purpose of fixing or hedging the risks associated with fluctuations in foreign currency exchange rates. "Holder" means a Person in whose name a Note is registered. "immediate family" has the meaning assigned to the term in Rule 16a-1(e) under the Exchange Act. "Indebtedness" means with respect to any specified Person, any indebtedness of that Person, whether or not contingent, in respect of (i) borrowed money, (ii) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof), (iii) banker's acceptances, (iv) representing Capital Lease Obligations, (v) the balance deferred and unpaid of the 7 14 purchase price of any property, except any such balance that constitutes an accrued expense or trade payable or (vi) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not the Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person if and to the extent such Indebtedness would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. The term "Indebtedness" shall not include amounts owing to any insurance company in connection with the financing of insurance premiums permitted by the insurance company in the ordinary course of business. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this Indenture, as amended or supplemented from time to time. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" means the first $60.0 million aggregate principal amount of Notes issued under this Indenture on the date hereof. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "Investments" means with respect to any Person, all direct or indirect investments by that Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, that Person is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of that Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07 hereof. The acquisition by the Company or any Subsidiary of the Company of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Company or that Subsidiary in the third Person in an amount equal to the fair market value of the Investment held by the acquired Person in the third Person in an amount determined as provided in the final paragraph of Section 4.07 hereof. "Kirtland" means Kirtland Capital Partners III L.P. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. 8 15 "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Liquidated Damages" means all liquidated damages then owing pursuant to Section 5 of the Registration Rights Agreement. "Net Income" means, with respect to any specified Person, the net income (loss) of that Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain or loss, together with any related provision for taxes on the gain or loss, realized in connection with (a) any Asset Sale or (b) the disposition of any securities by that Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of that Person or any of its Restricted Subsidiaries and (ii) any extraordinary gain or loss, together with any related provision for taxes on the extraordinary gain or loss. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of all costs relating to that Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness, other than Senior Debt, secured by a Lien on the asset or assets that were the subject of the Asset Sale and any reserve for adjustment in respect of the sale price of the asset or assets or for any indemnification obligations assumed in connection with the Asset Sale, established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (A) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (B) is directly or indirectly liable as a guarantor or otherwise, or (C) constitutes the lender, provided, however, that the Company or any of its Restricted Subsidiaries may act as a guarantor with respect to any Non-Recourse Debt, provided that such Guarantee (1) shall be deemed an incurrence of Indebtedness not otherwise permitted by clause (x) of Section 4.09 hereof and (2) is a Restricted Investment that must be permitted by Section 4.07 hereof; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Non-U.S. Person" means a Person who is not a U.S. Person. "Note Guarantee" means the Guarantee by each Guarantor of the Company's payment obligations under this Indenture and on the Notes, executed pursuant to the provisions of this Indenture. 9 16 "Notes" has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering" means the offering of the Notes by the Company. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 13.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Participant" means, with respect to the Depositary, Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel, respectively (and, with respect to DTC, shall include Euroclear and Cedel). "Permitted Business" means the business conducted by the Company and its Subsidiaries on the date of this offering memorandum and businesses reasonably related thereto or supportive thereof. "Permitted Investments" means (i) any Investment in the Company or in a Restricted Subsidiary of the Company, (ii) any Investment in Cash Equivalents, (iii) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of the Investment (a) the Person becomes a Restricted Subsidiary of the Company or a Permitted Joint Venture of the Company that is engaged in a Permitted Business or (b) the Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company or a Permitted Joint Venture of the Company that is engaged in a Permitted Business, (iv) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof, (v) any acquisition of assets to the extent acquired in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company, (vi) Hedging Obligations, (vii) Investments existing on the date of this Indenture and any amendment, modification, restatement, extension, renewal, refunding, replacement, refinancing, in whole or in part, thereof, (viii) extensions of trade credit or advances to customers on commercially reasonable terms, each in the ordinary course of business, (ix) loans or advances to employees, officers, directors or consultants otherwise permitted by this Indenture and in the ordinary course of business not to exceed an aggregate of $1.0 million at any one time and (x) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (x) that are at any time outstanding not to exceed the greater of $10.0 million and 10.0% of Total Assets as of the date of such Investment. In the event that an item meets the criteria of more than one of the categories of Permitted Investments described in clauses (i) through (x) above, the Company may, in its sole discretion, classify or reclassify that item in any manner that complies with this Indenture and that item shall be treated as having been made pursuant to only one of such clauses. 10 17 "Permitted Joint Venture" means, with respect to any Person (i) any corporation, association, or other business entity engaged in a Permitted Business of which 50% of the Voting Stock is at the time of determination owned or controlled, directly or indirectly, by that Person or one or more of the Restricted Subsidiaries of that Person or a combination thereof (collectively, a "Group") or (ii) any corporation, association or other business entity engaged in a Permitted Business as to which the Group, at the time of initial Investment, has a contractual right to acquire 50% of the Voting Stock, provided that the Investment shall cease to be a Permitted Joint Venture if the Group fails to acquire 50% of the Voting Stock within six months of the initial Investment. "Permitted Junior Securities" means Equity Interests in the Company or any Guarantor or debt securities that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the Notes and the Note Guarantees are subordinated to Senior Debt pursuant to this Indenture. "Permitted Liens" means (i) Liens in favor of the Company or the Guarantors, (ii) Liens on property of a Person existing at the time the Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company, provided that the Liens were in existence prior to the contemplation of the merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary, (iii) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, provided that the Liens were in existence prior to the contemplation of the acquisition, (iv) Liens existing on the date of this Indenture, (v) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries, (vi) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business, (vii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made thereunder and (viii) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that (i) the principal amount (or accreted value, if applicable) of the Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of all expenses and premiums incurred in connection therewith), (ii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, the Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded and (iii) the Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Permitted Sale and Leaseback" means a sale and leaseback by the Company or any of its Restricted Subsidiaries of all or a portion of the manufacturing facility and property located in High Wycombe, United Kingdom owned by the Company and its Restricted Subsidiaries as of the date of the Indenture or added thereto since the date of the Indenture in the ordinary course of business; provided that the Net Proceeds of such Permitted Sale and Leaseback shall be applied pursuant to Section 4.10 hereof. 11 18 "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Principals" means Kirtland and its Affiliates, George S. Burr, Helen L. Burr, the Harold Hindman Trust--1969, James M. McConnell, Joseph E. Amaral, Kenneth L. Andersen, John R. Barrett, Jonathan L. Burr, the Jonathan L. Burr Trust--1965, Yahya Gharagozlou, Arthur D. Hindman, William J. Milliken, Linton A. Moulding, Jane Elizabeth Moulding, Norman L. Smith and any other employee stockholder of the Company as of the date of the Indenture. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Pro Forma Cost Savings" means the reduction in costs that occurred during the four-quarter reference period or subsequent to the reference period and on or prior to the Calculation Date that were (i) directly attributable to an acquisition and calculated on a basis that is consistent with Article 11 of Regulation S-X under the Securities Act as in effect on the date of the Indenture or (ii) that have actually been implemented as of the applicable Calculation Date by the business that was the subject of any acquisition within six months of the date of the acquisition, that are supportable and quantifiable by the underlying accounting records of the business, and are described, as provided below, in an Officers' Certificate, as if, in the case of each of clause (i) and (ii), all the reductions in costs had been effected as of the beginning of the period. Pro Forma Cost Savings described in clause (ii) above shall be set forth in reasonable specificity in a certificate delivered to the Trustee from the Company's Chief Financial Officer and, in the case of Pro Forma Cost Savings in excess of $5.0 million per four-quarter period, this certificate shall be accompanied by a supporting opinion from an accounting firm of national standing. "Productive Assets" means any long term assets that are used or useful in a Permitted Business. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Equity Offering" means a primary offering of Capital Stock, or rights, warrants or options to acquire Capital Stock of the Company (other than Disqualified Stock) to Persons who are not Affiliates of the Company for net proceeds to the Company of at least $15.0 million. "Recapitalization" means that certain transaction where, pursuant to a merger agreement, dated as of May 6, 1999, among the Company, Kirtland and ISN Acquisition Corporation, as amended by amendment no. 1 thereto, dated as of August 5, 1999, the parties thereto effected a recapitalization of the Company on the date of this Indenture. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of September __, 1999, by and among the Company, the Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements between the Company and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. 12 19 "Regulation S Permanent Global Note" means a permanent global Note in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period. "Regulation S Temporary Global Note" means a temporary global Note in the form of Exhibit A2 hereto bearing the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Related Party" means (i) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Principal or (ii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or the other Persons referred to in the immediately preceding clause (i). "Representative" means the indenture trustee or other trustee, agent or representative for any Senior Debt. "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Services department of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means any Investment other than a Permitted Investment. "Restricted Period" means the 40-day restricted period as defined in Regulation S. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated the Securities Act. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Debt" means (i) all Indebtedness of the Company or any Guarantor outstanding under the Credit Facilities and all Hedging Obligations with respect thereto, (ii) any other Indebtedness of the Company or any Guarantor that is permitted to be incurred by the Company or any Guarantor pursuant to 13 20 this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or any Subsidiary Guarantee, and (iii) all Obligations with respect to any of the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include (a) any liability for federal, state, local or other taxes owed or owing by the Company, (b) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates, (c) any trade payables and (d) any Indebtedness that is incurred in violation of this Indenture. A distribution may consist of cash, securities or other property, by set-off or otherwise. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1 - 02 of Regulation S - X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing the Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any of the interest or principal prior to the date originally scheduled for the payment thereof. "Subordinated Management Notes" means notes evidencing subordinated obligations of the Company or any of its Restricted Subsidiaries issued to current or former employees, directors, officers or consultants of the Company or any of its Restricted Subsidiaries in lieu of cash payments for any Equity Interest of the Company being repurchased from such persons that (i) provide that for so long as a Default under the Notes has occurred and is continuing, no payment shall be made with respect to any Obligations under such Subordinated Management Notes and (ii) are subordinated in full to the prior payment in cash of all amounts due in respect of the Notes. "Subsidiary" means, with respect to any specified Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is that Person or a Subsidiary of that Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Total Assets" means the total assets of the Company and its Restricted Subsidiaries on a consolidated basis determined in accordance with GAAP, as shown on the most recently available consolidated balance sheet of the Company and its Restricted Subsidiaries. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Global Note" means a permanent global Note substantially in the form of Exhibit A1 attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of 14 21 Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that the Subsidiary (i) has no Indebtedness other than Non-Recourse Debt, (ii) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or its Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company, (iii) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve that Person's financial condition or to cause that Person to achieve any specified levels of operating results and (iv) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to the designation and an Officers' Certificate certifying that the designation complied with the preceding conditions and was permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of the Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if the Indebtedness is not permitted to be incurred as of such date under Section 4.09 hereof, the Company shall be in default of that covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that the designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of the Unrestricted Subsidiary and the designation shall only be permitted if (1) the Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma basis as if the designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following the designation. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Voting Stock" of any Person as of any date means the Capital Stock of that Person that is at the time entitled to vote in the election of the Board of Directors of that Person. "Warrants" means the warrants to purchase 30,654 shares of the Company's common stock issued with the Notes on the date of the Indenture as part of the units offering. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between the date and the making of the payment by (ii) the then outstanding principal amount of the Indebtedness. 15 22 Section 1.02. Other Definitions.
Defined in Term Section ---- ------- "Affiliate Transaction"............................................................. 4.11 "Asset Sale Offer".................................................................. 3.09 "Authentication Order".............................................................. 2.02 "Bankruptcy Law".................................................................... 4.01 "Change of Control Offer"........................................................... 4.15 "Change of Control Payment.......................................................... 4.15 "Change of Control Payment Date".................................................... 4.15 "Covenant Defeasance"............................................................... 8.03 "Event of Default".................................................................. 6.01 "Excess Proceeds"................................................................... 4.10 "incur"............................................................................. 4.09 "Legal Defeasance".................................................................. 8.02 "Offer Amount"...................................................................... 3.09 "Offer Period"...................................................................... 3.09 "Paying Agent"...................................................................... 2.03 "Payment Blockage Notice" .......................................................... 10.03 "Payment Default" .................................................................. 6.01 "Permitted Debt".................................................................... 4.09 "Purchase Date"..................................................................... 3.09 "Registrar"......................................................................... 2.03 "Restricted Payments"............................................................... 4.07
Section 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes and the Note Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Note Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. 16 23 Section 1.04. Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not exclusive; (d) words in the singular include the plural, and in the plural include the singular; (e) provisions apply to successive events and transactions; and (f) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE 2. THE NOTES Section 2.01. Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibits A1 or A2 attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A1 attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the 17 24 Depositary for the accounts of designated agents holding on behalf of Euroclear or Cedel Bank, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Cedel Bank certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Company. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (d) Euroclear and Cedel Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or Cedel Bank. Section 2.02. Execution and Authentication. One Officer shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by one Officer (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any 18 25 additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. Section 2.04. Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. Section 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). Section 2.06. Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes shall be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct 19 26 the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Temporary Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than the Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. 20 27 (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the 21 28 Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or 22 29 (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Regulation S Temporary Global Note to Definitive Notes. Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take 23 30 delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. Subject to Section 2.06(a), if any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with 24 31 Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; 25 32 and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. 26 33 (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount 27 34 of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO INSTRON OR ANY OF OUR SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO INSTRON THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO INSTRON) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND 28 35 (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF INSTRON CORPORATION." (iii) Regulation S Temporary Global Note Legend The Regulation S Temporary Global Note shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. 29 36 (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.07. Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the 30 37 Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08. Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. Section 2.10. Temporary Notes. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.11. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of 31 38 transfer, exchange, payment, replacement or cancellation and shall destroy canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. Section 3.02. Selection of Notes to Be Redeemed. If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. 32 39 Section 3.03. Notice of Redemption. Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05. Deposit of Redemption Price. One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment 33 40 date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 3.07. Optional Redemption. (a) Except as set forth in clause (b) of this Section 3.07, the Company shall not have the option to redeem the Notes pursuant to this Section 3.07 prior to September 15, 2004. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on September 15 of the years indicated below: Year Percentage ---- ---------- 2004............................................................................. 106.625% 2005............................................................................. 104.417% 2006............................................................................. 102.208% 2007 and thereafter.............................................................. 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at any time prior to September 15, 2002, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes with the net proceeds of a Qualified Equity Offering at a redemption price equal to 113.250% of the aggregate principal amount thereof plus accrued and unpaid Liquidated Damages thereon, if any; provided that at least 65% in aggregate principal amount of the Notes originally issued remain outstanding immediately after the occurrence of any such redemption and that such redemption occurs within 45 days of the date of the closing of such Qualified Equity Offering. (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. Section 3.08. Mandatory Redemption. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. Section 3.09. Offer to Purchase by Application of Excess Proceeds. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. 34 41 The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $1,000 only; (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and 35 42 (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE 4. COVENANTS Section 4.01. Payment of Notes. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. 36 43 The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. Section 4.03. Reports. (a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports, in each case, within the time periods specified in the SEC's rules and regulations. In addition, following consummation of the Exchange Offer, whether or not required by the rules and regulations of the SEC, the Company shall file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. The Company shall at all times comply with TIA Section 314(a). (b) For so long as any Notes remain outstanding, the Company and the Guarantors shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Section 4.04. Compliance Certificate. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for 37 44 certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05. Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06. Stay, Extension and Usury Laws. The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07. Restricted Payments. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in (a) Equity Interests (other than Disqualified Stock) of the Company or (b) to the Company or a Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or the Note Guarantees, except (a) a payment of interest or principal at the Stated Maturity thereof or (b) any payment with respect to Indebtedness owed solely to the Company or a Restricted Subsidiary of the Company; or (iv) make any Restricted Investment (all the payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and 38 45 (b) the Company would, at the time of the Restricted Payment and after giving pro forma effect thereto as if the Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness under the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof; and (c) the Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (b), (c), (d), (e), (f) and (g) of the next succeeding paragraph), is less than the sum, without duplication, of: (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of this Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of the Restricted Payment (or, if the Consolidated Net Income for this period is a deficit, less 100% of the deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company since the date of this Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for the Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company), plus (iii) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the cash proceeds with respect to the Restricted Investment (less the cost of disposition, if any), plus (iv) 100% of any dividends received by the Company or a Restricted Subsidiary after the date of this Indenture from an Unrestricted Subsidiary of the Company, to the extent that the dividends were not otherwise included in Consolidated Net Income of the Company for that period, plus (v) to the extent that any Unrestricted Subsidiary of the Company is redesignated as a Restricted Subsidiary after the date of this Indenture, the fair market value of the Company's Investment in that Subsidiary as of the date of the redesignation. The preceding provisions shall not prohibit, and these items shall not be considered Restricted Payments: (a) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (b) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Restricted Subsidiary or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, Subordinated Indebtedness or Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(b) of the preceding paragraph; 39 46 (c) the defeasance, redemption, repurchase or other acquisition of Subordinated Indebtedness of the Company or any Guarantor with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (d) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis; (e) so long as no Default has occurred and is continuing or would be caused thereby, (a) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any current or former employee, officer, director or consultant of the Company (or any of its Restricted Subsidiaries) under any management equity subscription agreement, stock option agreement or other employee or management plan or agreement or employment benefit plan, and (b) any payment made that is related to or in respect of any Subordinated Management Notes; provided that the aggregate price paid for all repurchased, redeemed, acquired or retired Equity Interests, together with the aggregate amount of payments made that are related to or in respect of Subordinated Management Notes, shall not exceed $1.0 million in any calendar year (provided that in any calendar year this amount shall be increased by the amount available for use, but not used, under this clause (5) in the immediately preceding year); (f) repurchases of Capital Stock deemed to occur upon the exercise and of stock options if the Capital Stock represents a portion of the exercise price thereof; and (g) so long as no Default has occurred and is continuing or would be caused thereby, other Restricted Payments in an aggregate amount not to exceed $2.0 million. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or by the Company or a Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Section 4.07 shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds 5.0% of Total Assets. Not later than 30 days after the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that the Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (a)(i) pay dividends or make any other distributions (A) on its Capital Stock to the Company or any of its Restricted Subsidiaries, or (B) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any indebtedness owed to the Company or any of its Restricted Subsidiaries; (b) make loans or advances to the Company or any of its Restricted Subsidiaries; or (c) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. However, the preceding restrictions shall not apply to encumbrances or restrictions existing under or by reason of: (i) Existing Indebtedness and the Credit Agreement, each as in effect on the date of this Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect 40 47 to such dividend and other payment restrictions than those contained in such Existing Indebtedness or the Credit Agreement, each as in effect on the date of this Indenture; (ii) this Indenture, the Notes, the Exchange Notes and the Note Guarantees; (iii) applicable law, regulation or order; (iv) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of the acquisition (except to the extent the Indebtedness was incurred in connection with or in contemplation of the acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, the Indebtedness was permitted by the terms of this Indenture to be incurred; (v) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (vi) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property so acquired of the nature described in clause (c) above; (vii) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition; (viii) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing the Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (ix) Liens securing Indebtedness that limit the right of the debtor to dispose of the assets subject to the Lien; (x) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, assets sale agreements, stock sale agreements and other similar agreements; (xi) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; (xii) Indebtedness incurred after the date of this Indenture in accordance with the terms of this Indenture; provided, that the restrictions contained in the agreements governing this new Indebtedness are, in the good faith judgment of the Board of Directors of the Company, not materially less favorable, taken as a whole, to the holders of the Notes than those contained in the agreements governing Indebtedness outstanding on the date of this Indenture; (xiii) customary provisions in agreements with respect to Permitted Joint Ventures; and (xiv) any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (i) through (xiii) above; provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Board of Directors, no more restrictive, taken as a whole, with respect to the dividend and other payment restrictions than those contained in the dividend or other payment restrictions before the amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing. Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and the Company's Restricted Subsidiaries may incur Indebtedness or issue preferred stock, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which the additional Indebtedness is incurred or the Disqualified Stock or preferred stock is issued would have been at least 2.0 to 1.0 if the incurrence or issuance occurs on or before the third anniversary of the date of this Indenture and at least 2.25 to 1.0 if the incurrence or issuance occurs at any time thereafter, in each case determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the preferred stock or Disqualified Stock had been issued, as the case may be, at the beginning of the four-quarter period. 41 48 The provisions of the first paragraph of this Section 4.09 shall not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the incurrence by the Company and any Restricted Subsidiary of additional term or revolving credit Indebtedness and letters of credit under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (i) (with letters of credit being deemed to have a principal amount equal to the face amount thereof) not to exceed $80.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied by the Company or any of its Restricted Subsidiaries to repay any Indebtedness under a Credit Facility and effect a corresponding commitment reduction thereunder in the case of revolving credit Indebtedness pursuant to Section 4.10 hereof; (ii) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (iii) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Note Guarantees to be issued on the date of this Indenture and the Exchange Notes and the related Note Guarantees to be issued pursuant to the Registration Rights Agreement; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or a Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (iv), not to exceed 5.0% of Total Assets at any time outstanding, provided that the aggregate amount of Indebtedness at any one time outstanding pursuant to this clause (iv), clause (xii) and clause (xiv) of this Section 4.09 shall not exceed $15.0 Million; (v) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under the first paragraph of this Section 4.09 or clauses (ii), (iii), (iv), (v) or (xiv) of this paragraph; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that: (A) if the Company or any Guarantor is the obligor on the Indebtedness, the Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Subsidiary Guarantee, in the case of a Guarantor; and (B) (1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (2) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof; shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (vi); 42 49 (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred solely (A) for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding or (B) for the purpose of fixing or hedging the risks associated with fluctuations in foreign currency exchange rates; (viii) the guarantee by the Company or any of its Restricted Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.09; (ix) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment or accrual of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09; provided, in each case, that the amount thereof is included in Fixed Charges of the Company as accrued; (x) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt or issuance of preferred stock, provided, however, that if any of the Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, this event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (x); (xi) the issuance by the Company or any of its Restricted Subsidiaries of Subordinated Management Notes not to exceed $1.0 million in any calendar year (provided that in any calendar year such amount shall be increased by the amount available for issuance, but not issued, under this clause (xi) in any preceding calendar year); (xii) the incurrence by any Foreign Subsidiary of the Company of Indebtedness for working capital purposes not to exceed $5.0 million; (xiii) the incurrence of Indebtedness (including letters of credit) in respect of workers' compensation claims, self-insurance obligations, warranties, performance, surety, bid or similar advance payment bonds and completion guarantees provided by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with past practices; and (xiv) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness or the issuance of Disqualified Stock in an aggregate principal amount (or accreted value or liquidation preference, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred or Disqualified Stock issued pursuant to this clause (xiv), not to exceed $7.5 million. For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xiv) above, or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, the Company shall be permitted to classify the item of Indebtedness on the date of its incurrence in any manner that complies with this Section 4.09. Indebtedness under Credit Facilities outstanding on the date on which Notes are first issued and authenticated under this Indenture shall be deemed to have been incurred on such date in reliance on the exception provided by clause (i) of the definition of Permitted Debt. 43 50 Section 4.10. Asset Sales. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of, (ii) the fair market value is determined by the Company's Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee and (iii) except in the case of an Asset Swap, at least 75% of the consideration therefor received by the Company or its Restricted Subsidiary is in the form of cash, Cash Equivalents or Productive Assets. For purposes of this provision, each of the following shall be deemed to be cash: (A) any liabilities (as shown on the Company's or that Restricted Subsidiary's most recent balance sheet), of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are expressly assumed by the transferee of any such assets; and (B) any securities, notes or other obligations received by the Company or any Restricted Subsidiary from the transferee that are within 60 days after the consummation of the Asset Sale converted by the Company or its Restricted Subsidiary into cash (to the extent of the cash received in that conversion). Within 365 days after the receipt of any Net Proceeds from an Asset Sale, including any cash received in an Asset Swap, the Company may apply the Net Proceeds at its option (i) to repay Senior Debt and, if the Senior Debt repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto, (ii) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business or to make a Permitted Investment in a joint venture that is a Permitted Business, (iii) to purchase Notes in open market transactions, provided that the Company shall be deemed to have applied Net Proceeds in satisfaction of the requirements of this Section 4.10 pursuant to this clause (iii) in an amount equal to the lesser of (A) the purchase price in the open market transactions and (B) 100% of the principal amount of the Notes repurchased, (iv) to make a capital expenditure or (v) to acquire Productive Assets. Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall make an Asset Sale Offer pursuant to section 3.09 hereof to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100% of principal amount plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use the Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into an Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and other pari passu Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent the laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Asset Sale provisions of this Indenture by virtue of these conflicts. 44 51 Section 4.11. Transactions with Affiliates. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless (i) the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or its Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (A) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that the Affiliate Transaction complies with this Section 4.11 and that the Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion issued by an accounting, appraisal or investment banking firm of national standing that the Affiliate Transaction complies with clause (i) of the first paragraph of this Section 4.11. The following items shall not be deemed to be Affiliate Transactions and, therefore, shall not be subject to the provisions of the prior paragraph: (i) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or its Restricted Subsidiary; (ii) transactions between or among the Company and/or its Restricted Subsidiaries; (iii) transactions with a Person that is an Affiliate of the Company solely because the Company owns an Equity Interest in that Person; (iv) payment of reasonable directors fees; (v) sales of Equity Interests (other than Disqualified Stock) to Affiliates of the Company; (vi) Restricted Payments that are permitted by Section 4.07 hereof; (vii) the Advisory Services Agreement between the Company and Kirtland Partners Ltd. as in effect on the date of this Indenture; (viii) providing indemnity to current or former officers, directors, employees or consultants of the Company or any of its Subsidiaries as determined in good faith by the Board of Directors of the Company; (ix) performance of obligations of the Company or any of its Restricted Subsidiaries under any agreement to which it is a party on the date of this Indenture that is described in the Offering Memorandum, dated as of September 21, 1999, of the Company relating to the Offering, each agreement as in effect on the date of this Indenture; (x) the grant of stock options, restricted stock or similar rights to acquire common stock of the Company to the Company's or its Subsidiaries' employees, officers, directors and consultants pursuant to plans approved by the Board of Directors of the Company; (xi) loans or advances to the Company's or its Subsidiaries' employees or consultants otherwise permitted by this Indenture and not to exceed an aggregate of $1 million at any one time; (xii) the payment of all fees and expenses related to the Recapitalization; and (xiii) transactions with customers, joint venture partners, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and consistent with past practice in compliance with the terms of this Indenture and which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors of the Company. Section 4.12. Liens. The Company shall not and shall not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind securing Indebtedness that is pari passu or subordinated in right of payment to the Notes (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, unless all payments due under this Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured until the time that those obligations are no longer secured by a Lien. 45 52 Section 4.13. Business Activities. The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to the extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. Section 4.14. Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. Section 4.15. Offer to Repurchase Upon Change of Control. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 10 days following any Change of Control, the Company shall mail a notice to each Holder stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes in connection with a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Change of Control provisions of this Indenture by virtue of such conflict. 46 53 (b) On the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes so tendered payment in an amount equal to the purchase price for the Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered by such Holder, if any; provided, that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) Notwithstanding anything to the contrary in this Section 4.15, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 and Section 3.09 hereof and all other provisions of this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. (d) Prior to complying with any of the provisions of this Section 4.15, but in any event within 90 days following a Change of Control, the Company shall either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this Section 4.15. Section 4.16. No Senior Subordinated Debt. The Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of the Company and senior in any respect in right of payment to the Notes. No Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Debt of the Guarantor and senior in any respect in right of payment to that Guarantor's Subsidiary Guarantee. Section 4.17. Payments for Consent. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless the consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to the consent, waiver or agreement. Section 4.18. Additional Note Guarantees. If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the date of this Indenture, then that newly acquired or created Domestic Subsidiary must become a Guarantor and execute a supplemental indenture and deliver an Opinion of Counsel to the Trustee within 10 Business Days of the date on which it was acquired or created; provided that any Domestic Subsidiary that has been properly designated as Unrestricted Subsidiary in accordance with this Indenture shall not be required to become Guarantor for so long as it continues to constitute an Unrestricted Subsidiary. The form of such Note Guarantee is attached as Exhibit E hereto. 47 54 Section 4.19. Designation of Restricted and Unrestricted Subsidiaries. The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary so designated shall be deemed to be an Investment made as of the time of such designation and shall either reduce the amount available for Restricted Payments under the first paragraph of Section 4.07 hereof, or reduce the amount available for future Investments under one or more clauses of the definition of Permitted Investments, as the Company shall determine. That designation shall only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default. ARTICLE 5. SUCCESSORS Section 5.01. Merger, Consolidation, or Sale of Assets. The Company shall not, directly or indirectly (i) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation) or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless: (A) either (1) the Company is the surviving corporation or (2) the Person formed by or surviving any consolidation or merger (if other than the Company) or to which a sale, assignment, transfer, conveyance or other disposition was made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia, (B) the Person formed by or surviving any consolidation or merger (if other than the Company) or the Person to which a sale, assignment, transfer, conveyance or other disposition was made assumes all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee, (C) immediately after the transaction no Default or Event of Default exists and (D) the Company or the Person formed by or surviving any consolidation or merger (if other than the Company), or to which the sale, assignment, transfer, conveyance or other disposition was made shall, on the date of the transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, (1) have a Fixed Charge Coverage Ratio at least equal to 1.75 to 1.0 and equal to or greater than the Fixed Charge Coverage Ratio of the Company immediately before the transaction or (2) be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio Test set forth in the first paragraph of Section 4.09 hereof. In addition, the Company shall not, directly or indirectly, lease all or substantially all of its and its Restricted Subsidiaries' properties or assets, in one or more related transactions, to any other Person. This Section 5.01 shall not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of the Guarantors. Section 5.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of 48 55 the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale, assignment, transfer, conveyance or other disposition of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01. Events of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment when due of interest on, or Liquidated Damages with respect to, the Notes and such default continues for a period of 30 days, whether or not prohibited by Article 10 hereof; (b) the Company defaults in the payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption or otherwise, whether or not prohibited by Article 10 hereof; (c) the Company or any of its Subsidiaries fails to comply with any of the provisions of Section 4.15 or 5.01 hereof; (d) the Company or any of its Subsidiaries fails to observe or perform any other covenant, representation, warranty or other agreement in this Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class; (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, which default (i) is caused by a failure to pay principal of, or interest or premium, if any, on the Indebtedness before the expiration of the grace period provided in the Indebtedness on the date of the default, or (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $10 million or more; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such undischarged judgments exceeds $10 million; (g) the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (i) commences a voluntary case, 49 56 (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; or (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (ii) appoints a custodian of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by this Indenture, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under such Guarantor's Note Guarantee. Section 6.02. Acceleration. If any Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 hereof with respect to the Company, any Significant Subsidiary or any group of Significant Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; provided, that so long as any Indebtedness permitted to be incurred under this Indenture as part of the Credit Facilities shall be outstanding, such acceleration shall not be effective until the earlier of (i) an acceleration of any Indebtedness under the Credit Facilities or (ii) five Business Days after receipt by the Company and the administrative agent under the Credit Facilities of written notice of such acceleration of the Notes. Upon any such declaration, the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01 hereof occurs with respect to the Company, any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. 50 57 Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04. Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, the Notes (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05. Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. Section 6.06. Limitation on Suits. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. 51 58 A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07. Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder Section 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09. Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; 52 59 Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7. TRUSTEE Section 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; 53 60 (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02. Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. Section 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it 54 61 must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06. Reports by Trustee to Holders of the Notes. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. Section 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or 55 62 duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. Section 7.08. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. 56 63 If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. Section 7.10. Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). Section 7.11. Preferential Collection of Claims Against Company. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. Section 8.02. Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal 57 64 Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03. Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 418 hereof and clause (iv) of Section 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of Default. Section 8.04. Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium and Liquidated Damages, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming 58 65 that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which shall be used to defease the Notes pursuant to this Article Eight concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel (which may be subject to customary exceptions) to the effect that on the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. 59 66 The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06. Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company. Section 8.07. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes. Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Note Guarantees or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; 60 67 (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; (c) to provide for the assumption of the Company's or a Guarantor's obligations to the Holders of the Notes by a successor to the Company pursuant to Article 5 or Article 11 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (f) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date hereof; or (g) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the Notes. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02. With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.15 hereof), the Note Guarantees and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Note Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. 61 68 It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes except as provided above with respect to Sections 3.09, 4.10 and 4.15 hereof; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of, or premium or interest, or Liquidated Damages, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including Additional Notes, if any) and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or interest on the Notes; (g) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions; (h) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described in Section 3.09 hereof; (i) release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except in accordance with the terms of this Indenture. Section 9.03. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. 62 69 Section 9.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05. Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06. Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 13.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10. SUBORDINATION Section 10.01. Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. Section 10.02. Liquidation; Dissolution; Bankruptcy. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities: (i) holders of Senior Debt shall be entitled to receive payment in full of all Obligations due in respect of such Senior Debt (including interest after the commencement of any 63 70 such proceeding at the rate specified in the applicable Senior Debt) before Holders of the Notes shall be entitled to receive any payment with respect to the Notes (except that Holders may receive (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof); and (ii) until all Obligations with respect to Senior Debt (as provided in clause (i) above) are paid in full, any distribution to which Holders would be entitled but for this Article 10 shall be made to holders of Senior Debt (except that Holders of Notes may receive (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof), as their interests may appear. Section 10.03. Default on Designated Senior Debt. (a) The Company may not make any payment or distribution to the Trustee or any Holder in respect of Obligations with respect to the Notes and may not acquire from the Trustee or any Holder any Notes for cash or property (other than (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof) until all principal and other Obligations with respect to the Senior Debt have been paid in full if: (i) a default in the payment of any principal or other Obligations with respect to Designated Senior Debt occurs and is continuing beyond any applicable grace period in the agreement, indenture or other document governing such Designated Senior Debt; or (ii) a default, other than a payment default, on Designated Senior Debt occurs and is continuing that then permits holders of the Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of the default (a "Payment Blockage Notice") from a Person who may give it pursuant to Section 10.11 hereof. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until (A) at least 360 days shall have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (B) all scheduled payments of principal, premium, if any, and interest on the Securities that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been waived for a period of not less than 180 days. (b) The Company may and shall resume payments on and distributions in respect of the Notes and may acquire them upon the earlier of: (i) the date upon which the default is cured or waived, or (ii) in the case of a default referred to in clause (ii) of Section 10.03(a) hereof, 179 days pass after notice is received if the maturity of such Designated Senior Debt has not been accelerated, if this Article 10 otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. Section 10.04. Acceleration of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. 64 71 Section 10.05. When Distribution Must Be Paid Over. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Section 10.03 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under this Indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 10.06. Notice by Company. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article 10, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Article 10. Section 10.07. Subrogation. After all Senior Debt is paid in full and until the Notes are paid in full, Holders of Notes shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of Notes have been applied to the payment of Senior Debt. A distribution made under this Article 10 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as between the Company and Holders, a payment by the Company on the Notes. Section 10.08. Relative Rights. This Article 10 defines the relative rights of Holders of Notes and holders of Senior Debt. Nothing in this Indenture shall: (i) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (ii) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Debt; or 65 72 (iii) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Notes. If the Company fails because of this Article 10 to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. Section 10.09. Subordination May Not Be Impaired by Company. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. Section 10.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. Section 10.11. Rights of Trustee and Paying Agent. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article 10. Only the Company or a Representative may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. Section 10.12. Authorization to Effect Subordination. Each Holder of Notes, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the Representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. 66 73 Section 10.13. Amendments. The provisions of this Article 10 shall not be amended or modified without the written consent of the holders of all Senior Debt. ARTICLE 11. NOTE GUARANTEES Section 11.01. Guarantee Subject to this Article 11, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal of and interest on the Notes shall be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors shall have the right to seek 67 74 contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. Section 11.02. Subordination of Note Guarantee. The Obligations of each Guarantor under its Note Guarantee pursuant to this Article 10 shall be junior and subordinated to all existing and future Senior debt of each Guarantor and pari passu in right of payment with any future senior subordinated Indebtedness of each Guarantor. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 10 hereof. Section 11.03. Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor shall, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 10, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance. Section 11.04. Execution and Delivery of Note Guarantee. To evidence its Note Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Note Guarantee substantially in the form included in Exhibit E shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by its President or one of its Vice Presidents. Each Guarantor hereby agrees that its Note Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of the Guarantors. In the event that the Company creates or acquires any new Subsidiaries subsequent to the date of this Indenture, if required by Section 4.24 hereof, the Company shall cause such Subsidiaries to execute supplemental indentures to this Indenture and Note Guarantees in accordance with Section 4.24 hereof and this Article 11, to the extent applicable. 68 75 Section 11.05. Guarantors May Consolidate, etc., on Certain Terms. Except as otherwise provided in Section 10.05, no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person whether or not affiliated with such Guarantor unless: (a) immediately after giving effect to such transaction, no Default or Event of Default exists; and (b) either (i) subject to Section 11.05 hereof, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, this Indenture and the Note Guarantee on the terms set forth herein or therein; or (ii) the Net Proceeds of such sale or other disposition are applied in accordance with the provisions of Section 4.10 hereof. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. Section 11.06. Releases Following Sale of Assets. In the event of a sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) a Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) shall be released and relieved of any obligations under its Note Guarantee; provided (i) that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof, or (ii) if the Company properly designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.10 hereof, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee. 69 76 Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 11. ARTICLE 12. SATISFACTION AND DISCHARGE Section 12.01. Satisfaction and Discharge. This Indenture shall be discharged and shall cease to be of further effect as to all Notes issued hereunder, when: (1) either: (a) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Liquidated Damages, if any, and accrued interest to the date of maturity or redemption; (2) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit shall not result in a breach or violation of, or constitute a default under, any other instrument to which the Company [or any Guarantor] is a party or by which the Company or any Guarantor is bound; (3) the Company or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and (4) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be. In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. Notwithstanding the satisfaction and discharge of this Indenture, if money shall have been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section, the provisions of Section 12.02 and Section 8.06 shall survive. 70 77 Section 12.02. Application of Trust Money. Subject to the provisions of Section 8.06, all money deposited with the Trustee pursuant to Section 12.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 12.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and any Guarantor's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 12.01; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent. ARTICLE 13. MISCELLANEOUS Section 13.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. Section 13.02. Notices. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company and/or any Guarantor: Instron Corporation 100 Royall Street Canton, MA 02021 Telecopier No.: (781) 828-5750 Attention: Linton A. Moulding With a copy to: Jones, Day, Reavis & Pogue North Point 901 Lakeside Avenue Cleveland, OH 44114 Telecopier No.: (216) 579-0212 Attention: Christopher M. Kelly 71 78 If to the Trustee: Norwest Bank Minnesota, National Association N9303-120 Sixth and Marquette Minneapolis, MN 55479 Telecopier No.: (612) 667-9825 Attention: Corporate Trust Department The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 13.03. Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. 72 79 Section 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (c) a statement that the Person making such certificate or opinion has read such covenant or condition; (d) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (e) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (f) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 13.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 13.07. No Personal Liability of Directors, Officers, Employees and Stockholders. No past, present or future director, officer, employee, Affiliate, incorporator or stockholder of the Company or any Guarantor, solely by reason of this status, shall have any liability for any obligations of the Company or the Guarantors under the Notes, this Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all this liability. The waiver and release are part of the consideration for issuance of the Notes. Section 13.08. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 13.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. 73 80 Section 13.10. Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 11.05. Section 13.11. Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 13.12. Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 13.13. Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. Section 13.14. Limitation on Trust Liability. Each of Instron Realty Trust ("Trust") and IRT-II Trust ("Trust II") is a voluntary association with transferable shares organized under the laws of the Commonwealth of Massachusetts (more commonly referred to as a "Massachusetts Business Trust") and all persons dealing with each of Trust and Trust II must look solely to the property of each of Trust and Trust II for the enforcement of any claims against either Trust or Trust II. Neither the trustees, officers, agents nor shareholders of either Trust or Trust II assume any personal liability for obligations entered into on its behalf. In no event shall the Trustee seek or attempt to obtain any recovery or judgement against any trustee, officer, director, employee or shareholder of either Trust or Trust II. The Declaration of Trust, dated as of April 23, 1957, of Trust, and the Declaration of Trust, dated as of October 19, 1998, of Trust II are on file with the Secretary of the Commonwealth of Massachusetts. This Indenture has been executed on behalf of each of Trust and Trust II by the trustees or officers in such capacities and not individually. [Signatures on following page] 74 81 SIGNATURES Dated as of September 29, 1999 INSTRON CORPORATION By: /s/ John R. Barrett --------------------------------------- Name: John R. Barrett Title: Treasurer and Vice President of Corporate Development INSTRON SCHENCK TESTING SYSTEMS CORP. By: /s/ John R. Barrett --------------------------------------- Name: John R. Barrett Title: Treasurer and Vice President of Corporate Development INSTRON/LAWRENCE CORPORATION By: /s/ John R. Barrett --------------------------------------- Name: John R. Barrett Title: Treasurer and Vice President of Corporate Development INSTRON REALTY TRUST By: /s/ Linton A. Moulding --------------------------------------- Name: Linton A. Moulding Title: Chief Financial Officer and Vice President IRT-II TRUST By: /s/ Linton A. Moulding --------------------------------------- Name: Linton A. Moulding Title: Chief Financial Officer and Vice President 75 82 INSTRON JAPAN COMPANY, LTD. By: /s/ John R. Barrett --------------------------------------- Name: John R. Barrett Title: Treasurer and Vice President of Corporate Development INSTRON ASIA LIMITED By: /s/ John R. Barrett --------------------------------------- Name: John R. Barrett Title: Treasurer and Vice President of Corporate Development NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: /s/ Curtis Schwegman --------------------------------------- Name: Curtis Schwegman Title: Vice President 76 83 EXHIBIT A1 [Face of Note] CUSIP/CINS ________ 13-1/4% Senior Subordinated Notes due 2009 No. __ $____________ INSTRON CORPORATION promises to pay to _____________________________________________________________ or registered assigns, the principal sum of ___________________________________________________________ Dollars on September 15, 2009. Interest Payment Dates: March 15 and September 15 Record Dates: March 1 and September 1 Dated: September 29, 1999 INSTRON CORPORATION By: _______________________________________ Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: _______________________________ Authorized Signatory A1-1 84 [Back of Note] 13-1/4% Senior Subordinated Notes due 2009 [Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture] [Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Instron Corporation, a Massachusetts corporation (the "Company"), promises to pay interest on the principal amount of this Note at 13-1/4% per annum from September 29, 1999 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages semi-annually in arrears on March 15 and September 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be March 15, 2000. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the March 1 or September 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank Minnesota, National Association, the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of September 29, 1999 ("Indenture") by and among the Company, the Guarantors listed on Schedule I thereto and the A1-2 85 Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the indenture shall govern and be controlling. The Notes are obligations of the Company limited to $150.0 million in aggregate principal amount. 5. OPTIONAL REDEMPTION. (a) Except as set forth in clause (b) of this paragraph 5, the Company shall not have the option to redeem the Notes pursuant to this paragraph 5 prior to September 15, 2004. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on September 15 of the years indicated below:
Year Percentage ---- ---------- 2004............................................................................. 106.625% 2005............................................................................. 104.417% 2006............................................................................. 102.208% 2007 and thereafter.............................................................. 100.000%
(b) Notwithstanding the provisions of clause (a) of this paragraph 5, at any time prior to September 15, 2002, the Company on any one or more occasions may redeem up to 35% of the aggregate principal amount of Notes with the net proceeds of a Qualified Equity Offering at a redemption price equal to 113.250% of the aggregate principal amount thereof plus accrued and unpaid Liquidated Damages thereon, if any; provided that at least 65% in aggregate principal amount of the Notes originally issued remain outstanding immediately after the occurrence of any such redemption and that such redemption occurs within 45 days of the date of the closing of such Qualified Equity Offering. (c) Any redemption pursuant to this paragraph 5 shall be made pursuant to the provisions of Section 3.01 through 3.06 of the Indenture. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. REPURCHASE AT OPTION HOLDER. (a) If there is a Change of Control, the Company shall be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 10 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Subsidiary consummates any Asset Sales, within five days of each date on which the aggregate amount of Excess Proceeds exceeds $10 million, the Company shall commence an offer to all Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to A1-3 86 purchase the maximum principal amount of Notes (including any Additional Notes) that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including any Additional Notes) tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase shall receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Note Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class, and any existing default or compliance with any provision of the Indenture, the Note Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Note Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or Guarantor's obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, [to provide for the Issuance of Additional Notes in accordance with the limitations set forth in the Indenture], or to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Note Guarantee with respect to the Notes. 12. DEFAULTS AND REMEDIES. An Event of Default occurs if: (i) the Company defaults in the payment when due of interest on, or Liquidated Damages with respect to, the Notes and such default continues for a period of 30 days, whether or not prohibited by Article 10 of the Indenture; (ii) the A1-4 87 Company defaults in the payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption or otherwise, whether or not prohibited by Article 10 of the Indenture; (iii) the Company or any of its Subsidiaries fails to comply with any of the provisions of Section 4.15 or 5.01 of the Indenture; (iv) the Company or any of its Subsidiaries fails to observe or perform any other covenant, representation, warranty or other agreement in the Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class; (v) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of, or interest or premium, if any, on the Indebtedness before the expiration of the grace period provided in the Indebtedness on the date of the default, or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $10 million or more; (vi) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such undischarged judgments exceeds $10 million; (vii) the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case, (c) consents to the appointment of a custodian of it or for all or substantially all of its property, (d) makes a general assignment for the benefit of its creditors, or (e) generally is not paying its debts as they become due; or (viii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (b) appoints a custodian of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (c) orders the liquidation of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (ix) except as permitted by this Indenture, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under such Guarantor's Note Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes shall become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a A1-5 88 statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company, as such, shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE Notes. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of September 29, 1999, between the Company and the parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreements, if any, between the Company and the other parties thereto, relating to rights given by the Company to the purchasers of any Additional Notes (collectively, the "Registration Rights Agreement"). 18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Instron Corporation 100 Royall Street Canton, MA 02021 Attention: Linton A. Moulding A1-6 89 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: __________________________________ (Insert assignee's legal name) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _______________ Your Signature: _____________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A1-7 90 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: / / Section 4.10 / / Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $_______________ Date: _______________ Your Signature: _____________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: _____________________ Signature Guarantee*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A1-8 91 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE* The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount Amount of decrease Amount of increase in of this Global Note Signature of in Principal Amount Principal Amount following such authorized officer of of decrease of Trustee or Note Date of Exchange this Global Note this Global Note (or increase) Custodian ---------------- ---------------- ---------------- ------------- ---------
* This schedule should be included only if the Note is issued in global form. A1-9 92 EXHIBIT A2 [Face of Regulation S Temporary Global Note] CUSIP/CINS __________ 13-1/4% Senior Subordinated Notes due 2009 No. ___ $__________ INSTRON CORPORATION promises to pay to _____________________________________________________________ or registered assigns, the principal sum of ___________________________________________________________ Dollars on September 29, 2009. Interest Payment Dates: March 15, and September 15 Record Dates: March 1, and September 1 Dated: September 29, 1999 INSTRON CORPORATION By: _________________________________________ Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: _______________________________ Authorized Signatory A2-1 93 [Back of Regulation S Temporary Global Note] 13-1/4% Senior Subordinated Notes due 2009 THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON. THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF INSTRON CORPORATION. THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO INSTRON OR ANY OF OUR SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO INSTRON THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO INSTRON) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE A2-2 94 APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING. Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Instron Corporation, a Massachusetts corporation (the "Company"), promises to pay interest on the principal amount of this Note at 13-1/4% per annum from September 29, 1999 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages semi-annually on March 15 and September 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be March 15, 2000. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Until this Regulation S Temporary Global Note is exchanged for one or more Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Note shall in all other respects be entitled to the same benefits as other Senior Subordinated Notes under the Indenture. 2. METHOD OF PAYMENT. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the March 1 or September 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium, interest and Liquidated Damages at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer A2-3 95 instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank Minnesota, National Association, the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of September 29, 1999 ("Indenture") by and among the Company, the Guarantors listed on Schedule I thereto and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are obligations of the Company limited to $150.0 million in aggregate principal amount. 5. OPTIONAL REDEMPTION. (a) Except as set forth in clause (b) of this paragraph 5, the Company shall not have the option to redeem the Notes pursuant to this paragraph 5 prior to September 15, 2004. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on September 15, of the years indicated below:
Year Percentage ---- ---------- 2004............................................................................. 106.625% 2005............................................................................. 104.417% 2006............................................................................. 102.208% 2007 and thereafter.............................................................. 100.000%
(b) Notwithstanding the provisions of clause (a) of this paragraph 5, at any time prior to September 15, 2002, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes with the net proceeds of a Qualified Equity Offering at a redemption price equal to 113.250% of the aggregate principal amount thereof plus accrued and unpaid Liquidated Damages thereon, if any; provided that at least 65% in aggregate principal amount of the Notes originally issued remain outstanding immediately after the occurrence of any such redemption and that such redemption occurs within 45 days of the date of the closing of such Qualified Equity Offering. (c) Any redemption pursuant to this paragraph 5 shall be made pursuant to the provisions of Section 3.01 through 3.06 of the Indenture. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. A2-4 96 (a) If there is a Change of Control, the Company shall be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (the "Change of Control Payment"). Within 10 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Subsidiary consummates any Asset Sales, within five days of each date on which the aggregate amount of Excess Proceeds exceeds $10 million, the Company shall commence an offer to all Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Subsidiary) may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase shall receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. 8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. This Regulation S Temporary Global Note is exchangeable in whole or in part for one or more Global Notes only (i) on or after the termination of the 40-day restricted period (as defined in Regulation S) and (ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary Global Note for one or more Global Notes, the Trustee shall cancel this Regulation S Temporary Global Note. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount A2-5 97 of the then outstanding Notes, and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 12. DEFAULTS AND REMEDIES. An Event of Default occurs if: (i) the Company defaults in the payment when due of interest on, or Liquidated Damages with respect to, the Notes and such default continues for a period of 30 days, whether or not prohibited by Article 10 of the Indenture; (ii) the Company defaults in the payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption or otherwise, whether or not prohibited by Article 10 of the Indenture; (iii) the Company or any of its Subsidiaries fails to comply with any of the provisions of Section 4.15 or 5.01 of the Indenture; (iv) the Company or any of its Subsidiaries fails to observe or perform any other covenant, representation, warranty or other agreement in the Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class; (v) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of, or interest or premium, if any, on the Indebtedness before the expiration of the grace period provided in the Indebtedness on the date of the default, or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $10 million or more; (vi) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such undischarged judgments exceeds $10 million; (vii) the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case, (c) consents to the appointment of a custodian of it or for all or substantially all of its property, (d) makes a general assignment for the benefit of its creditors, or (e) generally is not paying its debts as they become due; or (viii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (b) appoints a custodian of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (c) orders the liquidation of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (ix) except as permitted by this Indenture, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under such Guarantor's Note Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. A2-6 98 Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes shall become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any of the Guarantors, as such, shall not have any liability for any obligations of the Company or such Guarantor under the Notes, the Note Guarantees or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE Notes. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of September __, 1999, between the Company and the parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreements, if any, between the Company and the other parties thereto, relating to rights given by the Company to the purchasers of any Additional Notes (collectively, the "Registration Rights Agreement"). 18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. A2-7 99 The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Instron Corporation 100 Royall Street Canton, MA 02021 Attention: Linton A. Moulding A2-8 100 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: __________________________________ (Insert assignee's legal name) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _______________ Your Signature: _____________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A2-9 101 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $_______________ Date: _______________ Your Signature: ________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ________________________ Signature Guarantee*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A2-10 102 SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note, or of other Restricted Global Notes for an interest in this Regulation S Temporary Global Note, have been made:
Principal Amount Amount of decrease Amount of increase in of this Global Note Signature of in Principal Amount Principal Amount following such authorized officer of of decrease of Trustee or Note Date of Exchange this Global Note this Global Note (or increase) Custodian ---------------- ---------------- ---------------- ------------- ---------
A2-11 103 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Instron Corporation 100 Royall Street Canton, MA 02021 Norwest Bank Minnesota, National Association N9303-120 Sixth and Marquette Minneapolis, MN 55479 Re: 13-1/4% Senior Subordinated Notes Due 2009 Reference is hereby made to the Indenture, dated as of September 29, 1999 (the "Indenture"), among Instron Corporation, as issuer (the "Company"), the Guarantors set forth on the signature pages thereto and Norwest Bank Minnesota, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to ___________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a B-1 104 plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Definitive Notes and in the Indenture and the Securities Act. 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer B-2 105 restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ____________________________ [Insert Name of Transferor] By:________________________ Name: Title: Dated: _______________________ B-3 106 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (c) a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP _________), or (ii) [ ] Regulation S Global Note (CUSIP _________), or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP _________), or (ii) [ ] Regulation S Global Note (CUSIP _________), or (iii) [ ] Unrestricted Global Note (CUSIP _________); or (b) [ ] a Restricted Definitive Note; or (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 107 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Instron Corporation 100 Royall Street Canton, MA 02021 Norwest Bank Minnesota, National Association N9303-120 Sixth and Marquette Minneapolis, MN 55479 Re: 13-1/4% Senior Subordinated Notes Due 2009 (CUSIP ____________) Reference is hereby made to the Indenture, dated as of September 29, 1999 (the "Indenture"), among Instron Corporation, as issuer (the "Company"), the Guarantors set forth on the signature pages thereto and Norwest Bank Minnesota, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for C-1 108 EXHIBIT C a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] 144A Global Note, [ ] Regulation S Global Note, with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. C-2 109 EXHIBIT C This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ___________________________ [Insert Name of Transferor] By: _______________________ Name: Title: Dated: ______________________ C-3 110 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Instron Corporation 100 Royall Street Canton, MA 02021 Norwest Bank Minnesota, National Association N9303-120 Sixth and Marquette Minneapolis, MN 55479 Re: 13-1/4% Senior Subordinated Notes Due 2009 Reference is hereby made to the Indenture, dated as of September 29, 1999 (the "Indenture"), among Instron Corporation, as issuer (the "Company"), the Guarantors set forth on the signature pages thereto and Norwest Bank Minnesota, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) [ ] a beneficial interest in a Global Note, or (b) [ ] a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. D-1 111 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ____________________________________ [Insert Name of Accredited Investor] By: _______________________________ Name: Title: Dated: _______________________ D-2 112 EXHIBIT E FORM OF NOTATION OF GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of September 29, 1999 (the "Indenture") among Instron Corporation, the Guarantors listed on Schedule I thereto and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Note Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Note Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Note Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. INSTRON SCHENCK TESTING SYSTEMS CORP. By: _________________________________ Name: Title: INSTRON/LAWRENCE CORPORATION By: _________________________________ Name: Title: E-1 113 EXHIBIT E INSTRON REALTY TRUST By: ___________________________________ Name: Title: IRT-II TRUST By: ___________________________________ Name: Title: INSTRON JAPAN COMPANY, LTD. By: ___________________________________ Name: Title: INSTRON ASIA LIMITED By: ___________________________________ Name: Title: E-2 114 EXHIBIT F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of Instron Corporation (or its permitted successor), a Massachusetts corporation (the "Company"), the other Guarantors (as defined in the Indenture referred to herein) and Norwest Bank Minnesota, National Association, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of September 29, 1999 providing for the issuance of an aggregate principal amount of up to $150.0 million of 13-1/4% Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Note Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so F-1 115 guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture, and the Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. (i) Pursuant to Section 11.02 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 11 of the Indenture, this new Note Guarantee shall be limited to the maximum amount permissible such that the obligations of such Guarantor under this Note Guarantee will not constitute a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Note Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. F-2 116 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Sections 11.04 and 11.05 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Note Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 and Section 11.05 of Article 10 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Note Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably F-3 117 required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee. (b) Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. F-4 118 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: _______________, ____ [GUARANTEEING SUBSIDIARY] By: _______________________________ Name: Title: [Instron Corporation] By: _______________________________ Name: Title: [EXISTING GUARANTORS] By: _______________________________ Name: Title: [TRUSTEE], as Trustee By: _______________________________ Authorized Signatory F-5 119 SCHEDULE I SCHEDULE OF GUARANTORS The following schedule lists each Guarantor under the Indenture as of the Issue Date: Instron Schenck Testing Systems Corp. Instron/Lawrence Corporation Instron Realty Trust IRT II Trust Instron Japan Company, Ltd. Instron Asia Limited F-6 EX-4.2 5 EXHIBIT 4.2 1 EXHIBIT 4.2 REGISTRATION RIGHTS AGREEMENT DATED AS OF SEPTEMBER 29, 1999 BY AND AMONG INSTRON CORPORATION THE SUBSIDIARY GUARANTORS SET FORTH HEREIN AND DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 2 This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of September 29, 1999, by and among Instron Corporation, a Massachusetts corporation (the "COMPANY"), the Subsidiary Guarantors set forth on the signature pages hereto (each, a "SUBSIDIARY GUARANTOR" and collectively, the "SUBSIDIARY GUARANTORS"), and Donaldson, Lufkin & Jenrette Securities Corporation (the "INITIAL PURCHASER"), who has agreed to purchase 60,000 Units consisting of $60.0 million principal amount of the Company's 13-1/4% Senior Subordinated Notes due 2009 (the "SENIOR SUBORDINATED NOTES") and warrants to purchase 30,654 shares of the Company's common stock, par value $0.01 per share pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated September 24, 1999, (the "PURCHASE AGREEMENT"), by and among the Company, the Subsidiary Guarantors and the Initial Purchaser. In order to induce the Initial Purchaser to purchase the Senior Subordinated Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchaser set forth in Section 2 of the Purchase Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in the Indenture, dated as of September 29, 1999, among the Company, the Subsidiary Guarantors and Norwest Bank Minnesota, National Association, as Trustee, relating to the Senior Subordinated Notes and the New Senior Subordinated Notes (the "INDENTURE"). The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: ACT: The Securities Act of 1933, as amended. AFFILIATE: As defined in Rule 144 of the Act. BROKER-DEALER: Any broker or dealer registered under the Exchange Act. CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture. CLOSING DATE: The date hereof. COMMISSION: The Securities and Exchange Commission. CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the New Senior Subordinated Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the period required pursuant to Section 3(b) hereof and (c) the delivery by the Company to the Registrar under the Indenture of New Senior Subordinated Notes in the same aggregate principal 3 amount as the aggregate principal amount of Senior Subordinated Notes tendered by Holders thereof pursuant to the Exchange Offer. CONSUMMATION DEADLINE: As defined in Section 3(b) hereof. EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a) hereof. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. EXCHANGE OFFER: The exchange and issuance by the Company of a principal amount of New Senior Subordinated Notes (which shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding principal amount of Senior Subordinated Notes that are tendered by such Holders in connection with such exchange and issuance. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. EXEMPT RESALES: The transactions in which the Initial Purchaser proposes to sell the Senior Subordinated Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act and pursuant to Regulation S under the Act. FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof. HOLDERS: As defined in Section 2 hereof. NEW SENIOR SUBORDINATED NOTES: The Company's 13-1/4% Senior Subordinated Notes due 2009 to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as contemplated by Section 4 hereof. PROSPECTUS: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. RECOMMENCEMENT DATE: As defined in Section 6(d) hereof. REGISTRATION DEFAULT: As defined in Section 5 hereof. REGISTRATION STATEMENT: Any registration statement of the Company and the Subsidiary Guarantors relating to (a) an offering of New Senior Subordinated Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) that is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. REGULATION S: Regulation S promulgated under the Act. 2 4 RULE 144: Rule 144 promulgated under the Act. SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof. SUSPENSION NOTICE: As defined in Section 6(d) hereof. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture. TRANSFER RESTRICTED SECURITIES: Each (A) Senior Subordinated Note, until the earliest to occur of (i) the date on which such Senior Subordinated Note is exchanged in the Exchange Offer for a New Senior Subordinated Note which is entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (ii) the date on which such Senior Subordinated Note has been disposed of in accordance with a Shelf Registration Statement (and the purchasers thereof have been issued New Senior Subordinated Notes), or (iii) the date on which such Senior Subordinated Note is distributed to the public pursuant to Rule 144 under the Act and each (B) New Senior Subordinated Note held by a Broker Dealer until the date on which such New Senior Subordinated Note is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including the delivery of the Prospectus contained therein). SECTION 2. HOLDERS A Person is deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permitted by applicable federal law (after the procedures set forth in Section 6(a)(i) below have been complied with), the Company and the Subsidiary Guarantors shall (i) cause the Exchange Offer Registration Statement to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 90 days after the Closing Date (such 90th day being the "FILING Deadline"), (ii) use its best efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, but in no event later than 180 days after the Closing Date (such 180th day being the "EFFECTIVENESS DEADLINE"), (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the New Senior Subordinated Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting (i) registration of the New Senior Subordinated Notes to be offered in exchange for the Senior Subordinated Notes that are Transfer Restricted Securities and (ii) resales of New Senior Subordinated Notes by Broker-Dealers that tendered into the Exchange Offer Senior Subordinated 3 5 Notes that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Senior Subordinated Notes acquired directly from the Company or any of its Affiliates) as contemplated by Section 3(c) below. (b) The Company and the Subsidiary Guarantors shall use their respective best efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 Business Days. The Company and the Subsidiary Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the New Senior Subordinated Notes shall be included in the Exchange Offer Registration Statement. The Company and the Subsidiary Guarantors shall use their respective best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 business days thereafter (such 30th day being the "CONSUMMATION DEADLINE"). (c) The Company shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Senior Subordinated Notes acquired directly from the Company or any Affiliate of the Company), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section shall also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement. Because such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with its initial sale of any New Senior Subordinated Notes received by such Broker-Dealer in the Exchange Offer, the Company and the Subsidiary Guarantors shall permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus delivery requirement. To the extent necessary to ensure that the prospectus contained in the Exchange Offer Registration Statement is available for sales of New Senior Subordinated Notes by Broker-Dealers, the Company and the Subsidiary Guarantors agree to use their respective reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented, amended and current as required by and subject to the provisions of Section 6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 180 days from the Consummation Deadline or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto. The Company and the Subsidiary Guarantors shall provide sufficient copies of the latest version of such Prospectus to such Broker-Dealers, promptly upon request, and in no event later than two business days after such request, at any time during such period. 4 6 SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Exchange Offer is not permitted by applicable law (after the Company and the Subsidiary Guarantors have complied with the procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities shall notify the Company within 20 Business Days following the Consummation Deadline that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the New Senior Subordinated Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Senior Subordinated Notes acquired directly from the Company or any of its Affiliates, then the Company and the Subsidiary Guarantors shall: (x) cause to be filed, on or prior to 30 days after the earlier of (i) the date on which the Company determines that the Exchange Offer Registration Statement cannot be filed as a result of clause (a)(i) above and (ii) the date on which the Company receives the notice specified in clause (a)(ii) above (such earlier date, the "FILING DEADLINE"), a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement) (in either case, the "SHELF REGISTRATION STATEMENT"), relating to all Transfer Restricted Securities, and (y) use their respective best efforts to cause such Shelf Registration Statement to become effective on or prior to 90 days after the Filing Deadline for the Shelf Registration Statement (such 90th day the "EFFECTIVENESS DEADLINE"). If, after the Company has filed an Exchange Offer Registration Statement that satisfies the requirements of Section 3(a) above, the Company is required to file and make effective a Shelf Registration Statement solely because the Exchange Offer is not permitted under applicable federal law (i.e., clause (a)(i) above), then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above; provided that, in such event, the Company shall remain obligated to meet the Effectiveness Deadline set forth in clause (y). To the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and the Subsidiary Guarantors shall use their respective best efforts to keep any Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(c)(i)) following the Closing Date, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant thereto. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer 5 7 Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 days after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to liquidated damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such information. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline, (ii) any such Registration Statement has not been declared effective by the Commission on or prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not been Consummated on or prior to the Consummation Deadline or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within 5 days by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective within 5 days of filing such post-effective amendment to such Registration Statement (each such event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the Company and the Subsidiary Guarantors hereby jointly and severally agree to pay to each Holder of Transfer Restricted Securities affected thereby liquidated damages in an amount equal to $.05 per week per $1,000 in principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues for the first 90-day period immediately following the occurrence of such Registration Default. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.50 per week per $1,000 in principal amount of Transfer Restricted Securities; provided that the Company and the Subsidiary Guarantors shall in no event be required to pay liquidated damages for more than one Registration Default at any given time. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease. All accrued liquidated damages shall be paid to the Holders entitled thereto, in the manner provided for the payment of interest in the Indenture, on each Interest Payment Date, as more fully set forth in the Indenture and the Notes. Notwithstanding the fact that any securities for which liquidated damages are due cease to be Transfer Restricted Securities, all obligations of the 6 8 Company and the Subsidiary Guarantors to pay liquidated damages with respect to securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Subsidiary Guarantors shall (x) comply with all applicable provisions of Section 6(c) below, (y) use their respective best efforts to effect such exchange and to permit the resale of New Senior Subordinated Notes by Broker-Dealers that tendered in the Exchange Offer Senior Subordinated Notes that such Broker-Dealer acquired for its own account as a result of its market making activities or other trading activities (other than Senior Subordinated Notes acquired directly from the Company or any of its Affiliates) being sold in accordance with the intended method or methods of distribution thereof, and (z) comply with all of the following provisions: (i) If, following the date hereof there has been announced a change in Commission policy with respect to exchange offers such as the Exchange Offer, that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Company and the Subsidiary Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Subsidiary Guarantors to Consummate an Exchange Offer for such Transfer Restricted Securities. The Company and the Subsidiary Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level. In connection with the foregoing, the Company and the Subsidiary Guarantors hereby agree to take all such other reasonable actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff. (ii) As a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a Broker Dealer) shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company and the Subsidiary Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the New Senior Subordinated Notes to be issued in the Exchange Offer and (C) it is acquiring the New Senior Subordinated Notes in its ordinary course of business. As a condition to its participation in the Exchange Offer each Holder using the Exchange Offer to participate in a distribution of the New Senior Subordinated Notes shall acknowledge and agree that, if the resales are of New Senior Subordinated Notes obtained by such Holder in exchange for Senior Subordinated Notes acquired directly from the Company or an Affiliate thereof, it (1) could not, under 7 9 Commission policy as in effect on the date of this Agreement, rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Subsidiary Guarantors shall provide a supplemental letter to the Commission (A) stating that the Company and the Subsidiary Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that neither the Company nor any Subsidiary Guarantor has entered into any arrangement or understanding with any Person to distribute the New Senior Subordinated Notes to be received in the Exchange Offer and that, to the best of the Company's and each Subsidiary Guarantor's information and belief, each Holder participating in the Exchange Offer is acquiring the New Senior Subordinated Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the New Senior Subordinated Notes received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above, if applicable. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Company and the Subsidiary Guarantors shall: (i) comply with all the provisions of Section 6(c) below and use their respective best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company and the Subsidiary Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof, and (ii) issue, upon the request of any Holder or purchaser of Senior Subordinated Notes covered by any Shelf Registration Statement contemplated by this Agreement, New Senior Subordinated Notes having an aggregate principal amount equal to the aggregate principal amount of Senior Subordinated Notes sold pursuant to the Shelf Registration Statement and surrendered to the Company for cancellation; the Company shall register 8 10 New Senior Subordinated Notes on the Shelf Registration Statement for this purpose and issue the New Senior Subordinated Notes to the purchaser(s) of securities subject to the Shelf Registration Statement in the names as such purchaser(s) shall designate. (iii) promptly prior to the filing of any document that is to be incorporated by reference into a Shelf Registration Statement or related Prospectus, provide copies of such document to each selling Holder in connection with such sale, if any, make the Company's and the Subsidiary Guarantors' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders may reasonably request; (iv) make available, during reasonable business hours, for inspection by each Holder and any attorney or accountant retained by such Holders, all financial and other records, pertinent corporate documents of the Company and the Subsidiary Guarantors as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities and cause the Company's and the Subsidiary Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, attorney or accountant in connection with such Shelf Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness. Information that the Company and Subsidiary Guarantors determine, in good faith, to be confidential and any information that it notifies the Holders is confidential shall not be disclosed by the Holders unless (i) the disclosure of such information is necessary to avoid or correct a material misstatement or material omission in such Registration Statement, (ii) the release of such information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is, in the opinion of counsel for any Holder, necessary in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Holder and arising out of, based upon, relating to, or involving this agreement, or any transactions contemplated hereby or arising hereunder, or (iv) the information has been made generally available to the public. Each selling Holder and its representatives will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transaction in the securities of the Company or for any other purpose other than customary due diligence unless and until such information is generally available to the public. Each selling Holder and its representatives will be required to further agree that it will, upon learning that disclosure of such information is sought in a court of competent jurisdiction, give notice to the Company and the Subsidiary Guarantors and allow the Company and the Subsidiary Guarantors to undertake appropriate action to prevent disclosure of the information deemed confidential. (v) if requested by any Holders in connection with such exchange or sale, promptly include in any Shelf Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as 9 11 reasonably practicable after the Company is notified of the matters to be included in such Prospectus supplement or post-effective amendment; (vi) upon the request of the Holders of at least 50% in aggregate principal amount of the then outstanding Transfer Restricted Securities, enter into such agreements (including underwriting agreements) and make such representations and warranties and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any applicable Shelf Registration Statement contemplated by this Agreement as may be reasonably requested by any Holder in connection with any sale or resale pursuant to any applicable Shelf Registration Statement. In such connection, the Company and the Subsidiary Guarantors shall: (A) upon request of the Holders of at least 50% in aggregate principal amount of the then outstanding Transfer Restricted Securities, furnish (or in the case of paragraphs (2) and (3), use its best efforts to cause to be furnished) to each Holder, upon the effectiveness of the Shelf Registration Statement: (1) a certificate, dated such date, signed on behalf of the Company and each Subsidiary Guarantor by (x) the President or any Vice President and (y) a principal financial or accounting officer of the Company and such Subsidiary Guarantor, confirming, as of the date thereof, the matters set forth in Sections 6(y), 9(a) and 9(b) of the Purchase Agreement and such other similar matters as such Holders may reasonably request; (2) an opinion, dated the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company and the Subsidiary Guarantors covering matters similar to those set forth in Exhibits C and D to the of the Purchase Agreement; and (3) a customary comfort letter, dated the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 9(h) of the Purchase Agreement; and (B) deliver such other documents and certificates as may be reasonably requested by the selling Holders to evidence compliance with the matters covered in clause (A) above and with any customary conditions contained in any agreement entered into by the Company and the Subsidiary Guarantors pursuant to this clause (vi); (c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement, the Company and the Subsidiary Guarantors shall: 10 12 (i) use their respective best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Subsidiary Guarantors shall file promptly an appropriate amendment to such Registration Statement curing such defect, and, if Commission review is required, use their respective best efforts to cause such amendment to be declared effective as soon as practicable. (ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise each Holder promptly and, if requested by such Holder, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Subsidiary Guarantors shall use their respective best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; 11 13 (iv) subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (v) furnish to each selling Holder in connection with such sale, if any, before filing with the Commission, copies of any Registration Statement or any related Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders in connection with such sale, if any, for a period of at least five business days, and the Company will not file any such Registration Statement or related Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such selling Holders shall reasonably object within five business days after the receipt thereof. A selling Holder shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, related Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading or fails to comply with the applicable requirements of the Act; (vi) furnish to each Holder who requests in connection with such exchange or sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (vii) deliver to each Holder without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Subsidiary Guarantors hereby consent to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (viii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders may request and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that neither the Company nor any Subsidiary Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that 12 14 would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (ix) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the selling Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the selling Holders may request at least two business days prior to such sale of Transfer Restricted Securities; (x) use their respective best efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (viii) above; (xi) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; (xii) otherwise use their respective best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); (xiii) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use its best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (xiv) provide promptly to each Holder, upon request, each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act. (d) Restrictions on Holders. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of the notice referred to in Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof (in each 13 15 case, a "SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until (i) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any Prospectuses, other than permanent file copies, then in such Holder's possession which have been replaced by the Company with more recently dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice. The time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by a number of days equal to the number of days in the period from and including the date of delivery of the Suspension Notice to the date of delivery of the Recommencement Date. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's and the Subsidiary Guarantors' performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the New Senior Subordinated Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company, the Subsidiary Guarantors and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing the New Senior Subordinated Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Subsidiary Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its and the Subsidiary Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Subsidiary Guarantors. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company and the Subsidiary Guarantors will reimburse the Initial Purchaser and the Holders of Transfer Restricted Securities who are tendering Senior Subordinated Notes into in the Exchange Offer and/or selling or reselling Senior Subordinated Notes or New Senior Subordinated Notes pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Latham & Watkins, unless another 14 16 firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION (a) The Company and the Subsidiary Guarantors agree, jointly and severally, to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who controls such Holder (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities, judgments, (including without limitation, any reasonable legal or other reasonable expenses incurred in connection with investigating or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto) provided by the Company to any Holder or any prospective purchaser of New Senior Subordinated Notes or registered Senior Subordinated Notes, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by an untrue statement or omission or alleged untrue statement or omission that is based upon information relating to any of the Holders furnished in writing to the Company by any of the Holders. (b) Each Holder of Transfer Restricted agrees, severally and not jointly, to indemnify and hold harmless the Company and the Subsidiary Guarantors, and their respective directors and officers, and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company, or the Subsidiary Guarantors to the same extent as the foregoing indemnity from the Company and the Subsidiary Guarantors set forth in section (a) above, but only with reference to information relating to such Holder furnished in writing to the Company by such Holder expressly for use in any Registration Statement. In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder). Any indemnified 15 17 party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party, (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party) or (iv) there exists an actual Conflict of interest between original counsel and such indemnified party. In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by a majority of the Holders, in the case of the parties indemnified pursuant to Section 8(a), and by the Company and Subsidiary Guarantors, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with its prior written consent or (ii) effected without its prior written consent if the settlement is entered into more than twenty business days after the indemnifying party shall have received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the indemnifying party shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) To the extent that the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Subsidiary Guarantors, on the one hand, and the Holders, on the other hand, from their sale of Transfer Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company and the Subsidiary Guarantors, on the one hand, and of the Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, 16 18 liabilities or judgments, as well as any other relevant equitable considerations. The relative fault of the Company and the Subsidiary Guarantors, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or such Subsidiary Guarantor, on the one hand, or by the Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and judgments referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 8(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company, the Subsidiary Guarantors and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(c) are several in proportion to the respective principal amount of Transfer Restricted Securities held by each Holder hereunder and not joint. SECTION 9. RULE 144A AND RULE 144 The Company and each Subsidiary Guarantor agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company or such Subsidiary Guarantor (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. 17 19 SECTION 10. MISCELLANEOUS (a) Remedies. The Company and the Subsidiary Guarantors acknowledge and agree that any failure by the Company and/or the Subsidiary Guarantors to comply with their respective obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Initial Purchaser or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchaser or any Holder may obtain such relief as may be required to specifically enforce the Company's and the Subsidiary Guarantors' obligations under Sections 3 and 4 hereof. The Company and the Subsidiary Guarantors further agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. Neither the Company nor any Subsidiary Guarantor will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any Subsidiary Guarantor has previously entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's and the Subsidiary Guarantors' securities under any agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 10(c)(i), the Company has obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. (d) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company and the Subsidiary Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telecopier, or air courier guaranteeing overnight delivery: 18 20 (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company or the Subsidiary Guarantors: Instron Corporation 100 Royal Street Canton, MA 02021-1089 Telecopier No.: (781) 828-5750 Attention: Chief Financial Officer With a copy to: Jones, Day, Reavis & Pogue North Point 901 Lakeside Avenue Cleveland, OH 44114 Telecopier No.: (216) 579-0212 Attention: Christopher M. Kelly, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 19 21 (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (l) Limitation of Liability. Each of Instron Realty Trust ("Trust") and IRT-II ("Trust II")is a voluntary association with transferable shares organized under the laws of the Commonwealth of Massachusetts (more commonly known as a "Massachusetts Business Trust") and all persons dealing with each of Trust and Trust II must look solely to the property of each of Trust and Trust II for the enforcement of any claims against each of Trust and Trust II. Neither the trustees, officers, agents nor shareholders of either Trust or Trust II assume any liability for obligations entered into on its behalf. In no event shall the Initial Purchaser seek or attempt to obtain any recovery or judgment against any trustee, officer, director, employee or shareholder of either Trust or Trust II. The Declaration of Trust, dated as of April 23, 1957, of Trust and the Declaration of Trust, dated October 19, 1998, of Trust II are on file with the Secretary of The Commonwealth of Massachusetts. The Registration Rights Agreement has been executed on behalf of each of Trust and Trust II by the trustees or officers of each of Trust and Trust II in such capacities and not individually. 20 22 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. INSTRON CORPORATION By: /s/ John R. Barrett ------------------------------- Name: John R. Barrett Title: Treasurer and Vice President of Corporate Development INSTRON SCHENCK TESTING SYSTEMS CORP. By: /s/ John R. Barrett ------------------------------- Name: John R. Barrett Title: Treasurer and Vice President of Corporate Development INSTRON/LAWRENCE CORPORATION By: /s/ John R. Barrett ------------------------------- Name: John R. Barrett Title: Treasurer and Vice President of Corporate Development INSTRON REALTY TRUST By: /s/ Linton A. Moulding ------------------------------- Name: Linton A. Moulding Title: Chief Financial Officer and Vice President 21 23 IRT-II TRUST By: /s/ Linton A. Moulding ------------------------------- Name: Linton A. Moulding Title: Chief Financial Officer and Vice President INSTRON JAPAN COMPANY LTD. By: /s/ John R. Barrett ------------------------------- Name: John R. Barrett Title: Treasurer and Vice President of Corporate Development INSTRON ASIA LTD. By: /s/ John R. Barrett ------------------------------- Name: John R. Barrett Title: Treasurer and Vice President of Corporate Development 22 24 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ William J.R. Wilson ------------------------------- Name: William J.R. Wilson Title: Vice President 23 EX-4.3 6 EXHIBIT 4.3 1 ================================================================================ Exhibit 4.3 WARRANT REGISTRATION RIGHTS AGREEMENT DATED AS OF SEPTEMBER 29, 1999 BY AND BETWEEN INSTRON CORPORATION AND DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION ================================================================================ 2 This Warrant Registration Rights Agreement (the "AGREEMENT") is made and entered into as of September 29, 1999, by and between Instron Corporation, a Massachusetts corporation (the "COMPANY") and Donaldson, Lufkin & Jenrette Securities Corporation (the "INITIAL PURCHASER"), who has agreed to purchase an aggregate of 60,000 Units, each consisting of $1,000 in aggregate principal amount of the Company's 13 1/4% Senior Subordinated Notes due 2009 (the "NOTES") and warrants (the "WARRANTS") to initially purchase 30,654 shares of the Company's Common Stock, pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of September 24, 1999, by and among the Company, the Subsidiary Guarantors set forth therein and the Initial Purchaser. In order to induce the Initial Purchaser to purchase the Units, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchaser set forth in Section 3 of the Purchase Agreement. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS. As used in this Agreement, the following capitalized terms shall have the following meanings: ACT: The Securities Act of 1933, as amended. AFFILIATE: As defined in Rule 144 of the Act. CLOSING DATE: The date hereof. COMMON STOCK: The common stock, par value $0.01 per share, of the Company. DEMAND EVENT: The earlier to occur of (a) 180 days after the date on which an initial Public Equity Offering and (b) the date on which any class of common stock of the Company is listed on a national securities exchange or authorized for quotation on the Nasdaq National Market System, other than in connection with the Public Equity Offering referred to in clause (a) of this definition. DEMAND REGISTRATION: As defined in Section 5 of this Agreement. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. HOLDERS: As defined in Section 2 hereof. INITIATING HOLDERS: One or more Holders owning individually or in the aggregate not less than the Requisite Securities. PERSON: Any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. PIGGY-BACK REGISTRATION. As defined in Section 6 of this Agreement. 3 PROSPECTUS: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such prospectus. PUBLIC EQUITY OFFERING: means an underwritten offering of Common Stock pursuant to a registration statement that has been declared effective by the SEC pursuant to the Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company). REGISTRABLE SECURITIES: Any of (i) the Warrant Shares (whether or not the related Warrants have been exercised) and (ii) any other securities issued or issuable with respect to any Warrant Shares by way of stock dividends or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (a) a Registration Statement with respect to the offering of such securities by the Holder thereof shall have been declared effective under the Securities Act and such securities shall have been disposed of by such Holder pursuant to such Registration Statement, (b) such securities have been sold to the public pursuant to Rule 144(k) (or any similar provisions then in force, but not Rule 144A) promulgated under the Securities Act, (c) such securities shall have been otherwise transferred by the Holder thereof and new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company or its transfer agent and subsequent disposition of such securities shall not require registration or qualification under the Securities Act or any similar state law then in force or (d) such securities shall have ceased to be outstanding. REGISTRATION EXPENSES: All expenses incident to the Company's performance of or compliance with this Agreement, including, without limitation, all SEC and stock exchange or National Association of Securities Dealers, Inc. registration and filing fees and expenses, fees and expenses of compliance with securities or blue sky laws (including, without limitation, reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities), preparing, printing, filing, duplicating and distributing the Registration Statement and the related prospectus, the cost of printing stock certificates, the cost and charges of any transfer agent, rating agency fees, printing expenses, messenger, telephone and delivery expenses, reasonable fees and disbursements of counsel for the Company and all independent certified public accountants, the fees and disbursements of underwriters customarily paid by issuers or sellers of securities (but not including any underwriting discounts or commissions or transfer taxes, if any, attributable to the sale of Registrable Securities by Selling Holders), and reasonable fees and expenses of one counsel for the Holders. REGISTRATION STATEMENT: Any registration statement of the Company relating to the registration for resale of Registrable Securities that is filed pursuant to the provisions of this Agreement and including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and all material incorporated by reference therein. REQUISITE SECURITIES: A number of Registrable Securities equal to not less than 25% of the then Registrable Securities held in aggregate by all Holders. SEC: The Securities and Exchange Commission. 2 4 SELLING HOLDER: A Holder who is selling Registrable Securities in accordance with the provisions of this Agreement. WARRANTS: The warrants of the Company issued and sold pursuant to the Purchase Agreement and the Warrant Agreement, together with any warrants issued in substitution or replacement therefor. WARRANT AGREEMENT: The Warrant Agreement dated the Closing Date by and between the Company and Norwest Bank Minnesota, National Association, as Warrant Agent. WARRANT SHARES: The Common Stock or other securities that any Holder may acquire upon exercise of a Warrant, together with any other securities which such Holder may acquire on account of any such securities, including, without limitation, as the result of any dividend or other distribution on Common Stock or any split-up of such Common Stock as provided for in the Warrant Agreement. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT. Holders of Registrable Securities. A Person is deemed to be a Holder of Registrable Securities (a "HOLDER") whenever such Person owns Registrable Securities or has the right to acquire such Registrable Securities, whether or not such acquisition has actually been effected. SECTION 3. INTENTIONALLY OMMITED SECTION 4. REGISTRATION PROCEDURES. In connection with any Demand Registration or Piggy-Back Registration, the Company shall (provided that it will not be required to take any action pursuant to this Section 4 that would, in the written opinion of counsel for the Company, violate applicable law): (a) Use commercially reasonable best efforts to effect such registration to permit the sale of the Registrable Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company will prepare and file with the SEC a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Registrable Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof; (b) Promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or related Prospectus, provide copies of such document to each Selling Holder in connection with such sale, if any, and make the Company's representatives reasonably available during normal business hours for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such Selling Holders may reasonably request; (c) Make available, during reasonable business hours, for inspection by each Holder and any attorney or accountant retained by such Holders, all financial and other records, pertinent corporate documents of the Company as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Holder, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness. Information that the Company determines, in good faith, to be confidential and any 3 5 information that it notifies the Holders is confidential shall not be disclosed by the Holders unless (i) the disclosure of such information is necessary to avoid or correct a material misstatement or material omission in such Registration Statement, (ii) the release of such information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is, in the opinion of counsel for any Holder, necessary in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Holder and arising out of, based upon, relating to, or involving this agreement, or any transactions contemplated hereby or arising hereunder, or (iv) the information has been made generally available to the public. Each Selling Holder and its representatives will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transaction in the securities of the Company or for any other purpose other than customary due diligence unless and until such information is generally available to the public. Each Selling Holder and its representatives will be required to further agree that it will, upon learning that disclosure of such information is sought in a court of competent jurisdiction, give notice to the Company and allow the Company to undertake appropriate action to prevent disclosure of the information deemed confidential; (d) If requested by any Holders in connection with such exchange or sale, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Registrable Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as reasonably practicable after the Company is notified of the matters to be included in such Prospectus supplement or post-effective amendment; (e) In connection with any Demand Registration and, to the extent the participants other than Holders of Registrable Securities in a Piggy-Back Registration receive any items set forth in this Section 4(e), in connection with a Piggy-Back Registration, upon the request of the Holders of not less than the Requisite Securities, enter into such agreements (including underwriting agreements) and make such representations and warranties and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Registrable Securities pursuant to any applicable Registration Statement contemplated by this Agreement as may be reasonably requested by any Holder in connection with any sale or resale pursuant to any applicable Registration Statement. In such connection, the Company shall: (i) upon request of the Holders of not less than the Requisite Securities, furnish (or in the case of paragraphs (B) and (C), use its best efforts to cause to be furnished) to each Holder, upon the effectiveness of the Registration Statement: (A) a certificate, dated such date, signed on behalf of the Company by (x) the President or any Vice President and (y) a principal financial or accounting officer of the Company, confirming, as of the date thereof, the matters set forth in Sections 6(y), 9(a) and 9(b) of the Purchase Agreement and such other similar matters as such Holders may reasonably request; (B) an opinion, dated the date of effectiveness of the Registration Statement, as the case may be, of counsel for the Company covering matters similar to those set forth in Exhibits C and D to the of the Purchase Agreement; and (C) a customary comfort letter, dated the date of effectiveness of the Registration Statement, as the case may be, from the Company's independent 4 6 accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 9(h) of the Purchase Agreement; and (ii) deliver such other documents and certificates as may be reasonably requested by the Selling Holders to evidence compliance with the matters covered in clause (i) above and with any customary conditions contained in any agreement entered into by the Company pursuant to this clause (e); (f) Use its best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 5 or 6 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (i) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading or (ii) not to be effective and usable for resale of Registrable Securities during the period required by this Agreement, the Company shall file promptly an appropriate amendment to such Registration Statement curing such defect, and, if SEC review is required, use their respective best efforts to cause such amendment to be declared effective as soon as practicable; (g) Prepare and file with the SEC such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Section 5 or 6 hereof, as the case may be; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (h) Advise each Holder promptly and, if requested by such Holder, confirm such advice in writing, (i) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (ii) of any request by the SEC for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Registrable Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (iv) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the SEC shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Registrable Securities under state securities or Blue Sky laws, the shall use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; 5 7 (i) Subject to Section 4(f), if any fact or event contemplated by Section 4(h)(iv) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Registrable Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (j) Furnish to each Selling Holder in connection with such sale, if any, before filing with the SEC, copies of any Registration Statement or any related Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders in connection with such sale, if any, for a period of at least five business days, and, in connection with any Demand Registration, the Company will not file any such Registration Statement or related Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such Selling Holders shall reasonably object within five business days after the receipt thereof. A Selling Holder shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, related Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading or fails to comply with the applicable requirements of the Act; (k) Furnish to each Holder who requests in connection with such sale, without charge, at least one copy of the Registration Statement, as first filed with the SEC, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (l) Deliver to each Holder without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company hereby consents to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each Selling Holder in connection with the offering and the sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (m) Prior to any public offering of Registrable Securities, cooperate with the Selling Holders and their counsel in connection with the registration and qualification of the Registrable Securities under the securities or Blue Sky laws of such jurisdictions as the Selling Holders may request and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the applicable Registration Statement; provided, however, that the Company shall not be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (n) In connection with any sale of Registrable Securities that will result in such securities no longer being Registrable Securities, cooperate with the Selling Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and to register such Registrable Securities in such denominations and such names as the Selling Holders may request at least two business days prior to such sale of Registrable Securities; 6 8 (o) Use their respective best efforts to cause the disposition of the Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities, subject to the proviso contained in clause (m)above; (p) Provide a CUSIP number for all Registrable Securities not later than the effective date of a Registration Statement covering such Registrable Securities and provide the Warrant Agent under the Warrant Agreement with printed certificates for the Registrable Securities that are in a form eligible for deposit with the Depository Trust Company; (q) Otherwise use its commercially reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make generally available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); (r) Provide promptly to each Holder, upon request, each document filed with the SEC pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act; (s) Use its commercially reasonable best efforts to cause the Warrant Shares issuable upon exercise of the Warrants to be quoted or listed on any exchange upon which the Company's Common Stock is then quoted or listed; and (t) Use its commercially reasonable best efforts to take all other steps reasonably necessary to effect the registration, offering and sale of the Registrable Securities covered by the Registration Statement. The Company may require each Selling Holder as to which any registration is being effected to furnish to the Company such information regarding the distribution of such Registrable Securities as is required by law to be disclosed in the applicable Registration Statement, and the Company may exclude from such registration the Registrable Securities of any Selling Holder who unreasonably fails to furnish such information promptly after receiving such request. If any such Registration Statement refers to any Holder by name or otherwise as the holder or any securities of the Company, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act or any similar Federal statute then in force, the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Holder agrees by acquisition of a Registrable Security that, upon receipt of the notice referred to in Section 4(h)(iii) or any notice from the Company of the existence of any fact of the kind described in Section 4(h)(iv) hereof (in each case, a "SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the applicable Registration Statement until (i) such Holder has received copies of the supplemented or amended Prospectus 7 9 contemplated by Section 4(i) hereof, or (ii) such Holder is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any Prospectuses, other than permanent file copies, then in such Holder's possession which have been replaced by the Company with more recently dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Registrable Securities that was current at the time of receipt of the Suspension Notice. The time period regarding the effectiveness of such Registration Statement set forth in Section 5 or 6 hereof, as applicable, shall be extended by a number of days equal to the number of days in the period from and including the date of delivery of the Suspension Notice to the date of delivery of the Recommencement Date. Notwithstanding any of the foregoing provisions of this Section 4 and subject to Section 6 hereof, in the case of any Piggy-Back Registration, the Company shall be deemed to have complied with the requirements of this Section 4 in respect of the Holders of Registrable Securities if (i) the Company follows the same registration procedures with respect to the Registrable Securities subject to such Piggy-Back Registration as the Company follows with respect to the other securities included in such registration (including any securities offered by the Company) and (ii) only if there are participants in the Piggy-Back Registration other than the Company or the Holders of the Registrable Securities, the Company provides the Holders of such Registrable Securities with the same rights with respect such registration procedures as are provided to the other participants in such Piggy-Back Registration. SECTION 5. DEMAND REGISTRATION. (a) After the occurrence of a Demand Event, one or more Initiating Holders owning individually or in the aggregate not less than the Requisite Securities may request in writing that the Company effect the registration under the Securities Act of all or part of such Initiating Holders' Registrable Securities and shall specify the number of Registrable Securities proposed to be sold and the intended method of disposition thereof (the "DEMAND REQUEST"). The Company will give written notice of the Demand Request to all registered holders of Registrable Securities within 10 days of receipt thereof. Within 120 days of receipt of the Demand Request the Company will, subject to the terms of this Agreement, file a Registration Statement and use its best efforts to effect the registration under the Securities Act of: (i) the Registrable Securities which the Company has been so requested to register by such Initiating Holders for disposition in accordance with the intended method of disposition stated in such request; (ii) all other Registrable Securities, the Holders of which shall have made a written request to the Company for registration thereof within 20 days after the giving of such written notice by the Company (which request shall specify the number of Registrable Securities proposed to be sold and the intended method of disposition of such Registrable Securities); and (iii) all shares of securities that the Company or any other stockholder may elect to register in connection with the offering of Registrable Securities pursuant to this Section 5, all to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities and the additional securities so to be registered. 8 10 (b) Registration under this Section 5 (the "DEMAND REGISTRATION") shall be on such appropriate registration form of the SEC (i) as shall be selected by the Company and (ii) as shall permit the disposition of such Registrable Securities in accordance with the intended method or methods of disposition specified in their request for such registration. (c) The Company will pay all Registration Expenses in connection with any registration requested pursuant to this Section 5. The Selling Holders shall pay the underwriting discounts, commissions, and transfer taxes, if any, in connection with the Registration Statement requested under this Section 5, which costs shall be allocated pro rata among all Selling Holders on whose behalf Registrable Securities of the Company are included in such registration on the basis of the respective amounts of the Registrable Securities then being registered on their behalf. (d) The Holders shall be entitled to request one (1) registration pursuant to this Section 5. A Registration Statement requested pursuant to this Section 5 shall not be deemed to have been effected (i) unless a Registration Statement with respect thereto has been declared effective by the SEC and (ii) the Company has complied in a timely manner and in all material respects with all of its obligations under this Agreement; provided, (i) if, after such Registration Statement has become effective, the offering of Warrant Shares pursuant to such Registration Statement is or becomes subject to any stop order, injunction or other order or requirement of the SEC or other governmental or administrative agency or court that prevents, restrains or otherwise limits the sale of Warrant Shares under such Registration Statement for any reason, other than by reason of some act or omission by any Holder participating in such registration, and does not become effective within a reasonable period of time thereafter, such period not to exceed 60 days from the date of such stop order, injunction, or other governmental order or requirement or (ii) the Registration Statement does not remain effective under the Securities Act until at least the earlier of (A) an aggregate of 180 days after the effective date thereof or (B) the consummation of the distribution by the Selling Holders of all of the Registrable Securities covered thereby. For purposes of calculation the 180-day period referred to in the preceding sentence, any period of time during which such Registration Statement was not in effect shall be excluded. The Holders shall be permitted to withdraw all or any part of the Registrable Securities from a Demand Registration at any time prior to the effective date of such Demand Registration. (e) If a requested registration pursuant to this Section 5 involves an underwritten offering, and the managing underwriter or underwriters shall advise the Company in writing (with a copy to each Holder requesting registration) that, in such managing underwriter's or underwriters' opinion, the number of securities requested to be included in such registration (including securities of the Company which are not Registrable Securities) is such as to adversely affect the success of such offering, including the price at which such securities can be sold, then the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, (i) first, Registrable Securities requested to be included in such registration by the Holders, pro rata among such holders requesting such registration on the basis of the number of such securities requested to be included by such Holders and (ii) second, securities held by other Persons, including the Company. If more than 10% of the securities of the Holders have been excluded from a Registration Statement pursuant to the provisions of this Section 5(e), then such registration shall not count toward determining whether the Company has satisfied its obligation to effect one Demand Registration pursuant to this Section 5 with respect to such securities. (f) If the Company receives a Demand Request during a "lock-up" or "black out" period (the "LOCK UP PERIOD") imposed on the Company pursuant to or in connection with any underwriting or purchase agreement relating to a Rule 144A offering or a registered public offering of Common Stock or securities convertible into or exchangeable for Common Stock, the Company shall not be required to 9 11 notify holders of Registrable Securities pursuant to Section 5(a) hereof or file a Registration Statement prior to the end of the Lock Up Period; provided, that such Lock Up Period shall not exceed 90 days or, in the case of the Company's initial Public Equity Offering, 180 days. The Company shall use all commercially reasonable best efforts to cause the Registration Statement to become effective no later than the later of (i) 180 days after receipt of the Demand Request or (ii) 60 days after the end of the Lock Up Period. The Company shall notify the holders of Registrable Securities within 10 days of the imposition of any Lock Up Period on the Company. SECTION 6. PIGGY-BACK REGISTRATION. (a) If the Company proposes to file a Registration Statement under the Securities Act with respect to an offering by the Company for its own account or for the account of any of the holders of any class of its Common Stock (other than (i) a Registration Statement on Form S-4 or S-8 (or any substitute form that may be adopted by the SEC), (ii) a Registration Statement filed in connection with an exchange offer or offering of securities solely to the Company's existing security holders or (iii) a Registration Statement concerning Common Stock offered to employees of the Company or its subsidiaries), then the Company shall give written notice of such proposed filing to the Holders as soon as practicable (but in no event fewer than 10 days before the anticipated filing date), and such notice shall offer such Holders the opportunity to register such number of Registrable Securities as each such Holder may request in writing within 20 days after receipt of such written notice from the Company (which request shall specify the Warrant Shares intended to be disposed of by such Selling Holder) (a "PIGGY-BACK REGISTRATION"). Upon the written request of any such Holder made within 20 days after the receipt of any such notice (which request shall specify the number of Registrable Securities intended to be disposed of by such Holder and the intended method of disposition thereof), the Company will, subject to the terms of this Agreement, effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Holders thereof, to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered, by inclusion of such Registrable Securities in the registration statement that covers the securities which the Company proposes to register, provided that, if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each Holder and, thereupon, (i) in the case of a determination not to register shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any holder or holders of Registrable Securities entitled to do so to request that such registration be effected as a registration under Section 5, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities. No registration effected under this Section 6 shall relieve the Company of its obligation to effect any registration upon request under Section 5, nor shall any such registration hereunder be deemed to have been effected pursuant to Section 5. The Company shall use its best efforts to keep such Piggy-Back Registration continuously effective under the Securities Act until the earlier of (A) an aggregate of 90 days after the effective date thereof or (B) the consummation of the distribution by the Holders of all of the Registrable Securities covered thereby. (b) The Company shall use its reasonable efforts to cause the managing underwriter or underwriters of such proposed offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included in the same terms and conditions as any similar securities of the Company or any other security holder included therein and to permit the sale or other disposition of such 10 12 Registrable Securities in accordance with the intended method of distribution thereof. The Selling Holders shall enter into reasonable and customary underwriting agreements in connection with any such underwritten registration. Any Selling Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any Registration Statement pursuant to these provisions by giving written notice to the Company of its request to withdraw prior to the effective date of such registration statement. The Company may withdraw a Piggy-Back Registration at any time prior to the time it becomes effective or the Company may elect to delay the registration; provided, however, that the Company shall give prompt written notice thereof to participating Holders. (c) The Company will pay all Registration Expenses in connection with registration of Registrable Securities requested pursuant to this Section 6 and the Selling Holders shall pay the underwriting discounts, commissions, and transfer taxes, if any, relating to the sale of such Selling Holders' Registrable Securities pursuant to this Section 6, such costs being allocated pro rata among all Selling Holders on whose behalf Registrable Securities of the Company are included in such registration on the basis of the respective amounts of Registrable Securities then being registered on their behalf. (d) Priority in Piggy-Back Registrations. If a registration pursuant to this Section 6 involves an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company, the Company will, if requested by any Holder and subject to the provisions of this Section 6, use its reasonable efforts to arrange for such underwriters to include all the Registrable Securities to be offered and sold by such Holder among the securities to be distributed by such underwriters. Notwithstanding anything to the contrary, if the managing underwriter of such underwritten offering shall, in writing, inform the Holders requesting such registration and the holders of any of the Company's other securities which shall have exercised registration rights in respect of such underwritten offering of its belief that the number of securities requested to be included in such registration (including securities of the Company that are not Registrable Securities) is such as to adversely affect the success of such offering, including the price at which such securities can be sold in (or during the time of) such offering, then the Company will be required to include in such registration statement only the amount of securities that it is so advised should be included in such registration. In such event, (x) in cases initially involving the registration for sale of securities for the Company's own account, securities shall be registered in such offering in the following order of priority: (i) first, the securities that the Company proposes to register, and (ii) second, the securities that have been requested to be included in such registration by Holders and by Persons entitled to exercise "piggy-back" registration rights pursuant to contractual commitments of the Company (pro rata on the amount of securities sought to be registered by such Holders and Persons) and (y) in cases not initially involving the registration for sale of securities for the Company's own account, securities shall be registered in such offering as follows: (i) first, the securities of any person whose exercise of a "demand" registration right pursuant to a contractual commitment of the Company is the basis for the registration (provided that if such person is a Holder, there shall be no priority as among Holders and Registrable Securities sought to be included by Holders shall be included pro rata based on the amount of securities sought to be registered by such persons), (ii) second, the securities that have been requested to be included in such registration by Holders and other persons entitled to exercise "piggy-back" registration rights pursuant to contractual commitments (pro rata based on the amount of securities sought to be registered by such Holders and persons) and (iii) third, the securities which the Company proposes to register. SECTION 7. LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS UNDER REGISTRATION COVENANTS. The obligations of the Company described in Sections 5 and 6 of this Agreement are subject to each of the following limitations, conditions and qualifications: 11 13 (a) The Company shall not be required to file a Registration Statement pursuant to a request for a Demand Registration if the Company has in effect a shelf registration statement which is available to the Holders. (b) Subject to the next sentence of this paragraph, the Company shall be entitled to postpone, for a reasonable period of time, the filing of effectiveness of, or suspend the rights of any Holder to make sales pursuant to, any Registration Statement otherwise required to be prepared, filed and made and kept effective by it under the registration covenants described in Section 5 hereof; provided, however, that the duration of such postponement or suspension may not exceed 45 days with respect to the Demand Registration. Such postponement or suspension may only be effected if (i) an event or circumstance occurs and is continuing as a result of which such Registration Statement, any related Prospectus or any document incorporated therein by reference as then amended or supplemented or proposed to be filed would, in the Company's good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and (ii)(A) the Company determines in its good faith judgment that the disclosure of the event at that time would have a material adverse effect on the business, operations or prospects of the Company or (B) the disclosure otherwise relates to a material business transaction or development that has not yet been publicly disclosed. If the Company shall so postpone the filing or effectiveness of, or suspend the rights of any Holders to make sales pursuant to, a Registration Statement it shall, as promptly as possible, notify any Selling Holders of such determination, and the Selling Holders shall (x) have the right, in the case of a postponement of the filing or effectiveness of a Registration Statement, upon the affirmation vote of the Selling Holders of not less than a majority of the Registrable Securities to be included in such Registration Statement, to withdraw the request for registration by giving written notice to the Company within 10 days after receipt of such notice, or (y) in the case of a suspension of the right to make sales, receive an extension of the registration period equal to the number of days of the suspension. Any Demand Registration as to which the withdrawal election referred to in the preceding sentence has been effected shall not be counted for purposes of the Demand Registration referred to in Section 5 hereof. The time period regarding the effectiveness of any Registration Statement pursuant to Section 5 or 6 hereof, as applicable, shall be extended by a number of days equal to the number of days in the suspension period described in this Section 7(b). (c) The Company shall not be required by this Agreement to include securities in a Registration Statement relating to a Piggy-back Registration above if (i) in the written opinion of counsel to the Company, addressed to the Holders seeking registration and delivered to them, the Holders of such securities seeking registration would be free to sell all such securities within the succeeding three-month period, without registration, under Rule 144 under the Securities Act, which opinion may be based in part upon the representation by the Holders of such securities seeking registration, which registration shall not be unreasonably withheld, that each such Holder is not an affiliate of the Company within the meaning of the Securities Act, and (ii) all requirements under the Securities Act for effecting such sales are satisfied at such time. (d) The Company's obligations shall be subject to the obligations of the Selling Holders to furnish all information and materials and not to take any and all actions as may be required under Federal and state securities laws and regulations to permit the Company to comply with all applicable requirements of the SEC and to obtain any acceleration of the effective date of such Registration Statement. 12 14 (e) The Company shall not be obligated to cause any special audit to be undertaken in connection with any registration pursuant to this Agreement unless such audit is requested by the underwriters with respect to such registration. (f) Each Holder of Registrable Securities agrees, if an to the extent reasonably requested by the managing underwriter or underwriters in a Public Equity Offering, not to effect any public sale or distribution of Registrable Securities, including a sale pursuant to Rule 144 (except as part of such Public Equity Offering), during the 90-day period beginning on the closing date of any such Public Equity Offering (which period shall be 180 days in the case of the Company's initial Public Equity Offering), to the extent timely notified in writing by the Company or such managing underwriter or underwriters. In the event that the Company is not otherwise in compliance with the provisions of this Agreement at the time the Holders receive any notice pursuant to this Section 7(f), the Holders shall not be required to comply with this Section 7(f). In addition, the provisions of this Section 7(f) shall not apply to any Holder of Registrable Securities if such Holder is prevented by applicable statute or regulation from entering into any such agreement; provided, that any such Holder shall undertake not to effect any public sale or distribution of any Registrable Securities commencing on the closing date of any such Public Equity Offering unless it has provided 45 days' prior written notice of such sale or distribution to the managing underwriter or underwriters. SECTION 8. REGISTRATION EXPENSES. The Company shall pay all Registration Expenses. SECTION 9. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who controls such Holder (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities, judgments, (including without limitation, any reasonable legal or other reasonable expenses incurred in connection with investigating or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto) provided by the Company to any Holder or any prospective purchaser of Registrable Securities, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by an untrue statement or omission or alleged untrue statement or omission that is based upon information relating to any of the Holders furnished in writing to the Company by any of the Holders. (b) Each Holder of Registrable Securities agrees, severally and not jointly, to indemnify and hold harmless the Company, and its directors and officers, and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company to the same extent as the foregoing indemnity from the Company set forth in section (a) above, but only with reference to information relating to such Holder furnished in writing to the Company by such Holder expressly for use in any Registration Statement. In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Registrable Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Registrable Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 13 15 (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 9(a) or 9(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 9(a) and 9(b), a Holder shall not be required to assume the defense of such action pursuant to this Section 9(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party, (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party) or (iv) there exists an actual Conflict of interest between original counsel and such indemnified party. In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by a majority of the Holders, in the case of the parties indemnified pursuant to Section 9(a), and by the Company, in the case of parties indemnified pursuant to Section 9(b). The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with its prior written consent or (ii) effected without its prior written consent if the settlement is entered into more than twenty business days after the indemnifying party shall have received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the indemnifying party shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) To the extent that the indemnification provided for in this Section 9is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by 14 16 the Company, on the one hand, and the Holders, on the other hand, from their sale of Registrable Securities or (ii) if the allocation provided by clause 9(d)(i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 9d)(i) above but also the relative fault of the Company, on the one hand, and of the Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative fault of the Company, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or by the Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and judgments referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 9(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 9(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Registrable Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Registrable Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 9(c) are several in proportion to the respective principal amount of Registrable Securities held by each Holder hereunder and not joint. SECTION 10. RULE 144A AND RULE 144. The Company agrees with each Holder, for so long as any Registrable Securities remain outstanding and during any period in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Registrable Securities in connection with any sale thereof and any prospective purchaser of such Registrable Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Registrable Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Registrable Securities pursuant to Rule 144. 15 17 SECTION 11. MISCELLANEOUS. (a) Remedies. The Company acknowledges and agrees that any failure by the Company to comply with its obligations under Sections 5 and 6 hereof may result in material irreparable injury to the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Sections 5 and 6 hereof. The Company further agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into or amend any agreement with respect to its securities that conflicts with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. Except as disclosed in the Offering Memorandum, the Company has not previously entered into any agreement granting any registration rights of its securities to any Person, and the rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any other agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding Registrable Securities (excluding Registrable Securities held by the Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not affect directly or indirectly the rights of other Holders whose Registrable Securities are not being sold pursuant to a Registration Statement may be given by the Holders of at least a majority of the Registrable Securities being sold. (d) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchaser, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company: Instron Corporation c/o Kirtland Capital Partners 2550 SOM Center Road Willoughby Hills, Ohio 44094 Attention: Thomas N. Littman 16 18 With a copy to: Jones, Day, Reavis & Pogue 901 Lakeside Avenue Cleveland, Ohio 44114 Attention: Christopher M. Kelly, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Warrant Agent at the address specified in the Warrant Agreement. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms hereof or of the Purchase Agreement or the Warrant Agreement. If any transferee of any Holder shall acquire Registrable Securities in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Registrable Securities. This Agreement 17 19 supersedes all prior agreements and understandings between the parties with respect to such subject matter. [SIGNATURE PAGE FOLLOWS] 18 20 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. INSTRON CORPORATION By: /s/ John R. Barrett ------------------------------------ Name: John R. Barrett Title: Treasurer DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ William Wilson ------------------------------------- Name: William Wilson Title: Vice President EX-4.4 7 EXHIBIT 4.4 1 Exhibit 4.4 INSTRON CORPORATION Warrants to Purchase 30,654 Shares of Common Stock WARRANT AGREEMENT Dated as of September 29, 1999 NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Warrant Agent 2 WARRANT AGREEMENT, dated as of September 29, 1999, between Instron Corporation, a Massachusetts corporation (the "COMPANY"), and Norwest Bank Minnesota, National Association, as warrant agent (the "WARRANT AGENT"). WHEREAS, the Company proposes to issue warrants (the "WARRANTS") to initially purchase up to an aggregate of 30,654 shares of Common Stock, par value $.01 per share (the "COMMON STOCK"), of the Company (the Common Stock issuable on exercise of the Warrants being referred to herein as the "WARRANT SHARES"), in connection with the offering (the "OFFERING") by the Company of 60,000 Units (the "UNITS"), each consisting of $1,000 principal amount at maturity of the Company's 13-1/4% Senior Subordinated Notes due 2009 (the "NOTES") and one Warrant, each Warrant initially representing the right to purchase 0.5109 Warrant Shares. WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act in connection with the issuance of Warrant Certificates (as defined) and other matters as provided herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: SECTION 1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the following respective meanings: "144A GLOBAL WARRANT" means a global Warrant substantially in the form of Exhibit A hereto bearing the Global Warrant Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee. "AFFILIATE" of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such specified Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of or for beneficial interests in any Global Warrant, the rules and procedures of the Depositary, Euroclear and Cedel Bank that apply to such transfer or exchange. "BUSINESS DAY" means any day other than a Legal Holiday. "CEDEL BANK" means Cedel Bank, SA. "CLOSING DATE" means the date hereof. "COMMISSION" means the Securities and Exchange Commission. 3 "DEPOSITARY" means, with respect to the Warrants issuable or issued in whole or in part in global form, the Person specified in Section 3.3 hereof as the Depositary with respect to the Warrants, and any and all successors thereto appointed as Depositary hereunder and having become such pursuant to the applicable provision of the Indenture. "EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "GLOBAL WARRANTS" means, individually and collectively, each of the Restricted Global Warrants and the Unrestricted Global Warrants, substantially, in the form of Exhibit A hereto issued in accordance with Section 3.1(b) and 3.5 hereof. "GLOBAL WARRANT LEGEND" means the legend set forth in Section 3.5(g)(ii), which is required to be placed on all Global Warrants issued under this Warrant Agreement. "HOLDER" means a person who owns Registrable Securities. "INDENTURE" means the indenture, dated the date hereof, among the Company, the Guarantors set forth therein and Norwest Bank Minnesota, National Association, as trustee relating to the Notes. "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a Global Warrant through a Participant. "INITIAL PURCHASER" means Donaldson, Lufkin & Jenrette Securities Corporation. "INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, which is not also a QIB. "LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "MANAGEMENT OPTIONS" means any options to purchase Common Stock granted to members of the Company's management on the Closing Date no more than 5.0% of the Company's outstanding Common Stock as of the Closing Date pursuant to the Instron Corporation 1999 Stock Option Plan as set forth on Exhibit H to the Letter Agreement, dated May 6, 1999, regarding the rollover of shares by certain members of management of the Company. "NON-U.S. PERSON" means a Person who is not a U.S. Person. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. 2 4 "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Warrant Agent in form and substance reasonably acceptable to the Warrant Agent. The counsel may be an employee of or counsel to the Company, any subsidiary of the Company or the Warrant Agent. "PARTICIPANT" means, with respect to the Depositary, Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Cedel). "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof, including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business. "PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 3.5(g)(i) to be placed on all Warrants issued under this Warrant Agreement except where otherwise permitted by the provisions of this Warrant Agreement. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "REGISTRABLE SECURITIES" shall mean the Warrants, the Warrant Shares and any other securities issued or issuable with respect to the Warrants or the Warrant Shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization; provided that a security ceases to be a Registrable Security when it is no longer a Transfer Restricted Security. The Registrable Securities are entitled to the benefits of the Warrant Registration Rights Agreement. "REGULATION S" means Regulation S promulgated under the Securities Act. "REGULATION S GLOBAL WARRANT" means a global Warrant in the form of Exhibit A hereto bearing the Global Warrant Legend, the Private Placement Legend and the Regulation S Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee. "REGULATION S LEGEND" means the legend set forth in Section 3.5(g)(iv) to be placed on all Registrable Securities issued pursuant to Regulation S. "RESTRICTED DEFINITIVE WARRANT" means a Definitive Warrant bearing the Private Placement Legend. "RESTRICTED GLOBAL WARRANT" means a Global Warrant bearing the Private Placement Legend. "ROLLOVER OPTIONS" means any restricted stock awards and options to purchase Common Stock granted to members of the Company's management on or before the Closing Date pursuant to Section 2.2 of the Company Disclosure Schedule delivered in connection with the Agreement and Plan of Merger, dated as of May 6, 1999, among Kirtland Capital Partners III L.P., ISN Acquisition Corporation and the Company. "RULE 144" means Rule 144 promulgated under the Securities Act. 3 5 "RULE 144A" means Rule 144A promulgated under the Securities Act. "RULE 903" means Rule 903 promulgated under the Securities Act. "RULE 904" means Rule 904 promulgated under the Securities Act. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SEPARATION DATE" means the earliest of (i) 180 days after the closing of the Offering, (ii) the date on which a registration statement with respect to a registered exchange offer for the Notes is declared effective under the Securities Act, (iii) the date on which a shelf registration statement with respect to the Notes is declared effective under the Securities Act, (iv) such date as Donaldson, Lufkin & Jenrette Securities Corporation, in its sole discretion, shall determine and (v) in the event the Company is required to make an offer to purchase Notes pursuant to Section 4.10 or 4.15 of the Indenture, the date the Company mails notice of such offer to the holders of the Notes. "TRANSFER RESTRICTED SECURITIES" shall mean each Warrant and Warrant Share until the earlier to occur of (i) the date on which such Warrant or Warrant Share has been effectively registered under the Act and disposed of in accordance with a Registration Statement covering it (and the purchasers thereof have been issued a registered freely tradable security) and (ii) the date on which such Warrant or Warrant Share is distributed to the public pursuant to Rule 144 under the Act. "TRUSTEE" means the trustee under the Indenture. "UNRESTRICTED GLOBAL WARRANT" means a global Warrant substantially in the form of Exhibit A attached hereto that bears the Global Warrant Legend and that has the "Schedule of Exchanges of Interests in the Global Warrant" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Warrants that do not bear the Private Placement Legend. "UNRESTRICTED DEFINITIVE WARRANT" means one or more Definitive Warrants that do not bear and are not required to bear the Private Placement Legend. "U.S. PERSON" means a U.S. person as defined in Rule 902(o) under the Securities Act. "WARRANT REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement, dated as of September 29, 1999, by and between the Company and the Initial Purchaser relating to the Warrants and the Warrant Shares. SECTION 2. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth hereinafter in this Agreement and the Warrant Agent hereby accepts such appointment. SECTION 3. ISSUANCE OF WARRANTS; WARRANT CERTIFICATES. 3.1. FORM AND DATING. 4 6 (a) General. The Warrants shall be substantially in the form of Exhibit A hereto (the "WARRANT Certificates"). The Warrants may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Warrant shall be dated the date of the countersignature. The terms and provisions contained in the Warrants shall constitute, and are hereby expressly made, a part of this Warrant Agreement. The Company and the Warrant Agent, by their execution and delivery of this Warrant Agreement, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Warrant conflicts with the express provisions of this Warrant Agreement, the provisions of this Warrant Agreement shall govern and be controlling. (b) Global Warrants. Warrants issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Warrant Legend thereon and the "Schedule of Exchanges of Interests in the Global Warrant" attached thereto). Warrants issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Warrant Legend thereon and without the "Schedule of Exchanges of Interests in the Global Warrant" attached thereto). Each Global Warrant shall represent such of the outstanding Warrants as shall be specified therein and each shall provide that it shall represent the number of outstanding Warrants from time to time endorsed thereon and that the number of outstanding Warrants represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Warrant to reflect the amount of any increase or decrease in the number of outstanding Warrants represented thereby shall be made by the Warrant Agent in accordance with instructions given by the Holder thereof as required by Section 3.5 hereof. (c) Euroclear and Cedel Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of beneficial interests in the Regulation S Global Warrant that are held by Participants through Euroclear or Cedel Bank. 3.2. EXECUTION. An Officer shall sign the Warrants for the Company by manual or facsimile signature. If the Officer whose signature is on a Warrant no longer holds that office at the time a Warrant is countersigned, the Warrant shall nevertheless be valid. A Warrant shall not be valid until countersigned by the manual signature of the Warrant Agent. The signature shall be conclusive evidence that the Warrant has been properly issued under this Warrant Agreement. The Warrant Agent shall, upon a written order of the Company signed by an Officer (a "WARRANT COUNTERSIGNATURE ORDER"), countersign Warrants for original issue up to the number stated in the preamble hereto. 5 7 The Warrant Agent may appoint an agent acceptable to the Company to countersign Warrants. Such an agent may countersign Warrants whenever the Warrant Agent may do so. Each reference in this Warrant Agreement to a countersignature by the Warrant Agent includes a countersignature by such agent. Such an agent has the same rights as the Warrant Agent to deal with the Company or an Affiliate of the Company. 3.3. WARRANT REGISTRAR. The Company shall maintain an office or agency where Warrants may be presented for registration of transfer or for exchange ("WARRANT REGISTRAR"). The Warrant Registrar shall keep a register of the Warrants and of their transfer and exchange. The Company may appoint one or more co-Warrant Registrars. The term "Warrant Registrar" includes any co-Warrant Registrar. The Company may change any Warrant Registrar without notice to any holder. The Company shall notify the Warrant Agent in writing of the name and address of any agent not a party to this Warrant Agreement. If the Company fails to appoint or maintain another entity as Warrant Registrar, the Warrant Agent shall act as such. The Company or any of its subsidiaries may act as Warrant Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Warrants. The Company initially appoints the Warrant Agent to act as the Warrant Registrar with respect to the Global Warrants. 3.4. HOLDER LISTS. The Warrant Agent shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders. If the Warrant Agent is not the Warrant Registrar, the Company shall promptly furnish to the Warrant Agent at such times as the Warrant Agent may request in writing, a list in such form and as of such date as the Warrant Agent may reasonably require of the names and addresses of the Holders. 3.5. TRANSFER AND EXCHANGE. (a) Transfer and Exchange of Global Warrants. A Global Warrant may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Warrants will be exchanged by the Company for Definitive Warrants if (i) the Company delivers to the Warrant Agent notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Warrants (in whole but not in part) should be exchanged for Definitive Warrants and delivers a written notice to such effect to the Warrant Agent. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Warrants shall be issued in such names as the Depositary shall instruct the Warrant Agent. Global Warrants also may be exchanged or replaced, in whole or in part, as provided in Sections 3.6 and 3.7 hereof. A Global Warrant may not be exchanged for another Warrant other than as 6 8 provided in this Section 3.5(a), however, beneficial interests in a Global Warrant may be transferred and exchanged as provided in Section 3.5(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Warrants. The transfer and exchange of beneficial interests in the Global Warrants shall be effected through the Depositary, in accordance with the provisions of this Warrant Agreement and the Applicable Procedures. Beneficial interests in the Restricted Global Warrants shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Warrants also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Warrant. Beneficial interests in any Restricted Global Warrant may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Warrant in accordance with the transfer restrictions set forth in the Private Placement Legend. Beneficial interests in any Unrestricted Global Warrant may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant. No written orders or instructions shall be required to be delivered to the Warrant Registrar to effect the transfers described in this Section 3.5(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Warrants. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 3.5(b)(i) above, the transferor of such beneficial interest must deliver to the Warrant Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Warrant in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Warrant in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Warrant Registrar containing information regarding the Person in whose name such Definitive Warrant shall be registered. Upon effectiveness of the Registration Statement (as defined in the Warrant Registration Rights Agreement) by the Company in accordance with Section 3.5(f) hereof, the requirements of this Section 3.5(b)(ii) shall be deemed to have been satisfied upon receipt by the Warrant Registrar of a certification required by the Company in connection with such Registration Statement delivered by the Holder of such beneficial interests in the Restricted Global Warrants. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Warrants contained in this Agreement and the Warrants or otherwise applicable under the Securities Act, the Warrant Agent shall adjust the principal amount of the relevant Global Warrant(s) pursuant to Section 3.5(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Warrant. A beneficial interest in any Restricted Global Warrant may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Warrant if the 7 9 transfer complies with the requirements of Section 3.5(b)(ii) above and the Warrant Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Warrant, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Warrant, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Warrant for Beneficial Interests in the Unrestricted Global Warrant. A beneficial interest in any Restricted Global Warrant may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Warrant or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant if the exchange or transfer complies with the requirements of Section 3.5(b)(ii) above and: (A) such transfer is effected pursuant to the Registration Statement in accordance with the Warrant Registration Rights Agreement; or (B) the Warrant Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Warrant proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Warrant, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Warrant proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (B), if the Warrant Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Warrant Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) above at a time when an Unrestricted Global Warrant has not yet been issued, the Company shall issue and, upon receipt of an Warrant Countersignature Order in accordance with Section 3.2 hereof, the Warrant Agent shall countersign one or more Unrestricted Global Warrants in the number equal to the number of beneficial interests transferred pursuant to subparagraph (B) above. (c) Transfer and Exchange of Beneficial Interests for Definitive Warrants. 8 10 (i) Beneficial Interests in Restricted Global Warrants to Restricted Definitive Warrants. If any holder of a beneficial interest in a Restricted Global Warrant proposes to exchange such beneficial interest for a Restricted Definitive Warrant or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Warrant, then, upon receipt by the Warrant Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Warrant proposes to exchange such beneficial interest for a Restricted Definitive Warrant, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Warrant Agent shall cause, in accordance with the standing instructions and procedures existing between the Depositary and the Warrant Agent, the number of Warrants represented by the Global Warrant to be reduced by the number of Warrants to be represented by the Definitive Warrant pursuant to Section 3.5(h) hereof, and the Company shall execute and the Warrant Agent shall countersign and deliver to the Person designated in the instructions a Definitive Warrant in the appropriate amount. Any Definitive Warrant issued in exchange for a beneficial interest in a Restricted Global Warrant pursuant to this Section 3.5(c) shall be registered in such name or names as the holder of such beneficial interest shall instruct the Warrant Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Warrant Agent shall deliver such Definitive Warrants to the Persons in whose 9 11 names such Warrants are so registered. Any Definitive Warrant issued in exchange for a beneficial interest in a Restricted Global Warrant pursuant to this Section 3.5(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Restricted Global Warrants to Unrestricted Definitive Warrants. A holder of a beneficial interest in a Restricted Global Warrant may exchange such beneficial interest for an Unrestricted Definitive Warrant or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Warrant only if: (A) such transfer is effected pursuant to the Registration Statement in accordance with the Warrant Registration Rights Agreement; or (B) the Warrant Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Warrant proposes to exchange such beneficial interest for a Definitive Warrant that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Warrant proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Warrant that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (B), if the Warrant Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Warrant Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Warrants to Unrestricted Definitive Warrants. If any holder of a beneficial interest in an Unrestricted Global Warrant proposes to exchange such beneficial interest for a Definitive Warrant or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Warrant, then, upon satisfaction of the conditions set forth in Section 3.5(b)(ii) hereof, the Warrant Agent shall cause the amount of the applicable Global Warrant to be reduced accordingly pursuant to Section 3.5(h) hereof, and the Company shall execute and the Warrant Agent shall countersign and deliver to the Person designated in the instructions a Definitive Warrant in the appropriate principal amount. Any Definitive Warrant issued in exchange for a beneficial interest pursuant to this Section 3.5(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Warrant Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Warrant Agent shall deliver such Definitive Warrants to the Persons in whose names such Warrants are so registered. Any Definitive Warrant issued in exchange for a 10 12 beneficial interest pursuant to this Section 3.5(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Warrants for Beneficial Interests. (i) Restricted Definitive Warrants to Beneficial Interests in Restricted Global Warrants. If any Holder of a Restricted Definitive Warrant proposes to exchange such Warrant for a beneficial interest in a Restricted Global Warrant or to transfer such Restricted Definitive Warrants to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Warrant, then, upon receipt by the Warrant Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Warrant proposes to exchange such Warrant for a beneficial interest in a Restricted Global Warrant, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Warrant is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Warrant is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Warrant is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Warrant is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Warrant is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Warrant is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Warrant Agent shall cancel the Restricted Definitive Warrant, increase or cause to be increased the amount of, in the case of clause (A) above, the appropriate Restricted Global Warrant, in the case of clause (B) above, the 144A Global Warrant, in the case of clause (C) above, the Regulation S Global Warrant. 11 13 (ii) Restricted Definitive Warrants to Beneficial Interests in Unrestricted Global Warrants. A Holder of a Restricted Definitive Warrant may exchange such Warrant for a beneficial interest in an Unrestricted Global Warrant or transfer such Restricted Definitive Warrant to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant only if: (A) such transfer is effected pursuant to the Registration Statement in accordance with the Registration Rights Agreement; or (B) the Warrant Registrar receives the following: (1) if the Holder of such Definitive Warrants proposes to exchange such Warrants for a beneficial interest in the Unrestricted Global Warrant, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Warrants proposes to transfer such Warrants to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Warrant, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Warrant Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Warrant Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 3.5(d)(ii), the Warrant Agent shall cancel the Definitive Warrants and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Warrant. (iii) Unrestricted Definitive Warrants to Beneficial Interests in Unrestricted Global Warrants. A Holder of an Unrestricted Definitive Warrant may exchange such Warrant for a beneficial interest in an Unrestricted Global Warrant or transfer such Definitive Warrants to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Warrant at any time. Upon receipt of a request for such an exchange or transfer, the Warrant Agent shall cancel the applicable Unrestricted Definitive Warrant and increase or cause to be increased the amount of one of the Unrestricted Global Warrants. If any such exchange or transfer from a Definitive Warrant to a beneficial interest is effected pursuant to subparagraphs (ii)(B) or (iii) above at a time when an Unrestricted Global Warrant has not yet been issued, the Company shall issue and, upon receipt of an Warrant Countersignature Order in accordance with Section 3.2 hereof, the Warrant Agent shall countersign one or more Unrestricted Global Warrants in the number equal to the number of beneficial interests of Definitive Warrants so transferred. (e) Transfer and Exchange of Definitive Warrants for Definitive Warrants. 12 14 Upon request by a Holder of Definitive Warrants and such Holder's compliance with the provisions of this Section 3.5(e), the Warrant Registrar shall register the transfer or exchange of Definitive Warrants. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Warrant Registrar the Definitive Warrants duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Warrant Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 3.5(e). (i) Restricted Definitive Warrants to Restricted Definitive Warrants. Any Restricted Definitive Warrant may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Warrant if the Warrant Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; or (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Warrants to Unrestricted Definitive Warrants. Any Restricted Definitive Warrant may be exchanged by the Holder thereof for an Unrestricted Definitive Warrant or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Warrant if: (A) any such transfer is effected pursuant to the Registration Statement in accordance with the Warrant Registration Rights Agreement; or (B) the Warrant Registrar receives the following: (1) if the Holder of such Restricted Definitive Warrants proposes to exchange such Warrants for an Unrestricted Definitive Warrant, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Warrants proposes to transfer such Warrants to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Warrant, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (B), if the Warrant Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the 13 15 effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Warrants to Unrestricted Definitive Warrants. A Holder of Unrestricted Definitive Warrants may transfer such Warrants to a Person who takes delivery thereof in the form of an Unrestricted Definitive Warrant. Upon receipt of a request to register such a transfer, the Warrant Registrar shall register the Unrestricted Definitive Warrants pursuant to the instructions from the Holder thereof. (f) Registration Statement. Upon the effectiveness of the Registration Statement and sales of Warrants in connection therewith in accordance with the Warrant Registration Rights Agreement, the Company shall issue and, upon receipt of a Warrant Countersignature Order in accordance with Section 3.2, the Warrant Agent shall countersign (i) one or more Unrestricted Global Warrants in an amount equal to the amount of the beneficial interests in the Restricted Global Warrants sold under such Registration Statement and (ii) Definitive Warrants in an amount equal to the amount of the beneficial interests of the Restricted Definitive Warrants sold under such Registration Statement. Concurrently with the issuance of such Warrants, the Warrant Agent shall cause the amount of the applicable Restricted Global Warrants to be reduced accordingly, and the Company shall execute and the Warrant Agent shall countersign and deliver to the Persons designated by the Holders of Definitive Warrants so accepted Definitive Warrants in the appropriate amount. 14 16 (g) Legends. The following legends shall appear on the face of all Global Warrants and Definitive Warrants issued under this Warrant Agreement unless specifically stated otherwise in the applicable provisions of this Warrant Agreement. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Warrant and each Definitive Warrant (and all Warrants issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN "IAI"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO INSTRON OR ANY OF OUR SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE FORM OF WHICH CAN BE OBTAINED FROM THE WARRANT AGENT) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO INSTRON THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO INSTRON) OR (VII) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND 15 17 (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING THE WARRANT AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING." (B) Notwithstanding the foregoing, any Global Warrant or Definitive Warrant issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 3.5 (and all Warrants issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Warrant Legend. Each Global Warrant shall bear a legend in substantially the following form: "THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.5 OF THE WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 3.5(A) OF THE WARRANT AGREEMENT, (III) THIS GLOBAL WARRANT MAY BE DELIVERED TO THE WARRANT AGENT FOR CANCELLATION PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL WARRANT MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (iii) Unit Legend. Each Warrant issued prior to the Separation Date shall bear a legend in substantially the following form: "THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF $1,000 PRINCIPAL AMOUNT AT MATURITY OF THE 13-1/4% SENIOR SUBORDINATED NOTES DUE 2009 OF INSTRON CORPORATION (THE "NOTES") AND ONE WARRANT (THE "WARRANTS") INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 0.5109 OF A SHARE, PAR VALUE $0.01 PER SHARE, OF INSTRON CORPORATION. PRIOR TO THE EARLIEST TO OCCUR OF (I) 180 DAYS AFTER THE CLOSING OF THE OFFERING OF THE UNITS, (II) THE DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO A REGISTERED EXCHANGE OFFER FOR THE NOTES IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (III) THE DATE ON WHICH A SHELF REGISTRATION STATEMENT WITH RESPECT TO THE NOTES IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (IV) SUCH DATE AS 16 18 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, IN ITS SOLE DISCRETION, SHALL DETERMINE AND (V) IN THE EVENT THE COMPANY IS REQUIRED TO PURCHASE NOTES PURSUANT TO SECTION 4.10 OR 4.15 OF THE INDENTURE GOVERNING THE NOTES, THE DATE THE COMPANY MAILS NOTICE OF SUCH OFFER TO THE HOLDERS OF THE NOTES, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES. (iv) Regulation S. Legend. Each Warrant that is a Registrable Security and issued pursuant to Regulation S shall bear the following legend on the fact thereof: "THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND THE WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. IN ORDER TO EXERCISE THIS WARRANT, THE HOLDER MUST FURNISH TO THE COMPANY AND THE WARRANT AGENT EITHER (A) A WRITTEN CERTIFICATION THAT IT IS NOT A U.S. PERSON AND THE WARRANT IS NOT BEING EXERCISED ON BEHALF OF A U.S. PERSON OR (B) A WRITTEN OPINION OF COUNSEL TO THE EFFECT THAT THE SECURITIES DELIVERED UPON EXERCISE OF THE WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR THAT THE DELIVERY OF SUCH SECURITIES IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. TERMS IN THIS LEGEND HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT." (h) Cancellation and/or Adjustment of Global Warrants. At such time as all beneficial interests in a particular Global Warrant have been exercised or exchanged for Definitive Warrants or a particular Global Warrant has been exercised, redeemed, repurchased or canceled in whole and not in part, each such Global Warrant shall be returned to or retained and canceled by the Warrant Agent in accordance with Section 3.8 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Warrant is exercised or exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Warrant or for Definitive Warrants, the amount of Warrants represented by such Global Warrant shall be reduced accordingly and an endorsement shall be made on such Global Warrant by the Warrant Agent or by the Depositary at the direction of the Warrant Agent to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Warrant, such other Global Warrant shall be increased accordingly and an endorsement shall be made on such Global Warrant by the Warrant Agent or by the Depositary at the direction of the Warrant Agent to reflect such increase. 17 19 (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Warrant Agent shall countersign Global Warrants and Definitive Warrants upon the Company's order or at the Warrant Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Warrant or to a holder of a Definitive Warrant for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith . (iii) All Global Warrants and Definitive Warrants issued upon any registration of transfer or exchange of Global Warrants or Definitive Warrants shall be the duly authorized, executed and issued warrants for Common Stock of the Company, not subject to any preemptive rights, and entitled to the same benefits under this Warrant Agreement, as the Global Warrants or Definitive Warrants surrendered upon such registration of transfer or exchange. (iv) Prior to due presentment for the registration of a transfer of any Warrant, the Warrant Agent, and the Company may deem and treat the Person in whose name any Warrant is registered as the absolute owner of such Warrant for all purposes and none of the Warrant Agent, or the Company shall be affected by notice to the contrary. (v) The Warrant Agent shall countersign Global Warrants and Definitive Warrants in accordance with the provisions of Section 3.2 hereof. (j) Facsimile Submissions to Warrant Agent. All certifications, certificates and Opinions of Counsel required to be submitted to the Warrant Registrar pursuant to this Section 3.5 to effect a registration of transfer or exchange may be submitted by facsimile. Notwithstanding anything herein to the contrary, as to any certificates and/or certifications delivered to the Warrant Registrar pursuant to this Section 3.5, the Warrant Registrar's duties shall be limited to confirming that any such certifications and certificates delivered to it are in the form of Exhibits B and C attached hereto. The Warrant Registrar shall not be responsible for confirming the truth or accuracy of representations made in any such certifications or certificates. As to any Opinions of Counsel delivered pursuant to this Section 3.5, the Warrant Registrar may rely upon, and be fully protected in relying upon, such opinions. 3.6. REPLACEMENT WARRANTS. If any mutilated Warrant is surrendered to the Warrant Agent or the Company and the Warrant Agent receives evidence to its satisfaction of the destruction, loss or theft of any Warrant, the Company shall issue and the Warrant Agent, upon receipt of a Warrant Countersignature Order, shall countersign a replacement Warrant if the Warrant Agent's requirements are met. If required by the Warrant Agent or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Warrant Agent and the Company to protect the Company, the Warrant Agent, any Agent and any agent for purposes of the countersignature from any loss that any of them may suffer if a Warrant is replaced. The Company may charge for its expenses in replacing a Warrant. 18 20 Every replacement Warrant is an additional warrant of the Company and shall be entitled to all of the benefits of this Warrant Agreement equally and proportionately with all other Warrants duly issued hereunder. 3.7. TEMPORARY WARRANTS. Until certificates representing Warrants are ready for delivery, the Company may prepare and the Warrant Agent, upon receipt of a Warrant Countersignature Order, shall issue temporary Warrants. Temporary Warrants shall be substantially in the form of certificated Warrants but may have variations that the Company considers appropriate for temporary Warrants and as shall be reasonably acceptable to the Warrant Agent. Without unreasonable delay, the Company shall prepare and the Warrant Agent shall countersign definitive Warrants in exchange for temporary Warrants. Holders of temporary Warrants shall be entitled to all of the benefits of this Warrant Agreement. 3.8. CANCELLATION. Subject to Section 3.5(h) hereof, the Company at any time may deliver Warrants to the Warrant Agent for cancellation. The Warrant Registrar and Warrant Paying Agent shall forward to the Warrant Agent any Warrants surrendered to them for registration of transfer, exchange or exercise. The Warrant Agent and no one else shall cancel all Warrants surrendered for registration of transfer, exchange, exercise, replacement or cancellation and shall destroy canceled Warrants (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Warrants shall be delivered to the Company. The Company may not issue new Warrants to replace Warrants that have been exercised or that have been delivered to the Warrant Agent for cancellation. SECTION 4. SEPARATION OF WARRANTS; TERMS OF WARRANTS; EXERCISE OF WARRANTS. (a) The Notes and Warrants will not be separately transferable until the Separation Date. Subject to the terms of this Agreement, each Warrant holder shall have the right, which may be exercised during the period commencing at the opening of business on the Separation Date and until 5:00 p.m., New York City time on September 15, 2009 (the "EXERCISE PERIOD"), to receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment of the exercise price (the "EXERCISE PRICE") (i) by tendering Notes having an aggregate principal amount at maturity, plus accrued and unpaid interest, if any, thereon to the date of exercise equal to the Exercise Price then in effect for such Warrant Shares or (ii) by tendering Warrants as set forth below or (iii) any combination of Notes and Warrants; provided that holders shall be able to exercise their Warrants only if a registration statement relating to the Warrant Shares is then in effect, or the exercise of such Warrants is exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other persons to whom it is proposed that the Warrant Shares be issued on exercise of the Warrants reside. Each holder may exercise its right, during the Exercise Period, to receive Warrant Shares on a net basis, such that, without the exchange of any finds, the holder will receive such number of Warrant Shares equal to the product of (A) the number of Warrant Shares for which such Warrant is exercisable as of the date of exercise (if the Exercise Price were being paid in 19 21 cash) and (B) the Cashless Exercise Ratio. The Cashless Exercise Ratio shall equal a fraction the numerator of which is the Market Value (as defined below) per share of Common Stock minus the Exercise Price per share as of the date of exercise and the denominator of which is the Market Value per share on the date of exercise. Each Warrant not exercised prior to 5:00 p.m., New York City time, on September 15, 2009 (the "EXPIRATION DATE") shall become void and all rights thereunder and all rights in respect thereof under this agreement shall cease as of such time. No adjustments as to dividends will be made upon exercise of the Warrants. The "MARKET VALUE" per share of Common Stock as of any date shall equal (i) if Common Stock is primarily traded on a securities exchange, the last sale price on such securities exchange on the trading day immediately prior to the date of determination, or if no sale occurred on such day, the mean between the closing "bid" and "asked" prices on such day, (ii) if the principal market for Common Stock is in the over-the-counter market, the closing sale price on the trading day immediately prior to the date of the determination, as published by the National Association of Securities Dealers Automated quotation System or similar organization, or if such price is not so published on such day, the mean between the closing "bid" and "asked" prices, if available, on such day, which prices may be obtained from any reputable pricing service, broker or dealer, and (iii) if neither clause (i) nor clause (ii) is applicable, the fair market value on the date of determination of Common Stock as determined in good faith by the Board of Directors of the Company. (b) In order to exercise all or any of the Warrants represented by a Warrant Certificate, (i) in the case of Definitive Warrants, the holder thereof must surrender for exercise the Warrant Certificate to the Company at the office of the Warrant Agent at its New York corporate trust office set forth in Section 6 hereof, (ii) in the case of a book-entry interest in a Global Warrant, the exercising Participant whose name appears on a securities position listing of the Depositary as the holder of such book-entry interest must comply with the Depositary's procedures relating to the exercise of such book-entry interest in such Global Warrant and (iii) in the case of both Global Warrants and Definitive Warrants, the holder thereof or the Participant, as applicable, must deliver to the Company at the office of the Warrant Agent the form of election to purchase on the reverse thereof duly filled in and signed, which signature shall be medallion guaranteed by an institution which is a member of a Securities Transfer Association recognized signature guarantee program, and upon payment to the Warrant Agent for the account of the Company of the Exercise Price, which is set forth in the form of Warrant Certificate attached hereto as Exhibit A, as adjusted as herein provided, for the number of Warrant Shares in respect of which such Warrants are then exercised. Payment of the aggregate Exercise Price shall be made (i) by tendering Notes in the manner provided in Section 4(a) hereof, (ii) by tendering Warrants in the manner provided in Section 4(a) hereof or (iii) a combination of (i) and (ii). (c) Subject to the provisions of Section 5 hereof, upon compliance with clause (b) above, the Warrant Agent shall deliver or cause to be delivered with all reasonable dispatch, to or upon the written order of the holder and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of whole Warrant Shares issuable upon the exercise of such Warrants or other securities or property to which such holder is entitled hereunder, together with cash as provided in Section 9 hereof; provided that if any consolidation, merger or lease or sale of assets is proposed to be effected by the Company as described in Section 8(m) hereof, or a tender offer or an exchange offer for shares of Common Stock shall be made, upon such surrender of Warrants and payment of the Exercise Price as aforesaid, the Warrant Agent shall, as soon as possible, but in any event not later than two business days thereafter, deliver or cause to be delivered the full number of Warrant Shares issuable upon the exercise of such Warrants in the manner described in this sentence or other 20 22 securities or property to which such holder is entitled hereunder, together with cash as provided in Section 9 hereof. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. (d) The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part. If less than all the Warrants represented by a Warrant Certificate are exercised, such Warrant Certificate shall be surrendered and a new Warrant Certificate of the same tenor and for the number of Warrants which were not exercised shall be executed by the Company and delivered to the Warrant Agent and the Warrant Agent shall countersign the new Warrant Certificate, registered in such name or names as may be directed in writing by the holder, and shall deliver the new Warrant Certificate to the Person or Persons entitled to receive the same. (e) All Warrant Certificates surrendered upon exercise of Warrants shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then be disposed of by the Warrant Agent in a manner satisfactory to the Company. The Warrant Agent shall account promptly to the Company with respect to Warrants exercised and concurrently pay to the Company all monies received by the Warrant Agent for the purchase of the Warrant Shares through the exercise of such Warrants. (f) The Warrant Agent shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the holders during normal business hours at its office. The Company shall supply the Warrant Agent from time to time with such numbers of copies of this Agreement as the Warrant Agent may request. SECTION 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. SECTION 6. RESERVATION OF WARRANT SHARES. (a) The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. (b) The Company or, if appointed, the transfer agent for the Common Stock (the "TRANSFER AGENT") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights of purchase aforesaid will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. 21 23 The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from time to time from such Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this Agreement. The Company will supply such Transfer Agent with duly executed certificates for such purposes and will provide or otherwise make available any cash which may be payable as provided in Section 9 hereof. The Company will furnish such Transfer Agent a copy of all notices of adjustments, and certificates related thereto, transmitted to each holder pursuant to Section 11 hereof. (c) Before taking any action which would cause an adjustment pursuant to Section 8 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take any corporate action which may, in the opinion of its counsel (which may be counsel employed by the Company), be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. (d) The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issuance thereof. SECTION 7. OBTAINING STOCK EXCHANGE LISTINGS. The Company will from time to time take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants, will be listed on the principal securities exchanges, automated quotation systems or other markets within the United States of America, if any, on which other shares of Common Stock are then listed, if any. SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES ISSUABLE. The Exercise Price and the number of Warrant Shares issuable upon the exercise of each Warrant are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 8. For purposes of this Section 8, "COMMON STOCK" means shares now or hereafter authorized of any class of common stock of the Company and any other stock of the Company, however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of the Company without limit as to per share amount, provided, however, that no adjustment shall be made for the issuance, on the date of this Agreement, of the Management Options and the Rollover Options. (a) Adjustment for Change in Capital Stock. If the Company (i) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock, (ii) subdivides its outstanding shares of Common Stock into a greater number of shares, (iii) combines its outstanding shares of Common Stock into a smaller number of shares, (iv) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock or (v) issues by reclassification of its Common Stock any shares of its capital stock, then the Exercise Price in effect immediately prior to such action shall be proportionately adjusted so that the holder of any Warrant thereafter exercised may receive the aggregate number and kind of shares of 22 24 capital stock of the Company which he would have owned immediately following such action if such Warrant had been exercised immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If, after an adjustment, a holder of a Warrant upon exercise of it may receive shares of two or more classes of capital stock of the Company, the Company shall determine, in good faith, the allocation of the adjusted Exercise Price between the classes of capital stock. After such allocation, the exercise privilege and the Exercise Price of each class of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to Common Stock in this Section 8. Such adjustment shall be made successively whenever any event listed above shall occur. (b) Adjustment for Rights Issue. If the Company distributes any rights, options or warrants to all holders of its Common Stock entitling them for a period expiring within 45 days after the record date mentioned below to purchase shares of Common Stock at a price per share less than the Fair Value (as defined herein) per share on that record date, the Exercise Price shall be adjusted in accordance with the formula: O + N x P --------- E' = E x M ------------------------- O + N where: E'= the adjusted Exercise Price. E = the current Exercise Price. O = the number of shares of Common Stock outstanding on the record date. N = the number of additional shares of Common Stock issued pursuant to such rights, options or warrants. P = the aggregate price per share of the additional shares. M = the Fair Value per share of Common Stock on the record date. The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If at the end of the period during which such rights, options or warrants are exercisable, not all rights, options or warrants shall have been exercised, the Exercise Price shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares actually issued. (c) Adjustment for Other Distributions. 23 25 If the Company distributes to all holders of its Common Stock any of its assets or debt securities or any rights or warrants to purchase debt securities, preferred stock, assets (including cash) or other securities of the Company, the Exercise Price shall be adjusted in accordance with the formula: M - F E' = E x ---------------- M where: E'= the adjusted Exercise Price. E = the current Exercise Price. M = the Fair Value per share of Common Stock on the record date mentioned below. F = the fair market value on the record date of the debt securities, preferred stock, assets, securities, rights or warrants to be distributed in respect of one share of Common Stock as determined in good faith by the Board of Directors of the Company (the "Board of Directors"). The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. This Section 8(c) does not apply to cash dividends or cash distributions paid out of consolidated current or retained earnings as shown on the books of the Company prepared in accordance with generally accepted accounting principles. Also, this Section 8(c) does not apply to rights, options or warrants referred to in Section 8(b) hereof. 24 26 (d) Adjustment for Common Stock Issue. If the Company issues shares of Common Stock for a consideration per share less than the Fair Value per share on the date the Company fixes the offering price of such additional shares, the Exercise Price shall be adjusted in accordance with the formula: P ----- E' = E x O + M ------------------- A where: E'= the adjusted Exercise Price. E = the then current Exercise Price. O = the number of shares outstanding immediately prior to the issuance of such additional shares. P = the aggregate consideration received for the issuance of such additional shares. M = the Fair Value per share on the date of issuance of such additional shares. A = the number of shares outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. This subsection (d) does not apply to: (1) any of the transactions described in subsections (a), (b) and (c) of this Section 8, (2) the exercise of Warrants, or the conversion or exchange of other securities convertible or exchangeable for Common Stock the issuance of which caused an adjustment to be made under Section 8(e), (3) Common Stock issued to the Company's employees (or employees of its subsidiaries) under bona fide employee benefit plans adopted by the Board of Directors and approved by the holders of Common Stock when required by law, if such Common Stock would otherwise be covered by this subsection (d) (but only to the extent that the aggregate number of shares excluded hereby and issued after the date of this Warrant Agreement shall not exceed 5% of the Common Stock outstanding at the time of the adoption of each such plan, exclusive of anti-dilution adjustments thereunder), 25 27 (4) Common Stock issued to shareholders of any person which merges into the Company, or with a subsidiary of the Company, in proportion to their stock holdings of such person immediately prior to such merger, upon such merger, provided that if such person is an Affiliate of the Company, the Board of Directors shall have obtained a fairness opinion from a nationally recognized investment banking, appraisal or valuation firm, which is not an Affiliate of the Company, stating that the consideration received in such merger is fair to the Company from a financial point of view, or (5) the issuance of shares of Common Stock pursuant to rights, options or warrants which were originally issued in a Non-Affiliate Sale (as defined below) together with one or more other securities as part of a unit at a price per unit. (e) Adjustment for Convertible Securities Issue. If the Company issues any securities convertible into or exchangeable for Common Stock (other than securities issued in transactions described in subsections (a), (b) and (c) of this Section 8) for a consideration per share of Common Stock initially deliverable upon conversion or exchange of such securities less than the Fair Value per share on the date of issuance of such securities, the Exercise Price shall be adjusted in accordance with this formula: P ----- O + M E' = E x ---------------- O + D where: E'= the adjusted Exercise Price. E = the then current Exercise Price. O = the number of shares outstanding immediately prior to the issuance of such securities. P = the aggregate consideration received for the issuance of such securities. M = the Fair Value per share on the date of issuance of such securities. D = the maximum number of shares deliverable upon conversion or in exchange for such securities at the initial conversion or exchange rate. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If all of the Common Stock deliverable upon conversion or exchange of such securities have not been issued when such securities are no longer outstanding, then the Exercise Price shall promptly be readjusted to the Exercise Price which would then be in effect had the adjustment upon the 26 28 issuance of such securities been made on the basis of the actual number of shares of Common Stock issued upon conversion or exchange of such securities. This subsection (e) does not apply to convertible securities issued to shareholders of any person which merges into the Company, or with a subsidiary of the Company, in proportion to their stock holdings of such person immediately prior to such merger, upon such merger, provided that if such person is an Affiliate of the Company, the Board of Directors shall have obtained a fairness opinion from a nationally recognized investment banking, appraisal or valuation firm, which is not an Affiliate of the Company, stating that the consideration received in such merger is fair to the Company from a financial point of view. (f) Consideration Received. For purposes of any computation respecting consideration received pursuant to subsections (d), and (e) of this Section 8, the following shall apply: (1) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (2) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors (irrespective of the accounting treatment thereof), whose determination shall be conclusive, and described in a Board resolution which shall be filed with the Warrant Agent; (3) in the case of the issuance of securities convertible into or exchangeable for shares, the aggregate consideration received therefor shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (1) and (2) of this subsection); and (4) in the case of the issuance of shares of Common Stock pursuant to rights, options or warrants which rights, options or warrants were originally issued together with one or more other securities as part of a unit at a price per unit, the consideration shall be deemed to be the fair value of such rights, options or warrants at the time of issuance thereof as determined in good faith by the Board of Directors whose determination shall be conclusive and described in a Board resolution which shall be filed with the Warrant Agent plus the additional minimum consideration, if any, to be received by the Company upon the exercise, conversion or exchange thereof (as determined in the same manner as provided in clauses (1) and (2) of this subsection). (g) Fair Value. In Sections 8 (b), (c), (d) and (e) hereof, the "FAIR VALUE" per security at any date of determination shall be (1) in connection with a sale by the Company to a party that is not an Affiliate of the Company in an arm's-length transaction (a "NON-AFFILIATE SALE"), the price per security at which such 27 29 security is sold and (2) in connection with any sale by the Company to an Affiliate of the Company, (a) the last price per security at which such security was sold in a Non-Affiliate Sale within the three-month period preceding such date of determination or (b) if clause (a) is not applicable, the fair market value of such security determined in good faith by (i) a majority of the Board of Directors, including a majority of the Disinterested Directors, and approved in a Board resolution delivered to the Warrant Agent or (ii) a nationally recognized investment banking, appraisal or valuation firm, which is not an Affiliate of the Company, in each case, taking into account, among all other factors deemed relevant by the Board of Directors or such investment banking, appraisal or valuation firm, the trading price and volume of such security on any national securities exchange or automated quotation system on which such security is traded. Notwithstanding the foregoing, any sale to Donaldson, Lufkin & Jenrette Securities Corporation (or any successor thereto) pursuant to an underwritten public offering registered under the Securities Act shall be deemed to be and treated as a Non-Affiliate Sale. For purposes of this Section 8(g), "DISINTERESTED DIRECTOR" means, in connection with any issuance of securities that gives rise to a determination of the Fair Value thereof, each member of the Board of Directors who is not an officer, employee, director or other Affiliate of the party to whom the Company is proposing to issue the securities giving rise to such determination. For purposes of this Section 8(g), "AFFILIATE" of any specified Person means (A) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person and (B) any director, officer or employee of such specified person. For purposes of this definition "CONTROL" (including, with correlative meanings, the terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. (h) When De Minimis Adjustment May Be Deferred. No adjustment in the Exercise Price need be made unless the adjustment would require an increase or decrease of at least 1% in the Exercise Price. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 8 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be, it being understood that no such rounding shall be made under subsection (p). (i) When No Adjustment Required. No adjustment need be made for a transaction referred to Section 8(a), (b), (c), (d), (e) or (f) hereof, if Warrant holders are to participate (without being required to exercise their Warrants) in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction. No adjustment need be made for (i) rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest or (ii) a change in the par value or no par value of the Common Stock. To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. 28 30 (j) Notice of Adjustment. Whenever the Exercise Price is adjusted, the Company shall provide the notices required by Section 10 hereof. (k) Notice of Certain Transactions. If (i) the Company takes any action that would require an adjustment in the Exercise Price pursuant to Section 8(a), (b), (c), (d), (e) or (f) hereof and if the Company does not arrange for Warrant holders to participate pursuant to Section 8(i) hereof, (ii) the Company takes any action that would require a supplemental Warrant Agreement pursuant to Section 8(l) hereof or (iii) there is a liquidation or dissolution of the Company, then the Company shall mail to Warrant holders a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, transfer, lease, liquidation or dissolution. The Company shall mail the notice at least 15 days before such date. Failure to mail the notice or any defect in it shall not affect the validity of the transaction. (l) Reorganization of Company. Immediately after the date hereof, if the Company consolidates or merges with or into, or transfers or leases all or substantially all its assets to, any person, upon consummation of such transaction the Warrants shall automatically become exercisable for the kind and amount of securities, cash or other assets which the holder of a Warrant would have owned immediately after the consolidation, merger, transfer or lease if the holder had exercised the Warrant immediately before the effective date of the transaction. Concurrently with the consummation of such transaction, the corporation formed by or surviving any such consolidation or merger if other than the Company, or the person to which such sale or conveyance shall have been made, shall enter into (i) a supplemental Warrant Agreement so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section 8(l) and (ii) a supplement to the Warrant Registration Rights Agreement providing for the assumption of the Company's obligations thereunder. The successor Company shall mail to Warrant holders a notice describing the supplemental Warrant Agreement and Warrant Registration Rights Agreement. If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an affiliate of the formed, surviving, transferee or lessee corporation, that issuer shall join in the supplemental Warrant Agreement and Warrant Registration Rights Agreement. If this Section 8(l) applies, Sections 8(a), (b), (c), (d), (e) and (f) hereof do not apply. (m) Company Determination Final. Any determination that the Company or the Board of Directors must make pursuant to Section 8(a), (c), (d), (e), (f), (g), (h) or (i) hereof is conclusive. (n) Warrant Agent's Disclaimer. The Warrant Agent has no duty to determine when an adjustment under this Section 8 should be made, how it should be made or what it should be. The Warrant Agent has no duty to determine whether any provisions of a supplemental Warrant Agreement under Section 8(l) hereof are correct. The Warrant Agent makes no representation as to the validity or value of any securities or assets 29 31 issued upon exercise of Warrants. The Warrant Agent shall not be responsible for the Company's failure to comply with this Section 8. (o) When Issuance or Payment May Be Deferred. In any case in which this Section 8 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise on the basis of the Exercise Price and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 10 hereof; provided that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment. (p) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to this Section 8, each Warrant outstanding prior to the making of the adjustment in the Exercise Price shall thereafter evidence the right to receive upon payment of the adjusted Exercise Price that number of shares of Common Stock (calculated to the nearest hundredth) obtained from the following formula: N' = N x E --- E' where: N'= the adjusted number of Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted Exercise Price. N = the number or Warrant Shares previously issuable upon exercise of a Warrant by payment of the Exercise Price prior to adjustment. E'= the adjusted Exercise Price. E = the Exercise Price prior to adjustment. (q) Form of Warrants. Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. SECTION 9. FRACTIONAL INTERESTS. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be 30 32 computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 9, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall pay an amount in cash equal to the Fair Value per Warrant Share, as determined on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole U.S. cent. SECTION 10. NOTICES TO WARRANT HOLDERS. (a) Upon any adjustment of the Exercise Price pursuant to Section 8 hereof, the Company shall promptly thereafter (i) cause to be filed with the Warrant Agent a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors of the Company (who may be the regular auditors of the Company) setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Shares (or portion thereof) issuable after such adjustment in the Exercise Price, upon exercise of a Warrant and payment of the adjusted Exercise Price, which certificate shall be conclusive evidence of the correctness of the matters set forth therein, and (ii) cause to be given to each of the registered holders of Warrants at the address appearing on the Warrant register for each such registered holder written notice of such adjustments by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 10. (b) In case: (i) the Company shall authorize the issuance to all holders of shares of Common Stock of rights, options or warrants to subscribe for or purchase shares of Common Stock or of any other subscription rights or warrants; (ii) the Company shall authorize the distribution to all holders of shares of Common Stock of evidences of its indebtedness or assets (other than dividends or cash distributions paid out of consolidated current or retained earnings as shown on the books of the Company prepared in accordance with generally accepted accounting principles or dividends payable in shares of Common Stock or distributions referred to in Section 10(a) hereof); (iii) of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (v) the Company proposes to take any action (other than actions of the character described in Section 8(a) hereof) which would require an adjustment of the Exercise Price pursuant to Section 8 hereof; 31 33 then the Company shall cause to be filed with the Warrant Agent and shall cause to be given to each of the registered holders of Warrants at his address appearing on the Warrant register, at least 20 days (or 10 days in any case specified in clauses (i) or (ii) above) prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (x) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, (y) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (z) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 11 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. (c) Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders of Warrants the right to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter, or any rights whatsoever as stockholders of the Company. SECTION 11. MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. (a) Any corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to the business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor warrant agent under the provisions of Section 13 hereof. In case at the time such successor to the Warrant Agent shall succeed to the agency created by this Agreement, and in case at that time any of the Warrant Certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent; and in case at that time any of the Warrant Certificates shall not have been countersigned, any successor to the Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor to the Warrant Agent; and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. (b) In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent whose name has been changed may adopt the countersignature under its prior name, and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name, and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. 32 34 SECTION 12. WARRANT AGENT. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound: (a) The statements contained herein and in the Warrant Certificates shall be taken as statements of the Company and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrant Certificates except as herein otherwise provided. (b) The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Agreement or in the Warrant Certificates to be complied with by the Company. (c) The Warrant Agent may consult at any time with counsel satisfactory to it (who may be counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. (d) The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate for any action taken in reliance on any Warrant Certificate, certificate of shares, notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (e) The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in the execution of this Agreement, to reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Agreement. The Company shall indemnify the Warrant Agent against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Warrant Agreement, including the costs and expenses of enforcing this Warrant Agreement against the Company and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Warrant Agent shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Warrant Agent to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Warrant Agent shall cooperate in the defense. The Warrant Agent may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. (f) The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more registered holders of Warrants shall furnish the Warrant Agent with reasonable security and indemnity for any costs and expenses which may be incurred, but this provision shall not affect the power of the 33 35 Warrant Agent to take such action as it may consider proper, whether with or without any such security or indemnity. All rights of action under this Agreement or under any of the Warrants may be enforced by the Warrant Agent without the possession of any of the Warrant Certificates or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent and any recovery of judgment shall be for the ratable benefit of the registered holders of the Warrants, as their respective rights or interests may appear. (g) The Warrant Agent, and any stockholder, director, officer or employee of it, may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. (h) The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own negligence or bad faith. (i) The Warrant Agent shall not at any time be under any duty or responsibility to any holder of any Warrant Certificate to make or cause to be made any adjustment of the Exercise Price or number of the Warrant Shares or other securities or property deliverable as provided in this Agreement, or to determine whether any facts exist which may require any of such adjustments, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the validity or value or the kind or amount of any Warrant Shares or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or with respect to whether any such Warrant Shares or other securities will when issued be validly issued and fully paid and nonassessable, and makes no representation with respect thereto. SECTION 13. CHANGE OF WARRANT AGENT. If the Warrant Agent shall become incapable of acting as Warrant Agent, the Company shall appoint a successor to such Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such incapacity by the Warrant Agent or by the registered holder of a Warrant Certificate, then the registered holder of any Warrant may apply to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Pending appointment of a successor to such Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. The holders of a majority of the unexercised Warrants shall be entitled at any time to remove the Warrant Agent and appoint a successor to such Warrant Agent. Such successor to the Warrant Agent need not be approved by the Company or the former Warrant Agent. After appointment the successor to the Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; provided that the former Warrant Agent shall deliver and transfer to the successor to the Warrant Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to give any notice provided 34 36 for in this Section 13, however, or any defect therein, shall not affect the legality or validity of the appointment of a successor to the Warrant Agent. SECTION 14. REPORTS. (a) The Company agrees with each holder, for so long as any Warrants or Warrant Shares remain outstanding and during any period in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Warrants or Warrant Shares in connection with any sale thereof and any prospective purchaser of such Warrants or Warrant Shares designated by such Holder or beneficial owner, the information required by Rule 144(A)(d)(4) under the Act in order to permit resales of such Warrants or Warrant Shares pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Warrants or Warrant Shares pursuant to Rule 144A. (j) The Company shall provide the Warrant Agent with a sufficient number of copies of all such reports that the Warrant Agent may be required to deliver to the holders of the Warrants and the Warrant Shares under this Section 14. SECTION 15. NOTICES TO COMPANY AND WARRANT AGENT. Any notice or demand authorized by this Agreement to be given or made by the Warrant Agent or by the registered holder of any Warrant to or on the Company shall be sufficiently given or made when received if deposited in the mail, first class or registered, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent) as follows: Instron Corporation c/o Kirtland Capital Partners 2550 SOM Center Road, Suite 105 Willoughby Hills, Ohio 44094 Telecopier No.: (440) 585-9699 Attention: Thomas N. Littman With a copy to: Jones, Day, Reavis & Pogue North Point, 901 Lakeside Avenue Cleveland, Ohio 44114 Telecopier No.: (216) 579-0212 Attention: Christopher M. Kelly, Esq. In case the Company shall fail to maintain such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations may be made and notices and demands may be served at the principal office of the Warrant Agent. Any notice pursuant to this Agreement to be given by the Company or by the registered holder(s) of any Warrant to the Warrant Agent shall be sufficiently given when and if deposited in the 35 37 mail, first-class or registered, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) to the Warrant Agent as follows: Norwest Bank Minnesota, National Association N9303-120 Sixth & Marquette Minneapolis, MN 55479 Telecopier No.: (613) 667-9825 Attention: Corporate Trust Services SECTION 16. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any holders of Warrants in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not in any way adversely affect the interests of the holders of Warrants. Any amendment or supplement to this Agreement that has an adverse effect on the interests of the holders of Warrants shall require the written consent of the holders of a majority of the then outstanding Warrants (excluding Warrants held by the Company or any of its affiliates). The consent of each holder of Warrants affected shall be required for any amendment pursuant to which the Exercise Price would be increased or the number of Warrant Shares purchasable upon exercise of Warrants would be decreased (other than pursuant to adjustments provided in this Agreement). SECTION 17. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 18. TERMINATION. This Agreement shall terminate at 5:00 p.m., New York City time on September 15, 2009. Notwithstanding the foregoing, this Agreement will terminate on any earlier date if all Warrants have been exercised. The provisions of Section 12 shall survive such termination. SECTION 19. GOVERNING LAW. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the internal laws of said State. SECTION 20. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrant Agent and the registered holders of Warrants any legal or equitable right, 36 38 remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the registered holders of Warrants. SECTION 21. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. [Signature Page Follows] 37 39 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. INSTRON CORPORATION By: /s/ John R. Barrett ------------------------------------------- Name: John R. Barrett Title: Treasurer and Vice President of Corporate Development NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Warrant Agent By: /s/ Curtis Schwegman ------------------------------------------- Name: Curtis Schwegman Title: Vice President 38 40 EXHIBIT A [Form of Warrant Certificate] [Face] Unit Legend. Each Warrant issued prior to the Separation Date shall bear the Unit Legend on the face thereof on the face thereof: Private Placement Legend: Each Warrant issued pursuant to an exemption from the registration requirements of the Securities Act shall bear the Private Placement Legend on the face thereof: No. ___________ ___Warrants CUSIP No. ________ Warrant Certificate INSTRON CORPORATION This Warrant Certificate certifies that Cede & Co., or its registered assigns, is the registered holder of Warrants expiring September 15, 2009 (the "Warrants") to purchase Common Stock, par value $0.01 (the "Common Stock"), of Instron Corporation, a Massachusetts corporation (the "Company"). Each Warrant entitles the registered holder upon exercise at any time from 9:00 a.m. on the Separation Date referred to below (the "Exercise Date") until 5:00 p.m. New York City Time on September 15, 2009 to receive from the Company 0.5109 fully paid and nonassessable shares of Common Stock (the "Warrant Shares") at the initial exercise price (the "Exercise Price") of $0.01 per share payable upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent, but only subject to the conditions set forth herein and in the Warrant Agreement referred to on the reverse hereof. The Exercise Price and number of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. No Warrant may be exercised after 5:00 p.m., New York City Time on September 15, 2009, and to the extent not exercised by such time such Warrants shall become void. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement. This Warrant Certificate shall be governed by and construed in accordance with the internal laws of the State of New York. A-1 41 IN WITNESS WHEREOF, Instron Corporation has caused this Warrant Certificate to be signed below. DATED: September 29, 1999 INSTRON CORPORATION By: ---------------------------------------- Name: Title: Countersigned: [-----------------------] as Warrant Agent By: ------------------------------------- Authorized Signature A-2 42 [Reverse of Warrant Certificate] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring at 5:00 p.m. New York City time on September 15, 2009 entitling the holder on exercise to receive shares of Common Stock, and are issued or to be issued pursuant to a Warrant Agreement dated as of October 5, 1998 (the "Warrant Agreement"), duly executed and delivered by the Company to Norwest Bank Minnesota, National Association, as warrant agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Warrants may be exercised at any time on or after the Separation Date and on or before 5:00 p.m. New York City time on September 15, 2009; provided that holders shall be able to exercise their Warrants only if a registration statement relating to the Warrants Shares is then in effect, or the exercise of such Warrants is exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other persons to whom it is proposed that the Warrant Shares be issued on exercise of the Warrants reside. In order to exercise all or any of the Warrants represented by this Warrant Certificate, the holder must deliver to the Warrant Agent at its New York corporate trust office set forth in Section 19 of the Warrant Agreement this Warrant Certificate and the form of election to purchase on the reverse hereof duly filled in and signed, which signature shall be medallion guaranteed by an institution which is a member of a Securities Transfer Association recognized signature guarantee program, and upon payment to the Warrant Agent for the account of the Company of the Exercise Price, as adjusted as provided in the Warrant Agreement, for the number of Warrant Shares in respect of which such Warrants are then exercised. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise of this Warrant. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price set forth on the face hereof may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the number of shares of Common Stock issuable upon the exercise of each Warrant shall be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. The Company has agreed pursuant to a Warrant Registration Rights Agreement dated as of September 29, 1999 (the "Warrant Registration Rights Agreement") to file within 90 days after the issuance of the Warrants and use all commercially reasonable best efforts to make effective on or before 180 days after such date a shelf registration statement on the appropriate form under the Securities Act, and to use its reasonable best efforts to keep such registration statement continuously effective under the Securities Act in order to permit the resale of the Warrants and Warrant Shares by the holders thereof for the period of time referred to in the immediately preceding sentence. Warrant Certificates, when surrendered at the office of the Warrant Agent by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may A-3 43 be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company and the Warrant Agent may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company. A-4 44 [Form of Election to Purchase] (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive _____________ shares of Common Stock and herewith tenders payment for such shares to the order of INSTRON CORPORATION, in the amount of [Notes] [Warrants] equal in [principal amount] [fair market value] to $__________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of _______________, whose address is __________________ and that such shares be delivered to ___________, whose address is ____________________________. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of ______________________, whose address is ____________________, and that such Warrant Certificate be delivered to whose address is____________________. ___________________________________________ Signature Date: ___________________________________________ Signature Guaranteed Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Warrant Agent, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Warrant Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-5 45 SCHEDULE OF EXCHANGES OF INTERESTS OF GLOBAL WARRANTS The following exchanges of a part of this Global Warrant have been made:
Number of Warrants Amount of decrease in this Global in Number of Amount of increase in Warrant following Signature of warrants in this Number of Warrants in such decrease or authorized officer Date of Exchange Global Warrant this Global Warrant increase of Warrant Agent - ---------------- ------------------ --------------------- ------------------ ------------------
A-6 46 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Instron Corporation c/o Kirtland Capital Partners 2550 SOM Center Road Willoughby Hills, Ohio 44094 Norwest Bank Minnesota, National Association N9303-120 Sixth & Marquette Minneapolis, MN 55479 Re: Warrants Reference is hereby made to the Warrant Agreement, dated as of September 29, 1999 (the "WARRANT AGREEMENT"), between Instron Corporation, as issuer (the "COMPANY"), and Norwest Bank Minnesota, National Association, as warrant agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. ___________________, (the "TRANSFEROR") owns and proposes to transfer the Warrant[s] or interest in such Warrant[s] specified in Annex A hereto, in the principal amount at maturity of $___________ in such Warrant[s] or interests (the "TRANSFER"), to ___________________________ (the "TRANSFEREE"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL WARRANT OR A DEFINITIVE WARRANT PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Warrant is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Warrant for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Warrant and/or the Definitive Warrant and in the Warrant Agreement and the Securities Act. 2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL WARRANT OR A DEFINITIVE WARRANT PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in B-1 47 the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Warrant and/or the Definitive Warrant and in the Warrant Agreement and the Securities Act. 3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN A DEFINITIVE WARRANT PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Warrants and Restricted Definitive Warrants and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) / / such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) / / such Transfer is being effected to the Company or a subsidiary thereof; or (c) / / such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) / / such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Warrant or Restricted Definitive Warrants and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Warrant Agreement and (2) if the Company requests, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will be subject to the restrictions on transfer enumerated in the Private B-2 48 Placement Legend printed on the IAI Global Warrant and/or the Definitive Warrants and in the Warrant Agreement and the Securities Act. 4. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL WARRANT OR OF AN UNRESTRICTED DEFINITIVE WARRANT. (a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Warrant Agreement and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Warrants, on Restricted Definitive Warrants and in the Warrant Agreement. (b) / / CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Warrant Agreement and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Warrants, on Restricted Definitive Warrants and in the Warrant Agreement. (c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Warrant Agreement and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Warrant Agreement, the transferred beneficial interest or Definitive Warrant will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Warrants or Restricted Definitive Warrants and in the Warrant Agreement. B-3 49 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ------------------------------------------- [Insert Name of Transferor] By: ------------------------------------------- Name: Title: Dated: ----------------------- B-4 50 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) / / a beneficial interest in the: (i) / / 144A Global Warrant, or (ii) / / Regulation S Global Warrant, or (b) / / a Restricted Definitive Warrant. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) / / a beneficial interest in the: (i) / / 144A Global Warrant, or (ii) / / Regulation S Global Warrant, or (iii)/ / Unrestricted Global Warrant; or (b) / / a Restricted Definitive Warrant; or (c) / / an Unrestricted Definitive Warrant, in accordance with the terms of the Warrant Agreement. B-5 51 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Instron Corporation c/o Kirtland Capital Partners 2550 SOM Center Road Willoughby Hills, Ohio 44094 Norwest Bank Minnesota, National Association N9303-120 Sixth & Marquette Minneapolis, MN 55479 Re: Warrants (CUSIP ____________) Reference is hereby made to the Warrant Agreement, dated as of September 29, 1999 (the "WARRANT AGREEMENT"), between Instron Corporation, as issuer (the "COMPANY"), and Norwest Bank Minnesota, National Association, as warrant agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. __________________________, (the "OWNER") owns and proposes to exchange the Warrant[s] or interest in such Warrant[s] specified herein, in the amount of $____________ in such Warrant[s] or interests (the "EXCHANGE"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE WARRANTS OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL WARRANT FOR UNRESTRICTED DEFINITIVE WARRANTS OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL WARRANT (a) / / Check if Exchange is from beneficial interest in a Restricted Global Warrant to beneficial interest in an Unrestricted Global Warrant. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Warrant for a beneficial interest in an Unrestricted Global Warrant in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Warrants and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Warrant is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL WARRANT TO UNRESTRICTED DEFINITIVE WARRANT. In connection with the Exchange of the Owner's beneficial C-1 52 interest in a Restricted Global Warrant for an Unrestricted Definitive Warrant, the Owner hereby certifies (i) the Definitive Warrant is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Warrants and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Warrant is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE WARRANT TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL WARRANT. In connection with the Owner's Exchange of a Restricted Definitive Warrant for a beneficial interest in an Unrestricted Global Warrant, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Warrants and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE WARRANT TO UNRESTRICTED DEFINITIVE WARRANT. In connection with the Owner's Exchange of a Restricted Definitive Warrant for an Unrestricted Definitive Warrant, the Owner hereby certifies (i) the Unrestricted Definitive Warrant is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Warrants and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Warrant Agreement and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Warrant is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE WARRANTS OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL WARRANTS FOR RESTRICTED DEFINITIVE WARRANTS OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL WARRANTS (a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL WARRANT TO RESTRICTED DEFINITIVE WARRANT. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Warrant for a Restricted Definitive Warrant in a number equal to the number of beneficial interests exchanged, the Owner hereby certifies that the Restricted Definitive Warrant is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Warrant Agreement, the Restricted Definitive Warrant issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Warrant and in the Warrant Agreement and the Securities Act. (b) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE WARRANT TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL WARRANT. In connection with the Exchange of the Owner's Restricted Definitive Warrant for a beneficial interest in the [CHECK ONE] / / 144A Global Warrant, / / C-2 53 Regulation S Global Warrant in a number equal to the number of beneficial interests exchanged, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Warrants and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Warrant Agreement, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Warrant and in the Warrant Agreement and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ------------------------------------------- [Insert Name of Transferor] By: --------------------------------------- Name: Title: Dated: -------------------------- C-3 54 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Instron Corporation c/o Kirtland Capital Partners 2550 SOM Center Road Willoughby Hills, Ohio 44094 Norwest Bank Minnesota, National Association N9303-120 Sixth & Marquette Minneapolis, MN 55479 Re: Warrants Reference is hereby made to the Warrant Agreement, dated as of September 29, 1999 (the "WARRANT AGREEMENT"), between Instron Corporation, as issuer (the "COMPANY"), and Norwest Bank Minnesota, National Association, as warrant agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. In connection with our proposed purchase of $____________ amount of: (a) / / a beneficial interest in a Global Warrant, or (b) / / a Definitive Warrant, we confirm that: 1. We understand that any subsequent transfer of the Warrants or any interest therein is subject to certain restrictions and conditions set forth in the Warrant Agreement and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Warrants or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "SECURITIES ACT"). 2. We understand that the offer and sale of the Warrants have not been registered under the Securities Act, and that the Warrants and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Warrants or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if requested by the Company, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the D-1 55 provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Warrant or beneficial interest in a Global Warrant from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Warrants or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Warrants purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Warrants, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Warrants or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. We agree not to engage in any hedging transactions with regard to the Warrants unless such hedging transactions are in compliance with the Securities Act. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ------------------------------------------ [Insert Name of Transferor] By: -------------------------------------- Name: Title: Dated: ---------------------------- D-2 56 EXHIBIT E FORM OF WARRANT REGISTRATION RIGHTS AGREEMENT E-1 EX-10.1 8 EXHIBIT 10.1 1 Exhibit 10.1 CREDIT AND SECURITY AGREEMENT (U.S. $80,000,000) Dated as of September 29, 1999 among INSTRON CORPORATION INSTRON, LTD. INSTRON SCHENCK TESTING SYSTEMS, GMBH and INSTRON WOLPERT GMBH AS BORROWERS and THE BANKS WHICH ARE SIGNATORIES HERETO and NATIONAL CITY BANK as Administrative Agent 2 TABLE OF CONTENTS
Section Page - ------- ---- SECTION 1 DEFINITIONS AND ACCOUNTING TERMS........................................................................1 1.1 CERTAIN DEFINED TERMS................................................................................1 1.2 COMPUTATION OF TIME PERIODS..........................................................................1 1.3 ACCOUNTING TERMS; CALCULATIONS.......................................................................1 1.4 ADDITION OF BORROWERS................................................................................2 1.5 AUTHORIZATION OF BORROWER REPRESENTATIVE.............................................................2 1.6 CONSTRUCTION OF TERMS GENERALLY......................................................................2 1.7 CURRENCY EQUIVALENTS.................................................................................3 1.8 LIABILITY OF BORROWERS...............................................................................4 SECTION 2 STATEMENT OF TERMS......................................................................................4 2.1 REVOLVING CREDIT FACILITY............................................................................4 (a) REVOLVING CREDIT LOANS......................................................................4 (b) REVOLVING CREDIT BORROWINGS.................................................................4 (c) REVOLVING CREDIT NOTES; LOAN ACCOUNT........................................................5 2.2 REQUESTS FOR REVOLVING CREDIT BORROWINGS.............................................................5 (a) CREDIT REQUESTS EXECUTED BY BORROWER REPRESENTATIVE.........................................5 (b) DEEMED CREDIT REQUESTS......................................................................7 2.3 FUNDING OF REVOLVING CREDIT LOANS....................................................................8 2.4 AVAILABILITY OF FUNDS................................................................................9 2.5 FAILURES TO FUND LOANS OR PARTICIPATING INTERESTS....................................................9 (a) CONTINUING OBLIGATION OF BORROWERS.........................................................10 (b) PAYMENT CONSTITUTING RATABLE PORTION.......................................................10 (c) TREATMENT OF BANK FAILING TO FUND..........................................................10 (D) CONTINUING OBLIGATION OF BANKS TO FUND.....................................................11 (e) DEFAULTING LENDER; OBLIGATIONS OF DESIGNATED SWING LINE LENDERS AND LETTER OF CREDIT ISSUERS.....................................................................11 2.6 AFFILIATED FUNDING THROUGH, ON BEHALF OF, OR BY BANKS...............................................11 (a) SPC FUNDING ON BEHALF OF BANKS.............................................................11 (b) FUNDING BY BANKS, DESIGNATED SWING LINE LENDERS, AND DESIGNATED LETTER OF CREDIT ISSUERS THROUGH OR ON BEHALF OF LENDING INSTALLATIONS..........................12 2.7 SWING LINE LOAN FACILITY............................................................................13 (a) SWING LINE LOANS...........................................................................13 (b) CONDITIONS TO SWING LINE LOANS.............................................................13 (c) SWING LINE BORROWINGS......................................................................14 (d) SWING LINE LOAN REQUESTS...................................................................14 (e) NOTICE OF REQUESTS; OUTSTANDINGS...........................................................15 (f) PROCEDURE FOR OBTAINING QUOTED MONEY MARKET RATE...........................................15 (g) SWING LINE NOTES; SWING LINE LOAN ACCOUNT..................................................16 (h) FUNDING OF SWING LINE LOANS................................................................16 (i) AVAILABILITY OF FUNDS......................................................................17 (j) REFUNDING SWING LINE LOANS; SETTLEMENT BY BANKS............................................17 (k) PARTICIPATING INTEREST.....................................................................18 2.8 TERM FACILITY.......................................................................................19 (a) TERM LOANS.................................................................................19 (b) TERM BORROWINGS............................................................................19 (c) TERM NOTES; LOAN ACCOUNT RECORD OF TERM LOANS..............................................19 (d) AMORTIZATION AND MATURITY OF TERM LOANS....................................................20
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2.9 FUNDING OF TERM LOANS BY BANKS......................................................................20 (a) DISBURSEMENT OF TERM FUNDS RECEIVED........................................................21 (b) AVAILABILITY OF TERM LOAN FUNDS............................................................21 2.10 REPAYMENTS; PREPAYMENTS; REDUCTIONS OF COMMITMENTS.................................................21 (a) SCHEDULED REPAYMENTS; DENOMINATIONS OF REPAYMENTS..........................................21 (b) MANDATORY PREPAYMENT OF LOANS..............................................................21 (c) MANDATORY APPLICATION OF NET PROCEEDS AND EXCESS CASH FLOW; RESULTING MANDATORY REDUCTION IN REVOLVING CREDIT COMMITMENTS AND TERM LOANS....................22 (d) PERMITTED PREPAYMENTS......................................................................23 (e) REDUCTION OF REVOLVING CREDIT COMMITMENTS..................................................24 2.11 RATE CONVERSION AND RATE CONTINUATION..............................................................24 2.12 LETTERS OF CREDIT..................................................................................27 (a) DESIGNATED LETTER OF CREDIT ISSUER AND DESIGNATED EUROPEAN ADMINISTRATIVE AGENT.................................................................................27 (b) TERM; FORM; REQUESTS AND CONDITIONS OF LETTERS OF CREDIT...................................28 (c) EXISTING LETTERS OF CREDIT.................................................................29 (d) PARTICIPATION BY BANKS IN LETTERS OF CREDIT................................................29 (e) REIMBURSEMENT; INTEREST....................................................................30 (f) FAILURE TO REIMBURSE DRAWINGS..............................................................30 (g) OBLIGATIONS ABSOLUTE.......................................................................32 (h) LIABILITY OF DESIGNATED LETTER OF CREDIT ISSUER............................................32 (i) DESIGNATED LETTER OF CREDIT ISSUER INDEMNITY...............................................33 (j) EFFECT OF APPLICABLE LAW OR CUSTOM.........................................................33 (k) TERMINATION OF LETTER OF CREDIT COMMITMENT.................................................34 (l) GUARANTY OF OTHER LETTER OF CREDIT OBLIGOR'S LETTER OF CREDIT OBLIGATIONS..................34 2.13 INTEREST ON LOANS..................................................................................37 (a) INTEREST RATE..............................................................................37 (b) APPLICABLE MARGIN; TERMS OF ADJUSTMENT.....................................................38 2.14 DEFAULT INTEREST...................................................................................39 2.15 INTEREST RATE DETERMINATION........................................................................39 (a) ADMINISTRATIVE AGENT DETERMINATION; NOTICE.................................................39 (b) FAILURE OF BORROWERS TO ELECT..............................................................40 2.16 FEES...............................................................................................40 (a) UNDERWRITING, ARRANGEMENT AND STRUCTURING FEE..............................................40 (b) ANNUAL ADMINISTRATIVE AGENT'S FEE..........................................................40 (c) UNUSED COMMITMENT FEE......................................................................40 (d) LETTER OF CREDIT FEES......................................................................41 (e) APPLICABLE FEE PERCENTAGES.................................................................41 (f) PAYMENT OF FEES; NONREFUNDABLE.............................................................42 2.17 MANNER AND APPLICATION OF PAYMENTS; CONTROL ACCOUNT MAINTENANCE; COMPUTATIONS......................42 (a) MANNER OF PAYMENT..........................................................................42 (b) APPLICATION OF PAYMENTS....................................................................43 (c) ADMINISTRATIVE AGENT MAINTENANCE OF CONTROL ACCOUNT........................................43 (d) DESIGNATED EUROPEAN ADMINISTRATIVE AGENT MAINTENANCE OF DESIGNATED EUROPEAN CONTROL ACCOUNT.......................................................................43 (e) CONTROL ACCOUNT CHARGES AND CREDITS; ADMINISTRATIVE AGENT REPORTS..........................44 (f) AUTHORIZATION TO CHARGE BANKING ACCOUNTS...................................................44 (g) COMPUTATIONS OF INTEREST AND FEES..........................................................45 (h) PAYMENT NOT ON BUSINESS DAY................................................................45 (i) FAILURE TO PAY IN ALTERNATE CURRENCY.......................................................45
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(j) ALTERNATE CURRENCY AMOUNTS.................................................................45 (k) PRESUMPTION OF PAYMENT IN FULL BY THE BORROWERS............................................46 2.18 LIBOR RATE LOANS: UNASCERTAINABLE RATE; ILLEGALITY; INCREASED COSTS................................46 (a) UNASCERTAINABLE RATE; ILLEGALITY; INCREASED COSTS..........................................46 (b) CANCELLATION OF REQUESTS; CONVERSION OF OUTSTANDINGS.......................................48 2.19 PRO RATA TREATMENT OF BANKS........................................................................48 2.20 EUROPEAN ECONOMIC AND MONETARY UNION...............................................................48 (a) EFFECTIVENESS OF PROVISIONS................................................................48 (b) REDENOMINATION OF ALTERNATIVE CURRENCIES...................................................49 (c) PAYMENTS BY THE ADMINISTRATIVE AGENT GENERALLY.............................................49 (d) BASIS OF ACCRUAL...........................................................................49 (e) ROUNDING...................................................................................49 (f) OTHER CONSEQUENTIAL CHANGES................................................................50 SECTION 3 CONDITIONS OF LENDING..................................................................................50 3.1 CONDITIONS PRECEDENT TO INITIAL LOANS...............................................................50 3.2 CONDITIONS PRECEDENT TO ALL LOANS...................................................................50 (a) REPRESENTATION BRINGDOWN...................................................................50 (b) NO DEFAULT; COMPLIANCE WITH TERMS..........................................................50 (c) NO MATERIAL ADVERSE CHANGE.................................................................51 (d) CONFIRMATION OF BORROWING BASE.............................................................51 (e) OTHER DELIVERIES...........................................................................51 SECTION 4 SECURITY INTEREST IN COLLATERAL; COLLATERAL REQUIREMENTS...............................................51 4.1 GRANT OF SECURITY INTEREST..........................................................................51 (a) DOMESTIC BORROWER COLLATERAL...............................................................51 (b) U.K. COLLATERAL............................................................................52 (c) GERMAN COLLATERAL..........................................................................52 4.2 PERFECTION..........................................................................................53 4.3 CHANGES AFFECTING PERFECTION........................................................................53 4.4 INSPECTION; VERIFICATION............................................................................54 4.5 REINSTATEMENT.......................................................................................54 4.6 TERMINATION OF SECURITY INTEREST; RELEASE OF COLLATERAL.............................................54 SECTION 5 REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO COLLATERAL.......................................56 5.1 GENERAL REPRESENTATIONS AS TO COLLATERAL............................................................56 5.2 REPRESENTATIONS AND WARRANTIES REGARDING ACCOUNTS...................................................57 5.3 TREATMENT OF ACCOUNTS AND GENERAL INTANGIBLES.......................................................57 5.4 LIEN PRIORITY.......................................................................................57 5.5 LIEN WAIVERS, LANDLORD WAIVERS, WAREHOUSE RECEIPTS..................................................58 5.6 MAINTENANCE OF INSURANCE............................................................................58 SECTION 6 GENERAL REPRESENTATIONS AND WARRANTIES.................................................................58 6.1 EXISTENCE...........................................................................................59 6.2 AUTHORIZATION; ENFORCEABILITY.......................................................................59 6.3 NO VIOLATION........................................................................................59 6.4 LITIGATION; PROCEEDINGS.............................................................................60 6.5 TAXES...............................................................................................60 6.6 TITLE...............................................................................................60 6.7 CONSENTS; APPROVALS.................................................................................60 6.8 LAWFUL OPERATIONS...................................................................................61
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6.9 ENVIRONMENTAL COMPLIANCE............................................................................61 6.10 ENVIRONMENTAL LAWS AND PERMITS.....................................................................62 6.11 ERISA..............................................................................................62 6.12 AGREEMENTS; ADVERSE OBLIGATIONS; LABOR DISPUTES....................................................62 6.13 FINANCIAL STATEMENTS; PROJECTIONS..................................................................63 (a) FINANCIAL STATEMENTS.......................................................................63 (b) FINANCIAL PROJECTIONS......................................................................63 6.14 INTELLECTUAL PROPERTY..............................................................................64 6.15 MERGER; OFFERING...................................................................................64 6.16 MERGER DOCUMENTS...................................................................................64 6.17 STRUCTURE; CAPITALIZATION..........................................................................64 6.18 VALUE; SOLVENCY....................................................................................65 6.19 INVESTMENT COMPANY ACT STATUS......................................................................65 6.20 REGULATION U/REGULATION X COMPLIANCE...............................................................65 6.21 YEAR 2000 COMPLIANCE...............................................................................65 6.22 FULL DISCLOSURE....................................................................................66 SECTION 7 COVENANTS OF THE BORROWERS.............................................................................66 7.1 REPORTING AND NOTICE COVENANTS......................................................................66 (a) QUARTERLY FINANCIAL STATEMENTS.............................................................66 (b) ANNUAL FINANCIAL STATEMENTS................................................................67 (c) OFFICER'S CERTIFICATE; MANAGEMENT DISCUSSION; STATEMENTS OF OPERATIONS.....................67 (d) ANNUAL BUSINESS PLAN.......................................................................68 (e) OTHER INFORMATION..........................................................................68 (f) NOTICES....................................................................................68 (g) NOTICE OF DEFAULT UNDER ERISA..............................................................69 (h) ENVIRONMENTAL REPORTING....................................................................69 (i) MULTIEMPLOYER PLAN WITHDRAWAL LIABILITY....................................................69 (j) SEC REPORTS AND REGISTRATION STATEMENTS....................................................69 (k) ANNUAL, QUARTERLY AND OTHER REPORTS TO SENIOR SUBORDINATED NOTEHOLDERS PURSUANT TO SENIOR SUBORDINATED NOTE INDENTURE........................................69 (l) PRESS RELEASES.............................................................................70 7.2 AFFIRMATIVE COVENANTS...............................................................................70 (a) CORPORATE EXISTENCE........................................................................70 (b) FINANCIAL RECORDS..........................................................................70 (c) FINANCIAL EXAMINATION AND REVIEW...........................................................70 (d) COMPLIANCE WITH LAW........................................................................70 (e) COMPLIANCE WITH ENVIRONMENTAL LAWS.........................................................71 (f) PROPERTIES.................................................................................71 (g) USE OF PROCEEDS............................................................................71 (h) COMPLIANCE WITH TERMS OF ALL MATERIAL CONTRACTS............................................72 (i) TAXES......................................................................................72 (j) INSURANCE..................................................................................72 (k) LICENSE TO THIRD PARTIES AND SUBSIDIARIES..................................................72 (l) CERTAIN SUBSIDIARIES TO JOIN IN SUBSIDIARY GUARANTY AND STOCK PLEDGE.......................73 (m) MOST FAVORED COVENANT STATUS...............................................................74 (n) HEDGE AGREEMENTS...........................................................................74 7.3 NEGATIVE COVENANTS..................................................................................75 (a) CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS .........................................75 (b) CREDIT EXTENSIONS; PREPAYMENTS; PAYMENTS OF SUBORDINATED DEBT..............................78
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(c) INDEBTEDNESS...............................................................................80 (d) LIENS......................................................................................82 (e) INVESTMENTS................................................................................84 (f) DISTRIBUTIONS; MANAGEMENT FEE..............................................................85 (g) CHANGE IN NATURE OF BUSINESS...............................................................86 (h) CHARTER AMENDMENTS.........................................................................86 (i) COMPLIANCE WITH ERISA......................................................................86 (j) REGULATION U COMPLIANCE....................................................................87 (k) ACCOUNTING CHANGES.........................................................................87 (l) ARM'S-LENGTH TRANSACTIONS..................................................................87 7.4 FINANCIAL COVENANTS.................................................................................87 (a) MINIMUM CONSOLIDATED NET WORTH.............................................................87 (b) MINIMUM CONSOLIDATED FIXED CHARGE COVERAGE RATIO...........................................88 (c) MINIMUM CONSOLIDATED EBIT TO CONSOLIDATED INTEREST EXPENSE RATIO...........................89 (d) CONSOLIDATED SENIOR FUNDED DEBT TO ADJUSTED EBITDA RATIO...................................89 (e) CONSOLIDATED TOTAL FUNDED DEBT TO ADJUSTED EBITDA RATIO....................................89 (f) MINIMUM CONSOLIDATED ADJUSTED EBITDA.......................................................90 (g) MAXIMUM CONSOLIDATED CAPITAL EXPENDITURES..................................................90 SECTION 8 EVENTS OF DEFAULT......................................................................................90 8.1 PAYMENT.............................................................................................90 8.2 REPRESENTATIONS AND WARRANTIES......................................................................91 8.3 REPORTING AND NOTICE PROVISIONS; VIOLATION OF CERTAIN AFFIRMATIVE COVENANTS.........................91 8.4 VIOLATION OF NEGATIVE COVENANTS AND FINANCIAL COVENANTS.............................................91 8.5 CROSS-DEFAULT.......................................................................................91 8.6 FALSE OR MISLEADING REPORTS.........................................................................91 8.7 DESTRUCTION OF COLLATERAL...........................................................................91 8.8 CHANGE OF CONTROL...................................................................................92 8.9 TERMINATION OF EXISTENCE............................................................................92 8.10 FAILURE OF ENFORCEABILITY OF THIS AGREEMENT, CREDIT DOCUMENT; SECURITY.............................92 8.11 ERISA..............................................................................................92 8.12 JUDGMENTS..........................................................................................92 8.13 FORFEITURE PROCEEDINGS.............................................................................93 8.14 FINANCIAL IMPAIRMENT...............................................................................93 SECTION 9 REMEDIES...............................................................................................93 9.1 ACCELERATION; TERMINATION...........................................................................93 9.2 AUTOMATIC ACCELERATION AND TERMINATION..............................................................93 9.3 GENERAL RIGHTS AND REMEDIES OF ADMINISTRATIVE AGENT AND THE BANKS...................................94 9.4 ADDITIONAL REMEDIES.................................................................................94 (a) POSSESSION OF COLLATERAL...................................................................94 (b) FORECLOSURE OF LIENS.......................................................................95 (c) DISPOSITION OF COLLATERAL..................................................................95 (d) APPLICATION OF COLLATERAL; APPLICATION OF LIQUIDATION PROCEEDS.............................95 9.5 APPOINTMENT OF ATTORNEY-IN-FACt.....................................................................96 9.6 SET-OFF.............................................................................................97 9.7 TERMINATION; EFFECT ON BORROWER OBLIGATIONS.........................................................97
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9.8 ACTIONS IN RESPECT OF THE LETTERS OF CREDIT UPON DEFAULT............................................98 9.9 LETTER OF CREDIT COLLATERAL ACCOUNT.................................................................98 (a) APPLICATION................................................................................98 (b) NO BORROWER OR THIRD PARTY CLAIMS..........................................................98 (c) NO LIENS OR TRANSFERS OF ACCOUNT...........................................................99 9.10 AUTHORITY TO EXECUTE TRANSFERS.....................................................................99 9.11 LIMITED LICENSE TO LIQUIDATE.......................................................................99 9.12 EQUALIZATION.......................................................................................99 9.13 REMEDIES CUMULATIVE...............................................................................100 SECTION 10 BORROWER GUARANTY....................................................................................100 10.1 DOMESTIC BORROWER CROSS-GUARANTY..................................................................100 10.2 MAXIMUM LIABILITY.................................................................................100 10.3 GUARANTY UNCONDITIONAL............................................................................100 10.4 DISCHARGE; REINSTATEMENT..........................................................................101 10.5 WAIVER............................................................................................101 10.6 STAY OF ACCELERATION..............................................................................102 10.7 SUBROGATION AND CONTRIBUTION RIGHTS...............................................................102 (a) GUARANTEED OBLIGATION AND CONTRIBUTION PAYMENTS...........................................102 (b) JOINDER; WAIVER...........................................................................103 SECTION 11 THE AGENTS...........................................................................................103 11.1 THE ADMINISTRATIVE AGENT..........................................................................103 11.2 DESIGNATED EUROPEAN ADMINISTRATIVE AGENTS.........................................................103 11.3 SYNDICATION AGENT.................................................................................104 11.4 NATURE OF APPOINTMENT.............................................................................104 11.5 AGENTS AS BANKS; OTHER TRANSACTIONS...............................................................104 11.6 INSTRUCTIONS FROM BANKS...........................................................................104 11.7 BANK'S DILIGENCE..................................................................................105 11.8 NO IMPLIED REPRESENTATIONS........................................................................105 11.9 SUB-AGENTS........................................................................................105 11.10 AGENTS' DILIGENCE................................................................................105 11.11 NOTICE OF DEFAULT................................................................................105 11.12 LIABILITY OF AGENTS..............................................................................106 11.13 INDEMNITY OF AGENTS..............................................................................106 11.14 RESIGNATION OF AGENT.............................................................................107 11.15 RESIGNATION OF DESIGNATED EUROPEAN ADMINISTRATIVE AGENTS.........................................107 SECTION 12 TRANSFERS AND ASSIGNMENTS............................................................................108 12.1 TRANSFER OF COMMITMENTS...........................................................................108 (a) PRIOR CONSENT.............................................................................108 (b) AGREEMENT; TRANSFER FEE...................................................................108 (c) NO PROHIBITED TRANSACTION.................................................................108 (d) NOTES.....................................................................................109 (e) PARTIES...................................................................................109 12.2 SALE OF PARTICIPATIONS............................................................................109 (a) BENEFITS OF PARTICIPANT...................................................................109 (b) RIGHTS RESERVED...........................................................................109 (c) NO DELEGATION.............................................................................110 (d) NO PROHIBITED TRANSACTION.................................................................110 12.3 CHANGE OF LENDING OFFICE; REPLACEMENT OF BANKS....................................................110 (a) CHANGE OF LENDING OFFICE..................................................................110 (b) REPLACEMENT OF BANKS......................................................................110 (c) EFFECT ON RIGHTS AND OBLIGATIONS..........................................................111
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12.4 CONFIDENTIALITY...................................................................................111 SECTION 13 INDEMNITIES..........................................................................................112 13.1 INCREASED COSTS...................................................................................112 13.2 RISK-BASED CAPITAL................................................................................112 13.3 TAXES.............................................................................................113 (a) TAXES; WITHHOLDING........................................................................113 (b) STAMP TAXES...............................................................................114 (c) OTHER TAXES...............................................................................114 (d) REQUEST FOR REFUND........................................................................114 (e) EXEMPTION CERTIFICATE.....................................................................114 (f) FURNISHING OF CERTIFICATE.................................................................115 (g) FILINGS TO CLAIM U.K. WITHHOLDING EXEMPTION OR REDUCTION..................................115 (h) RELATED TAX EXEMPTION FILINGS.............................................................116 (i) U.K. TAX CREDITS..........................................................................116 (j) SURVIVAL OF PROVISION.....................................................................117 13.4 LOSSES............................................................................................117 13.5 INDEMNIFICATION FOR REQUESTS......................................................................117 13.6 GENERAL INDEMNITY.................................................................................118 13.7 ENVIRONMENTAL INDEMNITY...........................................................................118 13.8 CERTIFICATE FOR INDEMNIFICATION...................................................................118 13.9 DUTY TO MITIGATE; STANDARD TREATMENT; REIMBURSEMENT LIMITATION PERIOD.............................119 SECTION 14 GENERAL..............................................................................................119 14.1 AMENDMENTS AND WAIVERS............................................................................119 14.2 GENERAL APPOINTMENT AS ATTORNEY-IN-FACT...........................................................120 (a) ADMINISTRATIVE AGENT NOT LIABLE...........................................................120 (b) PERFORMANCE BY ADMINISTRATIVE AGENT OF THE BORROWERS' OBLIGATIONS.........................121 14.3 JUDGMENT CURRENCY.................................................................................121 (a) CONVERSION................................................................................121 (b) DISCHARGE.................................................................................121 (c) COSTS OF CONVERSION.......................................................................121 14.4 CUMULATIVE PROVISIONS.............................................................................121 14.5 EFFECTIVE AGREEMENT; BINDING EFFECT...............................................................122 14.6 COSTS AND EXPENSES................................................................................122 14.7 SURVIVAL OF PROVISIONS............................................................................122 14.8 CAPTIONS..........................................................................................123 14.9 SHARING OF INFORMATION............................................................................123 14.10 INTEREST RATE LIMITATION.........................................................................123 14.11 LIMITATION OF LIABILITY..........................................................................124 14.12 ILLEGALITY.......................................................................................124 14.13 NOTICES..........................................................................................124 14.14 GOVERNING LAW....................................................................................125 14.15 ENTIRE AGREEMENT.................................................................................125 14.16 JURY TRIAL WAIVER................................................................................125 14.17 JURISDICTION.....................................................................................125 14.18 VENUE; INCONVENIENT FORUM........................................................................126 14.19 EXECUTION IN COUNTERPARTS; EXECUTION BY FACSIMILE................................................126
vii 9 EXHIBITS AND ANNEXES
Exhibit A-1 (Form of Revolving Credit Note) Exhibit A-2 (Form of Swing Line Note) Exhibit A-3 (Form of Term Note) Exhibit B-1 (Form of Credit Request) Exhibit B-2 (Form of Swing Line Request) Exhibit B-3 (Form of Letter of Credit Request) Exhibit C (Form of Rate Conversion/Continuation Request) Exhibit D-1 (Form of Stock Pledge -- Instron Corporation for Domestic Subsidiaries) Exhibit D-2 (Form of Share Charge -- Instron Corporation for Instron, Holdings, Ltd.) Exhibit D-3 (Form of Share Pledge -- Instron Corporation for Instron, GmbH) Exhibit D-4 (Form of Third Party Charge of Shares -- Instron Holdings, Ltd. for Instron Ltd.) Exhibit E-1 (Form of Collateral Assignment of Security Interest in Patents and Patent Applications) Exhibit E-2 (Form of Collateral Assignment of Security Interest in Trademarks and Licenses) Exhibit E-3 (Form of Collateral Assignment of Security Interest Copyrights) Exhibit F-1 (Form of Mortgage--Massachusetts) Exhibit F-2 (Form of Debenture --United Kingdom -- Instron, Ltd.) Exhibit F-3 (Form of Security Transfer Agreement -- German) Exhibit G (Form of Existing Lender Payout Letter) Exhibit H (Form of Advertising Permission Letter) Exhibit I (Form of Bank Assignment Agreement) Exhibit J (Form of Landlord Waiver) Exhibit K-1 (Form of Limited License Agreement -- Borrower) Exhibit K-2 (Form of Limited License Agreement -- Third Party) Exhibit L-1 (Form of Guaranty Agreement -- Domestic Subsidiaries) Exhibit L-2 (Form of Security Agreement -- Domestic Subsidiaries) Exhibit M (Form of Borrowing Base Certificate) Annex I Commitments Annex II Definitions Annex III Conditions Precedent to Initial Loans Annex IV Supplemental Schedule Annex V Additional Borrower Addendum Annex VI Interim Waiver of Certain Closing Conditions
viii 10 CREDIT AND SECURITY AGREEMENT U.S. $80,000,000 Dated as of September 29, 1999 INSTRON CORPORATION, a Massachusetts corporation, INSTRON, LTD., a corporation organized under the laws of the United Kingdom, and INSTRON SCHENCK TESTING SYSTEMS, GMBH, a corporation organized under the laws of the Federal Republic of Germany, and INSTRON WOLPERT GMBH, a corporation organized under the laws of the Federal Republic of Germany, the BANKS listed on the signature pages of this Agreement, and NATIONAL CITY BANK, a national banking association, as Administrative Agent for the Banks under this Agreement, each DESIGNATED EUROPEAN ADMINISTRATIVE AGENT designated pursuant to the terms hereof, each DESIGNATED SWING LINE LENDER designated pursuant to the terms hereof, and each DESIGNATED LETTER OF CREDIT ISSUER designated pursuant to the terms hereof, hereby agree as follows: SECTION 1 DEFINITIONS AND ACCOUNTING TERMS. 1.1 CERTAIN DEFINED TERMS. Certain capitalized terms used in this Agreement are defined on Annex II attached hereto and incorporated herein by reference. 1.2 COMPUTATION OF TIME PERIODS. In this Agreement, for the purpose of computing periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." 1.3 ACCOUNTING TERMS; CALCULATIONS. All accounting and financial terms not specifically defined herein shall be construed in accordance with GAAP as in effect from time to time. In all cases, such accounting and financial terms shall be applied on a basis consistent with those applied in the preparation of Instron Corporation's audited financial statements for its fiscal year ending December 31, 1998; provided, however, (a) that all financial statements shall reflect Instron Corporation's adoption of FAS 106 and (b) if any change in GAAP in itself affects the calculation of any financial covenant in Section 7.4 of this Agreement, the Borrower Representative may by written notice to the Administrative Agent, or the Administrative Agent may, or upon request by the Required Banks shall, by written notice to the Borrower Representative, require that such covenant thereafter be calculated in accordance with GAAP as in effect (and applied by Instron Corporation) immediately before such change in GAAP occurs. If any such notice is given, the compliance certificates delivered pursuant to Section 7.1(c) of this Agreement after such change occurs shall be accompanied by reconciliations of the difference between the calculation set forth therein and a calculation made in accordance with GAAP as in effect from time to time after such change occurs. The financial statements to be furnished to the Administrative Agent on behalf of the Banks pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved, except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Administrative Agent and, in each case, consented to by the Administrative Agent; provided that, if at any time the computations determining compliance with Section 7.4 utilize accounting principles different from those 11 utilized in the financial statements furnished to the Administrative Agent on behalf of the Banks, such computations shall set forth in reasonable detail a description of the differences and the effect thereof on such computations. 1.4 ADDITION OF BORROWERS. By execution of an Additional Borrower Addendum by a signatory thereof, and upon acceptance of such Additional Borrower Addendum by the Administrative Agent and the Required Banks and, to the extent applicable, the applicable Designated Swing Line Lender and Designated Letter of Credit Issuer, each in its sole discretion, and such signatory's satisfaction of all conditions and completion of all deliveries specified in such Additional Borrower Addendum, this Agreement shall be deemed amended so that such signatory shall become for all purposes a party to this Agreement as if an original signatory hereto and shall be admitted as a Borrower hereunder. Except to the extent this Agreement is expressly amended by the Additional Borrower Addendum in respect to such signatory Borrower, this Agreement shall be binding for all purposes upon such signatory Borrower as if an original signatory thereto. 1.5 AUTHORIZATION OF BORROWER REPRESENTATIVE. For purposes of this Agreement including, without limitation, Sections 1.3, 2.2, 2.10 and 2.11 of this Agreement, each of the Borrowers hereby: (i) authorizes the Borrower Representative to make such requests, give such notices or furnish such certificates to the Administrative Agent, the Banks or any Designated Swing Line Lender or Designated Letter of Credit Issuers as may be required or permitted by this Agreement for the benefit of such Borrower and to give any consents on behalf of such Borrower required by Section 12.1(a) of this Agreement in connection with assignments by Banks pursuant thereto and (ii) authorizes the Administrative Agent to treat such requests, notices, certificates or consents made, given or furnished by the Borrower Representative as having been made, given or furnished by such Borrower for purposes of this Agreement. Unless otherwise agreed to by the Administrative Agent, the Borrower Representative shall be the only Person entitled to make, give or furnish such requests, notices, certificates or requests directly to the Administrative Agent, the Banks or any Designated Swing Line Lender or Designated Letter of Credit Issuer for purposes of this Agreement. Each of the Borrowers agrees to be bound by all such requests, notices, certificates and consents and other such actions by the Borrower Representative and agrees that all notices to and demands upon the Borrower Representative in respect of any Borrower shall constitute effective notice to and demand upon such Borrower for all purposes hereof. In each case, the Administrative Agent, the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers shall be entitled to rely upon all such requests, notice, certificates and consents made, given or furnished by the Borrower Representative pursuant to the provisions of this Agreement or any other Loan Documents as being made or furnished on behalf of, and with the effect of irrevocably binding, such Borrower. 1.6 CONSTRUCTION OF TERMS GENERALLY. The definitions of terms in this Agreement shall apply equally to the singular and plural forms of the terms defined. Whenever the context requires, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes," and "including," shall be deemed to be followed by the phrase "without limitation." The word "will" shall be construed to have the same meaning as the word "shall." Unless the context otherwise requires, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument, or other document as from time to time amended, supplemented or otherwise modified (subject to any restriction on such amendments, supplements or modifications as may be set forth herein), (b) any reference herein 2 12 to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein," "hereof," and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its entirety and not any particular provision hereof, (d) all references to sections, Annexes and Exhibits shall be construed to refer to sections of, and Annexes and Exhibits to, this Agreement, and (e) unless the context or the provisions of this Agreement otherwise indicate, the words "assets" and "property" shall be construed to have the same meaning and effect and to refer to any and all real property, and tangible and intangible assets and properties, including cash, securities, accounts and contract rights and interests in any of the foregoing. 1.7 CURRENCY EQUIVALENTS. For purposes of this Agreement, except as otherwise specified herein, (i) the equivalent in Dollars of any Alternate Currency shall be determined by using the applicable Exchange Rate at which the Administrative Agent offers to exchange Dollars for such Alternate Currency at its Payment Office at 9:00 A.M. (local time at the Payment Office of the Administrative Agent) two Business Days prior to the date on which such equivalent is to be determined, (ii) the equivalent in any Alternate Currency of any other Alternate Currency shall be determined by using the applicable Exchange Rate at which the Administrative Agent offers to exchange such Alternate Currency for the equivalent in Dollars of such other Alternate Currency at its Payment Office at 9:00 A.M. (local time at the Payment Office of the Administrative Agent) two Business Days prior to the date on which such equivalent is to be determined, and (iii) the equivalent in any Alternate Currency of Dollars shall be determined by using the applicable Exchange Rate at which the Administrative Agent offers to exchange such Alternate Currency for Dollars at its Payment Office at 9:00 A.M. (local time at the Payment Office of the Administrative Agent) two Business Days prior to the date on which such equivalent is to be determined; provided, that (A) the equivalent in Dollars of each LIBOR Rate Loan made in an Alternate Currency shall be recalculated hereunder on each date that it shall be necessary (or the Administrative Agent shall elect) to determine the unused portion of each Bank's Commitment, or the amount of any Loan outstanding on such date; (B) for purposes of Sections 2.7(a), 2.12(e) and 2.10(b), the equivalent in Dollars of any Swing Line Loan denominated in an Alternate Currency shall be calculated by the applicable Designated European Administrative Agent: (x) on the date of the making of such Swing Line Loan or the Rate Continuation or Rate Conversion of such Swing Line Loan (y) on the first Business Day of each calendar month thereafter and (z) in any other case where the same is required or permitted to be calculated, on such other day as the such Designated European Administrative Agent may, in its sole discretion, consider appropriate; (C) the equivalent in Dollars of any unreimbursed drawing in respect of any Letter of Credit denominated in an Alternate Currency shall be determined at the time the drawing under such Letter of Credit was paid or disbursed by the applicable Designated Letter of Credit Issuer or the applicable Lending Installation thereof; (D) for purposes of Sections 2.1(a), 2.12(e) and 2.10(b), the equivalent in Dollars of any Revolving Credit Loan denominated in an Alternate Currency or the face amount of any Letter of Credit denominated in an Alternate Currency shall be calculated by the Administrative Agent (x) on the date of the making of such Loan, the Rate Continuation or Rate Conversion of such Loan, or the issuance of the respective Letter of Credit, as the case may be, (y) on the first Business Day of each calendar month thereafter and (z) in any other case where the same is required or permitted to be calculated, on such other day as the Administrative Agent may, in its sole discretion, consider appropriate; and (E) for purposes of Sections 2.16(c), 2.16(d)(i) and 2.16(d)(ii), the equivalent in Dollars of any Loan denominated in an Alternate Currency or the face amount of any Letter of Credit denominated in an Alternate Currency shall be calculated on the first day of each calendar month in the quarterly period in which the respective payment is due pursuant to said Sections. 3 13 1.8 LIABILITY OF BORROWERS. The parties intend that this Agreement shall in all circumstances be interpreted to provide that each Foreign Borrower is liable only for Loans made to such Borrower, interest on such Loans, such Foreign Borrower's guaranty pursuant to Section 2.12(l)(ii) of reimbursement obligations owing to the Designated Letter of Credit Issuer by its Foreign Subsidiaries, and its Ratable Borrower Share of otherwise unallocated general fees, reimbursements and charges hereunder and under any other Loan Document. The parties likewise intend that this Agreement shall in all circumstances be interpreted to provide, unless otherwise expressly stated to the contrary, that each Domestic Borrowers and each Domestic Subsidiary which is a party to a Subsidiary Guaranty is liable for all Obligations of all of the Borrowers. SECTION 2 STATEMENT OF TERMS. 2.1 REVOLVING CREDIT FACILITY. (a) REVOLVING CREDIT LOANS. Subject to the terms and conditions set forth in this Agreement, each Bank severally agrees to make, from time to time from and after the Closing Date until the Business Day immediately preceding the Revolving Credit Termination Date, Loans, denominated in Dollars or Alternate Currency, to or for the account of each of the Borrowers on a revolving credit basis (each a "Revolving Credit Loan"); provided, however, that (i) the outstanding principal amount of Revolving Credit Loans by or on behalf of such Bank to such Borrower, when taken together with the outstanding principal amount of Revolving Credit Loans made by or on behalf of such Bank to all other Borrowers, shall not at any time exceed the lesser of: (x) an amount equal to such Bank's Ratable Portion of the Borrowing Base at such time minus the sum of the LC Exposure of such Bank at such time and the Swing Line Exposure of such Bank at such time or (y) such Bank's Revolving Credit Commitment in effect at such time minus the sum of the LC Exposure of such Bank at such time and the Swing Line Exposure of such Bank at such time, and (ii) in any event, no Revolving Credit Loans may be made in an Alternate Currency if after giving effect thereto the Dollar equivalent of the aggregate outstanding principal amount of all Revolving Credit Loans denominated in all Alternate Currencies, together with the Dollar equivalent of the aggregate Alternate Currency LC Exposure and the aggregate Alternate Currency Swing Line Exposure of all Banks, would exceed Thirty Million Dollars ($30,000,000) (the "Alternate Currency Sublimit"). Within the limits set forth in this Agreement, a Borrower may borrow, prepay and reborrow Revolving Credit Loans made to such Borrower. (b) REVOLVING CREDIT BORROWINGS. Each Revolving Credit Borrowing to a Borrower shall be: (i) if comprised of Alternate Base Rate Loans, in an amount of not less than Five Hundred Thousand Dollars ($500,000), or an integral multiple of Fifty Thousand Dollars ($50,000) in excess thereof, (ii) if comprised of LIBOR Rate Loans denominated in Dollars, in an aggregate amount of not less than One Million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars ($100,000) in excess thereof, and (iii) if comprised of LIBOR Rate Loans denominated in an Alternate Currency, in an aggregate amount of not less than the Alternate Currency equivalent of One Million Dollars ($1,000,000) or an integral multiple of the Alternate Currency equivalent of One Hundred Thousand Dollars ($100,000) in excess thereof. Each Borrowing denominated in an Alternate Currency may only be a LIBOR Rate Borrowing and not an Alternate Base Rate Borrowing. Each 4 14 Borrower shall be entitled to have more than one Revolving Credit Borrowing outstanding at one time; provided, however, that no Borrower shall be entitled to request a Revolving Credit Borrowing which, together with all outstanding Revolving Credit Borrowings, Term Borrowings and Swing Line Loans to all Borrowers, would result in an aggregate of more than twenty-five (25) Borrowings (for purposes of determining the number of outstanding Borrowings, outstanding Alternate Base Rate Loans of all of the Domestic Borrowers shall be treated as a separate Borrowing and all outstanding Swing Line Loans to each Borrower shall be treated as a separate Borrowing by such Borrower) outstanding at any one time to all of the Borrowers. (c) REVOLVING CREDIT NOTES; LOAN ACCOUNT. Each Bank's Revolving Credit Loans to a Borrower shall be evidenced at all times by a Revolving Credit Note which shall (i) be executed and delivered by the Borrower and payable to the order of such Bank and (ii) be in a stated principal amount equal to the Revolving Credit Commitment of such Bank and be payable to the order of such Bank in an amount equal to the unpaid principal amount of such Bank's Revolving Credit Loans evidenced thereby, (iii) mature on the Revolving Credit Termination Date, (iv) bear interest as provided in this Agreement, (v) be subject to mandatory prepayment as provided in Section 2.10, and (vi) be entitled to the benefits of this Agreement and the other Loan Documents. Whenever a Borrower obtains a Revolving Credit Borrowing, each Bank shall endorse an appropriate entry in respect of the Revolving Credit Loan of such Bank comprising such Borrowing on such Bank's Revolving Credit Note or make an appropriate entry in a loan account (the "Loan Account") maintained in such Bank's books and records, or both, to evidence such Bank's Revolving Credit Loans to such Borrower. The Loan Account shall also evidence: (i) accrued interest on the Revolving Credit Loans of such Bank to each Borrower, (ii) all other amounts due to the Bank in respect of such Revolving Credit Loans, and (iii) all payments made by each Borrower in respect of such Revolving Credit Loans. Each entry on a Bank's Revolving Credit Note, books and records or Loan Account shall be prima facie evidence of the data entered. Such entries by a Bank shall not be a condition to any Borrower's obligation to repay the Obligations. 2.2 REQUESTS FOR REVOLVING CREDIT BORROWINGS. Revolving Credit Loans comprising a Revolving Credit Borrowing shall be made upon request of a Borrower in accordance with clause (a) below or upon a request deemed to be made by a Borrower pursuant to clause (b) below. (a) CREDIT REQUESTS EXECUTED BY BORROWER REPRESENTATIVE. (i) Requests from a Borrower for Revolving Credit Loans shall be given by the Borrower Representative to the Administrative Agent or, to the extent that a Designated European Administrative Agent has been designated for any Borrower, the Designated European Administrative Agent designated for such Borrower, as the case may be, not later than 12:00 noon (local time at the Notice Office of the Administrative Agent or such Designated European Administrative Agent): (i) on the Business Day which is the requested date of a proposed Revolving Credit Borrowing comprised of Alternate Base Rate Loans, (ii) on the Business Day which is two (2) Business Days before the requested date of a proposed Revolving Credit Borrowing comprised of LIBOR Rate Loans 5 15 denominated in Dollars (provided that any Revolving Credit Borrowing comprised of LIBOR Rate Loans being requested to be advanced on the Closing Date shall not require such two (2) Business Day prior notice), and (iii) on the Business Day which is four (4) Business Days before the requested date of a proposed Revolving Credit Borrowing comprised of LIBOR Rate Loans denominated in an Alternate Currency. Each such request (a "Credit Request") for a Revolving Credit Loan shall be a written or telephonic notice (in the case of a telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent or such Designated European Administrative Agent, as the case may be). Each written Credit Request or written confirmation thereof shall be substantially in the form of Exhibit B-1 attached hereto, signed by the Borrower Representative and transmitted by the Borrower Representative to the Administrative Agent or such Designated European Administrative Agent, as the case may be, by telecopier. Each written and telephonic Credit Request and each confirmation thereof shall specify: (A) the Borrower which is to receive the proceeds of the Loans, (B) the requested date of advance of the Loans comprising such Borrowing, (C) the aggregate amount of such Loans, (D) whether such Borrowing is to be comprised of Alternate Base Rate Loans or LIBOR Rate Loans, (E) in the case of a proposed Borrowing comprised of LIBOR Rate Loans, the initial Interest Period for such LIBOR Rate Loans, and (F) in the case of a proposed Borrowing comprised of LIBOR Rate Loans, the currency, if other than Dollars, in which such LIBOR Rate Loans are being requested. Each Credit Request by or on behalf of a Borrower shall be irrevocable and binding on such Borrower and be subject to the indemnification provisions of Section 13 of this Agreement. The Administrative Agent and such Designated European Administrative Agent may rely on such telephonic Credit Request to the same extent that such Agents may rely on a written Credit Request. The Borrower for which a Credit Request was made shall bear all risks related to the giving of such Credit Request by the Borrower Representative whether given telephonically or by such other method of transmission as the Borrower Representative shall elect. (ii) In the case of a proposed Revolving Credit Borrowing comprised of LIBOR Rate Loans denominated in an Alternate Currency, the obligation of each Bank to make its LIBOR Rate Loan in the requested Alternate Currency as part of such Revolving Credit Borrowing is subject to: (A) if such requested Alternate Currency is an Alternate Currency described in clause (i) of the definition of the term Alternate Currency, confirmation to the Borrower Representative by the Administrative Agent or the Designated European Administrative Agent designated for the Borrower for which the Credit Request is made, as the case may be, not later than four (4) Business Days before the requested date of such Revolving Credit Borrowing that such Alternate Currency is readily and freely transferable and convertible into Dollars, or (B) if such requested Alternate Currency is not an Alternate Currency described in clause (i) of the definition of the term Alternate 6 16 Currency, confirmation to the Notice Office of the Administrative Agent or such Designated European Administrative Agent, as the case may be, by each Bank not later than four (4) Business Days before the requested date of such Revolving Credit Borrowing that such Alternate Currency is acceptable to such Bank. The Administrative Agent or such Designated European Administrative Agent shall promptly notify the Borrower Representative and each of the Banks in the event that: (x) all of the Banks affirmatively confirm such Alternate Currency is acceptable as required by clause (B) above and (y) one or more of the Banks do not affirmatively confirm such Alternate Currency is acceptable as required by clause (B) above. If the Administrative Agent or such Designated European Administrative Agent has not provided the affirmative confirmation referred to in clause (A) above or has notified the Borrower Representative that not all of the Banks have affirmatively confirmed acceptability of the Alternate Currency as required by clause (B), the Borrower Representative may, by notice to the Administrative Agent at the Notice Office thereof not later than three (3) Business Days before the requested date of such Revolving Credit Borrowing, withdraw the Credit Request relating to such requested Revolving Credit Borrowing. If the Borrower Representative withdraws such Credit Request, the Revolving Credit Borrowing requested in such Credit Request shall not occur and the Administrative Agent or such Designated European Administrative Agent shall promptly notify each of the Banks of such withdrawal. If the Borrower Representative does not withdraw such Credit Request, the Administrative Agent or such Designated European Administrative Agent, as the case may be, shall promptly notify each of the Banks, and such Credit Request shall be deemed to be a Credit Request which requests a Revolving Credit Borrowing comprised of LIBOR Rate Loans denominated in Dollars in an aggregate amount equal to the Dollar equivalent, on the date the Administrative Agent or such Designated European Administrative Agent notifies each of the Banks, of the amount of the originally requested Revolving Credit Borrowing denominated in the Alternate Currency. Such notice of continued Credit Request by the Administrative Agent or such Designated European Administrative Agent to each of the Banks shall state such aggregate amount of such Revolving Credit Borrowing in Dollars and such Bank's ratable portion of such Revolving Credit Borrowing. (b) DEEMED CREDIT REQUESTS. A Borrower shall be deemed to have made a request for a Borrowing (a "Deemed Credit Request"), which Deemed Credit Request shall be deemed to be irrevocable, upon the occurrence of any of the following (i) LETTER OF CREDIT DRAWING. As specified in Section 2.12(f) of this Agreement, upon a failure of a Borrower to reimburse any Designated letter of Credit Issuer with respect to a drawing under a Letter of Credit, the applicable Borrower, or, in the case of a Letter of Credit issued for the account of a Letter of Credit Obligor that is not a Borrower, the Borrower guarantying reimbursement of such Letter of Credit Obligor pursuant to Section 2.12(l) of this Agreement, shall be deemed to have made a Deemed Credit Request for a Revolving Credit Borrowing comprised of Alternate Base Rate Loans denominated in Dollars in an 7 17 amount equal to the amount necessary to reimburse the applicable Designated Letter of Credit Issuer for such drawing. (ii) SWING LINE LOAN REFUNDING. As specified in Section 2.7(j) of this Agreement, upon a demand by a Designated Swing Line Lender for a refunding of outstanding Swing Line Loans advanced to a Borrower, such Borrower shall be deemed to have made a Deemed Credit Request for a Revolving Credit Borrowing comprised of LIBOR Rate Loans denominated in Dollars in an amount equal to the amount necessary to refund the applicable Designated Swing Line Lender for such outstanding Swing Line Loans. (iii) PAYMENT OF INTEREST AND OBLIGATIONS. Upon the occurrence of any interest, fee or other payment Obligation of a Borrower hereunder becoming due without payment, such Borrower shall be deemed to have made a Deemed Credit Request for a Revolving Credit Borrowing comprised of Alternate Base Rate Loans in an amount equal to the amount necessary to pay such interest, fee or payment Obligation. Each Bank acknowledges and agrees that its obligation to participate in and make Loans comprising a Borrowing pursuant to a Deemed Credit Request is absolute and unconditional and shall not be affected by any event or circumstance whatsoever, including the occurrence of any Potential Default or Event of Default hereunder or the failure of any condition precedent set forth in Section 3 of this Agreement to be satisfied at the time of the making of such Deemed Credit Request, and each Loan made by a Bank in satisfaction of its obligation shall be made without any offset, abatement, withholding or reduction whatsoever. 2.3 FUNDING OF REVOLVING CREDIT LOANS. The Administrative Agent or the Designated European Administrative Agent designated for the Borrower for which a Credit Request is made, as the case may be, shall notify each Bank of a Credit Request or Deemed Credit Request not later than 1:00 p.m. (local time at the Payment Office of the Administrative Agent or such Designated European Administrative Agent, as the case may be) on the date received by telecopier, telephone or similar form of transmission. Each Bank shall, before 2:00 p.m. (local time at the Payment Office of the Administrative Agent or such Designated European Administrative Agent, as the case may be) on the date of each Revolving Credit Borrowing requested for a Borrower, make available to the Administrative Agent or such Designated European Administrative Agent, as the case may be, in Dollars or, subject to Section 2.2(a)(ii), the applicable Alternate Currency, in immediately available funds at the account of the Administrative Agent or such Designated European Administrative Agent, as the case may be, maintained at the Payment Office of the Administrative Agent or such Designated European Administrative Agent, as the case may be, as shall have been notified by the Administrative Agent or such Designated European Administrative Agent, as the case may be, to the Banks prior to such date, such Bank's Ratable Portion of the Revolving Credit Loans comprising such Revolving Credit Borrowing. On the date specified for a Revolving Credit Borrowing in such Credit Request (or, in the case of a Deemed Credit Request, on the earliest dated permitted after the receipt of Credit Request hereunder), after receipt by the Administrative Agent or such Designated European Administrative Agent, as the case may be, of the funds representing a Bank's Ratable Portion of such Revolving Credit Borrowing and subject to the terms of this Agreement and the fulfillment of the conditions set forth in Section 3 of this Agreement, the Administrative Agent or such 8 18 Designated European Administrative Agent shall promptly make such Revolving Credit Loan of such Bank available to the Borrower specified in the Credit Request or with respect to which the Deemed Credit Request is applicable, in immediately available funds, by wire transfer or intrabank transfer to: (A) the Operating Account of such Borrower or (B) such other account of such Borrower as the Administrative Agent or such Designated European Administrative Agent, as the case may be, and the Borrower Representative shall have agreed upon from time to time for this purpose; provided, however, that, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, the Administrative Agent or such Designated European Administrative Agent, as the case may be, shall return the amounts so received to the respective Banks. 2.4 AVAILABILITY OF FUNDS. Subject to Section 2.2(a)(ii) of this Agreement, unless the Administrative Agent or the applicable Designated European Administrative Agent shall have received notice from a Bank prior to the date (or, in the case of Alternate Base Rate Loans, prior to the time) of any Revolving Credit Borrowing that such Bank will not make available to the Administrative Agent or such Designated European Administrative Agent, such Bank's Ratable Portion of the Revolving Credit Borrowing, the Administrative Agent or such Designated European Administrative Agent may assume that such Bank has made its Ratable Portion of the Revolving Credit Borrowing available to the Administrative Agent or such Designated European Administrative Agent on the date of the Revolving Credit Borrowing in accordance with Section 2.3 of this Agreement. In reliance upon such assumption, the Administrative Agent or such Designated European Administrative Agent may, but shall not be obligated to, make available on such date to the Borrower, specified in the Credit Request or to which the Deemed Credit Request is applicable, a corresponding portion of the Revolving Credit Borrowing. Any disbursement by the Administrative Agent or such Designated European Administrative Agent in reliance on such assumption shall be deemed to be a Revolving Credit Loan by such Bank. 2.5 FAILURES TO FUND LOANS OR PARTICIPATING INTERESTS. If, and to the extent that, any Bank fails to make available to the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, the amount of such Bank's Ratable Portion of any Revolving Credit Borrowing pursuant to Section 2.3 hereof (or pursuant to Section 2.7(j) or 2.12(f) hereof in connection with Deemed Credit Requests for Revolving Credit Loan refunding of Swing Line Loans or payment of unpaid reimbursement obligations hereunder) or Term Borrowing pursuant to Section 2.8(d) made available to a Borrower by the Administrative Agent or such Designated European Administrative Agent pursuant to Section 2.4 hereof or fails to make available to the Administrative Agent or such Designated European Administrative Agent the amount of such Bank's participation purchase price payable for its participating interest in outstanding Swing Line Loans to such Borrower or unpaid reimbursement obligations owing by such Borrower (pursuant to Section 2.7(k) or 2.12(f) hereof), such Bank shall pay such amount to the Administrative Agent or such Designated European Administrative Agent, as the case may be, for application pursuant to this Section immediately upon demand by the Administrative Agent or such Designated European Administrative Agent therefor. To the extent such Bank does not pay such amount to the Administrative Agent or such Designated European Administrative Agent, as the case may be, forthwith upon such demand by the Administrative Agent or such Designated European Administrative Agent, the Administrative Agent or such Designated European Administrative Agent, as the case may be, shall promptly request payment thereof from such Borrower, and such Borrower shall immediately pay such amount to the Administrative Agent or such Designated European Administrative Agent for application pursuant to this Section. Such Bank and such Borrower shall be severally liable to pay interest to 9 19 the Administrative Agent or such Designated European Administrative Agent, as the case may be, for application pursuant to this Section on such amount for each day from the date such amount should otherwise have been made available to the Administrative Agent or such Designated European Administrative Agent until the date any such amount is paid to the Administrative Agent or such Designated European Administrative Agent, as the case may be, by such Bank or such Borrower, as the case may be, at a per annum rate of interest equal to: (x) if paid by such Bank, the Federal Funds Effective Rate in the case of the Administrative Agent or Cost of Funds Rate in the case of such Designated European Administrative Agent or (y) if paid by such Borrower, the interest rate applicable to such Revolving Credit Borrowings or Term Borrowings. (a) CONTINUING OBLIGATION OF BORROWERS. Failure of any Bank to fund its Ratable Portion of any Revolving Credit Borrowing or Term Borrowing or to pay the participation purchase price for its participating interests hereunder shall not relieve or excuse the performance by any Borrower of any of such Borrower's duties or obligations hereunder. (b) PAYMENT CONSTITUTING RATABLE PORTION. If such Bank pays to the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, the Bank's Ratable Portion of such Revolving Credit Borrowing, Term Borrowing or participation purchase price for its participating interests hereunder prior to repayment of such amount by the applicable Borrower, the amount so repaid shall constitute such Bank's Ratable Portion of such Revolving Credit Borrowing, Term Borrowing or participation purchase price for its participating interest. Such payment shall be applied as if paid when otherwise required hereunder and shall be applied as provided in Section 2.3, 2.7(j), 2.12(f), 2.7(k) or 2.12(f) hereof, as the case may be. In such circumstances, such Borrower shall have no further obligation to make the payment required by this Section. (c) TREATMENT OF BANK FAILING TO FUND. To the extent any Bank fails to make available to the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, such Bank's Ratable Portion of Revolving Credit Borrowings or Term Borrowings hereunder or such Bank's participation purchase price for its participating interests hereunder, the Administrative Agent or such Designated European Administrative Agent shall not be obligated to transfer to such Bank any payments made by a Borrower to the Administrative Agent or such Designated European Administrative Agent for the benefit of such Bank until such Bank's cure of such failure. Until the earlier of such Bank's cure of such failure or the termination of the Commitments of the Banks and the Aggregate Swing Line Commitment of the Designated Swing Line Lenders, all amounts repaid to the Administrative Agent or such Designated European Administrative Agent, as the case may be, by a Borrower which would otherwise be required to be applied to such Bank's Ratable Portion of the Obligations shall be advanced to such Borrower, the affected Designated Swing Line Lender or Designated Letter of Credit Issuer, as applicable, by the Administrative Agent or such Designated European Administrative Agent, as the case may be, on behalf such Bank to cure, in full or in part, the failure by such Bank, but shall nevertheless be deemed to have been paid to such Bank in satisfaction of the Obligations to which such payment would otherwise have been applied. 10 20 (d) CONTINUING OBLIGATION OF BANKS TO FUND. It is understood that: (i) a Bank shall not be responsible for any failure by any other Bank to perform its obligation to make any Loans hereunder or make payments of any participation purchase price for its participating interest hereunder, (ii) the Commitment of a Bank shall not be increased or decreased as a result of any failure by any other Bank to perform its obligation to make any Loans hereunder or pay any participation purchase price, (iii) failure by any Bank to perform its obligation to make any Loans hereunder or pay the participation purchase price for its participating interests hereunder shall not excuse any other Bank from its obligation to make any Loans hereunder or pay any participation purchase price for its participating interests hereunder, and (iv) the obligations of each Bank hereunder shall be individual and several, not joint and several. (e) DEFAULTING LENDER; OBLIGATIONS OF DESIGNATED SWING LINE LENDERS AND LETTER OF CREDIT ISSUERS. In the circumstance that any Defaulting Lenders exist, no Designated Swing Line Lender or Designated Letter of Credit Issuer shall be required to make or issue, as the case may be, any Swing Line Loan or Letter of Credit unless such Designated Swing Line Lender or Designated Letter of Credit Issuer have entered into arrangements with the applicable Borrowers satisfactory to such Designated Swing Line Lender or Designated Letter of Credit Issuer and the Borrower Representative which either (i) eliminate such Designated Swing Line Lender's or Designated Letter of Credit Issuer's risk with respect to the refunding of or participation in Swing Line Loans and Letters of Credit by such Defaulting Lender, including creation of a cash collateral account to assure payment of such Defaulting Lender's Ratable Portion of outstanding Swing Line Obligations and Letter of Credit Obligations or (ii) provide that the making of such Swing Line Loan or the issuance of the Letter of Credit, taking into account the potential failure of such Defaulting Lender to refund or purchase participating interests therein, will not cause the Designated Swing Line Lender or Designated Letter of Credit Issuer, as the case may be, to incur aggregate credit exposure hereunder with respect to Revolving Credit Loans made thereby and Swing Line Obligations and Letter of Credit Obligations owing thereto to be in excess of its Revolving Credit Commitment (such applicable Borrower agreeing not to thereafter incur Revolving Credit Loans or Swing Line Obligations and Letter of Credit Obligations hereunder which would cause such aggregate excess exposure). 2.6 AFFILIATED FUNDING THROUGH, ON BEHALF OF, OR BY BANKS. (a) SPC FUNDING ON BEHALF OF BANKS. Notwithstanding anything to the contrary contained herein, all or any part of a Loan that any Bank or Designated Swing Line Lender (an "Obligated Bank") may be obligated to fund pursuant to this Agreement may be funded on such Bank's behalf by a special purpose funding vehicle (an "SPC"); provided, however, that, (a) if any SPC fails to fund all or any part of such Loan, the Obligated Bank shall be obligated to fund such Loan pursuant to the terms hereof, (b) in no event shall any such funding by any SPC increase the costs or expenses for which any Borrower is liable under this Agreement and (c) in no event shall any such funding through any SPC subject any Borrower to any Taxes or other Taxes without such Obligated Bank's being subject to the exercise by the Borrowers of their rights under Section 12.3 of this Agreement. The funding of a Loan by an SPC hereunder shall utilize the Commitment of the Obligated Bank to the same 11 21 extent, and as if, such Loan were funded by such Obligated Bank, and for purposes of this Agreement, such Loan shall be deemed to have been made by such Obligated Bank. Each party hereto hereby agrees that: (i) no SPC shall be liable for any indemnity or payment under this Agreement for which such Obligated Bank would otherwise be liable and (ii) the SPC shall act only on behalf of and through the Obligated Bank and shall have no rights hereunder or otherwise with respect to any Borrower independent of those of such Obligated Bank hereunder. Notwithstanding anything to the contrary contained in this Agreement, any SPC may disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or guarantee for such SPC's obligations which has agreed in writing to be bound by the provisions of Section 12.4 hereof. This Section 2.6 may not be amended without the prior written consent of each Obligated Bank which has notified Borrower Representative and the Administrative Agent that all or any part of any of its Loans is being funded by an SPC at the time of such amendment. (b) FUNDING BY BANKS, DESIGNATED SWING LINE LENDERS, AND DESIGNATED LETTER OF CREDIT ISSUERS THROUGH OR ON BEHALF OF LENDING INSTALLATIONS. Notwithstanding anything to the contrary contained herein, all or any part of a Loan that any Obligated Bank may be obligated to fund pursuant to this Agreement (i) may be funded by such Bank on behalf of such Bank's Lending Installation or (ii) may be funded on such Bank's behalf by such Bank by and through any such Lending Installation; provided that, (a) if any Lending Installation fails to fund all or any part of such Loan, the Obligated Bank shall be obligated to fund such Loan pursuant to the terms hereof, (b) in no event shall any such funding by any Lending Installation increase the costs or expenses for which any Borrower is liable under this Agreement and (c) in no event shall any such funding on behalf of or through any such Lending Installation subject any Borrower to any Taxes or other Taxes without such Obligated Bank's being subject to the exercise by the Borrowers of their rights under Section 12.3 of this Agreement. The funding of a Loan by a Lending Installation hereunder shall utilize the Commitment of the Obligated Bank to the same extent, and as if, such Loan were funded by such Obligated Bank, and for purposes of this Agreement, such Loan shall be deemed to have been made directly by such Obligated Bank. The funding of a Loan by such Lending Installation on behalf of its Obligated Bank hereunder shall utilize the Commitment of the Obligated Bank to the same extent, and as if, such Loan were funded by such Obligated Bank for its own account, and for purposes of this Agreement, such Loan shall be deemed to have been made by such Obligated Bank for the account of the Obligated Bank. Any payments made by any Borrower to the Obligated Bank or its Lending Installation shall be applied in reduction of the Obligations owing by such Borrower to the Obligated Bank and shall automatically reduce on dollars for dollar any related account of the Lending Installation with respect to such Obligations to the Obligated Bank. Each party hereto hereby agrees that the Lending Installation shall have no rights hereunder or otherwise with respect to any Borrower independent of those of such Obligated Bank hereunder but shall by reason of its acceptance of its selection as a Lending Installation, otherwise be deemed subject to the terms and conditions hereof. This Section 2.6 may not be amended without the prior written consent of each Obligated Bank which has notified Borrower Representative and the Administrative Agent that all or any part of any of its Loans is being funded on such Bank's behalf through a Lending Installation at the time of such amendment. 12 22 2.7 SWING LINE LOAN FACILITY. (a) SWING LINE LOANS. Subject to the terms and conditions set forth in this Agreement, each Foreign Borrower having a Designated Swing Line Lender designated for such Borrower hereunder may request such Designated Swing Line Lender to make, and each such Designated Swing Line Lender is irrevocably authorized by the Administrative Agent, the Designated European Administrative Agent designated for such Borrower and the Banks to make and severally agrees to make directly or through its Lending Installation, from time to time from and after the Closing Date until the Business Day immediately preceding the Swing Line Termination Date, Loans denominated in Dollars or Alternate Currency to or for the account of such Borrower on a revolving credit basis (each a "Swing Line Loan"); provided, however, that the aggregate principal amount of Swing Line Loans advanced by all Designated Swing Line Lenders outstanding at any time shall not exceed the lesser of: (i) Five Million Dollars ($5,000,000) or the Alternate Currency equivalent thereof (the "Aggregate Swing Line Commitment") or (ii) the lesser of the aggregate Revolving Credit Commitments of the Banks in effect at such time or the Borrowing Base minus the sum of the aggregate principal amount of the Revolving Credit Loans of the Banks outstanding at such time and the aggregate LC Exposure of the Banks at such time. Within the limits set forth herein, a Borrower may borrow, pay or prepay and reborrow Swing Line Loans advanced to such Borrower. (b) CONDITIONS TO SWING LINE LOANS. (i) CONDITION PRECEDENT TO SWING LINE LOANS. The Foreign Borrowers shall be entitled to request Swing Line Loans only from and after the time during or upon expiration of the Syndication Period to the extent that the Administrative Agent has designated a Designated European Administrative Agent which Designated European Administrative Agent has been assigned a minimum of at least $5,000,000 of an initial Bank's rights and obligations under this Agreement and of the Revolving Credit Commitment of such initial Bank hereunder. (ii) CONDITIONS TO CESSATION OF ADVANCE OF SWING LINE LOANS. If the conditions to borrowing Swing Line Loans pursuant to Section 3.2 hereof cannot be satisfied with respect to one or more of the Borrowers, the Borrower Representative shall, and any Bank, Designated Swing Line Lender or Lending Installation may, give immediate written notice (a "Non-Compliance Notice") of such failure to the Designated European Administrative Agent and each Designated Swing Line Lender, as the case may be, and the Designated European Administrative Agent shall promptly provide each Bank and the Administrative Agent at the Notice Office of such Bank and the Administrative Agent with a copy of such Non-Compliance Notice. If the conditions for borrowing under Section 3.2 hereof cannot be satisfied, the Required Banks may by telephonic or written notice to the Designated European Administrative Agent instruct the Designated European Administrative Agent to direct the Designated Swing Line Lenders to cease, and the Designated European Administrative Agent shall by telephonic or written notice to the Designated Swing Line Lenders promptly 13 23 direct the Designated Swing Line Lenders to cease, and thereupon the Designated Swing Line Lenders shall immediately cease, making Swing Line Loans to the Borrowers for which such Designated Swing Line Lender is designated until the conditions to borrowing are satisfied or waived in accordance with Section 14.1 hereof. Unless the Designated European Administrative Agent so directs the Designated Swing Line Lenders to cease making Swing Line Loans, each Designated Swing Line Lender may, but is not obligated to, continue to make (subject to the limitations of Section 2.7(a) hereof) Swing Line Loans one (1) Business Day after the Non-Compliance Notice is furnished to the Banks by the applicable Designated European Administrative Agent. (c) SWING LINE BORROWINGS. The Swing Line Loans to a Borrower shall be comprised of one or more Swing Line Borrowings from the Designated Swing Line Lender designated for such Borrower as such Borrower may elect from time to time. Each Swing Line Borrowing advanced to a Borrower by the Designated Swing Line Lender designated for such Borrower shall be: (i) if denominated in Dollars, in an aggregate amount of not less than Two Hundred and Fifty Thousand Dollars ($250,000) or an integral multiple of One Hundred Thousand Dollars ($100,000) in excess thereof, and (ii) if denominated in an Alternate Currency, in an aggregate amount of not less than the Alternate Currency equivalent of Two Hundred and Fifty Thousand Dollars ($250,000) or an integral multiple of the Alternate Currency equivalent of One Hundred Thousand Dollars ($100,000) in excess thereof. Each Borrower shall be entitled to have more than one Swing Line Borrowing outstanding at one time; provided, however, that no Borrower shall be entitled to request a Swing Line Borrowing which would result in an aggregate of more than ten (10) Swing Line Borrowings from the applicable Designated Swing Line Lender for such Borrower outstanding at any one time to such Borrower. (d) SWING LINE LOAN REQUESTS. Requests for Swing Line Loans for a Borrower shall be given by the Borrower Representative to the Designated European Administrative Agent designated for such Borrower not later than 2:00 p.m. (local time at the Notice Office of such Designated European Administrative Agent): (i) on the Business Day which is the same Business Day as the requested date of a proposed Swing Line Loan which is to be a Money Market Rate Loan or (ii) on the Business Day which is three (3) Business Days prior to or, to the extent acceptable the applicable Designated Swing Line Lender, in its sole discretion, the same Business Day as the requested date of a proposed Swing Line Loan which is to be a LIBOR Rate Loan. Each such request (a "Swing Line Request") for a Swing Line Loan shall be a written or telephonic notice (in the case of a telephonic notice, promptly confirmed in writing if so requested by the Designated European Administrative Agent). Each written Swing Line Request or written confirmation thereof be shall be substantially in the form of Exhibit B-2 attached hereto, signed by the Borrower Representative and transmitted by the Borrower Representative to the Designated European Administrative Agent by telecopier. Each written and telephonic Swing Line Request and each confirmation thereof shall specify: (i) the requested date of the proposed Swing Line Loan, (ii) the aggregate amount of such Swing Line Loan, (iii) confirmation that such Swing Line Loan is to be comprised of Swing Line Borrowing denominated in Dollars or, if other than in Dollars, the Alternate Currency in which such Swing Line Loan is to be denominated, (iv) confirmation whether such Swing Line Loan is the be a Money Market Rate Loan or a LIBOR Rate Loan and (v) if the Swing Line 14 24 Loan is to be a Money Market Rate Loan, confirmation of the maturity date of the requested Swing Line Loan (which shall not be more than thirty (30) days in the case of Money Market Rate Loans) and the Borrower's acceptance of the fixed or floating Quoted Money Market Rate quoted to the Borrower Representative by the Designated European Administrative Agent pursuant to Section 2.7(f) of this Agreement. Each Swing Line Request shall be irrevocable and binding on the Borrower for which the request was made and be subject to the indemnification provisions of Section 13 of this Agreement. The Borrower for which a Swing Line Request was made shall bear all risks related to the giving of such Swing Line Request by the Borrower Representative on behalf of such Borrower whether given telephonically or by such other method of transmission as the Borrower Representative shall elect. (e) NOTICE OF REQUESTS; OUTSTANDINGS. Each Designated European Administrative Agent shall give the Designated Swing Line Lender and the Administrative Agent, which Administrative Agent shall in turn give each Bank, prompt written or telecopy notice of any Swing Line Request received from the Borrower Representative pursuant to Section 2.7(d) and the amount of Swing Line Loans funded by the Designated Swing Line Lender pursuant thereto. Such Designated European Administrative Agent shall maintain the record of such fundings of Swing Line Loans in the Control Account maintained by such Designated European Administrative Agent pursuant to Section 2.17(d) hereof. Each Designated European Administrative Agent shall provide to the Administrative Agent a quarterly (or monthly if requested by the Administrative Agent) summary describing the Swing Line Loans advanced during such period by the Designated Swing Line Lender and then outstanding as well as an identification for the relevant period of the daily aggregate principal of such Swing Line Loans outstanding. (f) PROCEDURE FOR OBTAINING QUOTED MONEY MARKET RATE. Whenever the Borrower Representative proposes to submit a Swing Line Request to the Designated European Administrative Agent for a Swing Line Borrowing to a Borrower, requests for an interest rate quote for such Swing Line Borrowing shall be given by the Borrower Representative to such Designated European Administrative Agent not later than 11:00 (local time at the Notice Office of such Designated European Administrative Agent and Lending Installation thereof) on the same Business Day as the Swing Line Request is required to be given to such Designated European Administrative Agent pursuant to Section 2.7(d) hereof. Each such request (a "Rate Quote Request") for a quote shall be a written or telephonic notice requesting such Designated European Administrative Agent to quote a fixed or floating interest rate (the "Quoted Money Market Rate") which would be applicable to the Money Market Rate Loan comprising such Swing Line Borrowing if such Money Market Rate Loan were made on or prior to a date specified in such Rate Quote Request and remained outstanding until the maturity date specified in such Rate Quote Request. The Designated European Administrative Agent will immediately so notify the Designated Swing Line Lenders of such Rate Quote Request, and, if all of such Designated Swing Line Lenders are agreeable to a particular interest rate for the proposed maturity of such Money Market Rate Loans, such Quoted Money Market Rate for such proposed Money Market Rate Loan shall be quoted by the Designated European Administrative Agent to the Borrower Representative on or before 1:00 p.m. (local time at the Notice Office of such Designated European Administrative Agent) on the day such Rate Quote Request is received by the Designated European Administrative Agent. The parties contemplate that any Quoted Money Market Rate will be a rate of interest which reflects a margin corresponding to the Applicable Margin in 15 25 effect at the time of quotation of any Quoted Money Market Rate over the then prevailing: (i) Federal Funds Effective Rate or Cost of Funds Rate or (ii) any other then prevailing commercial paper, call money, overnight repurchase or similar commonly quoted interest rate, in each case, to be selected as the basis for the quote by such Designated European Administrative Agent. (g) SWING LINE NOTES; SWING LINE LOAN ACCOUNT. The Swing Line Loans from each Designated Swing Line Lender shall be evidenced at all times by a Swing Line Note which shall (i) be executed and delivered by such Borrower for which the Designated Swing Line Lender is designated and payable to the order of such Designated Swing Line Lender, (ii) be in a stated principal amount equal to the Designated Swing Line Lender Commitment and be payable in the principal amount of the Swing Line Loans evidenced thereby, (iii) as to any Swing Line Loans advanced, mature on the selected maturity date applicable to such Swing Line Loan and in no event later than the Swing Line Termination Date, (iv) bear interest as provided in Section 2.13(a)(iii) in respect of each Money Market Rate Loan evidenced thereby, (v) be subject to mandatory prepayment as provided in Section 2.10, and (vi) be entitled to the benefits of this Agreement and the other Loan Documents. Whenever a Borrower obtains a Swing Line Loan, the Designated Swing Line Lender advancing such Swing Line Loan shall endorse an appropriate entry on such Swing Line Note or make an appropriate entry in a loan account (the "Swing Line Loan Account") maintained in such Designated Swing Line Lender's books and records, or both, to evidence such Swing Line Loans. The Swing Line Loan Account shall also evidence: (A) accrued interest on the Swing Line Loan, (B) all other amounts due to the Designated Swing Line Lender in respect of the Swing Line Note and (C) all payments made by the Borrower to the Designated Swing Line Lender for application to such Swing Line Loans. Each entry on the Swing Line Note, Designated Swing Line Lender's books and records or the or in the Swing Line Loan Account shall be prima facie evidence of the data entered. Such entries shall not be a condition to a Borrower's obligation to repay the Obligations in respect of Swing Line Loans. (h) FUNDING OF SWING LINE LOANS. The Designated European Administrative Agent designated for the Borrower for which a Credit Request is made shall notify the Designated Swing Line Lender for such Borrower of a Swing Line Credit Request not later than 1:00 p.m. (local time at the Notice Office of such Designated Swing Line Lender) on the date received by telecopier, telephone or similar form of transmission. Each Designated Swing Line Lender shall, before 2:00 p.m. (local time at the Payment Office of the Designated European Administrative Agent) on the date of each Swing Line Loan requested for a Borrower, make available such Swing Line Loan to such Designated European Administrative Agent, in Dollars or, subject to the Alternate Currency Sublimit specified in Section 2.1(a) hereof and the provisions of Section 2.2(a)(ii) hereof, the applicable Alternate Currency, in immediately available funds at the account of such Designated European Administrative Agent, maintained at the Payment Office of such Designated European Administrative Agent as shall have been notified by such Designated European Administrative Agent to the Designated Swing Line Lenders prior to such date. On the date specified for a Swing Line Loan in such Swing Line Credit Request, after such Designated European Administrative Agent's receipt of the funds representing such Designated Swing Line Lender's Swing Line Loan and subject to the terms of this Agreement and the fulfillment of the conditions set forth in Section 3 of this Agreement, such Designated European Administrative Agent shall promptly make such Swing Line 16 26 Loan of such Designated Swing Line Lender available to the Borrower specified in the Swing Line Credit Request, in immediately available funds, by wire transfer or intrabank transfer to: (A) the Operating Account of such Borrower or (B) such other account of such Borrower as such Designated European Administrative Agent and the Borrower Representative shall have agreed upon from time to time for this purpose; provided, however, that, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, such Designated European Administrative Agent shall return the amounts so received to the respective Banks. (i) AVAILABILITY OF FUNDS. Subject to Section 2.2(a)(ii) of this Agreement, unless the applicable Designated European Administrative Agent shall have received notice from the Designated Swing Line Lender designated for a Borrower for which a Swing Line Credit Request has been made prior to the date (or, in the case of Money Market Rate Loans, prior to the time) requested for such Swing Line Loans that such Designated Swing Line Lender will not make available to such Designated European Administrative Agent, the proceeds of such Designated Swing Line Lender's Swing Line Loan, such Designated European Administrative Agent may assume that such Designated Swing Line Lender has made its Swing Line Loan proceeds available to such Designated European Administrative Agent on the date of the Swing Line Borrowing in accordance with Section 2.7(h) of this Agreement. In reliance upon such assumption, such Designated European Administrative Agent may, but shall not be obligated to, make available on such date to such Borrower specified in the Credit Request, the amount of such requested Swing Line Loan. Any disbursement by such Designated European Administrative Agent in reliance on such assumption shall be deemed to be a Swing Line Loan by such Designated Swing Line Lender. (j) REFUNDING SWING LINE LOANS; SETTLEMENT BY BANKS. Each Designated Swing Line Lender may from time to time by written or telecopy notice given to the Designated European Administrative Agent designated for such Designated Swing Line Lender not later 11:00 a.m. (local time at the Notice Office of such Designated European Administrative Agent), in any case on a date selected by the Designated Swing Line Lender in its sole discretion, notify such Designated European Administrative Agent of the aggregate principal amount of the Swing Line Loans advanced by such Designated Swing Line Lender outstanding as of the close of business on the Business Day immediately preceding the date of the notice and direct that such aggregate principal amount of Swing Line Loans be refunded by the Banks. Upon receipt of such notice (a "Refunding Notice"), such Designated European Administrative Agent shall, not later than 1:00 p.m. (local time at the Notice Office of such Designated European Administrative Agent) on such date of notice from such Designated Swing Line Lender, give notice to each Bank at the Lending Office of each such Bank specifying its Ratable Portion of such outstanding Swing Line Loans. Upon receipt of such notice, each Bank shall make available to such Designated European Administrative Agent for the benefit of such Designated Swing Line Lender, in immediately available funds, at the account of such Designated European Administrative Agent maintained at the Payment Office of such Designated European Administrative Agent, not later than 3:00 p.m.(local time at the Payment Office of such Designated European Administrative Agent) on the date of such notice, its Ratable Portion of such aggregate amount of Swing Line Loans outstanding and being refunded. If such Designated European Administrative Agent's notice to the Banks is received after 1:00 p.m. (local time at the Lending Office of such Bank), each Bank shall make its Ratable Portion available to such Designated 17 27 European Administrative Agent for the benefit of the Designated Swing Line Lender not later than 11:00 a.m. (local time at the Payment Office of such Designated European Administrative Agent) on the next succeeding Business Day. Upon making such payment, each Bank shall be deemed to have made a LIBOR Rate Loan having a one month interest period to the Borrower whose Swing Line Loans are being refunded in the amount of its Ratable Portion of any such Swing Line Loan. Promptly upon the same day as receipt of such proceeds, the proceeds of such Loans shall be applied directly by such Designated European Administrative Agent to reimburse the Designated Swing Line Lender for such outstanding Swing Line Loans. Each Bank's obligation to make such refunding payment is absolute and unconditional and shall not be affected by any event or circumstance whatsoever, including the occurrence of any Potential Default or Event of Default hereunder or the failure of any condition precedent set forth in Section 3 of this Agreement to be satisfied, and each such payment shall be made without any setoff, recoupment, counterclaim, abatement, withholding or reduction whatsoever; except, however, that the Banks shall have no obligation to make such payment if the Designated Swing Line Lender made such Swing Line Loans being refunded after such Designated Swing Line Lender was in receipt of telephonic or written notice from the applicable Designated European Administrative Agent on behalf of the Required Banks pursuant to Section 2.7(b) hereof directing such Designated Swing Line Lender to cease making Swing Line Loans. (k) PARTICIPATING INTEREST. In the event that the obligation of the Banks to make a Revolving Credit Loan pursuant to Subsection (i) to refund Swing Line Loans of a Designated Swing Line Lender cannot be satisfied by the Banks because any of the events specified in Section 8.14 shall have occurred in respect to a Borrower or one or more of the Banks shall determine that it is legally prohibited from making such a Revolving Credit Loan, each Bank (other than the Designated Swing Line Lender) or each such Bank so prohibited (other than the Designated Swing Line Lender), as the case may be, shall be obligated to purchase on the date the Revolving Credit Loan would have been made pursuant to Subsection (i) hereof an undivided participating interest in the outstanding Swing Line Loans in an amount equal to such Bank's Ratable Portion of the Swing Line Loans. On the purchase date, each Bank or each such Bank so prohibited shall pay to the applicable Designated European Administrative Agent, for the benefit of such Designated Swing Line Lender, in immediately available funds, at the account of such Designated European Administrative Agent maintained at the Payment Office of such Designated European Administrative Agent not later than the time such Bank would have been obligated to fund a Loan pursuant to Subsection (e) hereof, a participation purchase price in amount equal to such Bank's Ratable Portion. The proceeds of purchases by the Banks of such participating interests shall be applied directly by such Designated European Administrative Agent to reimburse the Designated Swing Line Lender for such outstanding Swing Line Loans. Upon receipt of such participation purchase price, the Designated Swing Line Lender shall, if requested by a Bank purchasing a participating interest, issue a participation certificate, dated the date of the Designated Swing Line Lender's receipt of such proceeds, and evidencing such Bank's participating interest in such Swing Line Loans. Whenever, at any time after a Designated Swing Line Lender has received from the Designated European Administrative Agent designated therefor the proceeds of any such participating interest by any other Bank, such Designated Swing Line Lender receives any payment from or on behalf of the Borrowers on account of the Swing Line Loans, such Designated Swing Line Lender will promptly pay to such Designated European Administrative Agent for distribution to such Bank its Ratable Portion of such payments (appropriately adjusted, in the case of interest payments, to 18 28 reflect the period of time during which such Bank's participating interest was outstanding); provided, however, in the event such payment in respect of Swing Line Loans is required to be returned by the Designated Swing Line Lender, such Bank will return to such Designated European Administrative Agent for payment over the Designated Swing Line Lender any portion of such payment previously distributed by such Designated European Administrative Agent on behalf of the Designated Swing Line Lender. 2.8 TERM FACILITY. (a) TERM LOANS. Subject to the terms and conditions of this Agreement, each Bank having a Term Commitment hereunder severally agrees to make, on a one time basis on the Closing Date hereof, a Loan, denominated in Dollars, on a term basis (the "Term Loan") to Instron Corporation, which Term Loan can be incurred only on the Closing Date and only in the entire amount of the Term Commitment specified on Annex I in respect to such Bank; provided, however, that the outstanding principal amount of the Term Loan by each Bank shall not at any time exceed such Bank's Term Commitment. The Term Loan of each Bank shall be comprised of one or more Term Borrowings, as Instron Corporation may elect from time to time by delivery to the Administrative Agent by the Borrower Representative of a Rate Conversion/Continuation Request pursuant to Section 2.11 of this Agreement; provided, however, that the Term Loan of each Bank made on the Closing Date may, at the election of the Borrower Representative which shall not require any prior notice, consist of Alternate Base Rate Loans or LIBOR Rate Loans or some combination thereof. (b) TERM BORROWINGS. Each Term Borrowing shall be: (i) if comprised of Alternate Base Rate Loans, in an aggregate amount of not less than Five Hundred Thousand Dollars ($500,000) or an integral multiple of Fifty Thousand Dollars ($50,000) in excess thereof and (ii) if comprised of LIBOR Rate Loans, in an aggregate amount of not less than One Million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars ($100,000) in excess thereof. Instron Corporation shall be entitled to have more than one Term Borrowing outstanding at one time; provided, however, that the Borrowers shall not be entitled to request any Term Borrowing which, together with all outstanding Revolving Credit Borrowings and Swing Line Loans to all Borrowers and Term Borrowings to Instron Corporation, would result in any Bank's having an aggregate of more than twenty-five (25) Borrowings (for purposes of determining the number of outstanding Borrowings, outstanding Alternate Base Rate Loans to all of the Borrowers shall be treated as a separate Borrowing and all outstanding Swing Line Loans to each Borrower shall be treated as a separate Borrowing by such Borrower) outstanding at any one time to all of the Borrowers. (c) TERM NOTES; LOAN ACCOUNT RECORD OF TERM LOANS. Each Bank's Term Loan to Instron Corporation shall be evidenced at all times by and repayable in accordance with a Term Note, as the case may be, each of which Term Notes shall: (i) be executed and delivered by Instron Corporation and payable to the order of such Bank and (ii) be in a stated principal amount equal to the Term Commitment, as applicable, of such Bank and be payable to the order of such Bank in an amount equal to the unpaid principal amount of such Bank's Term Loan evidenced 19 29 thereby, (iii) be payable in installments as provided therein and in Section 2.8(d) hereof and mature on the Term Loan Maturity Date applicable to such Term Loan, (iv) bear interest as provided in this Agreement, (v) be subject to mandatory prepayment as provided in Section 2.10 hereof, and (vi) be entitled to the benefits of this Agreement and the other Loan Documents. Each Bank shall endorse an appropriate entry in respect of disbursements and repayments of the Term Loans of such Bank comprising such Borrowing on such Bank's Term Note with respect to such Term Loan or make an appropriate entry in the Loan Account maintained in such Bank's books and records, or both, to evidence such Bank's Term Loan to Instron Corporation. The Loan Account shall also evidence: (i) accrued interest on the Term Loans of such Bank to Instron Corporation, (ii) all other amounts due to the Bank in respect of such Term Loan, and (iii) all payments made by Instron Corporation in respect of such Term Loan. Each entry on a Bank's Term Note, books and records or Loan Account shall be prima facie evidence of the data entered. Such entries by a Bank shall not be a condition to Instron Corporation's obligation to repay the Obligations. (d) AMORTIZATION AND MATURITY OF TERM LOANS. (i) TERM LOAN AMORTIZATION. The Term Loan of each Bank shall be repaid by Instron Corporation to the Administrative Agent for the benefit of the Banks in twenty two (22) quarterly installments of principal payable on the first day of each January, April, July and October of each calendar year as follows: (i) during the period commencing with January 1, 2000 and continuing until and including October 1, 2000, each installment shall be in a principal amount equal to such Bank's Ratable Portion of Seven Hundred and Fifty Thousand Dollars ($750,000), payable together with interest thereon, (ii) during the period commencing with January 1, 2001 and continuing until and including October 1, 2001, each installment shall be in a principal amount equal to such Bank's Ratable Portion of One Million Dollars ($1,000,000), payable together with interest thereon, (iii) during the period commencing with January 1, 2002 and continuing until and including October 1, 2002, each installment shall be in a principal amount equal to such Bank's Ratable Portion of One Million Two Hundred and Fifty Thousand Dollars ($1,250,000), payable together with interest thereon, (iv) during the period commencing with January 1, 2003 and continuing until and including April 1, 2005, each installment shall be in a principal amount equal to such Bank's Ratable Portion of One Million Five Hundred Thousand Dollars ($1,500,000), payable together with interest thereon (with the final installment payable on April 1, 2005 also including any other amount required to bring the principal of the Term Loan of such Bank to zero) (with each of such referenced repayment dates being a "Term Loan Repayment Date" and such April 1, 2005 Term Loan Repayment Date being the "Term Loan Maturity Date"). Amounts repaid with respect to a Term Loan may not be reborrowed. 2.9 FUNDING OF TERM LOANS BY BANKS. Each Bank shall, prior to 1:00 P.M. (local time at the Payment Office of the Administrative Agent) on the Closing Date, make available to the Administrative Agent, in immediately available funds at the account of the Administrative Agent maintained at the Payment Office thereof as shall have been notified by the Administrative Agent to the Banks prior to such date, the amount of Term Loans specified in Annex I in respect of such Bank. 20 30 (a) DISBURSEMENT OF TERM FUNDS RECEIVED. Upon the Administrative Agent's receipt of funds on the Closing Date representing a Bank's Term Loan, and subject to the terms of this Agreement and the fulfillment of the conditions set forth in Section 3 of this Agreement, the Administrative Agent shall make the Term Loan of such Bank available to the Borrowers (by advancing such funds to Instron Corporation) in immediately available funds, by wire transfer or intrabank transfer: to the Operating Account of Instron Corporation; provided, however, that, if the Term Loans shall not occur on such date because any condition precedent herein specified shall not have been met, the Administrative Agent shall return the amounts so received to the respective Banks. (b) AVAILABILITY OF TERM LOAN FUNDS. Unless the Administrative Agent shall have received notice from a Bank on the Closing Date that such Bank will not make available to the Administrative Agent such Bank's Term Loan being advanced to the Borrowers, the Administrative Agent may assume prior to receipt of funds from such Bank that such Bank has made its Term Loans available to the Administrative Agent on the Closing Date. In reliance upon such assumption, the Administrative Agent may, but shall not be obligated to, make available to the Borrowers funds in the amount of such Bank's Term Loan. Any disbursement by the Administrative Agent in reliance on such assumption shall be deemed to be the advance by such Bank of its Term Loan. 2.10 REPAYMENTS; PREPAYMENTS; REDUCTIONS OF COMMITMENTS. (a) SCHEDULED REPAYMENTS; DENOMINATIONS OF REPAYMENTS. Each Borrower shall repay to the Administrative Agent, or the applicable Designated European Administrative Agent, in immediately available funds, for the account of the Banks the outstanding principal amount of its aggregate Revolving Credit Loans on the Revolving Credit Termination Date. Instron Corporation shall repay to the Administrative Agent, in immediately available funds, for the account of the applicable Banks, the Term Loans advanced by such Bank in accordance with Section 2.8(d) hereof and the applicable Term Note. Each of the Borrowers shall repay to the applicable Designated European Administrative Agent for the benefit of the applicable Designated Swing Line Lender the Swing Line Loans advanced to such Borrower in accordance with Section 2.7(g) of this Agreement and the Swing Line Note. Repayments of Revolving Credit Loans denominated in Dollars shall be made in Dollars. Repayments of Revolving Credit Loans denominated in an Alternate Currency shall be made in such Alternate Currency. Repayments of Swing Line Loans denominated in Dollars shall be made in Dollars. Repayments of Swing Line Loans denominated in an Alternate Currency shall be made in such Alternate Currency. Reimbursements of drawings on Letters of Credit whether denominated in Dollars or in an Alternate Currency shall be made in Dollars. (b) MANDATORY PREPAYMENT OF LOANS. (i) PREPAYMENT OF EXCESS REVOLVING CREDIT LOANS. If, on any Business Day, the aggregate Revolving Credit Loans then outstanding exceed an amount equal to the aggregate Revolving Credit Commitments of all of the Banks then applicable minus the then aggregate LC Exposure and aggregate Swing Line Exposure of all of the Banks, then the Borrowers shall on such day prepay to the 21 31 Administrative Agent or the applicable Designated European Administrative Agent for the account of the Banks an amount at least equal to such excess. (ii) PREPAYMENT OF EXCESS REVOLVING CREDIT LOANS DENOMINATED IN ALTERNATE CURRENCIES. If, on any Business Day, the Dollar equivalent of the aggregate principal amount of Revolving Credit Loans denominated in Alternate Currencies then outstanding, together with the Dollar equivalent of the then aggregate Alternate Currency LC Exposure and aggregate Alternate Currency Swing Line Exposure of all Banks, exceeds the Alternate Currency Sublimit, then the Borrowers shall on such day prepay to the Administrative Agent or the applicable Designated European Administrative Agent for the account of the Banks an amount at least equal to such excess. (iii) PREPAYMENT OF EXCESS SWING LINE LOANS. If, on any Business Day, (x) the aggregate principal amount of Swing Line Loans then outstanding exceeds the Aggregate Swing Line Commitment of the Designated Swing Line Lenders then in effect, or (y) the aggregate Swing Line Loans then outstanding from a Designated Swing Line Lender to a Borrower exceeds the Designated Swing Line Commitment of such Designated Swing Line Lender, each affected Borrower shall on such day prepay to the applicable Designated European Administrative Agent for the account of such Designated Swing Line Lender such principal amount of Swing Line Loans outstanding to such Borrower as shall eliminate such excess. (c) MANDATORY APPLICATION OF NET PROCEEDS AND EXCESS CASH FLOW; RESULTING MANDATORY REDUCTION IN REVOLVING CREDIT COMMITMENTS AND TERM LOANS. (i) APPLICATION OF NET PROCEEDS. From and after the Closing Date, each Borrower shall apply, subject to the extent otherwise provided in Section 7.3(c), 100% of all of the Net Proceeds relating to such Borrower or the Subsidiaries thereof promptly upon receipt thereof to prepay its Term Loans and Revolving Credit Loans outstanding at the time of such receipt with such prepayments being applied:(A) first, to outstanding Term Loans, in the inverse order of maturity, (B) second, to outstanding Revolving Credit Loans and (C) third, to outstanding Swing Line Loans; provided, however, that nothing in this Subsection 2.10(c)(i) hereof or in the definition of "Net Proceeds" shall constitute authorization not otherwise permitted by this Agreement for any Borrower or any Subsidiaries thereof to enter into any transaction that would generate Net Proceeds. (ii) EXCESS CASH FLOW RECAPTURE. Not later than ten (10) days after the ninetieth (90th) day following each Fiscal Year end of Instron Corporation, commencing with Fiscal Year ending December 31, 2000, if the Consolidated Senior Funded Debt to Adjusted EBITDA Ratio of Instron Corporation and its consolidated Subsidiaries measured as of such Fiscal Year end exceeds 2.00 to 1.00, Instron Corporation shall prepay the Term Loans, and the Borrowers shall 22 32 prepay the Revolving Credit Loans and Swing Line Loans outstanding at the time in an aggregate amount equal to 50.00% of the Consolidated Excess Cash Flow of Instron Corporation and its consolidated Subsidiaries for such immediately preceding Fiscal Year with such prepayments being applied: (A) first, to outstanding Term Loans, in the inverse order of maturity, (B) second, after no Term Loans are outstanding, to outstanding Revolving Credit Loans and (C) last, to outstanding Swing Line Loans; provided, however, that any voluntary prepayments of outstanding Term Loans pursuant to Section 2.10(d) hereof during any Fiscal Year shall be credited against the prepayment of Loans otherwise required under this clause (ii) with respect to Consolidated Excess Cash Flow with respect to such Fiscal Year. (iii) POSTPONEMENT OF PREPAYMENT; EFFECT OF PREPAYMENT. Unless an Event of Default has occurred which is continuing and has not been waived in accordance with Section 14.1 hereof, in the event that the making of any prepayment of Term Loans, Revolving Credit Loans or Swing Line Loans required by this Section 2.10(c) would result in an obligation on the part of a Borrower to make a breakage payment in respect thereof under Section 13.4 of this Agreement (unless waived in accordance with Section 14.1 hereof), such Borrower may upon notice by the Borrower Representative to the Administrative Agent postpone making such prepayment for a period of up to 30 days or such shorter period as will result in no such breakage payment being payable. Each prepayment required by this Section 2.10(c) shall constitute (A) with respect to each prepayment of Revolving Credit Loans required hereby, only a prepayment and not a permanent reduction in the amount of the Revolving Credit Commitments of the Banks and (B) with respect to each prepayment of Term Loans required hereby, not only a prepayment but also a permanent reduction in the amount of the applicable Term Commitments of the Lenders hereunder. Amounts prepaid with respect to Term Loans may not be reborrowed. (d) PERMITTED PREPAYMENTS. A Borrower may prepay all or any part of the Term Loans or the Revolving Credit Loans for the account of the Banks by having the Borrower Representative give notice to the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, stating the proposed date of prepayment, the Type of Borrowing being prepaid and the aggregate principal amount of the prepayment: (i) not later than 12:00 noon (local time at the Notice Office of the Administrative Agent) on any Business Day, with respect to Alternate Base Rate Loans, (ii) not later than 12:00 noon (local time at the Notice Office of the Administrative Agent or the applicable Designated European Administrative Agent) on the fourth Business Day prior to such prepayment, with respect to LIBOR Rate Loans (whether denominated in Dollars or an Alternate Currency). Thereafter, on the date of such prepayment, such Borrower shall: (A) prepay the aggregate outstanding principal amount of the Alternate Base Rate Loans in whole or ratably in part as specified in such notice and (B) prepay the outstanding aggregate principal amount of the LIBOR Rate Loans comprising part of the same Borrowing in whole or ratably in part as specified in such notice, together with prepayment of interest on the principal amount of the LIBOR Rate Loans comprising such Borrowing so prepaid accrued to the date of such prepayment; provided, however, 23 33 that: (I) each partial prepayment of Alternate Base Rate Loan shall be in the aggregate principal amount of not less than One Hundred Thousand Dollars ($100,000), (II) each partial prepayment of LIBOR Rate Loans denominated in an Alternate Currency shall be in an aggregate principal amount of not less than the Dollar equivalent of Five Hundred Thousand Dollars ($500,000), or an integral multiple of the Dollar equivalent of Two Hundred and Fifty Thousand Dollars ($250,000) in excess thereof, (III) each partial prepayment of LIBOR Rate Loans denominated in Dollars shall be in an aggregate principal amount of not less than Five Hundred Thousand Dollars ($500,000), or an integral multiple of Two Hundred and Fifty Thousand Dollars ($250,000) in excess thereof, and (IV) any prepayment of any LIBOR Rate Loans made on other than the last day of an Interest Period shall obligate the Borrowers to reimburse the Banks in respect thereof pursuant to Section 13.4 of this Agreement. (e) REDUCTION OF REVOLVING CREDIT COMMITMENTS. Upon three (3) Business Days prior written notice from the Borrower Representative to the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, the Borrowers may request that the Banks permanently reduce, in whole or in part, the aggregate Revolving Credit Commitments, whereupon the aggregate Revolving Credit Commitments shall be so reduced. Each reduction in the aggregate Revolving Credit Commitments hereunder shall be made among the Banks ratably in accordance with their Revolving Credit Commitments. Each reduction shall be subject to the following: (i) each such reduction shall be in an aggregate principal amount of not less than Five Million Dollars ($5,000,000) or a multiple of One Million Dollars ($1,000,000) in excess thereof, and (ii) the Borrowers shall not be permitted to reduce the aggregate Revolving Credit Commitments unless, concurrently with any reduction, one or more of the Borrowers shall make principal payments, ratable among the Banks, on each Bank's then outstanding Revolving Credit Loans to such Borrower in an amount which, when aggregated with such ratable payments to the Banks by the other Borrowers, will result in the aggregate Revolving Credit Loans of the Banks to the Borrowers outstanding after such payments, when taken together with the aggregate LC Exposure and Swing Line Exposure of the Banks to the Borrowers then outstanding, not exceeding the aggregate Revolving Credit Commitments of the Banks as so reduced. On the date of each reduction, each of the Borrowers shall pay to the Administrative Agent for the account of the Banks its Ratable Borrower Share of: (x) the commitment fees and interest accrued through the date of such reduction in respect of the aggregate Revolving Credit Commitment of the Banks so reduced and (y) any amounts required pursuant to the provisions of Section 13.4 of this Agreement. Each reduction in the Revolving Credit Commitments hereunder, if any, shall be a permanent reduction and no amount in excess of such reduced commitment may be borrowed or reborrowed. 2.11 RATE CONVERSION AND RATE CONTINUATION. Each Borrower shall have the right to convert all or any portion of the Revolving Credit Loans or Term Loans comprising any Borrowing or any Swing Line Loan into, or continue all or any portion of the Revolving Credit Loans or Term Loans comprising any Borrowing or any Swing Line Loan as, LIBOR Rate Loans or Alternate Base Rate Loans, as the case may be, in the case of Revolving Credit Loans or Term Loans, and a LIBOR Rate Loan or Money Market Rate Loan, as the case may be, in the case of any Swing Line Loan, upon request delivered by the Borrower Representative to the Administrative Agent or the applicable Designated European Administrative Agent designated for such Borrower, as the case may be, not later than 12:00 noon (local time at the Notice Office of the Administrative Agent or such 24 34 Designated European Administrative Agent) to the following extent: (a) on the Business Day that a Borrower desires to convert all or a portion of the LIBOR Rate Loans denominated in Dollars comprising a Revolving Credit Borrowing or a Term Loan Borrowing into Alternate Base Rate Loans, (b) three (3) Business Days prior to the Business Day on which a Borrower desires to convert any Alternate Base Rate Loans comprising a Revolving Credit Borrowing or a Term Loan Borrowing into LIBOR Rate Loans for a given permissible Interest Period, (c) three (3) Business Days prior to the Business Day on which a Borrower desires to continue any LIBOR Rate Loans comprising a Revolving Credit Borrowing or a Term Loan Borrowing, as LIBOR Rate Loans for an additional Interest Period of the same duration, (d) three (3) Business Days prior to the Business Day on which, or, to the extent acceptable the applicable Designated Swing Line Lender, in its sole discretion, the same Business Day as a Borrower desires to continue any LIBOR Rate Loan comprising a Swing Line Loan, as a LIBOR Rate Loan for an additional Interest Period of the same duration, (d) three (3) Business Days prior to the Business Day on which a Borrower desires to convert any LIBOR Rate Loans having a particular Interest Period comprising a Revolving Credit Borrowing or a Term Loan Borrowing into LIBOR Rate Loans having a different permissible Interest Period, (e) three (3) Business Days prior to the Business Day on which, or, to the extent acceptable the applicable Designated Swing Line Lender, in its sole discretion, the same Business Day as, a Borrower desires to convert any LIBOR Rate Loan having a particular Interest Period comprising a Swing Line Loan into LIBOR Rate Loan having a different permissible Interest Period, (f) three (3) Business Days prior to the Business Day on which, or, to the extent acceptable the applicable Designated Swing Line Lender, in its sole discretion, the same Business Day as, a Borrower desires to convert any Money Market Rate Loan comprising a Swing Line Loan into LIBOR Rate Loan for a given permissible Interest Period, or (f) three (3) Business Days prior to the Business Day on which, or, to the extent acceptable the applicable Designated Swing Line Lender, in its sole discretion, the same Business Day as, a Borrower desires to convert any LIBOR Rate Loan comprising a Swing Line Loan into Money Market Rate Loan; provided, however, that each such Rate Conversion or Rate Continuation shall be subject to the following: (i) each Rate Conversion or Rate Continuation of Loans comprising a Borrowing shall be made ratably among the Banks based upon each Bank's Ratable Portion of such converted or continued Borrowing; (ii) if less than all of the outstanding principal amount of Loans comprising a Revolving Credit Borrowing or a Term Loan Borrowing are converted or continued, the aggregate principal amount of such Loans comprising a Borrowing converted or continued shall be: (A) in the case of LIBOR Rate Loans, not less than Five Hundred Thousand Dollars ($500,000) or, in the case of Alternate Currency Loans, the Alternate Currency equivalent thereof, or an integral multiple of Two Hundred and Fifty Thousand Dollars ($250,000) or, in the case of Alternate Currency Loans, the Alternate Currency equivalent thereof, in excess thereof, (B) in the case of Alternate Base Rate Loans, not less than Five Hundred Thousand Dollars ($500,000), or an integral multiple of Fifty Thousand Dollars ($50,000) in excess thereof, and (C) in the case of Money Market Rate Loans, not less than Two Hundred Fifty Thousand Dollars ($250,000), or an integral multiple of One Hundred Thousand Dollars ($100,000) in excess thereof; (iii) each Rate Conversion or Rate Continuation shall be effected as if each Bank were applying the proceeds of the Loans resulting from such Rate Conversion or Rate Continuation to the Loans being converted or continued, as the case may be, and the accrued interest on any such Loans (or portion thereof) being converted or continued 25 35 shall be paid to the Administrative Agent on behalf of each Bank by the Borrowers at the time of such Rate Conversion or Rate Continuation; (iv) LIBOR Rate Loans shall not be converted or continued at a time other than the end of an Interest Period applicable thereto unless the Borrowers shall pay, upon demand, any amounts due to the Administrative Agent for the benefit of the Banks pursuant to Section 13.4 of this Agreement; (v) Loans may not be converted into or continued as LIBOR Rate Loans comprising a Revolving Credit Borrowing unless the Interest Period applicable thereto expires on or prior to the applicable Revolving Credit Termination Date; (vi) Loans may not be converted into or continued as LIBOR Rate Loans comprising a Term Borrowing unless the Interest Period applicable thereto expires on or prior to the Term Loan Maturity Date applicable to the Loans comprising such Term Borrowing; (vii) after and during the continuance of a Potential Default, and after the occurrence of an Event of Default which is continuing and has not been waived in accordance with Section 14.1 hereof, Loans may not be converted into or continued (at the expiration of the Interest Period applicable thereto) as LIBOR Rate Loans; (viii) with respect to LIBOR Rate Loans comprising a Term Borrowing, no Interest Period can be selected which ends after any Term Loan Repayment Date, unless, after giving effect to such selection, the aggregate unpaid principal amount of Alternate Base Rate Loans, together with the aggregate unpaid principal amount of all Term Borrowings which are comprised of LIBOR Rate Loans with Interest Periods ending on or prior to such Term Loan Repayment Date shall be at least equal to that portion of the aggregate principal amount of the Term A Loan and the Term B Loan due and payable on and prior to such Term Loan Repayment Date; and (ix) Loans that cannot be converted into or continued as LIBOR Rate Loans by reason of clause (v), (vi), (vii) or (viii) of this Section shall be automatically converted at the end of the Interest Period in effect for such LIBOR Rate Loans into Alternate Base Rate Loans, except that LIBOR Rate Loans denominated in an Alternate Currency that cannot be converted or continued by reason of clause (v) or (vii) of this Section shall become due and payable upon the last day of the applicable Interest Period with respect thereto. Each such request for a conversion or continuation (a "Rate Conversion/Continuation Request") in respect of Loans comprising a Borrowing shall be a written or telephonic notice (in the case of a telephonic notice, promptly confirmed in writing if so requested by the Administrative Agent or the applicable Designated European Administrative Agent). Each written Rate Conversion/Continuation Request or written confirmation thereof shall be substantially in the form of Exhibit C attached hereto, signed by the Borrower Representative and transmitted by the Borrower Representative to the Administrative Agent or such Designated European Administrative Agent, as applicable, by telecopier. Each written and telephonic Rate Conversion/Continuation Request and each confirmation thereof shall specify: (A) the identity and amount of the Loans that the Borrower requests be converted or continued, (B) the Type of 26 36 Loans into which such Loans are to be converted or continued, (C) if such notice requests a Rate Conversion, the date of the Rate Conversion (which shall be a Business Day), (D) in the case of a Borrowing being converted into or continued as a LIBOR Rate Borrowing, the currency in which such LIBOR Borrowing is denominated, (E) in the case of Loans comprising a Borrowing being converted into or continued as LIBOR Rate Loans, the Interest Period for such LIBOR Rate Loans and (F) in the case of LIBOR Rate Loan comprising a Swing Line Loan being converted into a Money Market Rate Loan, the Quoted Money Market Rate therefor and the maturity date thereof determined as provide in Section 2.7(f) hereof. The Administrative Agent and each Designated European Administrative Agent may rely on such telephonic Rate Conversion/Continuation Request to the same extent that the Administrative Agent and the applicable Designated European Administrative Agent may rely on a written Rate Conversion/Continuation Request. Each Rate Conversion/Continuation Request, whether telephonic or written, shall be irrevocable and binding on the Borrower for which the request was made and subject such Borrower to the indemnification provisions of Section 13 of this Agreement. The Borrower for which a Rate Conversion/Continuation Request was made shall bear all risks related to the giving of such Rate Conversion/Continuation Request by the Borrower Representative on behalf of such Borrower whether given telephonically or by such other method of transmission as the Borrower Representative shall elect. 2.12 LETTERS OF CREDIT. Subject to the terms and conditions set forth in this Agreement, each Designated Letter of Credit Issuer designated for a Borrower and the Subsidiaries thereof agrees, at any time and from time to time, from and including the Closing Date but in no event after the thirtieth (30th) calendar day immediately preceding the Revolving Credit Termination Date, directly or through its Lending Installation to issue and deliver, or to extend the expiration of, Letters of Credit, denominated in Dollars or any Alternate Currency, for the account of such Borrower or such Subsidiaries (each such Borrower and any such Subsidiaries being herein referred to as "Letter of Credit Obligors"); provided, however, that, the aggregate LC Exposure of the Banks shall not at any time exceed the lesser of: (x) Twenty Million Dollars ($20,000,000) or (y) an amount equal to the Borrowing Base at such time minus the aggregate Revolving Credit Loans of the Banks to all of the Borrowers outstanding at such time and the aggregate Swing Line Exposure of the Banks to all of the Borrowers at such time or (z) the sum of the aggregate Revolving Credit Commitments of the Banks at such time minus the sum of the aggregate outstanding Revolving Credit Loans of the Banks to all of the Borrowers outstanding at such time and the aggregate Swing Line Exposure of the Banks to all of the Borrowers at such time. (a) DESIGNATED LETTER OF CREDIT ISSUER AND DESIGNATED EUROPEAN ADMINISTRATIVE AGENT. Subject to the terms and conditions set forth in this Agreement, the applicable Designated Letter of Credit Issuer shall issue Letters of Credit for the account of any of the Borrowers, provided, however, Letters of Credit consisting of Demand Guarantees or Contract Guarantees will only be issued to the extent that the Administrative Agent has designated a Designated European Administrative Agent which Designated European Administrative Agent has been assigned a minimum of at least $5,000,000 of an initial Bank's rights and obligations under this Agreement and of the Revolving Credit Commitment of such initial Bank hereunder. 27 37 (b) TERM; FORM; REQUESTS AND CONDITIONS OF LETTERS OF CREDIT. Each Letter of Credit shall be issued in such form as the applicable Designated Letter of Credit Issuer may reasonably require subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, and any subsequent revisions thereof or (x) in the case of a Letter of Credit constituting a Demand Guarantee, the Uniform Rules for Demand Guarantees (1992 Revision), International Chamber of Commerce Publication No. 458, and any subsequent revisions thereof or (y) in the case of a Letter of Credit constituting a Contract Guarantee, the Uniform Rules for Contract Guarantees (1978), International Chamber of Commerce Publication No. 325, and any subsequent revisions thereof. Each Letter of Credit shall: (x) permit drawings upon presentation of one or more sight drafts and such other documents as specified by the Borrower Representative in the Credit Request delivered pursuant to Section 2.12(b)(i) of this Agreement and agreed to by such Designated Letter of Credit Issuer, which drawings shall occur on or prior to the applicable expiration date of such Letter of Credit, (y) by its terms expire not later than the earlier of one (1) year after the date of issuance of such Letter of Credit or the fifteenth (15th) Business Day prior to the Revolving Credit Termination Date and (z) by its terms provide for payment of drawings in Dollars or an Alternate Currency. (i) Requests for Letters of Credit for the account of a Borrower or any Subsidiaries thereof shall be given by the Borrower Representative to the Designated Letter of Credit Issuer, to the extent applicable, the Lending Installation thereof, and the Administrative Agent and Designated European Administrative Agent designated for such Borrower not later than 12:00 noon (local time at the Notice Office of the Designated Letter of Credit Issuer and, to the extent applicable, the Lending Installation thereof) three (3) Business Days prior to the specified date for the issuance of the requested Letter of Credit. Each such request (a "Letter of Credit Request") for a Letter of Credit shall be a written or telephonic notice (in the case of a telephonic notice, promptly confirmed in writing if so requested by the Designated Letter of Credit Issuer). Each written Letter of Credit Request or written confirmation thereof shall be substantially in the form of Exhibit B-3 attached hereto, signed by the Borrower Representative and transmitted by the Borrower Representative to the Designated Letter of Credit Issuer, such Lending Installation and the Administrative Agent and such Designated European Administrative Agent by telecopier. Each written and telephonic Letter of Credit Request and each confirmation thereof shall specify with respect to each Letter of Credit requested: (i) the account party for whose benefit the Letter of Credit is being requested, (ii) the face amount thereof and the currency in which the face amount will be denominated, (iii) the beneficiary, (iv) the intended date of issuance and (v) the terms of the Letter of Credit, and shall be promptly forwarded by the Administrative Agent or the applicable Designated European Administrative Agent to the applicable Designated Letter of Credit Issuer. Concurrently with each Credit Request requesting a Letter of Credit, the applicable Letter of Credit Obligor shall execute and deliver to the Designated Letter of Credit Issuer in respect of such requested Letter of Credit a reimbursement or similar agreement, in the Designated Letter of Credit Issuer's then standard form of application for and reimbursement agreement with respect to letters of credit, Demand Guarantees and Contract Guarantees (such 28 38 documents being hereinafter collectively referred to as a "Reimbursement Agreement"); provided, however, that in the event of any conflict between the provisions of any such Reimbursement Agreement and this Agreement, the provisions of this Agreement shall govern. The Designated Letter of Credit Issuer may rely on such telephonic Letter of Credit Request to the same extent that the Administrative Agent or the applicable Designated European Administrative Agent may rely on a written Credit Request. The Borrower for which a Letter of Credit request was made shall bear all risks related to the giving of such Letter of Credit Request by the Borrower Representative on behalf of such Borrower whether given telephonically or by such other method of transmission as the Borrowers shall elect. (ii) Each Designated Letter of Credit Issuer shall, on the date of each issuance of a Letter of Credit by it or through its Lending Installation, give the Administrative Agent and such Designated European Administrative Agent, if applicable, written notice of the issuance of such Letter of Credit, accompanied by a copy to the Administrative Agent of the Letter of Credit or Letters of Credit issued by it. Each Designated Letter of Credit Issuer shall provide to the Administrative Agent a quarterly (or monthly if requested by any Bank) summary describing each Letter of Credit issued by such Designated Letter of Credit Issuer and then outstanding as well as an identification for the relevant period of the daily aggregate Letter of Credit outstandings represented by Letters of Credit issued by such Designated Letter of Credit Issuer. (c) EXISTING LETTERS OF CREDIT. The Supplemental Schedule contains a description of all Existing Letters of Credit. With respect to Existing Letters of Credit issued by a bank that is a Designated Letter of Credit Issuer on the Effective Date as to which such Designated Letter of Credit Issuer makes a written request to the Administrative Agent and the Designated European Administrative Agent, if applicable, and the Borrower Representative on the Closing Date requesting that such Existing Letter of Credit be treated as a "Letter of Credit" hereunder, such Existing Letter of Credit shall thereupon constitute a "Letter of Credit" (and no longer an "Existing Letter of Credit") for all purposes hereof, and shall be deemed to have been issued, for purposes of Section 3.4(a), on the Closing Date. From and after the Closing Date, the terms of this Agreement shall apply to such Existing Letters of Credit, superseding any other agreement otherwise applicable to them to the extent inconsistent with the terms hereof. Absent such election by such Designated Letter of Credit Bank, Existing Letters of Credit shall not constitute "Letters of Credit" hereunder for any purpose including Sections 2.12(d) and 4.1 hereof. (d) PARTICIPATION BY BANKS IN LETTERS OF CREDIT. By its issuance of a Letter of Credit and without further action on its part, each Designated Letter of Credit Issuer hereby grants to each Bank, and each Bank hereby acquires from such Designated Letter of Credit Issuer, a participation in such Letter of Credit equal to such Bank's Ratable Portion of the Letter of Credit's face amount, effective on the date of the issuance of such Letter of Credit. In consideration, each Bank hereby absolutely and unconditionally agrees to pay to the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, 29 39 for the account of each Designated Letter of Credit Issuer such Bank's Ratable Portion of each disbursement made by such Designated Letter of Credit Issuer in respect of such Letter of Credit and not reimbursed by the applicable Letter of Credit Obligor or Borrower guarantying such reimbursement obligation as hereinafter provided for any reason including the illegality of such reimbursement or as to which any reimbursement payment is required to be refunded to a Borrower or applicable Letter of Credit Obligor for any reason. Each Bank acknowledges and agrees that its obligation to acquire risk participations pursuant to this Section 2.12(d) is absolute and unconditional and shall not be affected by any event or circumstance whatsoever, including the occurrence of any Potential Default or Event of Default hereunder or the failure of any condition precedent set forth in Section 3 of this Agreement to be satisfied and each payment in satisfaction thereof shall be made without any offset, abatement, withholding or reduction whatsoever; provided, however, that the foregoing shall not be construed to excuse any Designated Letter of Credit Issuer from liability to any Bank to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by each of the Banks to the fullest extent permitted by applicable Law) suffered by such Bank that are caused by such Designated Letter of Credit Issuer's gross negligence or willful misconduct. (e) REIMBURSEMENT; INTEREST. Each Borrower agrees that (x) whenever there is a drawing on a Letter of Credit issued by a Designated Letter of Credit Issuer for the account of such Borrower, the Borrower shall pay, and (y) whenever there is a drawing on a Letter of Credit issued by a Designated Letter of Credit Issuer for the account of another Letter of Credit Obligor whose reimbursement obligation such Borrower is guarantying pursuant to Section 2.12(l) of this Agreement, the Borrower shall cause such Letter of Credit Obligor to pay, to the Administrative Agent or the Designated European Administrative Agent, as the case may be, on the date of such drawing an amount equal to such drawing, such payment to be made in immediately available funds and in Dollars (and in the amount which is the Dollar equivalent of the payment or disbursement made by such Designated Letter of Credit Issuer under such Letter of Credit in an Alternate Currency). The Administrative Agent or the Designated European Administrative Agent, as the case may be, shall promptly remit any such payment to such Designated Letter of Credit Issuer. If there is a drawing on a Letter of Credit, then, unless the Letter of Credit Obligor (or the Borrower guarantying the reimbursement obligation of such Letter of Credit Obligor) shall reimburse such amount in full on the date of such drawing, the unpaid amount thereof shall bear interest for the account of the applicable Designated Letter of Credit Issuer for each day from and including the date of such drawing until the earlier of the date of reimbursement by the applicable Letter of Credit Obligor (or the Borrower guarantying the reimbursement obligation of such Letter of Credit Obligor) or the date on which such drawing is reimbursed by Revolving Credit Loans, at the rate per annum that would apply to such amount if such amount were a Revolving Credit Borrowing comprised of Alternate Base Rate Loans. (f) FAILURE TO REIMBURSE DRAWINGS. In the event that the applicable Letter of Credit Obligor (or the Borrower guarantying the reimbursement obligation of such Letter of Credit Obligor) fails to make a timely reimbursement, together with any interest thereon, to the Administrative Agent or the Designated European Administrative Agent, as the case may be, on the date of any drawing on a Letter of Credit, such failure shall constitute a Deemed Credit Request requesting an Alternate Base Rate Loan to be made to such Letter of Credit Obligor if 30 40 such Letter of Credit Obligor is a Borrower or, if such Letter of Credit Obligor is not a Borrower, to the Borrower which is guarantying the reimbursement obligation of such Letter of Credit Obligor, in an aggregate amount equal to the amount reimbursable to the applicable Designated Letter of Credit Issuer plus any interest thereon (the Administrative Agent having determined in the case of any payment by a Designated Letter of Credit Issuer made in an Alternate Currency the equivalent thereof in Dollars). The Administrative Agent or such Designated European Administrative Agent, as the case may be, shall disburse all such loan proceeds directly to the Designated Letter of Credit Issuer to satisfy the aforesaid reimbursement liability. The obligations of the Banks to the Administrative Agent and such Designated European Administrative Agent under this Section 2.12 are in addition to and not in limitation of the obligations of the Banks under Section 11 of this Agreement. In the event that the obligation of the Banks to make a Revolving Credit Loan pursuant to this Section 2.12(f) cannot be satisfied by the Banks because any of the events specified in Section 8.14 shall have occurred with respect to the Borrower for whose account the Letter of Credit has been issued (or which is guarantying the reimbursement obligations of the Letter of Credit Obligor for whose account the Letter of Credit was issued) or one or more of the Banks shall determine that such Banks are legally prohibited from making such a Revolving Credit Loan, each Bank (other than the applicable Designated Letter of Credit Issuer) or each such Bank so prohibited (other than the applicable Designated Letter of Credit Issuer), as the case may be, shall be obligated to purchase on the date the Revolving Credit Loan would have been made pursuant to this Section (e) an undivided participating interest in the outstanding unpaid reimbursement obligation owing to such Designated Letter of Credit Issuer in an amount equal to the Revolving Credit Loan that such Bank would otherwise have been obligated to fund. On the purchase date, each Bank or each such Bank so prohibited shall pay to the Administrative Agent or such Designated European Administrative Agent, as the case may be, for the benefit of the Designated Letter of Credit Issuer, in immediately available funds, at the account of the Administrative Agent or Designated European Administrative Agent, as the case may be, maintained at the Payment Office of the Administrative Agent or Designated European Administrative Agent, as the case may be, not later than the time such Bank would have been obligated to fund such Revolving Credit Loan pursuant to this Section (e), a participation purchase price in amount equal to such Revolving Credit Loan. The proceeds of purchases by the Banks of such participating interests shall be applied directly by the Administrative Agent or such Designated European Administrative Agent, as the case may be, to reimburse the Designated Letter of Credit Issuer for such unpaid reimbursed obligation. Upon receipt of such participation purchase price, the Designated Letter of Credit Issuer shall, if requested by a Bank purchasing a participating interest, issue a participation certificate, dated the date of the Designated Letter of Credit Issuer's receipt of such proceeds, and evidencing such Bank's participating interest in such unpaid reimbursement obligation. Whenever, at any time after a Designated Letter of Credit Issuer has received from the Administrative Agent the proceeds of any such participating interest by any other Bank, such Designated Letter of Credit Issuer receives any payment from or on behalf of applicable Borrower on account of such unpaid reimbursed obligation, such Designated Letter of Credit will promptly pay to the Administrative Agent or such Designated European Administrative Agent, as the case may be, for distribution to such Bank its Ratable Portion of such payments (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding); provided, however, in the event such payment in respect of unpaid reimbursement obligations is required to be returned by the Designated Letter of Credit Issuer, such Bank will return to the Administrative Agent or such Designated European Administrative Agent for payment over the Designated Letter of Credit Issuer any portion of such payment previously distributed by the Administrative Agent or such Designated European Administrative Agent on behalf of the Designated Letter of Credit Issuer. 31 41 (g) OBLIGATIONS ABSOLUTE. The obligation of each Borrower for whose account a Letter of Credit was issued to reimburse, and to cause each other Letter of Credit Obligor whose reimbursement obligation such Borrower is guarantying pursuant to Section 2.12(l) of this Agreement to reimburse, the Designated Letter of Credit Issuer shall be absolute and unconditional and shall be performed under all circumstances including, without limitation: (i) any lack of validity or enforceability of any Letter of Credit, (ii) the existence of any claim, offset, defense or other right that such Borrower or any other Letter of Credit Obligor may have against the beneficiary of any Letter of Credit or any successor in interest thereto, (iii) the existence of any claim, offset, defense or other right that any Bank or the Administrative Agent or Designated European Administrative Agent may have against any Borrower or other Letter of Credit Obligor or against the beneficiary of any Letter of Credit or against any successor in interest thereto, (iv) the existence of any fraud or misrepresentation in the presentment of any draft or other item drawn and paid under any Letter of Credit by any person other than the Designated Letter of Credit Issuer, (v) any payment of any draft or other item by a Designated Letter of Credit Issuer which does not strictly comply with the terms of any Letter of Credit issued by such Designated Letter of Credit Issuer, so long as, in each case, such payment shall not have constituted gross negligence or willful misconduct on the part of such Designated Letter of Credit Issuer, (vi) any improper use which may be made of the Letter of Credit or any improper acts or omissions of any beneficiary or transferee of the Letter of Credit in connection therewith, (vii) any statement or any other documents presented under any Letter of Credit proving to be insufficient, forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever, (viii) the insolvency of any Person issuing any documents in connection with the Letter of Credit, (ix) any irregularity in the transaction with respect to which a Letter of Credit is issued, including any fraud by the beneficiary or any transferee of such Letter of Credit, (x) any errors, omissions, interruptions or delays in transmission or delivery of any messages, (xi) any act, error, neglect or default, omission, insolvency or failure of business of any of the correspondents of the Designated Letter of Credit Issuer, or (xii) any other circumstances arising from causes beyond the control of the Designated Letter of Credit Issuer. (h) LIABILITY OF DESIGNATED LETTER OF CREDIT ISSUER. It is expressly understood and agreed that the absolute and unconditional obligation of a Borrower hereunder to reimburse, and to cause the other Letter of Credit Obligors whose reimbursement obligation such Borrower is responsible to reimburse, disbursements in respect of Letters of Credit issued by a Designated Letter of Credit Issuer shall not be construed to excuse such Designated Letter of Credit Issuer from liability to such Borrower or any Letter of Credit Obligor to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent permitted by applicable Law) suffered by such Borrower or any other Letter of Credit Obligor of the foregoing that are caused by the gross negligence or willful misconduct of such Designated Letter of Credit Issuer in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties agree that each Designated Letter of Credit Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit; provided, however, that each Designated Letter of Credit Issuer shall have the right in its sole 32 42 discretion to decline to accept such documents and to decline to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit. In making any payment under any Letter of Credit, the Designated Letter of Credit Issuer's (i) exclusive reliance as to any and all matters set forth therein on documents, signatures and endorsements presented to it under such Letter of Credit which on their face appear to be in order, whether not the amount due to the beneficiary thereunder equals the amount of such draft, whether any document presented pursuant to such Letter of Credit proves to be in order, and whether any other statement or any other document or any signature or endorsement with respect thereto presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and (ii) making payment upon presentation of documents not complying in any immaterial respect with the terms of the Letter of Credit shall, in each case, not be deemed to constitute willful misconduct or gross negligence of the Designated Letter of Credit Issuer. Any action, inaction or omission on the part of the Designated Letter of Credit Issuer or any of its correspondents, under or in connection with any Letter of Credit issued by the Designated Letter of Credit Issuer or any renewal or extension thereof or the related instruments or documents, if taken in good faith and in conformity with applicable Laws and regulations governing Letters of Credit generally and the terms of this Section 2.12(h), shall be binding upon the Borrowers and the other applicable Letter of Credit Obligors and shall not place the Designated Letter of Credit Issuer or any of its correspondents under any liability to the Borrowers or any other Letter of Credit Obligors. The Designated Letter of Credit Issuer's rights, powers, privileges and immunities specified in or arising under this Agreement are in addition to any heretofore or at any time hereafter otherwise created or arising rights, powers, privileges and immunities, whether by statute or rule of Law or contract. (i) DESIGNATED LETTER OF CREDIT ISSUER INDEMNITY. Each Borrower for whose account a Letter of Credit is issued or which is guarantying the reimbursement obligation of another Letter of Credit Obligor for whose account a Letter of Credit has been issued shall indemnify the Designated Letter of Credit Issuer issuing such Letter of Credit from and against: (i) any loss or liability (other than any caused by the Designated Letter of Credit Issuer's gross negligence or willful misconduct as determined by the final judgment of a court of competent jurisdiction) incurred by the Designated Letter of Credit Issuer in respect of this Agreement and the Letters of Credit issued by the Designated Letter of Credit Issuer for the account of such Borrower or such Letter of Credit Obligor and (ii) any out-of-pocket expenses incurred by such Designated Letter of Credit Issuer in defending itself or otherwise related to this Agreement or any such Letter of Credit issued by such Designated Letter of Credit Issuer (other than any caused by the Designated Letter of Credit Issuer's gross negligence or willful misconduct as determined by the final judgment of a court of competent jurisdiction) including, without limitation, reasonable fees and expenses of legal counsel incurred by such Designated Letter of Credit Issuer in the defense of any claim against it or in the prosecution of its rights and remedies. (j) EFFECT OF APPLICABLE LAW OR CUSTOM. All Letters of Credit issued hereunder, all reimbursement obligations hereunder and all reimbursement obligations under any Reimbursement Agreement will, except to the extent otherwise expressly provided in this Agreement, the Reimbursement Agreements or such Letters of Credit, be governed by the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, and any subsequent revisions thereof, or (x) in the case of a Letter 33 43 of Credit constituting a Demand Guarantee, the Uniform Rules for Demand Guarantees (1992 Revision), International Chamber of Commerce Publication No. 458, and any subsequent revisions thereof or (y) in the case of a Letter of Credit constituting a Contract Guarantee, the Uniform Rules for Contract Guarantees (1978), International Chamber of Commerce Publication No. 325, and any subsequent revisions thereof. (k) TERMINATION OF LETTER OF CREDIT COMMITMENT. In the event that: (i) any restriction is imposed on any Designated Letter of Credit Issuer (including, without limitation, any legal lending or acceptance limits imposed by the United States of America or any political subdivision thereof or of any foreign government or central bank) which in the judgment of such Designated Letter of Credit Issuer would prevent such Designated Letter of Credit Issuer from issuing Letters of Credit or maintaining its commitment to issue Letters of Credit or (ii) there shall have occurred, at any time during the term of this Agreement: (A) any outbreak of hostilities or other national or international crisis or change in economic conditions if the effect of such outbreak, crisis or change would make the issuance of Letters of Credit impracticable, (B) the enactment, publication, decree or other promulgation of any statute, regulation, rule or order of any court or other governmental authority which would materially and adversely affect the ability of the Borrowers to perform their obligations under this Agreement or the ability of any Letter of Credit Obligor to perform its obligations under this Agreement or any Reimbursement Agreement, or (C) the taking of any action by any government or agency in respect of its monetary or fiscal affairs which would have a material adverse effect on the issuance of Letters of Credit, then such Designated Letter of Credit Issuer, in the case of the occurrence of any event described hereinabove, shall give written notice of the occurrence of such event to the Borrower Representative and the Administrative Agent and Designated European Administrative Agent, if applicable, whereupon the commitment of such Designated Letter of Credit Issuer to issue or extend any Letter of Credit shall be suspended on the effective date of such notice and shall continue to be suspended until the effect of such event shall cease to exist. (l) GUARANTY OF OTHER LETTER OF CREDIT OBLIGOR'S LETTER OF CREDIT OBLIGATIONS. (i) Each Domestic Borrower hereby unconditionally guarantees, jointly and severally, for the benefit of the Administrative Agent, each Designated European Administrative Agent, to the extent applicable, the Banks and each Designated Letter of Credit Issuer, the full and punctual payment of the obligations of each Letter of Credit Obligor under each Letter of Credit Document to which such Letter of Credit Obligor is now or hereafter becomes a party. Upon failure by any such Letter of Credit Obligor to pay punctually any such amount, each Domestic Borrower shall be jointly and severally obligated to forthwith on demand by the Administrative Agent pay the amount not so paid at the place and in the currency and otherwise in the manner specified in this Agreement or any applicable Letter of Credit Document. As a separate, additional and continuing obligation, each Domestic Borrower unconditionally and irrevocably undertakes and agrees, for the benefit of the Administrative Agent or the Designated European Administrative Agent, if applicable, and the Banks, that, should any of the foregoing amounts not be recoverable from the Domestic Borrowers for any reason whatsoever (including, without limitation, by reason of any provision of 34 44 any Loan Document or any other agreement or instrument executed in connection therewith being or becoming void, unenforceable, or otherwise invalid under any applicable law) then, notwithstanding any notice or knowledge thereof by any Bank, the Administrative Agent or the Designated European Administrative Agent, if applicable, any of their respective Affiliates, or any other Person, at any time, each Domestic Borrower as sole, original and independent obligor, upon demand by the Administrative Agent or such Designated European Administrative Agent, will make payment to the Administrative Agent or such Designated European Administrative Agent, for the account of the Banks and the Administrative Agent or such Designated European Administrative Agent, of all such obligations not so recoverable by way of full indemnity, in such currency and otherwise in such manner as is provided in the Loan Documents. (ii) Each Foreign Borrower hereby unconditionally guarantees, severally, for the benefit of the Administrative Agent, each Designated European Administrative Agent, if applicable, the Banks and each Designated Letter of Credit Issuer applicable thereto, the full and punctual payment of the obligations of each Letter of Credit Obligor that is a Subsidiary of such Foreign Borrower under each Letter of Credit Document to which such Letter of Credit Obligor is now or hereafter becomes a party. Upon failure by any such Letter of Credit Obligor to pay punctually any such amount, such Foreign Borrower shall forthwith on demand by the Administrative Agent or such applicable Designated European Administrative Agent pay the amount not so paid at the place and in the currency and otherwise in the manner specified in this Agreement or any applicable Letter of Credit Document. As a separate, additional and continuing obligation, each such Foreign Borrower unconditionally and irrevocably undertakes and agrees, for the benefit of the Administrative Agent, such applicable Designated European Administrative Agent and the Banks, that, should any of the foregoing amounts not be recoverable from such Foreign Borrower for any reason whatsoever (including, without limitation, by reason of any provision of any Loan Document or any other agreement or instrument executed in connection therewith being or becoming void, unenforceable, or otherwise invalid under any applicable law) then, notwithstanding any notice or knowledge thereof by any Bank, the Administrative Agent, such applicable Designated European Administrative Agent any of their respective Affiliates, or any other Person, at any time, such Foreign Borrower as sole, original and independent obligor, upon demand by the Administrative Agent or such applicable Designated European Administrative Agent, will make payment to the Administrative Agent or such applicable Designated European Administrative Agent, for the account of the Banks, the Administrative Agent or such or such Designated European Administrative Agent, as the case may be, of all such obligations not so recoverable by way of full indemnity, in such currency and otherwise in such manner as is provided in the Loan Documents. (iii) The obligations of each Borrower under this Section 2.12(l) shall be unconditional and absolute and, without limiting the generality of the 35 45 foregoing shall not be released, discharged or otherwise affected by the occurrence, one or more times, of any of the following: (A) any extension, renewal, settlement, compromise, waiver or release in respect to any obligation of any Letter of Credit Obligor under any Letter of Credit Document, by operation of law or otherwise; (B) any modification or amendment of or supplement to this Agreement, any Note or any other Loan Document; (C) any release, non-perfection or invalidity of any direct or indirect security for any obligation of any of the Borrowers under this Agreement, any Note or any other Loan Document or of any other Letter of Credit Obligor under any Letter of Credit Document; (D) any change in the corporate existence, structure or ownership of any Letter of Credit Obligor or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Letter of Credit Obligor or its assets or any resulting release or discharge of any obligation of any Letter of Credit Obligor contained in any Letter of Credit Document; (E) the existence of any claim, set-off or other rights which a Borrower may have at any time against any Letter of Credit Obligor, the Administrative Agent or applicable Designated European Administrative Agent, any Bank or any other person, whether in connection herewith or any unrelated transactions; (F) any invalidity or unenforceability relating to or against any other Letter of Credit Obligor for any reason or any Letter of Credit Document, or any provision of applicable law or regulation purporting to prohibit the payment by any other Letter of Credit Obligor of any Obligations in respect of any Letter of Credit; or (G) any other act or omission to act or delay of any kind by any other Letter of Credit Obligor, the Administrative Agent or applicable Designated European Administrative Agent, any Bank or any other person or any other circumstance whatsoever which might, but for the provisions of this section, constitute a legal or equitable discharge of any Borrower's obligations under this section. (iv) Each Borrower's obligations under this Section 2.12(l) shall remain in full force and effect until the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts payable by such Borrower under the Loan Documents and by any other Letter of Credit Obligor under the Letter of Credit Documents shall have been paid in full. If at any time any payment of any of the Obligations of any Letter of Credit Obligor in respect of any Letter of Credit Documents is rescinded or must be otherwise restored or 36 46 returned upon the insolvency, bankruptcy or reorganization of such Letter of Credit Obligor, the applicable Borrower's obligations under this section with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. (v) Each of the Borrowers irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any person against any Letter of Credit Obligor or any other person, or against any collateral or guaranty of any other person. (vi) Until the indefeasible payment in full of all of the Obligations and the termination of the Commitments of the Banks hereunder, none of the Borrowers shall have any rights, by operation of law or otherwise, upon making any payment under this section, to be subrogated to the rights of the payee against any Letter of Credit Obligor with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by any Letter of Credit Obligor in respect thereof. (vii) In the event that acceleration of the time for payment of any amount payable by any Letter of Credit Obligor under any Letter of Credit Document is stayed upon insolvency, bankruptcy or reorganization of such Letter of Credit Obligor, all such amounts otherwise subject to acceleration under the terms of any applicable Letter of Credit Document shall nonetheless be payable by the applicable Borrower or Borrowers under this Section 2.12(l) forthwith on demand by the Administrative Agent. 2.13 INTEREST ON LOANS. (a) INTEREST RATE. Each Borrower shall pay interest on the unpaid principal amount of each Revolving Credit Loan or Term Loan made by the Banks to such Borrower and each Swing Line Loan made by a Designated Swing Line Lender to such Borrower from the date of such Loan until the principal amount thereof shall have been paid in full as follows: (i) ALTERNATE BASE RATE LOANS. During such periods as any Alternate Base Rate Loans comprising a Revolving Credit Borrowing or Term Loan Borrowing are outstanding, such Borrower shall pay interest on such Alternate Base Rate Loans at a rate per annum equal to the sum of the Alternate Base Rate plus the Applicable Margin which is then in effect and applicable to Borrowings comprised of Alternate Base Rate Loans, payable quarterly, in arrears, on the first day of each January, April, July and October of each calendar year and on the date such Alternate Base Rate Loans comprising such Borrowing shall be converted or paid in full (whether at maturity, by reason of acceleration or otherwise) and, after maturity, on demand. 37 47 (ii) LIBOR RATE LOANS. During such periods as any LIBOR Rate Loans comprising a Revolving Credit Borrowing or Term Loan Borrowing are outstanding or any LIBOR Rate Loan comprising a Swing Line Borrowing is outstanding, such Borrower shall pay interest on such LIBOR Rate Loans at a rate per annum equal to the sum of the London Interbank Offered Rate plus the Applicable Margin which is then in effect and applicable to Borrowings comprised of LIBOR Rate Loans as of the most recently preceding Margin Adjustment Date occurring prior to the date of the making of such LIBOR Rate Loans, or the conversion or continuation of such LIBOR Rate Loans in accordance with Section 2.11, payable: (A) on the last day of each Interest Period and (B) if such Interest Period has a duration of more than three months, three months after the first day of such Interest Period and (C) on the date such LIBOR Rate Loans comprising such Borrowing shall be converted to Base Rate Loans, or paid in full (whether at maturity, by reason of acceleration or otherwise) and (D) after maturity, on demand. (iii) QUOTED MONEY MARKET RATE LOANS. During such periods as any Money Market Rate Loan comprising a Swing Line Borrowing is outstanding, such Borrower to which such Swing Line Loan is outstanding shall pay interest on such Money Market Rate Loan at a rate per annum equal to the Quoted Money Market Rate applicable to such Money Market Loan, payable upon prepayment (on the amount prepaid), at maturity (whether by acceleration or otherwise), and, after maturity, on demand. (b) APPLICABLE MARGIN; TERMS OF ADJUSTMENT. (i) COMMENCEMENT; CONDITIONS. So long as no Event of Default shall have occurred which is continuing and has not been waived in accordance with Section 14.1 hereof, the Applicable Margin shall be calculated as herein specified as of the Closing Date and as of the first day of the calendar month of each Fiscal Year commencing on April 1, 2000 (each such date, a "Margin Adjustment Date"), if at least three (3) Business Days prior to such Margin Adjustment Date, the Administrative Agent shall have received: (A) the financial statements required by Section 7.1(a) for the Fiscal Quarter ending immediately prior to such Margin Adjustment Date or, where the Fiscal Quarter ending prior to such Margin Adjustment Date is a Fiscal Year end, the financial statements required by Section 7.1(b) for such Fiscal Year ending immediately prior to such Margin Adjustment Date (each such Fiscal Quarter end and Fiscal Year end, a "Margin Determination Date") and (B) in each case, a certificate complying with Section 7.1(c) certifying Consolidated Total Funded Debt to Adjusted EBITDA Ratio of Instron Corporation and its consolidated Subsidiaries for the applicable Testing Period ending as of such Margin Determination Date. (ii) CALCULATION AND DURATION OF ADJUSTMENT. On each Margin Adjustment Date, the Applicable Margin shall be the Applicable Margin set forth in the definition of "Applicable Margin" for Alternate Base Rate Loans or the LIBOR Rate Loans, as the case may be, comprising Revolving Credit Borrowings 38 48 which corresponds to the Borrowers' Consolidated Total Funded Debt to Adjusted EBITDA Ratio as measured for the applicable Testing Period ending as of the Margin Determination Date applicable to such Margin Adjustment Date. The Applicable Margin effective as of a particular Margin Adjustment Date shall remain effective only until the next succeeding Margin Adjustment Date at which time the Applicable Margin shall be recalculated pursuant to this Subsection (b); provided, however, that: (A) if (x) an Event of Default shall have occurred which is continuing and has not been waived in accordance with Section 14.1 hereof or (y) even if such Event of Default has been so waived by the Banks, if the Borrowers shall not have delivered as of any Margin Adjustment Date the financial statements required to have been delivered previously thereto under Section 7.1(a) and 7.1(b) of this Agreement, then, at the election of the Required Banks, the Applicable Margin shall be: (a) with respect to Revolving Credit Borrowings comprised of Alternate Base Rate Loans, the Alternate Base Rate plus one and one half percent (1.50%) per annum, and (b) with respect to Revolving Credit Borrowings comprised of LIBOR Rate Loans, the London Interbank Offered Rate plus three percent (3.00%) per annum, and (B) if an Event of Default shall have occurred which is continuing and has not been waived in accordance with Section 14.1 hereof, the interest rate shall be, upon the election of the Required Banks, the default interest rate applicable pursuant to Section 2.14 of this Agreement. 2.14 DEFAULT INTEREST. If any principal, interest or fees due under this Agreement shall not be paid when due or if any Note or any amounts due under any Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by operation of any provision of acceleration of maturity therein contained, or if there shall otherwise occur an Event of Default which is continuing and has not been waived in accordance with Section 14.1 hereof, then, at the election of the Required Banks, (a) the principal of each outstanding Loan and, to the extent permitted by law, the unpaid interest thereon shall bear interest, payable on demand, at a rate per annum equal at all times to two percent (2%) per annum in excess of the interest rate otherwise then payable (including, if imposed, the interest rate reflecting the increased Applicable Margin set forth in Section 2.13(b)(ii)) pursuant to the terms of this Agreement and (b) the Applicable Fee Percentage shall be two percent (2%) in excess of the Applicable Fee Percentage per annum otherwise applicable pursuant to the proviso to Section 2.16(e) of this Agreement. 2.15 INTEREST RATE DETERMINATION. (a) ADMINISTRATIVE AGENT DETERMINATION; NOTICE. The Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, shall determine the London Interbank Offered Rate in accordance with the definition of "London Interbank Offered Rate" set forth in Annex II of this Agreement. The Administrative Agent or such applicable Designated European Administrative Agent shall give prompt notice to each of the Banks and the Borrower Representative of the applicable interest rate determined by the Administrative 39 49 Agent or the applicable Designated European Administrative Agent, as the case may be, for purposes of Sections 2.11 and 2.13 of this Agreement. (b) FAILURE OF BORROWERS TO ELECT. If no Interest Period is specified in any Credit Request or any Rate Conversion/Continuation Request for any LIBOR Rate Loans, the Borrowers shall be deemed to have selected an Interest Period with a duration of one month. If the Borrower Representative shall not have given notice in accordance with Section 2.11 of this Agreement to continue any LIBOR Rate Loans into a subsequent Interest Period (and shall not have otherwise delivered a Rate Conversion/Continuation Request in accordance with Section 2.11 of this Agreement to convert such Loans), then, at the end of the Interest Period applicable to such LIBOR Rate Loans (unless such LIBOR Rate Loans are repaid pursuant to the terms hereof), the Borrowers shall be deemed to have selected an Interest Period with a duration of one month, except that LIBOR Rate Loans denominated in an Alternate Currency shall, at the end of the Interest Period applicable thereto, become due and payable. 2.16 FEES. The following fees shall be payable as set forth below: (a) UNDERWRITING, ARRANGEMENT AND STRUCTURING FEE Each Borrower agrees to pay to the Administrative Agent on the Closing Date for its sole account such Borrower's Ratable Borrower Share of a one time fee for underwriting, arranging and structuring the financing transaction contemplated by this Agreement in the amount specified in the Agent Fee Letter. (b) ANNUAL ADMINISTRATIVE AGENT'S FEE. Each Borrower agrees to pay to the Administrative Agent for its sole account such Borrower's Ratable Borrower Share of an annual Administrative Agent fee as set forth in the Agent Fee Letter. (c) UNUSED COMMITMENT FEE. Each Borrower agrees to pay to the Administrative Agent for the ratable benefit of the Banks, allocable to the Banks in accordance with each Bank's Ratable Portion thereof, such Borrower's Ratable Borrower Share of an unused commitment fee on the average daily unused portion of the aggregate Revolving Credit Commitments (taking into consideration the daily outstanding LC Exposure of the Banks as usage for purposes of calculating such daily unused portion) of the Banks from the Closing Date until the Revolving Credit Termination Date at a rate per annum equal to the Applicable Fee Percentage then in effect, payable quarterly in arrears on the first day of each January, April, July and October, commencing January 1, 2000, and on the Revolving Credit Termination Date. 40 50 (d) LETTER OF CREDIT FEES. The Borrowers shall pay the following fees with respect to Letters of Credit: (i) ANNUAL STANDBY LETTER OF CREDIT FEE. Each Borrower agrees to pay to the Administrative Agent for the ratable benefit of the Banks, quarterly in advance on the Closing Date and on the first Business Day of each calendar quarter thereafter, a risk participation fee equal to: (A) in the case of Letters of Credit other than Contract Guarantees or Demand Guarantees, (x) the Applicable Fee Percentage then in effect multiplied by (y) the aggregate face amount of all Letters of Credit then outstanding for the account of such Borrower or such other Letter of Credit Obligor being guaranteed by such Borrower and (B) in the case of Contract Guarantees or Demand Guarantees, (x) 50% of the Applicable Fee Percentage then in effect multiplied by (y) the aggregate face amount of all such Letters of Credit then outstanding for the account of such Borrower or such other Letter of Credit Obligor being guaranteed by such Borrower (unless, in either case, such amount attributable to such Letter of Credit Obligor has been directly paid to the Designated Letter of Credit Issuer pursuant to the applicable reimbursement agreement). (ii) LETTER OF CREDIT FACING FEE. Each Borrower agrees to pay to the Administrative Agent, for the sole account of the Designated Letter of Credit Issuer designated for such Borrower, a facing fee for all Letters of Credit issued by such Designated Letter of Credit Issuer for the account of such Borrower or such other Letter of Credit Obligor being guaranteed by such Borrower (unless such amount attributable to such Letter of Credit Obligor has been directly paid to the Designated Letter of Credit Issuer pursuant to the applicable reimbursement agreement) equal to one-eighth of one percent (0.125%) per annum of the average daily maximum amount available to be drawn under all Letters of Credit issued by such Designated Letter of Credit Issuer while outstanding, payable quarterly in arrears on the first day of each calendar quarter. (iii) OTHER FEES RELATING TO LETTERS OF CREDIT. Each Borrower agrees to pay to the Designated Letter of Credit Issuer designated for such Borrower, for its sole account, upon issuance by such Designated Letter of Credit Issuer of any Letters of Credit for the account of such Borrower or such other Letter of Credit Obligor being guaranteed by such Borrower (unless such amount attributable to such Letter of Credit Obligor has been directly paid to the Designated Letter of Credit Issuer pursuant to the applicable reimbursement agreement), any standard amendment and modification fees, issuance fees, draw fees and any other standard fees and charges charged by such Designated Letter of Credit Issuer in connection with Letters of Credit. (e) APPLICABLE FEE PERCENTAGES. So long as no Event of Default shall have occurred which is continuing and has not been waived in accordance with Section 14.1 hereof, each Applicable Fee 41 51 Percentage shall be calculated as herein specified as of the Closing Date and as of the first day of the calendar month of each Fiscal Year commencing on April 1, 2000 (each such date, a "Fee Percentage Adjustment Date"), if at least three (3) Business Days prior to such Fee Percentage Adjustment Date, the Administrative Agent shall have received: (A) the financial statements required by Section 7.1(a) for the Fiscal Quarter ending immediately prior to such Fee Percentage Adjustment Date or, where the Fiscal Quarter ending prior to such Fee Percentage Adjustment Date is a Fiscal Year end, the financial statements required by Section 7.1(b) for such Fiscal Year ending immediately prior to such Fee Percentage Adjustment Date (each such Fiscal Quarter end and Fiscal Year end, a "Fee Percentage Determination Date") and (B) a certificate complying with Section 7.1(c) certifying the Consolidated Total Funded Debt to EBITDA Ratio of Instron Corporation and its consolidated Subsidiaries as of such Fee Percentage Determination Date. On each Fee Percentage Adjustment Date, each Applicable Fee Percentage shall be the percentage set forth in the definition of "Applicable Fee Percentage" which corresponds to the Borrowers' Consolidated Total Funded Debt to EBITDA Ratio as of the Fee Percentage Determination Date applicable to such Fee Percentage Adjustment Date. The Applicable Fee Percentage effective as of a particular Fee Percentage Adjustment Date shall remain effective only until the next succeeding Fee Percentage Adjustment Date, at which time the Applicable Fee Percentage shall be recalculated pursuant to this Section 2.16(e); provided, however, that, if an Event of Default shall have occurred which is continuing and has not been waived in accordance with Section 14.1 hereof, or if the Borrowers shall not have delivered as of such Fee Percentage Adjustment Date the financial statements in accordance with Sections 7.1(a) and 7.1(b) of this Agreement, then, upon the election of the Required Banks, the Applicable Fee Percentage shall be the highest per annum percentage appearing in the tables incorporated into the definitions. (f) PAYMENT OF FEES; NONREFUNDABLE. All fees set forth in this Section 2.16 shall be paid in Dollars on the date due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, to the Banks, the Designated Swing Line Lenders or the Designated Letter of Credit Issuers. Once paid, to the extent permitted by applicable Law, none of such fees shall be refundable under any circumstances. 2.17 MANNER AND APPLICATION OF PAYMENTS; CONTROL ACCOUNT MAINTENANCE; COMPUTATIONS. (a) MANNER OF PAYMENT. Each of the Borrowers shall make all payments to be made under this Agreement by such Borrower with respect to the Obligations hereunder, not later than 12:00 noon (local time at the Payment Office of the Administrative Agent or the applicable Designated European Administrative Agent) on the day on which such payment shall become due in immediately available funds and without setoff, counterclaim, defense or deduction of any kind, to the Administrative Agent's or the applicable Designated European Administrative Agent's account maintained at the Payment Office of the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, for distribution by the Administrative Agent or the applicable Designated European Administrative Agent to the Banks and application thereof by the Banks to such Borrowers' Loan Account. 42 52 (b) APPLICATION OF PAYMENTS. After receipt of any payment by the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, the Administrative Agent or the applicable Designated European Administrative Agent will cause to be distributed on the day of such receipt like funds relating to such payment (other than amounts payable pursuant to Section 2.16(a) and (b) of this Agreement solely to the Administrative Agent and amounts payable pursuant to Section 2.16(d)(ii) and 2.16(d)(iii) of this Agreement solely to a Designated Letter of Credit Issuer) ratably to each of the Banks for the account of its respective Lending Office. At the time of a Borrowers' making payment hereunder, the Borrower Representative shall specify to the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, the Obligations of such Borrower to which such payment is to be applied. If the Borrower Representative does not specify an application or if an Event of Default has occurred which is continuing and has not been waived in accordance with Section 14.1 hereof, the Administrative Agent or such applicable Designated European Administrative Agent shall, subject to Section 2.19 and 9.4(d)(iv) of this Agreement, distribute such payment to the Banks for application to such Loans (or participations therein) as the Administrative Agent or such applicable Designated European Administrative Agent, in its sole discretion, elects or as the Required Banks shall have directed; provided, however, the Administrative Agent or such applicable Designated European Administrative Agent will use reasonable efforts to avoid an application of a payment which causes early prepayment of a LIBOR Rate Borrowing prior to expiration of its applicable Interest Period. (c) ADMINISTRATIVE AGENT MAINTENANCE OF CONTROL ACCOUNT. The Administrative Agent shall maintain on its books and records a control account (the "Control Account") in respect of each Borrower which shall reflect: (i) with respect to Revolving Credit Borrowings: (w) the outstanding Revolving Credit Loans to each Borrower, (x) the Ratable Portion of each Bank in the outstanding Revolving Credit Borrowings to each Borrower, (y) the Ratable Portion of each Bank in all payments made in respect of such Revolving Credit Loans and (z) accrued interest on the Revolving Credit Loans to each Borrower, (ii) with respect to outstanding Term Loans, (x) the outstanding principal amount to such Borrower by each of the Banks, (y) all payments made to each Bank in respect of such Term Loans to such Borrower and (z) accrued interest on such Term Loan owing by such Borrower, (iii) with respect to Swing Line Loans: (x) the outstanding Swing Line Loans to each Borrower by each Designated Swing Line Lender, (y) the Swing Line Exposure of each Bank and, to the extent applicable, the participating interests thereof in outstanding Swing Line Loans and (z) to the extent applicable, the participating interest of each Bank in all payments made and all accrued interest on Swing Line Loans in which such Bank has a participating interest, (iv) all Letter of Credit drawings and (v) all other Obligations of any Borrower that have become payable hereunder. Each entry by the Administrative Agent in the Control Account shall be, absent manifest error, prima facie evidence of the data entered. Such entries by the Administrative Agent shall not be a condition to any Borrower's obligation to repay the Obligations. (d) DESIGNATED EUROPEAN ADMINISTRATIVE AGENT MAINTENANCE OF DESIGNATED EUROPEAN CONTROL ACCOUNT. Each Designated European Administrative Agent shall maintain on its books and records a control account (the "Designated European Control Account") in 43 53 respect of each Borrower for which such Designated European Administrative Agent has been designated which shall reflect: (i) with respect to Revolving Credit Borrowings for such Borrowers: (w) the outstanding Revolving Credit Loans to each such Borrower, (x) the Ratable Portion of each Bank in the outstanding Revolving Credit Borrowings to each Borrower, (y) the Ratable Portion of each Bank in all payments made in respect of such Revolving Credit Loans and (z) accrued interest on the Revolving Credit Loans to each Borrower, (ii) with respect to Swing Line Loans: (x) the outstanding Swing Line Loans to each such Borrower by each Designated Swing Line Lender, (y) the Ratable Portion (or participating interest ) of each Bank in such outstanding Swing Line Loans and (z) to the extent applicable, the participating interest of each Bank in all payments made and all accrued interest on Swing Line Loans in which such Bank has a participating interest, (iii) all Letter of Credit drawings and (iv) all other Obligations of any Borrower that have become payable hereunder. Each entry by such Designated European Administrative Agent in the Designated European Control Account shall be, absent manifest error, prima facie evidence of the data entered. Such entries by such Designated European Administrative Agent shall not be a condition to any Borrower's obligation to repay the Obligations. If requested by the Administrative Agent, the Designated European Administrative Agent shall notify the Administrative Agent, on a weekly basis, of the information reflected in the Designated European Control Account as of the end of the prior week. (e) CONTROL ACCOUNT CHARGES AND CREDITS; ADMINISTRATIVE AGENT REPORTS. The Control Account and Designated European Control Account maintained by the Administrative Agent and each Designated European Administrative Agent, as the case may be, in respect of each Borrower will be charged with all Revolving Credit Loans, Term Loans and all Swing Line Loans made by the Banks or the applicable Designated Swing Line Lender to such Borrower and all other Obligations of such Borrower under this Agreement or any other Loan Document. Each of the Borrowers hereby authorizes each Bank to charge its Loan Account in respect of such Borrower with such Obligations. The Control Account and each Designated European Control Account in respect of a Borrower will be credited in accordance with this Section (b) with all payments received by the Administrative Agent and the Designated European Administrative Agent, as the case may be, directly from such Borrower or for the account of such Borrower. The Administrative Agent and each Designated European Administrative Agent shall send the Borrower Representative statements for the Borrowers in accordance with the Administrative Agent's and such Designated European Administrative Agent's standard procedures. Any and all such periodic or other statements or reconciliations of the Control Account and Designated European Control Account shall be final, binding and conclusive upon the Borrowers in all respects, absent manifest error, unless the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, receives specific written objection thereto from the Borrower Representative within thirty (30) Business Days after such statements or reconciliation shall have been sent to the Borrower Representative by the Administrative Agent or such Designated European Administrative Agent. The Loan Accounts of each Bank shall reflect the activity in the Control Account applicable to such Bank. (f) AUTHORIZATION TO CHARGE BANKING ACCOUNTS. If and to the extent any payment owed by a Borrower to the Administrative Agent, any Designated European Administrative Agent, any Bank or any Designated Swing Line Lender is not made when due hereunder or under the Notes, each of the Borrowers hereby authorizes the Administrative Agent, such Designated European 44 54 Administrative Agent, such Bank and such Designated Swing Line Lender, as the case may be, to charge from time to time against any or all of the accounts of the Borrowers or any Borrower with the Administrative Agent, such Designated European Administrative Agent, such Bank or such Designated Swing Line Lender, as the case may be, any amount so due, provided, however, that in no case shall any Foreign Borrower be liable for any amounts owing by any other Borrower. Notice of any such charge shall be given promptly to the Borrower Representative by the Administrative Agent, such Designated European Administrative Agent, such Bank or such Designated Swing Line Lender, as the case may be. (g) COMPUTATIONS OF INTEREST AND FEES. All computations of interest on LIBOR Rate Loans hereunder and of fees and other compensation hereunder shall be made by the Administrative Agent on the basis of a year of 360 days in each case for the actual number of days elapsed (commencing on the date such Loan was advanced but excluding the date such Loan shall be paid in full) occurring in the period for which such interest or fees are payable; provided, that all computations of interest on Alternate Base Rate Loans which are based on NCB's "prime rate" shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, for the actual number of days elapsed. Each determination by the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, of interest, fees or other amounts of compensation due hereunder shall be rebuttably presumed to be correct. (h) PAYMENT NOT ON BUSINESS DAY. Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day. Any such extension or reduction of time shall in such case be included in the computation of payment of interest, fees or other compensation, as the case may be. (i) FAILURE TO PAY IN ALTERNATE CURRENCY. If it is impossible or illegal for any Borrower to effect payment of a LIBOR Rate Loan denominated in an Alternate Currency in the same Alternate Currency as such Loan was borrowed, as required by Section 2.10(a), or if any Borrower shall default in the payment when due of any payment in an Alternate Currency, the Required Banks may, at their option, require such payment to be made to the Administrative Agent or applicable Designated European Administrative Agent, as the case may be, in Dollars in the Dollar equivalent of such Alternate Currency. In any case in which such Borrower shall make such payment in Dollars in the amount of the Dollar equivalent, such Borrower agrees to hold the Banks harmless from any loss incurred by the Banks arising from any change in the value of Dollars in relation to such Alternate Currency between the date such payment became due and the date of payment thereof, including, without limitation the costs of conversion and any other costs related thereto. The Borrowers' obligations under this Section (i) shall survive termination of this Agreement with respect to amounts requested by any Bank within thirty (30) days after such termination. (j) ALTERNATE CURRENCY AMOUNTS. Notwithstanding anything contained herein to the contrary, the Administrative Agent or applicable Designated European Administrative Agent, as the case 45 55 may be, may with respect to Credit Requests by the Borrower Representative for Borrowings comprised of LIBOR Rate Loans denominated in an Alternate Currency or notices of voluntary prepayments of less than the full amount of a LIBOR Rate Loan denominated in an Alternate Currency, engage in mutually agreeable rounding of the Alternate Currency amounts requested to be advanced or repaid; and, in such event, the Administrative Agent or such Designated European Administrative Agent shall promptly notify the Banks of such rounded amounts, and the Borrower Representative's Credit Request or notice shall thereby be deemed to reflect such rounded amounts. (k) PRESUMPTION OF PAYMENT IN FULL BY THE BORROWERS. Unless the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, shall have received notice from a Borrower or the Borrower Representative on behalf of a Borrower prior to the date on which any payment is due to the Banks hereunder that such Borrower will not make such payment in full, the Administrative Agent or such applicable Designated European Administrative Agent may assume that such Borrower has made such payment in full to the Administrative Agent on such date. In reliance upon such assumption, the Administrative Agent and such Designated European Administrative Agent, as applicable, may, but shall not be obligated to, distribute to each Bank on such due date the amount then due such Bank. If and to the extent a Borrower shall not have made such payment in full to the Administrative Agent or such Designated European Administrative Agent, each Bank shall repay to the Administrative Agent or such Designated European Administrative Agent promptly upon demand the amount distributed to such Bank, together with interest thereon (except to the extent otherwise paid by such Borrower) for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent or such Designated European Administrative Agent at the Federal Funds Effective Rate or the Cost of Funds Rate, as applicable, if the failure to pay relates to Revolving Credit Loans or Term Loans, or the Cost of Funds Rate of such Designated European Administrative Agent, if the failure to pay relates to Money Market Rate Swing Line Loans. All amounts payable under this Section 2.17(k) shall be payable in Dollars or the applicable Alternate Currency, as the case may. 2.18 LIBOR RATE LOANS: UNASCERTAINABLE RATE; ILLEGALITY; INCREASED COSTS. (a) UNASCERTAINABLE RATE; ILLEGALITY; INCREASED COSTS. In the event that (x) in the case of clause (i) below, the Administrative Agent or, with respect to Swing Line Loans or other LIBOR Rate Loans to a Borrower for which a Designated European Administrative Agent has been designated, the applicable Designated European Administrative Agent or (y) in the case of clauses (ii) and (iii) below, any Bank or Designated Swing Line Lender, shall have determined on a reasonable basis (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any date for determining the LIBOR Rate for LIBOR Rate Loans for any Interest Period that, by reason of any changes arising after the Effective Date affecting the London interbank eurocurrrency market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of the "London Interbank Offered Rate"; or 46 56 (ii) at any time, that such Bank or Designated Swing Line Lender shall incur increased costs or reductions in the amounts received or receivable hereunder in an amount which such Bank or Designated Swing Line Lender deems material with respect to any LIBOR Rate Loans (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of taxes or similar charges) to a Borrower because of any change since the Effective Date in any applicable law, governmental rule, regulation, guideline, order or request (whether or not having the force of law), or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline, order or request (such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding reserves includable in the "London Interbank Offered Rate" pursuant to the definition thereof); or (iii) at any time, that the making or continuance of any Eurocurrency Loan denominated in Dollars or in an Alternate Currency has become unlawful by compliance by such Bank or Designated Swing Line Lender in good faith with any change since the Effective Date in any law, governmental rule, regulation, guideline or order, or the interpretation or application thereof, or would conflict with any thereof not having the force of law but with which such Bank customarily complies; THEN, and in any such event, such Bank or Designated Swing Line Lender (or the Administrative Agent or such Designated European Administrative Agent, as applicable, in the case of clause (i) above) shall (x) on such date and (y) within 10 Business Days of the date on which such event no longer exists give notice (by telephone confirmed in writing) to the Borrower Representative and to the Administrative Agent and such Designated European Administrative Agent, as the case may be, of each such determination (which notice the Administrative Agent or Designated European Administrative Agent, as the case may be, shall promptly transmit to each of the other applicable Banks). Thereafter (x) in the case of clause (i) above, LIBOR Rate Loans shall no longer be available until such time as the Administrative Agent or Designated European Administrative Agent, as applicable, notifies the Borrower and the applicable Banks that the circumstances giving rise to such notice by the Administrative Agent or such Designated European Administrative Agent no longer exist, and any Credit Request or Rate Conversion/Continuation Request given by the Borrower Representative with respect to LIBOR Rate Loans which have not yet been incurred or converted shall be deemed rescinded by the Borrower or, in the case of a Credit Request, shall, at the option of the Borrower, be deemed converted into a Credit Request for Alternate Base Rate Loans to be made on the date of Borrowing contained in such Credit Request, (y) in the case of clause (ii) above, the affected Borrower shall pay to such Bank or Designated Swing Line Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Bank or Designated Swing Line Lender shall determine) as shall be required to compensate such Bank or Designated Swing Line Lender, for such increased costs or reductions in amounts receivable hereunder (a written notice as to the additional amounts owed to such Bank or Designated Swing Line Lender, showing the basis for the calculation thereof, which basis must be reasonable, submitted to the Borrower by such Bank or Designated Swing Line Lender shall, absent manifest error, be final and conclusive and binding upon all parties hereto) and (z) in the case of clause (iii) above, 47 57 the Borrower shall take one of the actions specified in section 2.18(b) as promptly as possible and, in any event, within the time period required by law. (b) CANCELLATION OF REQUESTS; CONVERSION OF OUTSTANDINGS. At any time that any LIBOR Rate Loan is affected by the circumstances described in Section 2.18(a)(ii), the Borrower to which the affected Bank or Designated Swing Line Lender has advanced such LIBOR Rate Loan may, and, in the event any LIBOR Rate Loan is affected by the circumstances described in Section 2.18(a)(iii), such affected Borrower shall, either (i) if the affected LIBOR Rate Loan is then being made pursuant to a Borrowing, by causing the Borrower Representative to give the Administrative Agent or the applicable Designated European Administrative Agent, as the case may be, telephonic (confirmed promptly in writing if requested) notice thereof on the same date that the Borrower Representative was notified by a Bank or a Designated Swing Line Lender pursuant to Section 2.18(a)(ii) or (iii), cancel said Borrowing, convert the related Credit Request into one requesting a Borrowing of Alternate Base Rate Loans or require the affected Bank to make its requested Loan as a Alternate Base Rate Loan, or (ii) if the affected LIBOR Rate Loan is then outstanding, upon at least one Business Day's notice from the Borrower Representative to the Administrative Agent or such Designated European Administrative Agent, as the case may be, require the affected Bank or Designated Swing Line Lender to convert each such LIBOR Rate Loan into an Alternate Base Rate Loan or, in the case of the Designated Swing Line Lender, into a Money Market Rate Loan with such conversion to be effective on the last day of the Interest Period currently applicable to such LIBOR Rate Loan, if the affected Bank or such Designated Swing Line Lender may lawfully continue to maintain and fund such Loan until such last day, or immediately, if the affected Bank or such Designated Swing Line Lender is not legally permitted to maintain and fund such Loan until such last day; provided, that, in the case of the Banks, if more than one Bank is affected at any time, then all affected Banks must be treated the same pursuant to this Section 2.18(b). 2.19 PRO RATA TREATMENT OF BANKS. Except as set forth in Sections 2.7, 2.16 and 9.6 of this Agreement, and except as set forth in the Administrative Agent Fee Letter, each Borrowing and participating interest hereunder, each payment or prepayment of principal of any Borrowing, any reduction of commitments, each payment of interest on the Loans, and each payment of the fees provided for hereunder shall be allocated among the Banks ratably in accordance with each Bank's Ratable Portion thereof. 2.20 EUROPEAN ECONOMIC AND MONETARY UNION. (a) EFFECTIVENESS OF PROVISIONS. The provisions of paragraphs (b) through (g) of this Section shall be effective from and after January 1, 1999; provided that, if and to the extent that any such provision relates to any state (or the currency of such state) that is not a Participating Member State on the date hereof, such provision shall become effective in relation to such state (and the currency of such state) at and from the date on which such state becomes a Participating Member State. 48 58 (b) REDENOMINATION OF ALTERNATIVE CURRENCIES. Each obligation under this Agreement of a party to this Agreement which has been denominated in the National Currency Unit of a Participating Member State shall be denominated, or redenominated into, the Euro Unit in accordance with EMU Legislation, provided that if and to the extent that any EMU Legislation provides that an amount denominated either in the Euro or in the National Currency Unit of a Participating Member State and payable within the Participating Member State by crediting an account of the creditor can be paid by the debtor either in the Euro Unit or in that National Currency Unit, any party to this Agreement shall be entitled to pay or repay any such amount either in the Euro Unit or in such National Currency Unit. (c) PAYMENTS BY THE ADMINISTRATIVE AGENT GENERALLY. With respect to the payment of any amount denominated in the Euro or in a National Currency Unit, neither the Administrative Agent nor any Designated European Administrative Agent shall be liable to any Borrower or any of the Banks in any way whatsoever for any delay, or the consequences of any delay, in the crediting to any account of any amount required by this Agreement to be paid by the Administrative Agent or such Designated European Administrative Agent, if the Administrative Agent or such Designated European Administrative Agent shall have taken all relevant steps to achieve, on the date required by this Agreement, the payment of such amount in immediately available, freely transferable, cleared funds (in the Euro Unit or, as the case may be, in a National Currency Unit) to the account of such Borrower or any Bank, as the case may be, in the principal financial center in the Participating Member State which such Borrower or, as the case may be, such Bank shall have specified for such purpose. In this paragraph (c), "all relevant steps" shall mean all such steps as may be prescribed from time to time by the regulations or operating procedures of such clearing or settlement system as the Administrative Agent or such Designated European Administrative Agent may from time to time determine for the purpose of clearing or settling payments of the Euro. (d) BASIS OF ACCRUAL. If the basis of accrual of interest or fees expressed in this Agreement with respect to the Alternate Currency of any state that becomes a Participating Member State shall be inconsistent with any convention or practice in the applicable interbank market for the basis of accrual of interest or fees in respect of the Euro, such convention or practice shall replace such expressed basis effective as of and from the date on which such state becomes a Participating Member State; provided that, if any Loan denominated in the Alternate Currency of such state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such Loan, at the end of the then current Interest Period (if any) for such Loan. (e) ROUNDING. Without prejudice and in addition to any method of conversion or rounding prescribed by the EMU Legislation, each reference in this Agreement to a minimum amount (or a multiple thereof) in a National Currency Unit to be paid to or by the Administrative Agent or the applicable Designated European Administrative Agent shall be replaced by a reference to such reasonably comparable and convenient amount (or a multiple thereof) in the Euro Unit as the Administrative Agent or such Designated European Administrative Agent may from time to time specify. 49 59 (f) OTHER CONSEQUENTIAL CHANGES. Each provision of this Agreement or the other Loan Documents shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify to be necessary or appropriate to reflect the introduction of or changeover to the Euro in Participating Member States. SECTION 3 CONDITIONS OF LENDING. 3.1 CONDITIONS PRECEDENT TO INITIAL LOANS. The effectiveness of this Agreement, the obligation of each Bank to make a Loan on the occasion of each Borrowing, the obligation of each Designated Swing Line Lender to make a Swing Line Loan, and the obligation of each Designated Letter of Credit Issuer to issue any Letters of Credit, are subject to the condition precedent that: (i) the conditions set forth in Annex III, attached hereto and incorporated herein by reference, shall have been satisfied, as determined by the Administrative Agent, in its sole discretion, on or before the Closing Date of this Agreement and (ii) the Administrative Agent shall have received on or before the Closing Date of this Agreement the documents and deliveries set forth on said Annex III (which, in the case of exhibits to this Agreement, shall be in the forms attached hereto, with blanks completed). 3.2 CONDITIONS PRECEDENT TO ALL LOANS. The obligation of each Bank to make a Loan on the occasion of each Borrowing, Rate Conversion and Rate Continuation, the obligation of each Designated Swing Line Lender to make a Swing Line Loan, and the obligation of each Designated Letter of Credit Issuer to issue or renew any Letter of Credit, is subject to the conditions precedent that: (a) REPRESENTATION BRINGDOWN. As of the date of any Credit Event, and before and after giving effect thereto, the representations and warranties contained in this Agreement and all other Loan Documents are (i) to the extent such representations and warranties are not otherwise subject by their terms to a materiality or Material Adverse Effect threshold, true and correct in all material respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, and (ii) to the extent such representations and warranties are otherwise subject by their terms to a materiality or Material Adverse Effect threshold, true and correct in all respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date; and (b) NO DEFAULT; COMPLIANCE WITH TERMS. As of the date of any Credit Event, and before and after giving effect thereto, each of the Borrowers shall be in compliance with all other terms and provisions set forth herein and in each other Loan Document on its part to be observed or performed, and at the time of and immediately after such Credit Event, no Potential Default or Event of Default shall have occurred and be continuing; and 50 60 (c) NO MATERIAL ADVERSE CHANGE. As of the date of any Credit Event, and before and after giving effect thereto, there shall have been no event which has had, or could reasonably be expected to have, a Material Adverse Effect. (d) CONFIRMATION OF BORROWING BASE. The Borrowers shall have delivered to the Administrative Agent a Borrowing Base Certificate required to have been delivered for the period in which such Credit Event occurs. (e) OTHER DELIVERIES. The Administrative Agent shall have received such other approvals or documents as the Administrative Agent may reasonably request consistent with the terms of this Agreement. Each Credit Event shall constitute a representation and warranty by each of the Borrowers that on the date of such Credit Event, the statements in clauses (a) through (c) above are true and correct as of such date and that the actions required under clauses (d) and (e) above have in fact been taken as of such date. SECTION 4 SECURITY INTEREST IN COLLATERAL; COLLATERAL REQUIREMENTS. 4.1 GRANT OF SECURITY INTEREST. (a) DOMESTIC BORROWER COLLATERAL. To secure the prompt payment and performance of: (w) the Obligations (including Obligations of any Borrower as a Borrower Guarantor to pay the Guaranteed Obligations of other Borrowers owing to the Banks, the Swing Line Exposure of the Banks and the LC Exposure of the Banks), (x) the Swing Line Obligations of any Borrower owing to a Designated Swing Line Lender, the Letter of Credit Obligations of any Borrower owing to a Designated Letter of Credit Issuer and (z) the Designated Hedge Obligations owing by any Borrower to a Designated Hedge Creditor, as the case may be, each Domestic Pledging Borrower hereby grants (or, by executing the Additional Borrower Addendum hereto, grants) to the Administrative Agent for itself and for the benefit of the Banks, each Designated Swing Line Lender, each Designated Letter of Credit Issuer and the Designated Hedge Creditor, a continuing security interest in and to and a pledge of all of the tangible and intangible, real property and personal property and assets of such Borrower (collectively, the "Domestic Borrower Collateral"), whether now owned or existing or hereafter acquired or arising and wheresoever located including, without limitation: (a) all Accounts, (b) all Inventory, (c) all Equipment, (d) all General Intangibles, (e) all Investment Property (provided, no capital stock in Foreign Subsidiaries of Instron Corporation will be taken as Collateral except to the extent specified in the Pledge and Security Agreements attached hereto as Exhibit D-2 and D-3), (f) any and all deposits or other sums at any time credited by or due from the Banks to such Borrower, whether in a depository account or other account, (g) all Instruments, documents, documents of title, policies and certificates of insurance, securities, goods, choses in action, Chattel Paper, cash or other property, to the extent owned by such Borrower or in which such Borrower has an interest, (h) all Collateral of such Borrower which now or hereafter is at any time in the possession or control of any of the Banks or in transit by mail or carrier to or from any of the Banks or in the 51 61 possession of any Person acting in a Bank's behalf, without regard to whether such Bank received the same in pledge, for safekeeping, as Administrative Agent for collection or transmission or otherwise or whether such Bank had conditionally released the same, and any and all balances, sums, proceeds and credits of such Pledging Borrower with such Bank, (i) all accessions to, substitutions for, and all replacements, Products and Proceeds of the herein above-referenced property of such Borrower described in this Subsection including, but not limited to, proceeds of insurance policies insuring such property and (j) all books, records, and other property (including, but not limited to, credit files, programs, printouts, computer software, programs, and disks, magnetic tape and other magnetic media, and other materials and records) of such Borrower pertaining to any such above-referenced property of such Borrower. Such continuing security interest and pledge in the Domestic Borrower Collateral shall be in addition to any other security interest or Lien in the tangible or intangible, real and personal property and assets of any Person securing the Obligations and/or the Designated Hedge Obligations; provided, however, that, with respect to General Intangibles or Equipment of a Pledging Domestic Borrower, to the extent that: (i) any such General Intangible is subject by reason of the terms of the instrument or agreement creating such General Intangible itself (and not any third party agreement) to a valid and effective contractual restriction prohibiting the creation or a security interest without the consent of another Person or otherwise requires the consent of such Person to permit such creation or (ii) any such item of Equipment is subject to a purchase money security interest permitted by Section 7.3(d) of this Agreement prohibiting the creation of any other security interest in such item of Equipment without the consent of another Person, THEN, the above stated grant of a security interest to the Administrative Agent shall not be effective as to such General Intangible or item of Equipment until such time as consent has been obtained from such Person; provided, further that, upon the occurrence of an Event of Default which is continuing and has not been waived in accordance with Section 14.1 hereof, such Domestic Pledging Borrower will, upon the written request of the Administrative Agent, obtain such consent. (b) U.K. COLLATERAL. Pursuant to the U.K. Collateral Documents, Instron, Ltd. shall grant to the Administrative Agent for the benefit of the Banks, the Designated U.K. Swing Line Lender, the Designated U.K. Letter of Credit Issuer and any Designated Hedge Creditor, effective as of the Closing Date, a Lien on the U.K. Collateral to secure the prompt payment and performance of all Obligations of Instron, Ltd. to the Banks, the Swing Line Obligations owing from Instron, Ltd. to the Designated U.K. Swing Line Lender, the Letter of Credit Obligations owing by Instron, Ltd. to the Designated U.K. Letter of Credit Issuer, and Instron, Ltd.'s Ratable Borrower Share of Designated Hedge Obligations. (c) GERMAN COLLATERAL. Pursuant to the German Collateral Documents, Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH shall each grant to the Administrative Agent for the benefit of the Banks, the Designated German Swing Line Lender, the Designated German Letter of Credit Issuer and any Designated Hedge Creditor, effective as of the Closing Date, a Lien on the German Collateral to secure the prompt payment and performance of all Obligations of Instron 52 62 Schenck Testing Systems, GmbH and Instron Wolpert GmbH to the Banks, the Swing Line Obligations owing from Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH to the Designated German Swing Line Lender, the Letter of Credit Obligations owing by Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH to the Designated German Letter of Credit Issuer, and Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH Ratable Borrower Share of Designated Hedge Obligations. 4.2 PERFECTION. Each Pledging Borrower shall execute such financing or other similar statements as are provided for by applicable law, and otherwise take such other action and execute such assignments or other instruments, control agreements or documents, in each case as the Administrative Agent may request to evidence, perfect, or record the Administrative Agent's security interest in the Collateral or to enable the Administrative Agent to exercise and enforce its rights and remedies under this Agreement and the other Loan Documents with respect to any Collateral. Each Pledging Borrower hereby authorizes the Administrative Agent on behalf of the Banks, each Designated Letter of Credit Issuer and the Designated Hedge Creditor to execute and file any such financing statement or continuation statement on such Borrower's behalf. Each Domestic Pledging Borrower acknowledges that a carbon, photographic, or other reproduction of this Agreement shall be sufficient as a financing statement to the extent permitted by law. 4.3 CHANGES AFFECTING PERFECTION. No Domestic Pledging Borrower shall, without giving the Administrative Agent at least twenty (20) days prior written notice thereof: (a) make any change in any location within the domestic United States where Inventory or Equipment of such Borrower is maintained (other than a change in location which relocates such Collateral to a location previously disclosed in the Supplemental Schedule), or locate any of such Inventory or Equipment at any new locations (other than in connection with (i) Inventory relocated without such conveyance of ownership to locations of Foreign Borrowers or Foreign Subsidiaries in connection to processing of such Inventory thereby to the extent permitted by proviso (X)(V) of Section 7.3(a)(xii) hereof, or (ii) Inventory or Equipment used in connection with a Sales Office relocated pursuant to the addition, closure or relocation of such Sales Office) provided that this limitation on changes in location of Inventory and Equipment is not applicable to changes in the location of (A) Inventory sold in the ordinary course of its business, (B) Equipment the ownership of which is conveyed to the extent permitted by Section 7.3(a)(ii), 7.3(a)(xi) or 7.3(a)(xii)(D) hereof or proviso (X)(I), (X)(III) and (X)(IV) of Section 7.3(a)(xii) hereof or (C) Inventory the ownership of which is conveyed to Foreign Borrowers or Foreign Subsidiaries in connection with the processing of such Inventory thereby to the extent permitted by Section 7.3(a)(xii)(C) hereof, (b) make any change in the location of its chief executive office, principal place of business or the office where its records pertaining to its Accounts and General Intangibles are kept, (c) add any new places of business or close of any of its existing places of business (except that no notice hereunder shall be required with respect to the addition, relocation or closure of any Sales Office), (d) make any change in its name or corporate structure, adopt new trade names, assumed names or fictitious names or otherwise add any name under which it does business, or (e) make any other change (excluding from the calculation of the limitation provided in this clause (e), the creation or suffering to exist of Liens permitted by Section 7.3(d) hereof), and changes in location without notification required by clause (a) hereof shall not be a violation of this Section unless, such other changes and changes in location without notice would reasonably be expected to affect the perfection or priority of the Administrative Agent's Lien in Collateral with a fair market value exceeding Two Million Dollars ($2,000,000) in the aggregate during the term of this Agreement. 53 63 4.4 INSPECTION; VERIFICATION. During regular business hours and after reasonable notice to the Borrower Representative, the Administrative Agent (by any of its officers, employees, Administrative Agents, representatives, or designees, including a Bank) shall have the right, at the applicable Pledging Borrower's expense, to inspect the Collateral and to inspect and audit, all books, records, journals, orders, receipts, or other correspondence related thereto (and to make extracts or copies thereof as the Administrative Agent may request) and to inspect the premises upon which any of the Collateral is located for the purpose of verifying the amount, quality, quantity, value, and condition of, or any other matter relating to, the Collateral; provided, however, that subject to the following proviso, the aggregate number of such inspections shall not exceed one (1) in any calendar year; provided, further, that during any period commencing upon the occurrence of an Event of Default and continuing until such Event of Default no longer continues or has been waived in accordance with Section 14.1 hereof, the Administrative Agent may exercise such access and other rights, at the applicable Pledging Borrower's expense, at any time and as often as the Administrative Agent deems such action necessary or desirable. In addition to inspections as outlined above (and only to the extent exercised concurrently with such inspection and to a reasonable extent), the Administrative Agent or its designee shall have the right, upon reasonable notice to and consultation with the Borrower Representative, to make test verifications of the Accounts and other Collateral and physical verifications of the Inventory and other tangible items of the Collateral at the expense of the applicable Pledging Borrower and in any manner and through any commercially reasonable medium that the Administrative Agent considers advisable, and each of the Pledging Borrowers agrees to furnish all such assistance and information as the Administrative Agent may require in connection therewith. Any inspection pursuant hereto shall, at the option of the applicable Pledging Borrower, occur in the presence of an officer of a Borrower. In addition, the Administrative Agent shall be entitled to conduct, at the Borrowers' expense, an (i) inventory audit and receivable testing and (ii) an asset based field examination and collateral audit of each of the Borrowers, which shall be in each case conducted promptly after the Closing Date and shall otherwise be in substance satisfactory to the Administrative Agent, in its reasonable discretion. 4.5 REINSTATEMENT. The provisions of Section 4 and Section 5 of this Agreement shall remain in full force and effect and continue to be effective in respect of a Borrower should any petition be filed by or against such Borrower for liquidation or reorganization, should such Borrower become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any part of such Borrower's assets or should any other Financial Impairment relating to such Borrower occur, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a "voidable preference", "fraudulent conveyance", or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 4.6 TERMINATION OF SECURITY INTEREST; RELEASE OF COLLATERAL. Upon the payment in full of all Obligations, Swing Line Obligations, and Letter of Credit Obligations, and the termination of the Commitments of each of the Banks and all LC Exposure and Swing Line Exposure thereof: (a) the security interests and the other Liens and licenses granted by the Pledging Borrowers to the Administrative Agent under this Agreement 54 64 and under any other Loan Documents shall terminate, (b) all rights to the Collateral shall revert to the Borrower with rights therein, (c) the Administrative Agent will, at such Borrower's expense, (x) execute and deliver to such Borrower all documents as such Borrower may reasonably request to evidence the termination of such security interests and the release of such Domestic Borrower Collateral, and (y) take such other actions with respect to this Agreement, the other Loan Documents, the Liens created thereby, and the Obligations as such Borrower shall reasonably request, and (d) this Agreement and all of the other Loan Documents will be terminated, and such Borrower will have no further liabilities or obligations thereunder (except any liabilities and/or obligations which under the terms of this Agreement or any Loan Document survive termination thereof). Notwithstanding the foregoing: (i) the pledge by Instron, Ltd. of the U.K. Collateral shall secure only the Obligations of Instron, Ltd. to the Banks, its Swing Line Obligations to the Designated U.K. Swing Line Lender, its Letter of Credit Obligations to the Designated U.K. Letter of Credit Issuer and its Ratable Borrower Share of any Designated Hedge Obligations and any fees and expenses owing to the Banks hereunder and, upon the payment in full of all such Obligations, Swing Line Obligations, Letter of Credit Obligations and its Ratable Borrower Share of Designated Hedge Obligations and fees and expenses hereunder owing by Instron, Ltd. and the termination of the Commitments of the Banks and the obligation of the Designated U.K. Swing Line Lender pursuant to the Aggregate Swing Line Commitment to the extent applicable thereto to Instron, Ltd. and all Swing Line Exposure related thereto and all LC Exposure attributable to Letters of Credit issued to Instron, Ltd. or any of its Subsidiaries, the U.K. Collateral Documents shall terminate, all rights in the U.K. Collateral shall revert to Instron, Ltd., and the Administrative Agent will, at the expense of Instron, Ltd., execute and deliver to thereto all documents as Instron, Ltd. may reasonably request to evidence the termination of such security interests and the release of the U.K. Collateral and (ii) the pledge by Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH of the German Collateral shall secure only the Obligations of Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH to the Banks, its Swing Line Obligations to the Designated German Swing Line Lender, its Letter of Credit Obligations to the Designated German Letter of Credit Issuer and its Ratable Borrower Share of any Designated Hedge Obligations and any fees and expenses owing to the Banks hereunder and, upon the payment in full of all such Obligations, Swing Line Obligations, Letter of Credit Obligations and its Ratable Borrower Share of Designated Hedge Obligations and fees and expenses hereunder owing by Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH and the termination of the Commitments of the Banks and the obligation of the German Swing Line Lender pursuant to the Aggregate Swing Line Commitment to the extent applicable thereto to Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH and all Swing Line Exposure related thereto and all LC Exposure attributable to Letters of Credit issued to Instron Schenck Testing Systems, GmbH or Instron Wolpert GmbH or any Subsidiaries of either thereof, the German Collateral Documents shall terminate, all rights in the German Collateral shall revert to Instron Schenck Testing Systems, GmbH or Instron Wolpert GmbH, as the case may be, and the Administrative Agent will, at 55 65 the expense of Instron Schenck Testing Systems, GmbH or Instron Wolpert GmbH, execute and deliver thereto all documents as Instron Schenck Testing Systems, GmbH or Instron Wolpert GmbH may reasonably request to evidence the termination of such security interests and the release of the German Collateral. SECTION 5 REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO COLLATERAL. 5.1 GENERAL REPRESENTATIONS AS TO COLLATERAL. The Supplemental Schedule sets forth: (a) the principal place of business of each of the Borrowers and its Subsidiaries and the office where the chief executive offices and accounting offices of each of the Borrowers and such Subsidiaries are located, (b) the office where each of the Domestic Pledging Borrowers keeps its records concerning Accounts and General Intangibles, (c) the location of each Domestic Pledging Borrower's registered office and (d) all locations of each Domestic Pledging Borrower's material production operations and facilities (other than locations constituting Sales Offices) and whether such location is owned or leased and each location at which Inventory, Equipment or other tangible Collateral (other than Inventory and Equipment located at a Sales Office and whose location at such office does not disqualify such office from constituting a Sales Office) of each Domestic Pledging Borrower is located other than undisclosed locations the aggregate fair market value of all Collateral at all such undisclosed locations of all Domestic Pledging Borrowers shall not exceed Two Million Five Hundred Thousand Dollars $2,500,000 unless prompt disclosure of such excess is made to the Administrative Agent, and all reasonable assistance is given to the Administrative Agent by such Borrower in reasonably perfecting the Administrative Agent's security interests at, sufficient locations to eliminate such excess undisclosed Collateral value) including, without limitation, the location of any warehouse, bailee or consignee at which such Collateral is located (with respect to any such Collateral not located at a specified main location owned by such Borrower, the Supplemental Schedule shall expressly indicate to the reasonable satisfaction of the Administrative Agent (1) the type of location of the Collateral (e.g., warehouse, bailee, consignee or otherwise); (2) the type of Collateral located at each such location (e.g., whether the Collateral is Equipment, Inventory or other tangible Collateral; (3) whether the Collateral is segregated or otherwise identifiable at each such location; and (4) the approximate dollar value of the Collateral located at each such location), (e) the locations and addresses of all owned or leased real property (other than property leased in connection with a Sales Office) of each Domestic Pledging Borrower, including the name of the record owner of such property and its respective legal description in each case where the Equipment Collateral located thereon has a fair market value exceeding Two Million Five Hundred Thousand Dollars $2,500,000 (each, a "Material Owned or Leased Real Property"), (f) the locations of each of the Domestic Pledging Borrowers registered offices, Administrative Agents, other offices and places of business (other than Sales Offices) during the five (5) years prior to the Closing Date, and (g) all trade names, assumed names, fictitious names and other names used by each of the Pledging Borrowers during the five (5) years prior to the Closing Date. Other than as set forth in the Supplemental Schedule attached hereto, no Pledging Borrower keeps any Collateral owned by it on any property not owned in fee simple by such Borrower, except (i) for Collateral consisting of Inventory and Equipment located at a Sales Office and whose location at such office does not disqualify such office from constituting a Sales Office and (ii) other Collateral the fair market value of which at all such locations does not at any time exceed in the case of all such Pledging Borrowers does not at any time exceed in the aggregate Two Million Five Hundred Thousand Dollars ($2,500,000). 56 66 5.2 REPRESENTATIONS AND WARRANTIES REGARDING ACCOUNTS. Each of the Domestic Pledging Borrowers agrees and represents that each Account and each invoice representing any Account will: (a) cover a bona fide sale or lease and delivery of merchandise sold or leased in the ordinary course of business of such Borrower or the rendition by such Borrower of services to customers in the ordinary course of business, (b) be for a liquidated amount maturing as stated in the schedule thereof and in the duplicate invoice covering said sale, and (c) other than the Administrative Agent's security interest therein, not be subject to any Lien except for those permitted by proviso (i) or (v) of Section 7.3(d) or to any offset, deduction or counterclaim; provided, however, that the Borrowers shall not be deemed to have violated clause (a) or (b) of this section unless the representations therein are untrue as to Accounts the unpaid obligation of which in the aggregate exceeds One Million Dollars ($1,000,0000. Each Domestic Pledging Borrower will use all commercially reasonable efforts consistent with sound business practice to avoid backdating, postdating or redating of invoices. 5.3 TREATMENT OF ACCOUNTS AND GENERAL INTANGIBLES. Each of the Domestic Pledging Borrowers shall use commercially reasonable efforts consistent with sound business practice to settle or adjust all disputes and claims regarding Accounts. Each of the Domestic Pledging Borrowers shall use all commercially reasonable efforts consistent with sound business practice: (i) to grant discounts, credits or allowances only in the ordinary course of business or on a commercially reasonable basis and (ii) to enter into extensions, compromises or settlements to any customer or Account Debtor, and to allow returns of merchandise thereby, only in the ordinary course of business consistent with past practices or on a commercially reasonable basis. Each of the Domestic Pledging Borrowers will perform and comply in all material respects with all obligations in respect of Accounts, Chattel Paper, General Intangibles and under all other contracts and agreements to which it is a party or by which it is bound relating to the Collateral where failure to so comply would result in a Material Adverse Effect. 5.4 LIEN PRIORITY. From and after the Closing Date, by reason of the filing of financing statements, assignments of financing statements and termination statements in all requisite governmental offices, this Agreement and the other Loan Documents (other than the U.K. Collateral Documents and German Collateral Documents) will create and constitute a valid and perfected first priority security interest (except as permitted by this Agreement or the other Loan Documents) in and Lien on that portion of the Domestic Borrower Collateral which can be perfected by such filing and by the execution and delivery of this Agreement and the other Loan Documents (other than the U.K. Collateral Documents and German Collateral Documents), which security interest will be enforceable against each of the Domestic Pledging Borrowers and all third parties as security for payment of all Obligations; except, that the absence of such perfection and priority will not constitute a violation of this Agreement with respect to Inventory, Equipment or other tangible Collateral of Domestic Pledging Borrowers: (x) located at a Sales Office and whose location at such office does not disqualify such office from constituting a Sales Office or (y) all such Collateral has an aggregate fair market value not exceeding Two Million Five Hundred Thousand Dollars ($2,500,000) without prompt disclosure and filings against Collateral having sufficient fair market value to eliminate such excess unperfected value). From and after the Closing Date, by reason of the recording of the mortgages contemplated by this Agreement, this Agreement and the other Loan Documents (including such mortgages) will create and constitute a valid first priority Lien in favor of the Administrative Agent on the real property of Instron Realty Trust II, a Massachusetts business trust, located in Canton, 57 67 Massachusetts and which property is the only real property on which Instron Corporation's Canton, Massachusetts manufacturing facility is located. 5.5 LIEN WAIVERS, LANDLORD WAIVERS, WAREHOUSE RECEIPTS. Upon the occurrence of an Event of Default which is continuing and has not been waived in accordance with Section 14.1 hereof, to the extent any Inventory or Equipment of a Domestic Pledging Borrower is at any time located on any real property not owned by such Borrower, such Borrower will, upon the Administrative Agent's request therefor, obtain and maintain valid and effective lien waivers in form and substance satisfactory to the Administrative Agent, whereby each owner, landlord and mortgagee having an interest in such real property shall disclaim any interest in such Inventory or Equipment, as the case may be, and shall agree to allow the Administrative Agent reasonable access to such real property in connection with any enforcement of the security interest granted hereunder, provided, however, that, notwithstanding the foregoing, Instron Corporation shall, within ninety (90) days after the Closing Date, obtain and maintain in effect at all times thereafter such a landlord waiver with respect to the real property located at Binghamton, New York and on which its Binghamton, New York manufacturing facility is located. None of the Domestic Pledging Borrowers shall store Inventory with fair market value exceeding Two Million Five Hundred Thousand Dollars ($2,500,000) in the aggregate at bailee, warehouseman or similar party locations without the Administrative Agent's prior written consent (such consent not to be unreasonably withheld or delayed) and, if the Administrative Agent gives such consent and requires such action, such Borrower will concurrently therewith cause any such bailee, warehouseman or similar party to issue and deliver to the Administrative Agent, in form and substance satisfactory to the Administrative Agent, warehouse receipts therefor in the Administrative Agent's name for Inventory so stored having a value in excess of such aggregated amount. 5.6 MAINTENANCE OF INSURANCE. Each of the Borrowers and the Subsidiaries thereof will maintain with financially sound and reputable companies, insurance policies: (a) insuring the Equipment, the Inventory, and all equipment subject to any lease, against loss by fire, explosion, theft and such other casualties as are usually insured against by companies engaged in the same or similar businesses, and (b) insuring such Borrower and the Administrative Agent against liability for personal injury and property damage relating to such Equipment, Inventory and equipment covered by any equipment lease, such policies to be in such form and in such amounts and coverage as may be reasonably satisfactory to the Administrative Agent (but in any event be upon such terms as are usual for companies engaged in the same or similar businesses as such Borrower), with losses payable to such Borrower and the Administrative Agent as their respective interests may appear, subject to Section 2.10(c)(i) of this Agreement and in the case of Foreign Borrowers and the Subsidiaries thereof, to Section 1.8 hereof. All such insurance with respect to the Equipment and Inventory shall (i) contain a breach of warranty clause in favor of the Administrative Agent, and (ii) provide that no cancellation, reduction in amount, change in coverage or expiration thereof shall be effective until at least thirty (30) days after written notice to the Administrative Agent thereof. SECTION 6 GENERAL REPRESENTATIONS AND WARRANTIES. To induce the Banks to advance or convert Loans hereunder, the Designated Swing Line Lenders to advance Swing Line Loans hereunder, and the Designated Letter of Credit Issuers to issue Letters of Credit hereunder, and so long as the Obligations shall remain outstanding or the Banks shall have any Commitment, Swing Line Exposure or LC Exposure hereunder, each of the Borrowers represents and warrants to the Administrative Agent and the Banks as follows: 58 68 6.1 EXISTENCE. Each of the Borrowers and each Subsidiary thereof is duly organized, validly existing and in good standing under the laws of their respective states of incorporation. None of the Borrowers has any Subsidiaries other than as listed in the Supplemental Schedule. Each of the Borrowers and each of the Subsidiaries thereof has all requisite corporate power and governmental licenses and approvals necessary to own its assets and carry on its business as now being or proposed to be conducted except in the case of such licenses and approvals as to which the failure to obtain would not have a Material Adverse Effect. Each of the Borrowers and each Subsidiary thereof is duly qualified or licensed to transact business in their respective jurisdictions of organization and in each additional jurisdiction where such qualification or licensure is necessary except where failure to so qualify or be licensed is not having, and would not have, a Material Adverse Effect. 6.2 AUTHORIZATION; ENFORCEABILITY The execution, delivery, and performance of this Agreement, the other Loan Documents, the Merger Agreement, the other Merger Documents, the Senior Subordinated Note Indenture, the Senior Subordinated Notes and the other Senior Subordinated Note Documents to which any Borrower (or any of its Subsidiaries) is a party: (a) are within such Borrower's or Subsidiary's corporate powers and (b) have been duly authorized. This Agreement, the other Loan Documents, the Merger Agreement, the other Merger Documents, the Senior Subordinated Note Indenture, the Senior Subordinated Notes and the other Senior Subordinated Note Documents to which any Borrower (or any of its Subsidiaries) is a party constitute the legal, valid and binding obligations of such Borrower or Subsidiary, as the case may be, enforceable against such Borrower or Subsidiary, as the case may be, in accordance with the terms thereof, subject to any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 6.3 NO VIOLATION. Neither the execution, delivery and performance by any of the Borrowers of this Agreement, the other Loan Documents, the Merger Agreement, the other Merger Documents, or the Senior Subordinated Note Indenture or the Senior Subordinated Notes to which it is party nor compliance with the terms and provisions thereof, nor consummation of the Merger or the issuance of the Senior Subordinated Notes pursuant to the Offering (i) will contravene any provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality applicable to such Borrower of the Subsidiaries thereof or its properties and assets, (ii) except as set forth in the Supplemental Schedule, will conflict with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (other than the Liens created pursuant to this Agreement and the other Loan Documents) upon any of the property or assets of any Borrower or any Subsidiaries thereof pursuant to the terms of any promissory note, bond, debenture, indenture, mortgage, deed of trust, credit or loan agreement, or any other material agreement or other instrument, to which such Borrower or Subsidiaries are a party or by which such Borrower or Subsidiaries or any property or assets thereof are bound or to which it may be subject, or (iii) will violate any provision of the certificate or articles of incorporation, code of regulations or by-laws, or other charter documents of such Borrower or any Subsidiaries thereof. 59 69 6.4 LITIGATION; PROCEEDINGS. As of the Closing Date, except as set forth in the Supplemental Schedule, there are no actions, suits, investigations or proceedings, and no orders, writs, injunctions, judgments or decrees, now pending, existing or, to the knowledge of any Borrower, threatened against any of the Borrowers or any Subsidiaries thereof, which are deemed by management of the Borrowers to be material to the Borrowers and the Subsidiaries thereof on a consolidated basis or which affect materially any property material to the Borrowers and the Subsidiaries thereof on a consolidated basis. There is no such action, suit, investigation, proceeding, order, writ, injunction, or decree pending against, or, to the knowledge of any Borrower, threatened against any or all of the Borrowers that: (i) when taken individually or with all other actions, suits, investigations, proceedings, orders, writs, injunctions or decrees, is having, or could reasonably be expected to have, a Material Adverse Effect or (ii) in any manner, draws into question the validity or enforceability of the this Agreement, the other Loan Documents, the Merger or the Senior Subordinated Notes. 6.5 TAXES. Each of the Borrower and each of the Subsidiaries thereof have filed all material federal, state and local tax returns which are required to be filed by any of them, and, except to the extent permitted by Section 7.2(i) of this Agreement, have paid all taxes and assessments due as shown on such returns, including interest, penalties and fees. The Borrowers and each of the Subsidiaries thereof has established on its books such charges, accruals and reserves in respect of taxes, assessments, fees and other governmental charges for all fiscal periods as are required by GAAP. None of the Borrowers knows of any proposed assessment for additional federal, foreign or state taxes for any period, or of any basis therefor, which, individually or in the aggregate, taking into account such charges, accruals and reserves in respect thereof as the Borrowers and the Subsidiaries thereof have made, could reasonably be expected to have a Material Adverse Effect. 6.6 TITLE. Each of the Borrowers and each of the Subsidiaries thereof has good title to all personal property assets reflected as being owned thereby in, and good and marketable title to all real property assets reflected as being owned thereby in, the financial statements referred to in Section 6.13 of this Agreement (other than the Third Party Intellectual Property) and in the consolidated financial statements delivered from time to time pursuant to Section 7.1 of this Agreement. All such assets are free of all Liens other than those in favor of the Administrative Agent and those otherwise disclosed in the Supplemental Schedule or permitted by Section 7.3(d) of this Agreement or the other Loan Documents. 6.7 CONSENTS; APPROVALS. Except as set forth on the Supplemental Schedule, no action, consent or approval of, registration or filing with or any other action by any governmental authority or other Person is or will be required in connection with the transactions contemplated by this Agreement, the other Loan Documents, the Merger Agreement, the other Merger Documents, the Offering, the Senior Subordinated Note Indenture, Senior Subordinated Notes and the other Senior Subordinated Note Documents, except such as have been made or obtained and are in full force and effect and except for the filings required to create or perfect the Liens in favor of the Administrative Agent that are contemplated hereby and by the other Loan Documents. 60 70 6.8 LAWFUL OPERATIONS. The operations of each of the Borrowers and each of the Subsidiaries thereof are in compliance with applicable requirements imposed by Law, including without limitation occupational safety and health laws and zoning ordinances, except to the extent any such noncompliance, when taken individually or with all other such noncompliance is not having, and could not reasonably be expected to have a Material Adverse Effect. 6.9 ENVIRONMENTAL COMPLIANCE. Each parcel of real property in which a Borrower or any Subsidiary of a Borrower has a real property interest (whether as fee owner, operator, lessor (directly or indirectly), lessee (directly or indirectly), mortgagee or otherwise) (collectively, "Properties") is in compliance with Environmental Laws except for any noncompliance, when taken individually or with all other such noncompliance, is not having, and would not reasonably be expected to have, a Material Adverse Effect. With respect to each of the Properties, (a) there is no pending or, to the knowledge of the Borrowers, threatened Environmental Claim against any Borrower or any Subsidiaries thereof or any other environmental condition with respect to any Property which Environmental Claim or condition, when taken individually or with all other such Environmental Claims or conditions, is resulting in, or would reasonably be expected to result in, a Material Adverse Effect and (b) each of the Borrowers and the Subsidiaries thereof are in compliance with all Environmental Permits, except to the extent any such noncompliance, when taken individually or together with all other instances of such noncompliance, is not resulting in, and would not reasonably be expected to result in, a Material Adverse Effect. Except as disclosed on the Supplemental Schedule, no Property is listed or, to the best knowledge of the Borrowers, proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar federal or state list of sites requiring investigation or clean-up. Except as disclosed in the Supplemental Schedule, the Borrowers are not aware: (i) of any underground storage tanks, active or abandoned, including petroleum storage tanks, landfills, lagoons, surface impoundments, disposal areas or disposal ponds on or under any Property that are in violation of any applicable Environmental Law, (ii) any polychlorinated biphenyls or friable asbestos present at any Property in violation of any applicable Environmental Law, (iii) any prior use of any Property by any Persons that constitutes a violation of any Environmental Laws or has resulted in a release of Hazardous Materials into the environment such as would give rise to a cleanup obligation or other Environmental Claim, (iv) of any event, condition or activity which may interfere with or prevent continued compliance by each Borrower and any Subsidiaries thereof with all Environmental Laws, (v) of any generation, manufacture, storage, treatment, transportation or disposal of Hazardous Material which has occurred or is occurring on or from any Property except in compliance with all applicable Environmental Laws or on any property adjoining such Property, or (vi) that any of the Borrowers or any Subsidiaries thereof has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar federal or state list or which is the subject of any federal, state or local enforcement actions or other investigations which would reasonably be expected to lead to claims against any or all of the Borrowers or any Subsidiaries thereof for any remedial work, damage to natural resources or personal injury, including claims under CERCLA provided, however, that, whether or not disclosed in the Supplemental Schedule, such environmental property conditions, materials, prior use, or other condition, events or activities, generation, manufacture, treatment, storage or transportation, when taken individually or together with all other such matters, is not resulting in, and would not reasonably be expected to result in, a Material Adverse Effect. 61 71 6.10 ENVIRONMENTAL LAWS AND PERMITS. Without limiting the representations made in Section 6.9 above, to the best knowledge of the Borrowers, there are no circumstances with respect to any Property or the operations of the Borrowers or any Subsidiaries thereof that would reasonably be expected to: (i) form the basis of an Environmental Claim against any or all of the Borrowers or any Subsidiaries thereof which would constitute a violation of Section 7.2(e) hereof, or (ii) cause any Property owned, leased or funded by any Borrower or any Subsidiaries thereof and material thereto to be subject to any material restrictions on ownership, occupancy, use or transferability under any applicable Environmental Law. 6.11 ERISA. The Supplemental Schedule sets forth a list of all of the Employee Benefit Plans of each of the Borrowers, all Subsidiaries thereof and each ERISA Affiliate thereof as of the Closing Date. Compliance by the Borrower with the provisions hereof and Credit Events contemplated hereby will not involve any prohibited transaction within the meaning of ERISA or section 4975 of the Internal Revenue Code. Each of the Borrowers and the Subsidiaries thereof, (i) have fulfilled all obligations under minimum funding standards of ERISA and the Code with respect to each Employee Benefit Plan that is not a Multiemployer Plan or a Multiple Employer Plan, (ii) has satisfied all respective contribution obligations in respect of each Multiemployer Plan and each Multiple Employer Plan, (iii) is in compliance in all material respects with all other applicable provisions of ERISA and the Code with respect to each Employee Benefit Plan, each Multiemployer Plan and each Multiple Employer Plan. No Accumulated Funding Deficiency exists in respect of any Employee Benefit Plan that is subject to Code Section 412 and no Reportable Event has occurred in respect of any Employee Benefit Plan that is subject to Title IV of ERISA which is continuing and which, in the case of such Accumulated Funding Deficiency or Reportable Event, when taken individually or with all other such Reportable Events or Accumulated Funding Deficiencies, is resulting in, or could reasonably be expected to result in, material liabilities or claims against the Borrowers and the Subsidiaries thereof taken as a whole. No "prohibited transactions" (as defined in Section 406 of ERISA or Section 4975 of the Code), have occurred which, when taken individually or with all other such "prohibited transactions," is resulting in, or could reasonably be expected to result in, material liabilities or claims against the Borrowers and the Subsidiaries thereof taken as a whole. None of the Borrowers, nor any of the Subsidiaries thereof, nor any ERISA Affiliate thereof, has: (i) had an obligation to contribute to any Multiemployer Plan except as disclosed in the Supplemental Schedule or (ii) incurred or reasonably expects to incur any liability for the withdrawal from such a Multiemployer Plan which withdrawal liability, when taken individually or with all other such withdrawal liabilities, is resulting in, or could reasonably be expected to result in, material liabilities or claims against the Borrowers and the Subsidiaries thereof taken as a whole. 6.12 AGREEMENTS; ADVERSE OBLIGATIONS; LABOR DISPUTES. The Supplemental Schedule sets forth a list of all Material Business Agreements of each Borrower and each of its Subsidiaries as of the Closing Date. As of the Closing Date, the Material Business Agreements of each Borrower are in full force and effect and have not been revoked or otherwise modified in any material respect since the execution thereof, except as disclosed on the Supplemental Schedule. Each Borrower is in material compliance with the terms of the Material Business Agreements to which it is a party. None of the Borrowers, nor any of their respective Subsidiaries, is subject to any contract, agreement, or corporate restriction which could reasonably be expected to have a Material Adverse Effect. None of the Borrowers, nor any of their respective Subsidiaries, is a party to any labor dispute (including any strike, slowdown, walkout or other concerted interruptions by its employees, but excluding grievance 62 72 disputes) which, individually or in the aggregate, is resulting in, or would reasonably be expected to result in, a Material Adverse Effect. There are no material strikes, slow downs, walkouts or other concerted interruptions of operations by employees of any Borrower or its Subsidiaries whether or not relating to any labor contracts. 6.13 FINANCIAL STATEMENTS; PROJECTIONS. (a) FINANCIAL STATEMENTS. The Borrowers have furnished to the Administrative Agent complete and correct copies of (i) the audited balance sheets of Instron Corporation and its consolidated Subsidiaries for the Fiscal Year ending December 31, 1998, and the related statements of income, shareholder's equity, and cash flows, and, as applicable, changes in financial position or cash flows for such Fiscal Year, and the notes to such financial statements, reported upon by PricewaterhouseCoopers, L.L.P., certified public accountants, and (ii) the internal unaudited financial statements consisting of a balance sheet and statements of income, shareholder's equity and cash flows as of July 31, 1999, certified by an executive officer of Instron Corporation. All such financial statements (a) have been prepared in accordance with GAAP, applied on a consistent basis (except as stated therein), with Instron Corporation's financial statements from prior Fiscal Years and (b) fairly present in all material respects the financial condition of Instron Corporation and its consolidated Subsidiaries as of the respective dates thereof and the results of operations for the respective fiscal periods then ending, subject in the case of any such financial statements which are unaudited, to the absence of any notes to such financial statement and to normal audit adjustments, none of which will involve a Material Adverse Effect. As of the Closing Date, none of the Borrowers has experienced a Material Adverse Effect since the December 31, 1998 financial statements, nor has there been any material change in the any Borrower's accounting procedures used therein. Instron Corporation and its consolidated Subsidiaries did not as of December 31, 1998, and will not as of the Closing Date, after giving effect to the Loans made on the Closing Date and the consummation of the Merger and the Offering, have any material contingent liabilities, material liabilities for taxes, unusual and material forward or long-term commitments or material unrealized or anticipated losses from any unfavorable commitments, except those reflected in such financial statements or the notes thereto in accordance with GAAP or, to the extent not required by GAAP to be reflected therein, were incurred in the ordinary course of business consistent with past practice, and which reflected or ordinary course matters in any such case will not be material in relation to the business, operations, properties, assets or condition (financial or otherwise) of the Borrower and the Subsidiaries thereof considered on a consolidated basis. (b) FINANCIAL PROJECTIONS. The Borrowers have delivered to the Banks prior to the execution and delivery of this Agreement (i) a copy of Instron Corporation's Report on Form 10-K as filed (without Exhibits) with the SEC for its fiscal year ended December 31, 1998, which contains a general description of the business and affairs of the Borrowers and the Subsidiaries thereof, and (ii) financial and business projections prepared by Instron Corporation with respect to Instron Corporation and its Subsidiaries for the fiscal years therein covered which take into account, on a pro forma basis, the recapitalization pursuant to the Merger, the Offering and the transactions contemplated hereby (the "Financial Projections"). Such Financial Projections for Instron Corporation and its Subsidiaries submitted to the Administrative Agent were prepared in good faith and were based upon assumptions 63 73 which the Borrowers believed to be reasonable (as of the dates of the Financial Projections). 6.14 INTELLECTUAL PROPERTY. Each of the Borrowers and each of the Subsidiaries thereof owns or has the legal and valid right to use all Intellectual Property necessary for the operation of its business as presently conducted, free from any Lien not permitted under Section 7.3(d) and free of any restrictions material to the operation of its business as presently conducted except as set forth in the Supplemental Schedule. The Supplemental Schedule sets forth Intellectual Property of Instron Corporation and Instron, Ltd. consisting of patents, patent applications, trademarks, trademark applications, copyrights and copyright applications deemed by management in its good faith judgment to be material to the Borrowers. Except as set forth in the Supplemental Schedule, none of the Borrowers nor any of the Subsidiaries thereof: (a) licenses as licensee any material Intellectual Property to any third party or (b) is a party to any Material License Agreement with respect to Third Party Intellectual Property. 6.15 MERGER; OFFERING. Prior to the execution and delivery of this Agreement, (a) the Merger became and is now effective and (b) the transactions contemplated by the Merger Agreement and the other Merger Documents have each been consummated strictly (i) in accordance with the respective terms thereof, without any amendment, waiver, modification or termination of any provision thereof except for such amendment, waiver, modification, termination or noncompliance therewith as to which the Administrative Agent has been notified in writing prior to such consummation and (ii) in compliance with all applicable Law. The Merger Agreement and the other Merger Documents constitute the legal, valid and binding obligations of each party thereto, enforceable against such party in accordance with the terms thereof, subject to any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). The Merger has been consummated in compliance with all applicable material laws. The Offering has been consummated in accordance with all applicable material laws and the holders of Senior Subordinated Notes will not be able to assert successfully any applicable rescission rights with respect to the purchase by such holders of the Senior Subordinated Notes. 6.16 MERGER DOCUMENTS. The Borrowers shall have delivered to the Administrative Agent true and correct copies of each of the Merger Agreement, the other Merger Documents and, to the extent requested by the Administrative Agent, each other instrument, agreement or document regarding the Merger. Each party to each Merger Document has performed and/or satisfied all obligations and conditions required of it prior to or as a condition to the consummation of the transactions contemplated by and consummated under the applicable Merger Documents except for such nonperformance or nonsatisfaction as to which the Administrative Agent has been notified in writing prior to such consummation. 6.17 STRUCTURE; CAPITALIZATION. By reason of consummation of the Merger, Kirtland Capital, together with the Affiliates thereof, are the record and beneficial owner of approximately eighty seven (87%( of the issued and outstanding capital stock of Instron Corporation. Instron Corporation is the record and beneficial owner of all issued and outstanding equity interests of each of Instron Schenck 64 74 Testing Systems, GmbH and Instron, Ltd. Instron Corporation has elected to be, and as of the Closing Date is, a C Corporation for federal tax purposes. By reason of consummation of the Merger, the authorized and issued capital stock, as well as issued and outstanding warrants for such stock, of Instron Corporation as of the Closing Date is as set forth on the Supplemental Schedule. The authorized and issued capital stock of each of Instron, Ltd., Instron Schenck Testing Systems, GmbH and of Instron Wolpert GmbH as of the Closing Date is as set forth on the Supplemental Schedule. Except as set forth on the Supplemental Schedule and other than the Stockholder Agreement, after giving effect to the Merger, there are no options, warrants or other rights to acquire any of the capital stock of Instron Corporation or any of the other Borrowers and no redemption rights or other repurchase obligations with respect to the capital stock of Instron Corporation. Instron Corporation and its consolidated Subsidiaries have and will continue to have a Fiscal Year end on the last day of December in each calendar year. 6.18 VALUE; SOLVENCY. Each of the Borrowers has received fair consideration and reasonably equivalent value for the obligations and liabilities it has incurred to the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers hereunder. After giving effect to the Merger, the Offering and the Obligations of the Borrowers hereunder as of the Closing Date, each of the Borrowers is as of the Closing Date Solvent. Instron Corporation and its consolidated Subsidiaries will at all times hereafter remain Solvent on a consolidated basis. No Borrower will incur additional Obligations to the Banks, Swing Line Obligations to the Designated Swing Line Lenders or Letter of Credit Obligations to the Designated Letter of Credit Issuers if at the time of incurrence of such additional Indebtedness, or as a result of the incurring of such additional Indebtedness, such Borrower is or would be rendered not Solvent. 6.19 INVESTMENT COMPANY ACT STATUS. None of the Borrowers nor any Subsidiaries thereof is an "investment company", or an "affiliated person" of, or a "promoter" or "principal underwriter" for an "investment company" (as such terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C. Section 80(a)(1), et seq.). 6.20 REGULATION U/REGULATION X COMPLIANCE. None of the Borrowers nor any Subsidiaries thereof owns any "margin stock", as that term is defined in Regulation U and Regulation X of the Board of Governors of the Federal Reserve System ("Margin Stock"). The proceeds of Loans made to the Borrowers pursuant to this Agreement will be used only for the purposes contemplated by Section 7.2(g)hereof. No part of the proceeds of Loans made to any of the Borrowers pursuant to this Agreement will be used, directly or indirectly, to purchase or carry any Margin Stock (as defined above) for a purpose which violates any applicable law, rule, or regulation including, without limitation, the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System, as amended. 6.21 YEAR 2000 COMPLIANCE. Each of the Borrowers has: (i) conducted a comprehensive review and assessment of all areas of its business and its Subsidiaries' business that would reasonably be expected to be materially and adversely affected by the "Year 2000 Problem" (that is, the risk that Technology is not Year 2000 Compliant), (ii) developed a detailed plan and timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan materially in accordance with that timetable. Each of the Borrowers reasonably anticipates that all Technology that is 65 75 material to its business and the business of its Subsidiaries will on a timely basis be Year 2000 Complaint. Each of the Borrowers has made inquiry of each of the "key suppliers, vendors, and customers" which are material to the business of such Borrower and its Subsidiaries with respect to such entities' being Year 2000 Compliant and, based on that inquiry, believes that each of them will on a timely basis be Year 2000 Compliant in all respects which are material to the business of such Borrower and its Subsidiaries. For the purposes of this paragraph, (a) "Technology" means computer, manufacturing, electronic equipment and telecommunications hardware, software and firmware, whether in computer systems, in embedded microchips or otherwise, which are material to a Borrower's and its Subsidiaries' businesses and financial operations, (b) "Year 2000 Compliant" means, with respect to the Technology of a Borrower and its Subsidiaries, such Technology (x) accurately processes date/time data (including, but not limited to calculating, comparing and sequencing) from, into and between the twentieth and twenty-first centuries and the years 1999 and 2000 and (y) accurately performs leap year calculations and (c) "key suppliers, vendors and customers" refers to those suppliers, vendors and customers of such Borrower and its Subsidiaries the business failure of which would with reasonable probability result in a Material Adverse Effect. 6.22 FULL DISCLOSURE. All factual information (taken as a whole) heretofore or contemporaneously furnished by or on behalf of the Borrowers or any Subsidiaries thereof in writing to the Administrative Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated herein is, other than the Financial Projections (as to which representations are made only as provided in Section 6.13(b) hereof) and all other such factual information (taken as a whole) hereafter furnished by or on behalf of such person in writing to any Bank will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided, except that any such future information consisting of financial projections prepared by the Borrowers is only represented herein as being based on good faith estimates and assumptions believed by such persons to be reasonable at the time made, it being recognized by the Banks that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ materially from the projected results. SECTION 7 COVENANTS OF THE BORROWERS. So long as any of the Obligations shall remain outstanding or the Banks shall have any Commitments, Swing Line Exposure or LC Exposure hereunder, each of the Borrowers shall comply, and will cause any Subsidiaries thereof to comply, with the following provisions: 7.1 REPORTING AND NOTICE COVENANTS. (a) QUARTERLY FINANCIAL STATEMENTS. The Borrowers shall furnish to the Administrative Agent, as soon as practicable and in any event within forty five (45) days after the end of each Fiscal Quarter of Instron Corporation, an unaudited consolidated and consolidating balance sheet of Instron Corporation and its consolidated Subsidiaries as at the end of such Fiscal Quarter and the related statements of operations, retained earnings and cash flow for such Fiscal Quarter, prepared on an unaudited comparative basis with the comparable period during the prior year and the annual business plan required by Section 7.1(d) for such 66 76 period and in accordance with GAAP, all in reasonable detail and certified, subject to normal year-end audit adjustments, by a Responsible Officer of Instron Corporation. (b) ANNUAL FINANCIAL STATEMENTS. The Borrowers shall furnish to the Administrative Agent, as soon as practicable and in any event within ninety (90) days after the end of each Fiscal Year of Instron Corporation, (i) a complete copy of the annual audit report of Instron Corporation and the Subsidiaries thereof (including, without limitation, all consolidated and consolidating financial statements of Instron Corporation and its consolidated Subsidiaries and notes thereto) for such Fiscal Year, all of which shall be in reasonable detail: (A) prepared on a comparative basis with the prior year and in accordance with GAAP and (B) accompanied by the opinion with respect to such financial statements of by independent public accountants of recognized national standing selected by the Borrowers, which opinion shall be unqualified and shall (i) state that such accountants audited such consolidated financial statements in accordance with generally accepted auditing standards, that such accountants believe that such audit provides a reasonable basis for their opinion, and that in their opinion such consolidated financial statements present fairly, in all material respects, the consolidated financial position of Instron Corporation and its consolidated Subsidiaries as at the end of such fiscal year and the consolidated results of their operations and cash flows for such fiscal year in conformity with generally accepted accounting principles, or (ii) contain such statements as are customarily included in unqualified reports of independent accountants in conformity with the recommendations and requirements of the American Institute of Certified Public Accountants (or any successor organization). (c) OFFICER'S CERTIFICATE; MANAGEMENT DISCUSSION; STATEMENTS OF OPERATIONS. The Borrowers shall furnish to the Administrative Agent: (i) concurrently with the financial statements delivered in connection with Sections 7.1(a) and 7.1(b) above, a certificate of a Responsible Officer of Instron Corporation, in his or her capacity as a Responsible Officer, setting forth the computations necessary to determine whether the Borrowers are in compliance with Section 7.4 of this Agreement and satisfaction of the financial standards required in connection with the determination of the Applicable Margin and the Applicable Fee Percentage and certifying that: (A) those financial statements fairly present in all material respects the financial condition and results of operations of the Borrowers subject (in the case of interim financial statements to routine year-end audit adjustments) and (B) no Potential Default or Event of Default then exists or, if any Potential Default or Event of Default does exist, a brief description of the Potential Default or Event of Default and the Borrowers' intentions in respect thereof, and (ii) Promptly after receipt thereof, any accountants' management report and any management letters relating to the financial statement referenced above or the condition of the Borrowers. 67 77 (iii) as soon as practicable and in any event within thirty (30) days after the end of each Fiscal Month of Instron Corporation, a certificate executed by a Responsible Officer of Instron Corporation reflecting the calculation of the Borrowers' Borrowing Base, substantially in the form attached hereto as Exhibit H-1 (each a "Borrowing Base Certificate") and satisfactory in substance to the Administrative Agent, together with any supporting documentation as may be reasonably requested by the Administrative Agent. (d) ANNUAL BUSINESS PLAN. The Borrowers will furnish to the Administrative Agent the final budget or business plan approved by the Board of Directors of Instron Corporation no later than the sixtieth (60th) day after commencement of each such Fiscal Year, and shall furnish promptly to the Administrative Agent during each such Fiscal Year, all revisions thereto approved by the Board of Directors of Instron Corporation and (if and to the extent prepared by management of the Borrower) for any subsequent fiscal years, as customarily prepared by management for its internal use, setting forth the forecasted balance sheet, income statement, operating cash flows and capital expenditures of Instron Corporation and its consolidated Subsidiaries for the period covered thereby, and the principal assumptions upon which forecasts and budget are based. (e) OTHER INFORMATION. The Borrowers shall furnish to the Administrative Agent, promptly upon the Administrative Agent's written request, such other information about the financial condition, properties and operations of the Borrowers and the Subsidiaries thereof and any of their Employee Benefit Plans as the Administrative Agent may from time to time reasonably request. (f) NOTICES. The Borrowers will cause the Responsible Officer of Instron Corporation to give the Administrative Agent (and in the case of the circumstance referenced in clause (v) below, to each of the Banks) prompt written notice whenever (and in any event within ten (10) Business Days after): (i) any of the Borrowers or any Subsidiaries thereof receives notice from any court, agency or other governmental authority of any alleged non-compliance with any Law or order which could reasonably be expected to have or result in, if such noncompliance is found to exist, a Material Adverse Effect, (ii) the Internal Revenue Service or any other federal, state or local taxing authority shall allege any default by any or all of the Borrowers or the Subsidiaries thereof in the payment of any tax material in amount or shall threaten or make any assessment in respect thereof which, if resulting in a determination adverse to the Borrowers, could reasonably be expected to have or result in a Material Adverse Effect, (iii) any litigation or proceeding shall be brought against any or all of the Borrowers or the Subsidiaries thereof before any court or administrative agency which could, if successfully brought against the Borrower, reasonably be expected to have or result in a Material Adverse Effect, (iv) any material adverse change or development in connection with any such litigation proceeding, or (v) such Responsible Officer reasonably believes that any Potential Default or Event of Default has occurred or that any other representation or warranty made herein shall for any reason have ceased to be true and complete in any material respect. 68 78 (g) NOTICE OF DEFAULT UNDER ERISA. If any or all of the Borrowers shall receive notice from any ERISA Regulator or otherwise have knowledge that a Default under ERISA exists with respect to any Employee Benefit Plan, the Borrowers shall notify the Administrative Agent of the occurrence of such Default under ERISA, within ten (10) Business Days after receiving such notice or obtaining such knowledge (the disclosures contained in the Supplemental Schedule being such notice of each Default under ERISA disclosed therein to the extent of the disclosure therein) and shall: (i) so long as the Default under ERISA has not been corrected to the satisfaction of, or waived in writing by the party giving notice, the Borrowers shall thereafter treat as a current liability (if not otherwise so treated) all liability of such Borrower or Borrowers or the Subsidiaries thereof that would arise by reason of the termination of or withdrawal from such Employee Benefit Plan if such plan was then terminated, and (ii) within forty-five (45) days of the receipt of such notice or obtaining such knowledge, furnish to the Administrative Agent a current consolidated balance sheet of the Borrowers with the amount of the current liability referred to above. (h) ENVIRONMENTAL REPORTING. Each of the Borrowers shall promptly deliver to the Administrative Agent, and in any event within ten (10) Business Days after receipt or transmittal by any Borrower or the Subsidiaries thereof, as the case may be, copies or, in the case of investigations or proceedings having no written embodiment, notice of all Environmental Claims brought against such Borrower or Subsidiaries which would, either individually or in the aggregate with all Environmental Claims against the Borrowers and the Subsidiaries thereof, reasonably be expected to result in a Material Adverse Effect. (i) MULTIEMPLOYER PLAN WITHDRAWAL LIABILITY. The Borrowers shall (i) once in each calendar year beginning in 1999, request a current statement of withdrawal liability from each Multiemployer Plan to which any of the Borrowers or any ERISA Affiliate is or has been obligated to contribute during such year and (ii) within fifteen (15) days after the Borrowers receive the such current statement, transmit a copy of such statement to the Administrative Agent. (j) SEC REPORTS AND REGISTRATION STATEMENTS. The Borrowers shall deliver to the Administrative Agent, promptly after transmission thereof or other filing with the SEC, copies of all registration statements (other than the exhibits thereto and any registration statement on Form S-8 or its equivalent) and all annual, quarterly or current reports that the Instron Corporation files with the SEC on Form 10-K, 10-Q or 8-K (or any successor forms). (k) ANNUAL, QUARTERLY AND OTHER REPORTS TO SENIOR SUBORDINATED NOTEHOLDERS PURSUANT TO SENIOR SUBORDINATED NOTE INDENTURE. The Borrowers shall deliver to the Administrative Agent, promptly after transmission thereof to holders of Senior Subordinated Notes, copies of all annual, quarterly and other reports that Instron Corporation furnishes to holders of Senior Subordinated Notes pursuant to any requirements of the Senior Subordinated Note Indenture. 69 79 (l) PRESS RELEASES. The Borrowers shall deliver to the Administrative Agent, promptly after the release thereof to any news organization or news distribution organization, copies of any press releases and other similar statements intended to be made available generally by Instron Corporation to the public concerning material developments relating to Instron Corporation or any of its Subsidiaries. 7.2 AFFIRMATIVE COVENANTS. (a) CORPORATE EXISTENCE. Each of the Borrowers shall, and shall cause each of the Subsidiaries thereof to, at all times maintain its respective corporate existence, rights and franchises, except as permitted under Section 7.3(a), maintain its good standing in the jurisdiction of its incorporation, and qualify as a foreign corporation in each jurisdiction where failure to qualify would reasonably be expected to result in a Material Adverse Effect. (b) FINANCIAL RECORDS. The Borrowers shall maintain at all times, correct and complete financial records in accordance with GAAP, consistently applied, and, without limiting the generality of the foregoing, make appropriate accruals to reserves for estimated and contingent losses and liabilities as required under GAAP. (c) FINANCIAL EXAMINATION AND REVIEW. Each of the Borrowers shall, at such Borrower's expense, upon reasonable prior written or oral notice from the Administrative Agent to the Borrower Representative permit, and shall cause each of its Subsidiaries to permit, designated representatives of the Administrative Agent and the Banks during normal business hours in the presence of an officer of such Borrower: (i) to examine, with the guidance and supervision of such Borrower, the Borrower's financial records and to make copies of and extracts from such records and (ii) to consult with such Borrower's and Subsidiaries' officers, directors, accountants, actuaries, trustees and plan administrators, as the case may be, in respect of such Borrower's and Subsidiaries' financial condition, each of which parties is hereby authorized by such Borrower to make such information available to the designated representatives of the Administrative Agent and the Banks to the same extent that it would to such Borrower. (d) COMPLIANCE WITH LAW. Each of the Borrowers will comply, and will cause each of its Subsidiaries to comply, in all respects with all applicable provisions of all Laws (whether statutory, administrative, judicial or other and whether federal, state or local and excluding Environmental Laws to the extent addressed in Section 7.2(e) of this Agreement) and every lawful governmental order; provided, however, that any alleged noncompliance shall not be deemed to be a violation of this Section 7.2(d) so long as: (i) such noncompliance by such Borrower or such Subsidiaries has not resulted or could not reasonably be expected to result in a Material Adverse Effect. 70 80 (e) COMPLIANCE WITH ENVIRONMENTAL LAWS. Each of the Borrowers will use and operate its facilities and properties, and cause each of its Subsidiaries to use and operate its respective facilities and properties, in such a manner that no obligation shall arise under any Environmental Law, including a clean-up obligation, which, when taken individually or with all other such obligations, would result in, or would reasonably be expected to result in, a Material Adverse Effect; provided, however, that, if any Environmental Claim (even if such claim will not have a Material Adverse Effect is made or any such obligation (even if such obligation would not have a Material Adverse Effect) arises, such Borrower and the Subsidiaries thereof shall, at its own cost and expense, timely satisfy such claim or obligation, provided, however, that no such claim or obligation need be satisfied if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if appropriate reserves or other appropriate provision, if any, as shall be required by GAAP have been made on the books of such Borrower or the Subsidiaries of such Borrower, as the case may be. Each of the Borrowers will keep, and will cause each of its Subsidiaries to keep, all necessary Environmental Permits in effect and remain in therewith, and handle all Hazardous Materials in compliance with all applicable Environmental Laws, except to the extent that any such lack of effectiveness or non-compliance, when taken individually or with all other instances of lack of effectiveness or non-compliance, would not result in, and would not reasonably be expected to result in, a Material Adverse Effect. None of the Borrowers shall suffer to exist, or permit any of their respective Subsidiaries to suffer to exist, an environmental condition which, when taken individually or with all other such conditions, would result in, or would reasonably be expected to result in, a Material Adverse Effect. The Borrowers shall not suffer or permit the aggregate of all liabilities or claims against the Borrowers for any noncompliance with Environmental Laws, any Environmental Claims, any environmental condition, the above-stated obligations under Environmental Laws, or any lack of effectiveness of Environmental Permits referenced in this Section and Section 6.9 hereof, when taken individually or together with all other such noncompliance, Environmental Claims, environmental conditions, above-stated obligations under Environmental Laws, and lack of effectiveness, to result in, or be reasonably expected to result in, a Material Adverse Effect. (f) PROPERTIES. Subject to Sections 5.2 and 7.3(a) of this Agreement, each of the Borrowers shall maintain, in all material respects, and shall cause each of its Subsidiaries to maintain, in all material respects, all assets necessary to its continuing operations in good working order and condition, ordinary wear and tear excepted, and shall refrain, and shall cause each of its Subsidiaries to refrain, from wasting or destroying any such assets or any part thereof. (g) USE OF PROCEEDS. The proceeds of (i) the Term Loans shall be used on the Closing Date by Instron Corporation to finance the portion of the Merger not otherwise financed by the Senior Subordinated Notes and (ii) the Revolving Credit Loans and Swing Line Loans, as the case may be, shall be used (A) on the Closing Date by Instron Corporation to finance any portion of the Merger not otherwise financed by the Senior Subordinated Notes and the Term Notes and (B) on the Closing Date, by all of the Borrowers to repay and refinance all or a portion of the Existing Bank Indebtedness of such Borrower under the Existing Credit Facilities; provided, however, that the maximum drawing on the 71 81 Revolving Credit Commitments of the Banks on the Closing Date for all purposes including the purposes specified in clause (A) and (B) hereof shall not exceed $30,000,000, (iii) to fund the Borrowers' working capital requirements provided such use of proceed to fund working capital requirements involving purchase of material assets shall involve purchases of assets consistent with past practices and sound and prudent business requirements and (iv) for transaction costs and other general corporate purposes of such Borrower (including Permitted Acquisitions and purchasing management stock as permitted by Section 7.3(c) hereof). (h) COMPLIANCE WITH TERMS OF ALL MATERIAL CONTRACTS. Each of the Borrowers shall perform and observe, and shall cause each of its Subsidiaries to perform and observe, all the material terms and provisions of each of the Material Business Agreements and the Material License Agreements to which they are a party. (i) TAXES. Each of the Borrowers shall pay in full, and shall cause each of its Subsidiaries to pay in full, prior in each case to the date when penalties for the nonpayment thereof would attach, all taxes, assessments and governmental charges and levies for which it may be or become subject and all lawful claims which, if unpaid, could reasonably be expected to become a Lien upon its property; provided, however, that no such tax, assessment, charge or levy need be paid so long as and to the extent that: (i) it is contested in good faith and by timely and appropriate proceedings effective, during the pendency of such proceedings, to stay the enforcement of such taxes, assessments and governmental charges and levies and (x) such stay prevents the creation of any Lien (other than inchoate Liens for property taxes) or (y) a bond has been provided which prevents the creation of any Lien (other than inchoate Liens for property taxes) and (ii) appropriate reserves, as required by GAAP, are made on the books of such Borrower and its Subsidiaries, as applicable; provided, further, that that the Borrower will not be considered to be in default of this section the Borrowers or any Subsidiary thereof fails to pay any such amount which, individually or in the aggregate, is immaterial. (j) INSURANCE. Each of the Borrowers shall, on the Closing Date and within five (5) Business Days of the request by the Administrative Agent thereafter, provide evidence satisfactory to the Administrative Agent that such Borrower has adequate personal and real property, casualty, liability, business interruption and product liability insurance, with the Administrative Agent listed as loss payee and additional insured (as applicable), such adequacy to be determined based on insurance maintained generally by companies in the same business as such Borrower. (k) LICENSE TO THIRD PARTIES AND SUBSIDIARIES. Except as disclosed in the Supplemental Schedule, none of the Borrowers nor any Subsidiary thereof has any existing license agreement as licensor with respect to Intellectual Property of such Borrower or Subsidiaries that does not provide, and neither such Borrower nor such Subsidiary will execute any license agreement as licensor with any Person (including, without limitation, any Subsidiary of such Borrower) with respect to any such Intellectual Property that does not provide that (i) upon an Event of Default and the acceleration of the Obligations, such license agreement shall, upon the written 72 82 request of the Administrative Agent, terminate and (ii) such agreement may only be amended in any material respect with the express written consent of the Administrative Agent, such consent not to be unreasonably withheld or delayed. (l) CERTAIN SUBSIDIARIES TO JOIN IN SUBSIDIARY GUARANTY AND STOCK PLEDGE. (i) If at any time after the Closing Date (a) any Borrower creates or acquires any Material Subsidiary or (b) any non-Borrower Subsidiary of a Borrower that was not a party to a Subsidiary Guaranty and Subsidiary Security Agreement on the Closing Date becomes a Material Subsidiary, then the Borrowers shall (x) notify the Administrative Agent promptly in writing of such event, identifying the Subsidiary in question and referring specifically to the rights of the Administrative Agent and the Banks under this Section, and (y) cause such Material Subsidiary to execute and deliver to the Administrative Agent for the benefit of the Banks, within thirty (30) days after the occurrence of such event, (A) either (I) subject to the satisfaction of all the requirements set forth in Section 1.4, an Additional Borrower Addendum, or (II) only in the case of a Material Subsidiary that is also a Domestic Subsidiary, a joinder supplement, in form and substance satisfactory to the Administrative Agent and the Required Banks, to the Subsidiary Guaranty pursuant to which such Material Subsidiary joins in the Subsidiary Guaranty as a guarantor thereunder and in the Subsidiary Security Agreement as a grantor thereunder, and (B) such evidence of the authority of such Material Subsidiary to execute and deliver such documents as the Administrative Agent shall reasonably request and (z) cause Instron Corporation to execute a supplement, in form and substance satisfactory to the Administrative Agent and the Required Banks, to the Subsidiary Pledge Agreement pursuant to which the stock of such Material Subsidiary is pledged by Instron Corporation thereunder. (ii) If at any time after the Closing Date, any non-Borrower Subsidiary of a Borrower that is not a party to a Subsidiary Guaranty or a Subsidiary Security Agreement has, during any Testing Period, consolidated earnings before interest, taxes, depreciation and amortization which, when aggregated with the consolidated earnings before interest, taxes, depreciation and amortization of all other non-Borrower Subsidiaries of a Borrower that are not parties to a Subsidiary Guaranty or a Subsidiary Pledge Agreement, would exceed 15% of Instron Corporation's Consolidated Adjusted EBITDA for such Testing Period, then the Borrowers shall (x) notify the Administrative Agent promptly in writing of such event, identifying all of the Subsidiaries in question and referring specifically to the rights of the Administrative Agent and the Banks under this Section, and (y) cause a sufficient number of such Subsidiaries to execute and deliver to the Administrative Agent for the benefit of the Banks, within thirty (30) days after the occurrence of such event, (A) either (I) subject to the satisfaction of all the requirements set forth in Section 1.4, an Additional Borrower Addenda, or (II) only in the case of Subsidiaries that are also a Domestic Subsidiaries, a joinder supplement, in form and substance satisfactory to the Administrative 73 83 Agent and the Required Banks, to the Subsidiary Guaranty pursuant to which such Subsidiary joins in the Subsidiary Guaranty as a guarantor thereunder and in the Subsidiary Security Agreement as a grantor thereunder, and (B) such evidence of the authority of such Material Subsidiary to execute and deliver such documents as the Administrative Agent shall reasonably request, to ensure that the consolidated earnings before interest, taxes, depreciation and amortization of such Subsidiaries is less than or equal to 15% of Instron Corporation's Consolidated Adjusted EBITDA. and (y) cause Instron Corporation to execute a supplement, in form and substance satisfactory to the Administrative Agent and the Required Banks, to the Subsidiary Pledge Agreement pursuant to which the stock of such Subsidiaries is pledged by Instron Corporation thereunder. (m) MOST FAVORED COVENANT STATUS. The Senior Subordinated Notes, and any indenture, guaranty or other similar instrument evidencing the Senior Subordinated Notes, shall not include any affirmative or negative business or financial covenants (or any events of default or other type of restriction which would have the practical effect of any affirmative or negative business or financial covenant, including, without limitation, any 'put' or mandatory prepayment of such Indebtedness upon the occurrence of a 'change of control') applicable to the Borrowers which are more restrictive than those set forth herein or in any of the other Loan Documents. To the extent any amendment, extension, renewal or refinancing of the Senior Subordinated Notes, or any indenture, guaranty or other similar instrument evidencing such amendment, extension, renewal or refinancing of the Senior Subordinated Notes includes affirmative or negative business or financial covenants (or any events of default or other type of restriction which would have the practical effect of any affirmative or negative business or financial covenant, including, without limitation, any 'put' or mandatory prepayment of such Indebtedness upon the occurrence of a 'change of control') applicable to the Borrowers which are more restrictive than those set forth herein or in any of the other Loan Documents, the Borrowers shall promptly so notify the Administrative Agent and, if the Administrative Agent shall so request by written notice to the Borrowers (after a determination has been made by the Required Banks that any of the above-referenced documents or instruments contain any such provisions, which either individually or in the aggregate, are more favorable to the Banks than any of the provisions set forth herein), the Borrowers, the Administrative Agent and the Banks shall promptly amend this Agreement to incorporate some or all of such provisions, in the discretion of the Administrative Agent and the Required Banks, into this Agreement and, to the extent necessary and reasonably desirable to the Administrative Agent and the Required Banks, into any of the other Loan Documents, all at the election of the Administrative Agent and the Required Banks. (n) HEDGE AGREEMENTS. Within sixty (60) day after the Closing Date, the Borrowers will enter, and will cause the Subsidiaries thereof to enter, into Hedge Agreements (i) in order to provide protection to the Borrowers and such Subsidiaries from fluctuations and other changes in interest rates and currency exchange rates, as and to the extent considered reasonably necessary by the Borrowers, but without exposing the Borrowers or such Subsidiaries to predominantly speculative risks unrelated to the amount of Indebtedness or assets intended to be subject to coverage on a notional basis under all such Hedge Agreements; and (ii) in the case of any Hedge Agreement entered into after the Effective Date, only if the proposed form thereof (including any proposed pricing or other material terms) has 74 84 been provided to the Administrative Agent contemporaneously with the entry into such Hedge Agreement. 7.3 NEGATIVE COVENANTS. (a) CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS . None of the Borrowers shall, nor permit any Subsidiaries thereof to, (x) merge or consolidate with or into, or enter into any agreement to merge or consolidate with or into, any other Person or otherwise be a party to any merger or consolidation; (y) purchase all or substantially all of the assets and business of another Person (purchases of inventory and materials in the ordinary course of business being permitted and leases and purchases of equipment in the ordinary course of business being permitted subject to Sections 7.3(d) and 7.4(g) hereof), or (z) except as set forth in the Supplemental Schedule, lease as lessor, sell, sell-leaseback, license or otherwise convey record or beneficial ownership (whether in one transaction or a series of transactions) of any of its property or assets (whether now owned or hereafter acquired); except that: (i) each of the Borrowers and any Subsidiaries thereof may sell or otherwise dispose of its Inventory in the ordinary course of its business; (ii) each of the Borrowers and any Subsidiaries thereof may sell or otherwise dispose of its Equipment that is obsolete, worn out, unnecessary or no longer used or useful in such Borrower's or Subsidiaries' business, so long as the Net Proceeds of any such sales of Equipment shall be applied to repay the Loans to the extent required by Section 2.10(c) of this Agreement; (iii) any Domestic Borrower may merge or consolidated with or into any other Domestic Borrower and any Foreign Borrower (other than Instron, Ltd.) may merge with or into any other Foreign Borrower; (iv) any Domestic Subsidiary of a Borrower may merge or consolidate with or into, or be liquidated into, a Domestic Borrower or any Domestic Subsidiary which is a Wholly-Owned Subsidiary of a Domestic Borrower so long as such Domestic Borrower or such Domestic Subsidiary is the surviving corporation, or may dispose of its properties or assets to such Domestic Borrower or such Domestic Subsidiary (whether such disposal is by means of lease, sale or other type of transfer except transfers of a type otherwise provided for in this Section 7.3(a)); (v) any Foreign Subsidiary of a Borrower may merge or consolidate with or into, or be liquidated into, a Foreign Borrower or a Domestic Borrower or any Subsidiary which is a Wholly-Owned Subsidiary of a Foreign Borrower or Domestic Borrower so long as such Foreign Borrower or Domestic Borrower, as the case may be, or such Wholly-Owned Subsidiary is the surviving corporation, or may dispose of its properties or assets to such Foreign Borrower or Domestic Borrower or such Wholly-Owned Subsidiary (whether such disposal is by means of lease, sale or other type of transfer except transfers of a type otherwise provided for in this Section 7.3(a)); 75 85 (vi) each of the Borrowers and any Subsidiaries thereof may make Acquisitions, so long as (A) no Potential Default or Event of Default then exists or would result therefrom and (B) such Acquisition constitutes a Permitted Acquisition; (vii) each of the Borrowers and any Subsidiaries thereof may lease (as lessee) real or personal property in the ordinary course of business; provided that (A) any such lease does not create a Capitalized Lease Obligation not otherwise permitted by Section 7.3(d)(xii) or (B) any such lease constituting an operating lease does not cause the aggregate rental payments under all operating leases to exceed the amount otherwise permitted by Section 7.3(d)(x); (viii) each of the Borrowers and any Subsidiaries thereof may license or sublicense Intellectual Property owned thereby in the ordinary course of business; provided that (A) such licenses or sublicenses shall not interfere in any material respect with the business of any Borrower or any Subsidiary and (B) the rights of the licensee under any such license shall be subject to the security interest granted hereunder in favor of the Administrative Agent; (ix) each of the Borrowers and any Subsidiaries thereof may effect sale-leaseback transactions with respect to real property thereof; provided that (A) the aggregate Net Proceeds of all such sale-leaseback transactions by all of the Borrowers and the Subsidiaries thereof shall not exceed $7,500,000, (B) no Default or Event of Default is then in existence or would result thereby, (C) each such sale shall be in an amount at least equal to the fair market value thereof (as determined in good faith by the Board of Directors of Instron Corporation) and shall be for a consideration not less than seventy five percent (75%) of which shall be cash proceeds, (D) the lease obligations created thereby are otherwise permitted under this Agreement, and (E) to the extent the Required Lenders consent to sale-leaseback transactions exceeding in the aggregate the Net Proceeds limits hereof, the Net Proceeds from such transactions in excess of $7,500,000 are contemporaneously therewith applied to repay the Loans to the extent required by Section 2.10(c) of this Agreement; (x) each of the Borrowers and any Subsidiaries thereof may grant leases or subleases to other Persons in the ordinary course of business; provided that such leases or subleases do not interfere in any material respect with the business of a Borrower or any Subsidiaries thereof and any interest or title of a lessor under any lease in violation of this Agreement; (xi) each of the Borrowers and any Subsidiaries thereof may sell or otherwise dispose (for purposes of this clause, the granting of Liens shall not be considered to be a disposition of the asset secured thereby) of Equipment or Cash Equivalents to Persons (which are neither Borrowers nor Subsidiaries) not otherwise permitted by this Section 7.3(a) hereof; provided that (A) the aggregate Net Proceeds received from all such sales and dispositions by all of the Borrowers and the Subsidiaries thereof permitted by this clause (xi) shall not exceed 76 86 $2,000,000 in any Fiscal Year of Instron Corporation, (B) no Default or Event of Default is then in existence or would result thereby, (C) each such sale shall be in an amount at least equal to the fair market value thereof (as determined in good faith by the Board of Directors Instron Corporation) and for all cash proceeds and (D) the Net Proceeds of any such sale are contemporaneously therewith applied to repay the Loans to the extent required by Section 2.10(c) of this Agreement, and (xii) Instron Corporation and the Domestic Subsidiaries thereof may convey ownership of tangible personal property of Instron Corporation and such Domestic Subsidiaries to Foreign Borrowers and Foreign Subsidiaries to the extent that: (A) such personal property does not consist of Accounts, General Intangibles, or Investment Property (other than Cash Equivalents to the extent permitted by clause (B) of this Section), (B) any conveyance of cash and Cash Equivalents are otherwise permitted as intercompany loans or investments pursuant to Sections 7.3(b) and 7.3(e) hereof; (C) ownership of any Inventory delivered to such Foreign Borrowers or Foreign Subsidiaries for processing may be conveyed to such Foreign Borrower or Foreign subsidiaries only to the extent such conveyance is consistent with the customary practice of the Borrowers with respect to the conveyancing of title to Inventory being processed by such affiliated processors and not otherwise materially adverse to the financial condition of Instron Corporation and such Domestic Subsidiaries, taken as a whole, and (D) ownership of Equipment may be conveyed to Foreign Borrowers or Foreign Subsidiaries in an amount the fair market value of which (as determined in good faith by the Board of Directors of Instron Corporation) shall not to exceed in the aggregate $5,000,000; provided, however, that (X) the restrictions on conveyances of tangible personal property specified in this Section 7.3(a) and this Subsection 7.3(a)(xii) are not applicable to (I) conveyances of Equipment and Inventory with respect to which fair consideration (as determined in good faith by the Board of Directors of Instron Corporation) is paid to Instron Corporation or such Domestic Subsidiaries by such Foreign Borrower or Foreign Subsidiaries, (II) transfers of Equipment which do not involve the conveyance of ownership to the extent such transfers are otherwise permitted by Section 4.3 hereof, (III) conveyances thereof from any Domestic Borrower or Domestic Subsidiary to any other Domestic Borrower or any Domestic Subsidiary which is a Wholly-Owned Subsidiary, (IV) conveyances thereof from any Foreign Borrower or Foreign Subsidiary to any Domestic Borrower or any Domestic Subsidiary which is a Wholly-Owned Subsidiary or (V) transfers of Inventory which do not involve the conveyance of ownership to the extent such transfers are consistent with the customary practice of the Borrowers with respect to Inventory being processed by such affiliated processors and not otherwise materially adverse to the financial condition of Instron Corporation and such Domestic Subsidiaries, taken as a whole, and (Y) all conveyances permitted in this Subsection 7.3(a)(xii) are be undertaken, in good faith, for commercially sound and prudent business reasons and consistent with the customary business practices of the Borrowers. 77 87 (xiii) Instron Corporation and the Domestic Subsidiaries thereof may convey ownership of intangible personal property of Instron Corporation and such Domestic Subsidiaries to Foreign Borrowers and Foreign Subsidiaries to the extent that such transfers: (A) are not materially adverse to the financial condition of Instron Corporation and such Domestic Subsidiaries, taken as a whole, and (B) are undertaken, in good faith, for commercially sound and prudent business reasons and consistent with the customary business practices of the Borrowers. (b) CREDIT EXTENSIONS; PREPAYMENTS; PAYMENTS OF SUBORDINATED DEBT. None of the Borrowers shall, nor permit any Subsidiaries thereof to, (x) make prepayments or advance payments in respect of Indebtedness to others (except to the Administrative Agent for the benefit of the Banks in accordance with this Agreement) or (y) loan any money to, assume any Indebtedness of or any other obligation of, or undertake any Guaranty Obligations with respect to the Indebtedness of, any other Person or (z) make any payments of principal or interest on Subordinated Debt, except for: (i) receivables owing to them held or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; (ii) loans and advances to employees for business-related travel expenses, moving expenses, costs of replacement homes and other similar expenses, in each case incurred in the ordinary course of business; (iii) loans and advances by any Subsidiary (including any Foreign Borrower) to Instron Corporation; provided, however, that the Indebtedness represented thereby constitutes unsecured Subordinated Debt; (iv) loans and advances (A) by Instron Corporation to any Domestic Subsidiary, (B) by Instron Corporation to any Foreign Borrower or any Foreign Subsidiary, (C) by any Domestic Subsidiary to any Foreign Borrower, any Foreign Subsidiary or Domestic Subsidiary, or (D) by any Foreign Borrower or Foreign Subsidiary to any Foreign Subsidiary, any other Foreign Borrower or any Domestic Subsidiary; provided, that the cumulative aggregate amount of all such loans and advances outstanding after the Effective Date (other than Permitted Assumed Acquisition Indebtedness and Permitted Subordinated Acquisition Indebtedness in connection with Permitted Acquisitions and excluding from treatment as a loan or advance, for purposes of this clause (iv), any intercompany trade payables incurred in the ordinary course of business consistent with past practice) by Instron Corporation and Domestic Subsidiaries to Foreign Borrowers and Foreign Subsidiaries shall not exceed (when aggregated with all investments by Instron Corporation made therein after the Effective Date other than Permitted Acquisition Investments) Ten Million Dollars ($10,000,000) in the aggregate. (v) unsecured Guaranty Obligations of (A) Instron Corporation or any Domestic Subsidiary thereof in respect of leases of any Borrower or any 78 88 Subsidiary thereof which are not prohibited by this Agreement, (B) any Foreign Borrower or any Foreign Subsidiary thereof in respect of leases of any such Foreign Borrower or any Foreign Subsidiary thereof which are not prohibited by this Agreement and (C) a Borrower or any Subsidiary thereof in respect of any other Person (other than in respect of indebtedness for borrowed money) arising as a matter of applicable law because the Borrower or such Subsidiary is or is deemed to be a general partner of such other person; provided that no Foreign Borrower or Foreign Subsidiary shall guaranty any obligations of such Person to the extent such guaranty would cause U. S. tax recognition by Instron Corporation of foreign income; (vi) any endorsement of a check or other medium of payment for deposit or collection, or any similar transaction in the normal course of business; (vii) any unsecured Guaranty Obligations consisting of (A) the Guaranty Obligations of a Borrower Guarantor consisting of its obligation to pay Guaranteed Obligations hereunder as provided by Section 10 hereof, (B) the Guaranty Obligations of any Borrower as the guarantor of any Letter of Credit Obligor as provided in Section 2.12(l) hereof and (C) other Guaranty Obligations of any Borrower or any Subsidiary in respect of Obligations of any other Borrower or Subsidiary thereof; (viii) any unsecured Guaranty Obligations of the unsecured Indebtedness of any Subsidiaries (including Foreign Borrowers) of the Indebtedness permitted in Sections 7.3(c)(xii) and 7.3(c)(xiii) hereof not otherwise permitted under the foregoing clauses; provided no Foreign Borrower or Foreign Subsidiary shall guaranty any obligations of Instron Corporation or any Domestic Subsidiary to the extent such guaranty would cause U. S. tax recognition by Instron Corporation of foreign income; (ix) any loan or advance by any Borrower or Subsidiary for the benefit of any other Borrower or Subsidiary evidenced by such Borrower's or Subsidiary's being the account party in respect of Existing Letters of Credit issued for the benefit of such other Borrower or other Subsidiary to the extent such Existing Letters of Credit are permitted by Section 2.12(c) hereof; (x) any Permitted Assumed Acquisition Indebtedness and Permitted Subordinated Acquisition Indebtedness; (xi) loans and advances to employees for purposes deemed prudent by the Board of Directors of Instron Corporation in an aggregate amount not to exceed $500,000 during any Fiscal Year, and any renewals, extensions or replacement thereof; (xii) so long as such payments are not prohibited pursuant to the Senior Subordinated Note Indenture at the time such payments become due, payments by Instron Corporation to the holders of the Senior Subordinated Notes an amount 79 89 (the "Permissible Senior Subordinated Note Amount") which may not exceed, during any Fiscal Year, the sum of all regularly scheduled payments of interest required to be made by Instron Corporation under the Senior Subordinated Note Documents; except that Instron Corporation shall not make, nor permit any of its Subsidiaries to make, any voluntary or optional payment or prepayment or redemption or acquisition for value (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) of the Senior Subordinated Notes, or effect any mandatory repurchase of the Senior Subordinated Notes pursuant to a "change of control" (as defined in the Senior Subordinated Note Indenture), or exchange of, or refinance or refund, any Senior Subordinated Notes of the Borrower permitted hereunder; provided, however, that the Borrowers may refinance or refund any such Subordinated Debt if the aggregate principal amount thereof is not increased or the weighted average life to maturity thereof is not reduced by more than 10% (computed in accordance with standard financial practice) and there is no change in the subordination provisions applicable thereto which is materially adverse to the Banks, the Designated Swing Line Lenders or the Designated Letter of Credit Issuers; and (xiii) so long as such payments are not prohibited pursuant to the applicable Subordination Agreement at the time such payments become due, payment by Instron Corporation or any Subsidiaries thereof to the holders of Subordinated Debt (other than payments with respect to the Senior Subordinated Notes) of an amount (the "Permissible Subordinated Amount") which may not exceed, during any Fiscal Year, the sum permitted by the applicable Subordination Agreement; except that Instron Corporation shall not make, nor permit any of its Subsidiaries to make, any voluntary or optional payment or prepayment or redemption or acquisition for value (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of pay or redemption or acquisition for value (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due), or effect any mandatory repurchase, or exchange of, or refinance or refund, any such Subordinated debt except to the extent permitted in the applicable Subordination Agreement. (c) INDEBTEDNESS. None of the Borrowers shall, nor permit any Subsidiaries thereof to, create, assume, incur, suffer to exist or have outstanding at any time any Indebtedness or other debt of any kind or be or become a Guarantor of or otherwise undertake or assume any Guaranty Obligation with respect to any Indebtedness of any other Person; except that this Section 7.3(c) shall not prohibit: (i) the Obligations, Swing Line Obligations, Letter of Credit obligations and Designated Hedge Obligations hereunder; (ii) ordinary course trade accounts payable or customer deposits; 80 90 (iii) unsecured Indebtedness of Instron Corporation to any Subsidiary (including a Foreign Borrower); provided, however, that such Indebtedness constitutes Subordinated Debt; (iv) Indebtedness of (A) any Domestic Subsidiary of Instron Corporation to Instron Corporation, (B) any Foreign Borrower or any Foreign Subsidiary to Instron Corporation, (C) any Foreign Borrower, any Foreign Subsidiary or Domestic Subsidiary to any Domestic Subsidiary, (D) any Foreign Borrower, Foreign Subsidiary or Domestic Subsidiary to any Foreign Borrower or other Foreign Subsidiary; provided, however, that the cumulative aggregate amount of all such Indebtedness outstanding after the Effective Date (other than Permitted Assumed Acquisition Indebtedness and Permitted Subordinated Acquisition Indebtedness in connection with Permitted Acquisitions and excluding from treatment as Indebtedness, for purposes of this clause (iv), any intercompany trade payables incurred in the ordinary course of business consistent with past practice) owing by all Foreign Borrowers and Foreign Subsidiaries to Instron Corporation and Domestic Subsidiaries shall not at any time exceed (when aggregated with all investments therein made after the Effective Date other than Permitted Acquisition Investments) Ten Million Dollars ($10,000,000) in the aggregate; (v) Indebtedness under Hedge Agreements or in respect of currency rate swaps or similar transactions; (vi) Indebtedness secured by a Lien permitted by clauses (ix), (x) or (xii) of Section 7.3(d) and up to the amount permitted therein; (vii) Indebtedness of a Borrower Guarantor consisting of its obligation to pay Guaranteed Obligations hereunder as provided by Section 10 of this Agreement or as the guarantor of any Letter of Credit Obligor as provided in Section 2.12(l) hereof; (viii) Indebtedness evidenced by Guaranty Obligations otherwise permitted by Sections 7.3(b)(v) and 7.3(b)(viii) hereof; (ix) Indebtedness of Instron Corporation to the holders of the Senior Subordinated Notes under the Senior Subordinated Note Documents, to the extent subject to the Senior Subordinated Note Indenture; (x) Indebtedness in connection any repurchase of capital stock of Instron Corporation from management in an amount not to exceed (when aggregated with cash repurchases of such capital stock by Instron Corporation permitted by Section 7.3(e)(viii) and 7.3(f) hereof) $1,000,000 during any Fiscal Year and only to the extent no Event of Default has occurred which is continuing which has not been waived in accordance with Section 14.1 hereof or would result by reason of such repurchase; 81 91 (xi) the existing Indebtedness as of July 3, 1999, to the extent not otherwise permitted pursuant to the foregoing clauses (and any refinancing, extension, renewal, or refunding thereof not involving an increase in the principal amount of such Indebtedness or a reduction of more than ten percent (10%) in the remaining weighted average life to maturity thereof (computed in accordance with standard financial practice) except to the extent such Indebtedness is required to be refinanced and terminated pursuant to Section 3.1 hereof; (xii) unsecured Indebtedness not otherwise permitted pursuant to the foregoing clauses incurred by Domestic Borrowers and non-Borrower Domestic Subsidiaries of any Borrower in amount not to exceed at any time Two Million Five Hundred Thousand Dollars ($2,500,000) in the aggregate; (xiii) unsecured Indebtedness not otherwise permitted pursuant to the foregoing clauses incurred by Foreign Borrowers and non-Borrower Foreign Subsidiaries of any Borrower in an amount not to exceed at any time Ten Million Dollars ($10,000,000) in the aggregate; (xiv) Permitted Subordinated Acquisition Indebtedness incurred in connection with Permitted Acquisitions and Permitted Assumed Acquisition Indebtedness, in each case, to the extent permitted to be incurred in connection with each such Permitted Acquisitions; (xv) in connection with Permitted Acquisitions, to the extent not otherwise permitted by the forgoing clauses, unsecured, unsubordinated Indebtedness to the extent permitted to be incurred in connection with a particular Permitted Acquisition in an amount outstanding not to exceed at any time Two Million Dollars ($2,000,000) in the aggregate; and (xvi) to the extent not otherwise permitted by the foregoing clauses, Subordinated Debt of the Borrowers and the Subsidiaries thereof. (d) LIENS. None of the Borrowers shall, nor permit any Subsidiaries thereof to, (x) acquire or hold any property subject to any Lien, (y) sell or otherwise transfer any Accounts, whether with or without recourse, or (z) suffer or permit any property now owned or hereafter acquired by it to be or become encumbered by a Lien; provided, however, that this Subsection shall not prohibit: (i) any lien for a tax, assessment or government charge or levy for taxes, assessments or charges not yet due and payable or not yet required to be paid pursuant to Section 7.2(i); (ii) any deposit or cash pledges securing only workers' compensation, unemployment insurance or similar obligations (other than Liens arising under ERISA) in the ordinary course of business; 82 92 (iii) any mechanic's, carrier's, landlord's or similar common law or statutory lien incurred in the ordinary course of business for amounts that are not yet due and payable or which are being diligently contested in good faith, so long as the Administrative Agent has been notified thereof and adequate reserves are maintained by such Borrower for their payment; (iv) zoning or deed restrictions, public utility easements, rights of way, minor title irregularities and similar matters relating to real property of such Borrower or its Subsidiaries, in all such cases having no material adverse effect as a practical matter on the ownership or use of any of the real property in question, as such property is used in the ordinary course of business of such Borrower or its Subsidiaries; (v) any Lien (1) which arises in connection with judgments or attachments the occurrence of which does not constitute an Event of Default under Section 8.12, (2) the execution or other enforcement of such Lien is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings and (3) which is junior in priority to the Liens of the Administrative Agent securing the Obligations from time to time outstanding; (vi) deposits or cash pledges securing performance of contracts, bids, tenders, leases (other than Capitalized Leases), statutory obligations, surety and appeal bonds (other than contracts for the payment of Indebtedness for borrowed money) arising in the ordinary course of business; (vii) any Lien in favor of the Administrative Agent created under the Loan Documents or any existing Lien fully disclosed in the Supplemental Schedule; (viii) Liens securing the replacement, extension or renewal of any Indebtedness permitted to be refinanced by Section 7.3(c) so long as such Lien is upon the same property previously subject thereto; (ix) any Lien (including any Permitted Acquisition Lien in connection with a Permitted Acquisition) created or assumed in purchasing, constructing or improving any real property or to which any real property is subject when purchased; provided, however, that: (x) the mortgage, security interest or other lien is confined to the property in question and (y) the Indebtedness secured thereby does not exceed the total cost of the purchase, construction or improvement and (z) the aggregate outstanding Indebtedness of such Borrower secured by such Liens (when taken together with any secured Indebtedness permitted to be secured pursuant to clause (xii) of this subsection and when taken together with the aggregate Indebtedness of the other Borrowers secured by Liens permitted by this clause (ix) of this subsection) shall not at any time exceed Five Million Dollars ($5,000,000) in the aggregate; 83 93 (x) any operating lease entered into by such Borrower as lessee; provided; however, that the scheduled rental payments in respect to all such leases of such Borrower (when taken together with all such leases of the Borrower and all other Borrowers) shall not at any time exceed Ten Million Dollars ($10,000,000) in the aggregate during any Fiscal Year of Borrowers; (xi) any transfer of a check or other medium of payment for deposit or collection, or any similar transaction in the ordinary course of business; (xii) any Lien (including any Lien in respect of a Capitalized Lease of personal property and any Permitted Acquisition Lien in connection with a Permitted Acquisition) which is created in connection with the purchase of personal property; provided, however, that: (x) the Lien is confined to the property in question, (y) the Indebtedness secured thereby does not exceed the total cost of the purchase, and (z) the aggregate outstanding Indebtedness secured by such Liens (when taken together with any secured Indebtedness permitted to be secured pursuant to clause (ix) of this subsection and when taken together with the aggregate Indebtedness of such Borrower and the other Borrowers secured by Liens permitted by this clause (xii) of this subsection) shall not at any time exceed Five Million Dollars ($5,000,000) in the aggregate; (xiii) security deposits to secure the performance of operating leases and deposits received from customers, in each case in the ordinary course of business; and (xiv) lease and subleases permitted by Section 7.3(a) hereof; and (e) INVESTMENTS. None of the Borrowers shall, nor permit any of its Subsidiaries to, (x) make or hold any investment in any common stocks, bonds or securities of any Person, or make any further capital contribution to any Person or (y) become a party to any partnership or non-limited liability Person, other than: (i) investments in the capital of its Subsidiaries existing as of the Effective Date and the capital contributions therein outstanding as of the Effective Time(and any increases thereof attributable to increases in retained earnings); (ii) investments notes or securities issued by a customer of such Borrower or its Subsidiaries in connection with a proceeding in respect of the Financial Impairment of such customer, (iii) investments in cash and Cash Equivalents; (iv) investments by Instron Corporation and Domestic Subsidiaries made after the Effective Date in the capital of Wholly-Owned Subsidiaries which are not Foreign Subsidiaries (and any increases thereof attributable to increases in retained earnings); 84 94 (v) investments (excluding for purposes of calculating the limitations herein, Permitted Acquisition Investments) by Instron Corporation and Domestic Subsidiaries made after the Effective Date in the capital of Foreign Borrowers and Foreign Subsidiaries in an amount not to exceed (when aggregated with loans and advances made to such Subsidiaries by Instron Corporation or the Subsidiaries thereof after the Effective Date other than Permitted Assumed Acquisition Indebtedness and Permitted Subordinated Acquisition Indebtedness) at any time Ten Million Dollars ($10,000,000) in the aggregate (and any increases thereof attributable to increases in retained earnings); (vi) investments acquired by Instron Corporation or any Subsidiaries thereof (A) in exchange for any other investment held by the Borrower or any such Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other investment, or (B) as a result of a foreclosure by Instron Corporation and the Subsidiaries thereof with respect to any secured investment or other transfer of title with respect to any secured investment in default; (vii) investments of Instron Corporation and any Subsidiaries thereof in Hedge Agreements; (viii) any repurchase of capital stock of Instron Corporation from management in an amount not to exceed (when aggregated with Indebtedness of Instron Corporation to the seller of such capital stock in connection with such repurchase permitted by Section 7.3(c)(x) hereof) $1,000,000 per annum and only to the extent no Event of Default has occurred which is continuing which has not been waived in accordance with Section 14.1 hereof or would result by reason of such repurchase, and (ix) any other existing investments to the extent not otherwise permitted by the forgoing clauses described on the Supplemental Schedule. (f) DISTRIBUTIONS; MANAGEMENT FEE. Other than in a writing made expressly subject to the Administrative Agent's written consent under this Agreement, Instron Corporation shall not make or commit itself to make, nor permit any of its Subsidiaries to make or commit to make, any Distribution (other than stock dividends) to its shareholders or members at any time or pay or commit itself to pay any management fee to any Affiliate of such Borrower or its Subsidiaries at any time; except, that: (x) each Subsidiary of Instron Corporation may make or commit itself to make Distributions to its shareholders or members at any time, (y) the Borrowers may pay management fees and board of directors fees in an aggregate amount not to exceed $600,000 during any Fiscal Year to the extent paid pursuant to and in accordance with the Management Agreement and (z) any repurchase of capital stock of Instron Corporation from management in an amount not to exceed during any Fiscal Year (when aggregated with Indebtedness 85 95 incurred during such Fiscal Year by Instron Corporation to the sellers of such capital stock permitted by Section 7.3(e)(viii) hereof) $1,000,000 and only to the extent no Event of Default has occurred which is continuing which has not been waived in accordance with Section 14.1 hereof or would result by reason of such repurchase; (g) CHANGE IN NATURE OF BUSINESS. None of the Borrowers shall, nor permit any Subsidiaries thereof to, make any material change in the nature of its business as carried on at the date hereof. (h) CHARTER AMENDMENTS. None of the Borrowers shall amend any of its Charter Documents or permit amendment of the Charter Documents of any of its Subsidiaries if such amendment would conflict with or cause and Event of Default or a Potential Default under this Agreement. (i) COMPLIANCE WITH ERISA. None of the Borrowers shall, nor permit any ERISA Affiliate to: (i) engage in any transaction in connection with which such Borrower or any ERISA Affiliate could reasonably be expected to be subject to either a civil penalty assessed pursuant to section 502(i) of ERISA or a tax imposed by section 4975 of the Internal Revenue Code, terminate or withdraw from any Employee Benefit Plan (other than a Multiemployer Plan) in a manner, or take any other action with respect to any such Employee Benefit Plan (including, without limitation, a substantial cessation of business operations or an amendment of an Employee Benefit Plan within the meaning of section 4041(e) of ERISA), which could reasonably be expected to result in any liability of any or all of the Borrowers or any ERISA Affiliate to the PBGC, to the Department of Labor or to a trustee appointed under section 4042(b) or (c) of ERISA, incur any liability to the PBGC on account of a withdrawal from or a termination of an Employee Benefit Plan under section 4063 or 4064 of ERISA, incur any liability for post-retirement benefits under any and all welfare benefit plans (as defined in section 3(1) of ERISA) other than as required by applicable statute, fail to make full payment when due of all amounts which, under the provisions of any Employee Benefit Plan or applicable Law, such Borrower or any ERISA Affiliate is required to pay as contributions thereto, or permit to exist any Accumulated Funding Deficiency, whether or not waived, with respect to any Employee Benefit Plan (other than a Multiemployer Plan); provided, however, that such engagement, termination, withdrawal, action, incurrence, failure or permitting shall not be deemed to have violated this clause (i) unless any such engagement, termination, withdrawal, action, incurrence, failure or permitting has resulted in, or could reasonably be expected to result in, a Material Adverse Effect; (ii) at any time permit the termination of any defined benefit pension plan intended to be qualified under section 401(a) and 501(a) of the Internal Revenue Code; provided, however, that such termination shall not be deemed to have violated this clause (ii) unless (A) the value of any benefit liability (as defined in section 4001(a)(16) of ERISA) upon the termination date of any such terminated defined benefit pension plans of such Borrower, such Borrower's Subsidiaries and their ERISA Affiliates exceeds the then current value (as defined in section 3 of ERISA) of all assets in all such terminated defined benefit pension plans by an amount in excess of Two Million Dollars ($2,000,000), or (B) the payment of such amount could reasonably be expected to result in a Material Adverse Effect; or (iii) if such Borrower or 86 96 any ERISA Affiliate becomes obligated under a Multiemployer Plan (except with respect to the potential liabilities now existing as disclosed in the Supplemental Schedule), effect a complete or partial withdrawal such that such Borrower or such Borrower's Subsidiaries or their ERISA Affiliates incur Withdrawal Liability under Title IV of ERISA with respect to Multiemployer Plans or otherwise have liability under Title IV of ERISA; provided, however, that the incurrence of such Withdrawal Liability or other liability under Title IV of ERISA shall not be deemed to be a violation of this clause (iii) unless (A) the amount the payment by any or all of the Borrowers of such Withdrawal Liability or other liability could reasonably be expected to result in a Material Adverse Effect. (j) REGULATION U COMPLIANCE. None of the Borrowers shall use any portion of the proceeds of any Loan for the purpose of purchasing or carrying any Margin Stock, or for any other purpose, in violation, in each case, of any requirement of Law or of the terms and conditions of this Agreement. (k) ACCOUNTING CHANGES. None of the Borrowers will, nor permit any of its Subsidiaries to, make or permit any change in its accounting policies or financial reporting practices and procedures, except as required or permitted by GAAP or as required by applicable law, in each case as to which such Borrower shall have delivered to the Administrative Agent prior to the effectiveness of any such change a report prepared by a Responsible Officer of Instron Corporation describing such change and explaining in reasonable detail the basis therefor and effect thereof. (l) ARM'S-LENGTH TRANSACTIONS. Except for (i) indemnification of directors and officers, (ii) transactions contemplated by the Stockholder Agreement, (iii) transactions contemplated by the Registration Rights Agreement (as defined in the Merger Agreement), (iv) employment agreements, (v) transactions with Affiliates otherwise permitted pursuant to this Agreement and (vi) as set forth on the Supplemental Schedule, none of the Borrowers will, nor permit any of its Subsidiaries to, enter into or permit to exist any transaction (including, without limitation, any transaction involving the investment, purchase, sale, lease, transfer or exchange of any property or the rendering of any service) with any Affiliate of such Borrower except in the ordinary course of the business of such Borrower and its Subsidiaries and upon fair and reasonable terms not less favorable to such Borrower or any of its Subsidiaries than would be usual and customary in transactions with persons who are not such Affiliates; provided, however, that any payment in connection with the Management Agreement to the extent permitted by Section 7.3(f) shall be permitted by this Section 7.3(l). 7.4 FINANCIAL COVENANTS. (a) MINIMUM CONSOLIDATED NET WORTH. The Borrowers shall not permit the Consolidated Net Worth of Instron Corporation and its consolidated Subsidiaries: (x) as of December 31, 1999, to be less than an amount equal to the sum one hundred and fifteen percent (115%) of the Consolidated Net Worth of Instron Corporation and its consolidated Subsidiaries as of 87 97 September 30, 1999, plus seventy-five percent (75%) of the Consolidated Net Income (if any and only to the extent a positive number) of Instron Corporation and its consolidated Subsidiaries for the Fiscal Quarter commencing October 1, 1999 and ending as of December 31, 1999, and (y) as at any date of determination ending after December 31,1999, to be less than the sum of: (i) the amount specified in clause (x) above, plus (ii) in respect of Fiscal Years ended after December 31, 1999 and ending on or prior to such date of determination, an aggregate amount equal to seventy-five percent (75%) of the Consolidated Net Income of Instron Corporation and its consolidated Subsidiaries (if any and only to the extent a positive number) attributable to each such Fiscal Year (which aggregate amount shall not be reduced by consolidated net losses (if any) reported for any such Fiscal Year); plus (iii) in respect of Fiscal Quarters ended prior to the Fiscal Year end of the Fiscal Year during which such date of determination is occurring, an aggregate amount equal to seventy-five percent (75%) of the Consolidated Net Income (if any and only to the extent a positive number) of Instron Corporation and its consolidated Subsidiaries for each such Fiscal Quarter ending on or prior to such date of determination (which aggregate amount shall not be reduced by consolidated net losses (if any) reported for any such Fiscal Quarter); plus (iv) an amount equal to one hundred percent (100%) of the sum of: (A) the amount of any capital contribution to Instron Corporation or its consolidated Subsidiaries after the Closing Date, plus (B) the cash proceeds (net of customary fees, costs and expenses including, without limitation, underwriters' or placement Administrative Agents' discounts and commissions and transfer and similar taxes) from the sale or issuance of equity securities of Instron Corporation or its consolidated Subsidiaries after the Closing Date (other than any sale or issuance to management or employees pursuant to employee benefit plans of general application), plus (C) the principal amount of any Indebtedness converted to or exchanged into equity securities of Instron Corporation or its consolidated Subsidiaries after the Closing Date. (b) MINIMUM CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Borrowers shall not permit the Consolidated Fixed Charge Coverage Ratio of Instron Corporation and its consolidated Subsidiaries, as of the end of any Fiscal Quarter ending during the periods set forth below, to be less than the Consolidated Fixed Charge Coverage Ratio (in each case, for the Testing Period (as defined below) ending as of such Fiscal Quarter end) corresponding to such period as set forth below: 88 98
Period Consolidated Fixed ------ ------------------ Charge Coverage Ratio --------------------- October 1, 1999 through December 31, 2000 1.05 1.00 January 1, 2001 and thereafter 1.10 to 1.00
(c) MINIMUM CONSOLIDATED EBIT TO CONSOLIDATED INTEREST EXPENSE RATIO. The Borrowers shall not permit the Consolidated EBIT to Consolidated Interest Expense Ratio of Instron Corporation and its consolidated Subsidiaries as of the end of any Fiscal Quarter ending during the periods set forth below to be less than the Consolidated EBIT to Consolidated Interest Expense Ratio (in each case, for the Testing Period (as defined below) ending as of such Fiscal Quarter end) corresponding to such period as set forth below:
Minimum Consolidated -------------------- Period EBIT to Interest Ratio ------ ---------------------- October, 1, 1999 through December 31, 1999 1.80 to 1.00 January 1, 2000 through December 31, 2000 2.00 to 1.00 January 1, 2001 through December 31, 2001 2.25 to 1.00 January 1, 2002 through December 31, 2002 2.50 to 1.00 January 1, 2003 through December 31, 2003 2.75 to 1.00 January 1, 2004 and thereafter 3.00 to 1.00
(d) CONSOLIDATED SENIOR FUNDED DEBT TO ADJUSTED EBITDA RATIO. The Borrowers shall not permit the Consolidated Senior Funded Debt to Adjusted EBITDA Ratio of Instron Corporation and its consolidated Subsidiaries, as at the end of any Fiscal Quarter ending during the periods set forth below, to exceed the Consolidated Senior Funded Debt to Adjusted EBITDA Ratio (in each case, for the Testing Period ending as of such Fiscal Quarter end) corresponding to such period as set forth below:
Period Consolidated Senior Funded ------ -------------------------- Debt to Adjusted EBITDA Ratio ----------------------------- December 31, 1999 through March 31, 2000 3.50 to 1.00 April 1, 2000 through September 30, 2000 3.25 to 1.00 October 1, 1999 through December 31, 2000 3.00 to 1.00 January 1, 2001 through December 31, 2001 2.75 to 1.00 January 1, 2002 and thereafter 2.50 to 1.00 January 1, 2003and thereafter 2.25 to 1.00
(e) CONSOLIDATED TOTAL FUNDED DEBT TO ADJUSTED EBITDA RATIO. The Borrowers shall not permit the Consolidated Total Funded Debt to Adjusted EBITDA Ratio of Instron Corporation and its consolidated Subsidiaries, as at the end of any Fiscal Quarter ending during the periods set forth below, to exceed the Consolidated Total Funded Debt to Adjusted EBITDA Ratio (in each case, for the 89 99 Testing Period ending as of such Fiscal Quarter end) corresponding to such period as set forth below:
Consolidated Total Funded ------------------------- Period Debt to Adjusted EBITDA Ratio ------ ----------------------------- October 1, 1999 through December 31, 1999 5.75 to 1.00 January 1, 2000 through June 30, 2000 5.50 to 1.00 July 1, 2000 through September 30, 2000 5.25 to 1.00 October 1, 2000 through June 30, 2001 5.00 to 1.00 July 1, 2001 through June 30, 2002 4.75 to 1.00 July 1, 2002 and thereafter 4.50 to 1.00
(f) MINIMUM CONSOLIDATED ADJUSTED EBITDA. The Borrowers shall not permit the Consolidated Adjusted EBITDA of Instron Corporation and its consolidated Subsidiaries as of the end of any Fiscal Quarter ending during the periods set forth below, to be less than the Consolidated Adjusted EBITDA (in each case, for the Testing Period ending as of such Fiscal Quarter end) corresponding to such period as set forth below:
Period Consolidated Adjusted EBITDA ------ ---------------------------- October 1, 1999 through December 31, 1999 $22,500,000 January 1, 2000 through December 31, 2000 $25,500,000 January 1, 2001 through December 31, 2001 $28,000,000 January 1, 2002 through December 31, 2002 $30,000,000 January 1, 2003 through December 31, 2003 $31,000,000 January 1, 2004 and thereafter $32,000,000
(g) MAXIMUM CONSOLIDATED CAPITAL EXPENDITURES. The Borrowers shall not permit the Consolidated Capital Expenditures (including any purchase money Indebtedness permitted under Section 7.3(c) of this Agreement) of Instron Corporation and its consolidated Subsidiaries to exceed, during any Fiscal Year, Eight Million Dollars ($8,000,000) in the aggregate. SECTION 8 EVENTS OF DEFAULT. The occurrence of any one or more of the following events shall constitute an "Event of Default": 8.1 PAYMENT. Failure by any Borrower (a) to make payment of principal or interest on the Notes executed by such Borrower when due or (b) to pay any other Obligation payable by such Borrower when required to be paid hereunder to the extent such failure is not remedied within three (3) Business Days after such required date of payment hereunder or thereunder; or 90 100 8.2 REPRESENTATIONS AND WARRANTIES. Any warranty or representation made or deemed made by a Borrower in respect of any Borrower, any Subsidiary of a Borrower or any Borrower Guarantor in this Agreement, any other Loan Document or any certificate, document or financial or other written statement furnished at any time in compliance with this Agreement shall prove to have been false or inaccurate when made or deemed made; or 8.3 REPORTING AND NOTICE PROVISIONS; VIOLATION OF CERTAIN AFFIRMATIVE COVENANTS. Failure by a Borrower (in respect of any Borrower, any Subsidiary of a Borrower or any Borrower Guarantor) to perform, keep or observe any term, provision, condition or covenant contained in this Agreement (other than those provisions, terms or conditions referenced in Sections 8.1, 8.2, and 8.4 of this Agreement) or any other Loan Document that is required to be kept or observed by such Borrower (in respect of any Borrower, any Subsidiary of a Borrower or any such Borrower Guarantor) and such failure shall continue without remedy for a period of thirty (30) Business Days; or 8.4 VIOLATION OF NEGATIVE COVENANTS AND FINANCIAL COVENANTS. Failure by a Borrower to perform, keep, or observe any term, provision, condition or covenant contained in Sections 4.2, 4.3 or 5.4 of this Agreement, or Sections 7.1(a) through 7.1(d) of this Agreement or Sections 7.2(a), 7.3 or 7.4 of this Agreement which is required to be performed, kept, or observed by such Borrower (in respect of any Borrower, any Subsidiary of a Borrower or any Borrower Guarantor); or 8.5 CROSS-DEFAULT. (a) Default by a Borrower or any Subsidiary of a Borrower in respect of: (i) any Indebtedness of such Borrower or such Subsidiary in excess of Five Million Dollars ($5,000,000) in the aggregate or (ii) the Subordinated Debt, where such default could permit the holder of such other Indebtedness to accelerate such Indebtedness or any portion thereof to the extent such default continues and has not been waived, or (b) default by a Borrower or any Subsidiary of a Borrower in respect of any Material Business Agreement or any Material License Agreement where such default (i) would permit the other party or parties to such agreement to terminate such agreement and (ii) has resulted or could reasonably be expected to result in a Material Adverse Effect or (c) failure by any Borrower or any of its Subsidiaries to perform, keep, observe or enforce any material terms, provisions, conditions or covenants contained in the Merger Agreement or the Merger Documents to which it is a party; or 8.6 FALSE OR MISLEADING REPORTS. The making or delivering to the Administrative Agent or the Banks by a Borrower, or any officers, employees or Administrative Agents of such Borrower, of any written statement, report, financial statement, or certificate which is not true and correct in any material respect when made; or 8.7 DESTRUCTION OF COLLATERAL. The loss, theft, damage or destruction of any portion of the Collateral having an aggregate value in excess of Two Million Five Hundred Thousand Dollars ($2,500,000), to the 91 101 extent not insured by an insurance carrier which has acknowledged coverage in the amount of the claim without any reservation of rights or which has been ordered by a court of competent jurisdiction to pay such claim; or 8.8 CHANGE OF CONTROL. The occurrence of a Change of Control; or 8.9 TERMINATION OF EXISTENCE. The dissolution or termination of existence of any Borrower, any Subsidiary of a Borrower, or any Borrower Guarantor of the Obligations, but only to the extent not permitted under Section 7.3(a); or 8.10 FAILURE OF ENFORCEABILITY OF THIS AGREEMENT, CREDIT DOCUMENT; SECURITY. If: (a) any covenant, material agreement or any Obligation of any Borrower, any Subsidiary of a Borrower or any Borrower Guarantor contained in or evidenced by this Agreement or any of the other Loan Documents shall cease to be enforceable, or shall be determined to be unenforceable, in accordance with its terms, or (b) any Borrower, any Subsidiary of a Borrower or any Borrower Guarantor shall deny or disaffirm its obligations under this Agreement or any of the other Loan Documents or any of the Liens granted in connection therewith, or (c) any Liens in favor of the Administrative Agent or the Banks granted in this Agreement or any of the other Loan Documents shall be determined to be void, voidable or invalid, or are subordinated or not otherwise given the priority contemplated by this Agreement, or (d) any perfected Liens granted in favor of the Administrative Agent or the Banks shall be determined to be unperfected except in connection with sales of Inventory in the normal course of the business of a Borrower or the Borrower Guarantor, as expressly contemplated and permitted by this Agreement and the other Loan Documents, or (e) any Borrower Guarantor of the Obligations of the Borrowers shall revoke or permit a payment default under its Guaranty Obligations; or 8.11 ERISA. If: (a) a Borrower, its Subsidiaries, or any of their ERISA Affiliates or any other Person institutes any steps to terminate an Employee Benefit Plan of such Borrower, such Subsidiaries, or such ERISA Affiliates, which Employee Benefit Plan is subject to Title IV of ERISA and, as a result of such termination, such Borrower, Subsidiary or ERISA Affiliate is required to make, or could reasonably be expected to be required to make, a contribution to such Employee Benefit Plan the payment of which (i) when taken together with all like termination payments suffered by the Borrowers, the Subsidiaries of the Borrowers or such ERISA Affiliates, either has resulted in, or could reasonably be expected to result in, a Material Adverse Effect or (b) such Borrower, such Subsidiary or such ERISA Affiliate fails to make a contribution to any Employee Benefit Plan which failure would be sufficient to give rise to a Lien under Section 302(f) of ERISA; or 8.12 JUDGMENTS. Any money judgment, writ or warrant of attachment or similar process involving an amount, when aggregated with all such money judgment, writ or warrant of attachment or similar process outstanding at such time, in excess of Five Million Dollars ($5,000,000), to the extent not insured by an insurance carrier which has acknowledged coverage in the amount of the claim without any reservation of rights or which has been ordered by a court of competent jurisdiction to pay such claim) is entered or filed against any or all of the Borrowers or any 92 102 Subsidiary thereof or against any of their respective assets and is not released, discharged, vacated, fully bonded or stayed within thirty (30) days after such judgment, writ or warrant of attachment or similar proceeding is entered; or 8.13 FORFEITURE PROCEEDINGS. An adjudication against any Borrower or any Subsidiary of such Borrower in any criminal proceedings requiring such Borrower's or such Subsidiary's forfeiture of any asset or assets having, either individually or in the aggregate, a value in excess of One Million Dollars ($1,000,000); or 8.14 FINANCIAL IMPAIRMENT. The Financial Impairment of any Borrower or any Material Subsidiary; provided, however, that, despite paragraph (b) of the definition of "Financial Impairment," the lack of Solvency of any Material Subsidiary or any Borrower (other than Instron Corporation and Instron, Ltd.) shall not be the basis for the occurrence of an Event of Default under this Section 8.14 unless (x) such other Borrower incurs additional Obligations hereunder after the existence of such lack of Solvency in violation of the representation set forth in Section 6.18 hereof or (y) such lack of Solvency has resulted in, or would reasonably be expected to result in, a Material Adverse Effect on Instron Corporation and its Subsidiaries on a consolidated basis. SECTION 9 REMEDIES. 9.1 ACCELERATION; TERMINATION. Upon the occurrence of an Event of Default described above in Sections 8.1 through 8.13 above, inclusive, the Administrative Agent may, and at the written request of the Required Banks shall, have the right to, without notice: (a) declare all of the Obligations due or to become due from each Borrower to the Administrative Agent and the Banks, whether under this Agreement, the Notes or otherwise, immediately due and payable, anything in the Notes or other evidence of the Obligations or in any of the other Loan Documents to the contrary notwithstanding, (b) declare all of the Swing Line Obligations due or to become due from any Borrower to the Designated Swing Line Lender designated for such Borrower, whether under this Agreement, the Notes or otherwise, immediately due and payable, anything in the Notes or other evidence of the Swing Line Obligations or in any of the other Loan Documents to the contrary notwithstanding (c) terminate each Bank's Revolving Credit Commitment whereupon no Bank shall have any further obligation to make any Loan or issue any Letter of Credit hereunder, (d) terminate each Designated Swing Line Lender's Swing Line Commitment whereupon no Designated Swing Line Lender shall have any further obligation to make any Swing Line Loan hereunder, (e) terminate each Designated Letter of Credit Issuer's obligation to issue Letters of Credit whereupon no Designated Letter of Credit Issuer shall have any further obligation to issue any Letter of Credit hereunder and (f) terminate each Bank's obligation to participate in Swing Line Loans and Letters of Credit, as the case may be, made or issued after such termination of the Swing Line Commitments and obligations to issue Letters of Credit. 9.2 AUTOMATIC ACCELERATION AND TERMINATION. If any Event of Default referred to in Section 8.14 above shall occur, (a) each Bank's Commitments shall automatically and immediately terminate (if not already expired or terminated by the Borrowers or terminated pursuant to this Section 9) whereupon no Bank shall have any obligation thereafter to make any Loan hereunder, (b) each Designated Swing Line Lender's Designated German Swing Line Lender Commitment and Designated U.K. Swing Line 93 103 Lender Commitment, as the case may be, shall automatically and immediately terminate (if not already expired or terminated by the Borrowers or otherwise terminated pursuant to this Section 9.1 hereof) whereupon no Designated Swing Line Lender shall have any obligation thereafter to make any Swing Line Loan hereunder, (c) each Designated Letter of Credit Issuer's obligation to issue Letters of Credit shall immediately terminate whereupon no Designated Letter of Credit Issuer shall have any obligation thereafter to issue any Letters of Credit hereunder, and (d) all of the Obligations and all other Indebtedness, if any, then owing to the Banks, any Designated Swing Line Lenders or any Designated Letter of Credit Issuer (other than Indebtedness, if any, already due and payable) shall thereupon become and thereafter be immediately due and payable in full, all without any presentment, demand or notice of any kind, which are hereby waived by the Borrowers. 9.3 GENERAL RIGHTS AND REMEDIES OF ADMINISTRATIVE AGENT AND THE BANKS. With respect to the Collateral, the Administrative Agent shall have all of the rights and remedies of a secured party under the UCC or under other applicable Law. The Administrative Agent, the Banks, Designated Swing Line Lenders and the Designated Letter of Credit Issuers shall have all other legal and equitable rights to which each may be entitled, all of which rights and remedies shall be cumulative, and none of which shall be exclusive, to the extent permitted by law, in addition to any other rights or remedies contained in this Agreement or in any of the other Loan Documents. Each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer hereby expressly agrees that, unless requested by the Administrative Agent, upon the concurrence of the Required Banks, such Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer will not take or cause to be taken, in respect of the Loans or the other Obligations or the Collateral, any action or remedy that is independent from the actions or remedies taken or to be taken by the Administrative Agent, except for any actions taken by any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer necessary to preserve its rights in connection with any Event of Default described in Section 8.14 of this Agreement. 9.4 ADDITIONAL REMEDIES. After the Obligations shall have been declared by the Administrative Agent to be or shall have otherwise hereunder become immediately due and payable, the Administrative Agent may, and upon direction of the Required Banks shall, exercise the following rights and remedies to the extent permitted by applicable law and in addition to any other right or remedy provided for in this Agreement: (a) POSSESSION OF COLLATERAL. The Administrative Agent shall have the right to take immediate possession of the Collateral and all Proceeds relating to such Collateral and: (i) require each of the Borrowers, at such Borrower's expense, to assemble the Collateral of such Borrower and make it available to the Administrative Agent at such manufacturing facilities of the Borrowers as the Administrative Agent shall designate or (ii) enter any of the premises of such Borrower or wherever any Collateral shall be located and to keep and store the same on such premises until sold. If the premises on which the Collateral is located is owned or leased by a Borrower, then such Borrower shall not charge the Administrative Agent for storage of such Collateral on such premises. 94 104 (b) FORECLOSURE OF LIENS. The Administrative Agent shall have the right to foreclose the Liens created under this Agreement and each of the other Loan Documents or under any other agreement relating to the Collateral. (c) DISPOSITION OF COLLATERAL. The Administrative Agent shall have the right to sell or to otherwise dispose of all or any Collateral in its then condition, or after any further manufacturing or processing thereof, at public or private sale or sales, wholesale dispositions, or sales pursuant to one or more contracts, with such notice as may be required by law, in lots or in bulk, for cash or on credit, all as the Administrative Agent, in its discretion, may deem advisable. Each of the Borrowers acknowledges and covenants that ten (10) days written notice to the Borrower Representative of any public or private sale or other disposition of Collateral shall be reasonable notice thereof, and such sale shall be at such Borrower's premises or at such other locations where the Collateral then is located, or as otherwise determined by the Administrative Agent. The Administrative Agent shall have the right to conduct such sales on such Borrower's premises, without charge therefor, and such sales may be adjourned from time to time in accordance with applicable law without further requirement of notice to the Borrowers. Each Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer shall have the right to bid or credit bid any such sale on its own behalf. (d) APPLICATION OF COLLATERAL; APPLICATION OF LIQUIDATION PROCEEDS. The Administrative Agent, with or without proceeding with sale or foreclosure or demanding (or having the Designated Swing Line Lender demand) payment of the Obligations, Swing Line Obligations or Letter of Credit Obligations shall have the right, without notice, at any time, to appropriate and apply to any Obligations, Swing Line Obligations or Letter of Credit Obligations any and all Collateral of a Borrower in the possession of the Administrative Agent, the Banks, any Designated Swing Line Lender or Designated Letter of Credit Issuer. All monies received by the Administrative Agent or any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer from the exercise of remedies under this Agreement or the other Loan Documents shall, unless otherwise required by the terms of the other Loan Documents or by applicable law, be applied as follows: (i) First, to the payment of all reasonable expenses (to the extent not otherwise paid by the Borrowers) incurred by the Administrative Agent and the Banks in connection with the exercise of such remedies, including, without limitation, all reasonable costs and expenses of collection, reasonable documented attorneys' fees, court costs and any foreclosure expenses; (ii) Second, to the payment pro rata of interest then accrued (x) in the case of a Foreign Borrower, on the outstanding Obligations of such Foreign Borrower, and (y) in the case of a Domestic Borrower, on the outstanding Obligations of all Borrowers; (iii) Third, to the payment pro rata of any fees then accrued and payable to the Administrative Agent or any Bank under this Agreement in respect 95 105 of the Loans, provided, however, that in no case shall proceeds of Collateral of any Foreign Subsidiary or monies received from any Foreign Subsidiary be applied to any Obligations of any other Borrower; (iv) Fourth, to the payment pro rata of: (A) the principal balance then owing on the outstanding Term Loans, (B) the principal balance then owing on the outstanding Revolving Credit Loans or (the amount of any participations in lieu thereof) and (C) the Designated Hedge Obligations then due under Designated Hedge Agreements to Designated Hedge Creditors of the Borrowers or any Subsidiary, subject to confirmation by the Administrative Agent of any calculations of termination or other payment amounts being made in accordance with normal industry practice, provided, however, that in no case shall any proceeds of Collateral of any Foreign Borrower or Foreign Subsidiary or monies received from any Foreign Borrower or Foreign Subsidiary be applied to any Obligations, Swing Line Obligations or Letter of Credit Obligations or Designated Hedge Obligations of any other Borrower; (v) Fifth, to the payment pro rata of all other amounts owed by the Borrowers to the Administrative Agent or any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer under this Agreement or any other Loan Document, and to any counterparties under Designated Hedge Agreements of the Borrowers and the Subsidiaries thereof, and if such proceeds are insufficient to pay such amounts in full, to the payment of such amounts pro rata, provided, however, that in no case shall proceeds of Collateral of any Foreign Subsidiary or monies received from any Foreign Subsidiary be applied to any Obligations of any other Borrower; and (vi) Finally, any remaining surplus after all of the Obligations and Designated Hedge Obligations have been paid in full, to the Borrowers or to whomsoever shall be lawfully entitled thereto. 9.5 APPOINTMENT OF ATTORNEY-IN-FACt. The Administrative Agent shall hereby have the right, and each of the Borrowers hereby irrevocably makes, constitutes, and appoints the Administrative Agent (and all officers, employees, or Administrative Agents designated by the Administrative Agent) as its true and lawful attorney-in-fact and Administrative Agent, with full power of substitution, to, from time to time (but only to the extent following the occurrence of an Event of Default which is continuing and has not been waived in accordance with Section 14.1 hereof) (a) effectuate, in the Borrower's name, the Borrower's obligations under this Agreement, (b) in the Borrower's or Administrative Agent's name: (i) demand payment of the Accounts, (ii) enforce payment of the Accounts, by legal proceedings or otherwise, (iii) exercise all of the Borrower's rights and remedies with respect to the collection of the Accounts and any other Collateral, (iv) settle, adjust, compromise, extend, or renew the Accounts, (v) settle, adjust, or compromise any legal proceedings brought to collect the Accounts, (vi) if permitted by applicable law, sell or assign the Accounts and other Collateral upon such terms, for such amounts, and at such time or times as the Administrative Agent deems advisable, (vii) discharge and release the Accounts and any other Collateral, (viii) take control, in any manner, of any item of payment or Proceeds relating to any Collateral, (ix) prepare, file, and sign the Borrower's name on a proof of claim in 96 106 bankruptcy or similar document against any Account Debtor, (x) prepare, file, and sign the Borrower's name on any notice of Lien, assignment, or satisfaction of Lien or similar document in connection with the Accounts, (xi) do all acts and things reasonably necessary, in the Administrative Agent's good faith discretion, to fulfill the Borrower's obligations under this Agreement, (xii) endorse the name of the Borrower upon any of the items of payment or Proceeds relating to any Collateral and deposit the same to the account of the Administrative Agent on account of the Obligations, (xiii) endorse the name of the Borrower upon any Chattel Paper, document, Instrument, invoice, freight bill, bill of lading, or similar document or agreement relating to the Accounts, Inventory and any other Collateral, (xiv) use the Borrower's stationery and sign the name of the Borrower to verifications of the Accounts and notices thereof to Account Debtors, (xv) use the information recorded on or contained in any data processing equipment and computer hardware and software relating to the Accounts, Inventory, and any other Collateral to which the Borrower has access, (xvi) make and adjust claims under such policies of insurance, receive and endorse the name of such Borrower on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance, and make all determinations and decisions with respect to such policies of insurance and (xvii) notify post office authorities to change the address for delivery of the Borrower's mail to an address designated by the Administrative Agent, receive and open all mail addressed to the Borrower, and, after removing all collections and other remittances and Proceeds of Collateral, forward the mail to the Borrower. Each of the Borrowers hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable. 9.6 SET-OFF. If any Event of Default referred to in Section 8 of this Agreement shall occur which is continuing and has not been waived in accordance with Section 14.1 hereof, each Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer, and any Lending Installation thereof on behalf thereof, shall have the right (in addition to such other rights as it may have by operation of Law or otherwise but subject to Section 9.12 of this Agreement) at any time to set off against and to appropriate and apply toward the payment of the Obligations, Swing Line Obligations or Letter of Credit Obligations, as applicable, and all other liabilities under this Agreement and the other Loan Documents then owing to it (and any participation purchased or to be purchased pursuant to this Agreement including Section 9.12 below) whether or not the same shall then have matured, any and all deposit (general or special) and any other Indebtedness at any time held or owing by such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer (including branches and agencies thereof wherever located) to or for the credit or account of a Borrower, all without notice to or demand upon such Borrower or any other Person, all such notices and demands being hereby expressly waived, provided, however, that in no case shall any such amounts obtained by setoff or otherwise received from any Foreign Borrower or any Foreign Subsidiary thereof be applied toward payment of any Obligations, Swing Line Obligations or Letter of Credit Obligations of any other Borrower other than such Foreign Borrower. 9.7 TERMINATION; EFFECT ON BORROWER OBLIGATIONS. Any termination by the Administrative Agent and/or any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer pursuant to this Section 9 of its performance shall not absolve, release, or otherwise affect the liability of the Borrowers in respect of transactions prior to such termination or affect any of the Liens, rights, powers, and remedies of the Administrative Agent or such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer which such Liens, rights, powers and remedies shall, in all events, continue until all Obligations, Swing Line Obligations, Letter of Credit Obligations and all other liabilities 97 107 hereunder of the Borrowers to the Administrative Agent and to the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers are satisfied. 9.8 ACTIONS IN RESPECT OF THE LETTERS OF CREDIT UPON DEFAULT. Upon the occurrence of an Event of Default which is continuing and has not been waived in accordance with Section 14.1 hereof, to the extent that any Letters of Credit have been issued which then are outstanding, the Administrative Agent, for the benefit of the Designated Letter of Credit Issuers and the Banks, may, and upon the direction of the Required Banks shall (whether in addition to taking any of the actions described in this Section 9 or otherwise), make demand upon Borrowers to, and forthwith upon such demand the Borrowers will, pay to the Administrative Agent in same day funds and in the currency in which such Letter of Credit is denominated, for deposit in a special cash collateral account (the "Letter of Credit Collateral Account"), to secure (x) in the case of a Foreign Borrower, the Letter of Credit Obligations of such Foreign Borrower in respect of any outstanding Letters of Credit (including, without limitation, any such obligations arising under Section 2.12(l)), and (y) in the case of a Domestic Borrower, the Letter of Credit Obligations of all Borrowers in respect of any outstanding Letters of Credit (including, without limitation, any such obligations arising under Section 2.12(l)), to be maintained at such office of the Administrative Agent as Administrative Agent shall direct, an amount equal to the maximum amount available to be drawn under the Letters of Credit. In the event that the Borrowers shall not deposit such funds upon demand by the Administrative Agent, the Administrative Agent may, in its sole discretion, deposit any funds of the Borrowers in the possession of the Administrative Agent to the Letter of Credit Collateral Account until the amount deposited in such account equals the maximum amount available to be drawn under the Letters of Credit. The Letter of Credit Collateral Account shall be in the name of Administrative Agent (as a cash collateral account), but under the sole dominion and control of the Administrative Agent and subject to the terms of this Agreement. 9.9 LETTER OF CREDIT COLLATERAL ACCOUNT. (a) APPLICATION. The Administrative Agent may, at any time or from time to time after funds are deposited in the Letter of Credit Collateral Account, apply funds then held in the Letter of Credit Collateral Account to the payment of any amounts, in such order as the Administrative Agent may elect or shall be directed by the Banks, as shall have become or shall become due and payable by the Borrowers to the Designated Letter of Credit Issuers under this Agreement or any Reimbursement Agreement first, in respect of the Letters of Credit and second, after the occurrence and during the continuance of any Event of Default, in respect of all other amounts constituting Obligations, provided, however, that in no case shall proceeds of Collateral of any Foreign Borrower or any Foreign Subsidiary thereof or monies deposited into the Letter of Credit Cash Collateral Account by such Foreign Borrower of any Foreign Subsidiary thereof be applied to any Letter of Credit Obligations or any other Obligations of any Borrower other than such Foreign Borrower. (b) NO BORROWER OR THIRD PARTY CLAIMS. 98 108 Neither the Borrowers nor any Person claiming on behalf of or through Borrowers shall have any right to withdraw any of the funds held in the Letter of Credit Collateral Account. (c) NO LIENS OR TRANSFERS OF ACCOUNT. Each of the Borrowers agrees that it will not: (i) sell or otherwise dispose of any interest in the Letter of Credit Collateral Account or any funds held therein, or (ii) create or permit to exist any lien, security interest or other charge or encumbrances upon or with respect to the Letter of Credit Collateral Account or any funds held therein, except as provided in or contemplated by this Agreement. 9.10 AUTHORITY TO EXECUTE TRANSFERS. Without limitation of any authorization granted to the Administrative Agent hereunder, each of the Borrowers also hereby authorizes the Administrative Agent, upon the occurrence of an Event of Default which is continuing and has not been waived in accordance with Section 14.1 hereof, to execute, in connection with the exercise by the Administrative Agent of its remedies hereunder, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 9.11 LIMITED LICENSE TO LIQUIDATE. Each of the Borrowers hereby grants to the Administrative Agent for the benefit of the Banks, the Designated Swing Line Lenders and Designated Letter of Credit Issuers: (a) a non-exclusive, royalty-free license or other right to use, without charge, all of such Borrower's Intellectual Property (including all rights of use of any name or trade secret) as it pertains to the Collateral, in manufacturing, advertising for sale and selling any Collateral; provided, however, that such license and right to use shall be exercisable by the Administrative Agent for the benefit of the Banks only upon request by the Administrative Agent after the occurrence of an Event of Default which is continuing and has not been waived in accordance with Section 14.1 hereof, and (b) to the extent permitted thereunder, all of such Borrower's rights under all licenses and all franchise agreements, which shall inure to the Administrative Agent for the benefit of the Banks, the Designated Swing Line Lenders and Designated Letter of Credit Issuers without charge but only upon request by the Administrative Agent after the occurrence of an Event of Default which is continuing and has not been waived in accordance with Section 14.1 hereof. 9.12 EQUALIZATION. Each Bank agrees with the other Banks that if at any time it shall obtain any Advantage over the other Banks or any thereof in respect of the Loans it will purchase from such other Bank or Banks, for cash and at par, such additional participation in the Loans owing to the other or others as shall be necessary to nullify the Advantage. If any such Advantage resulting in the purchase of an additional participation as aforesaid shall be recovered in whole or in part from the Bank receiving the Advantage, each such purchase shall be rescinded, and the purchase price restored (with interest and other charges if and to the extent actually incurred by the Bank receiving the Advantage) ratably to the extent of the recovery. During the existence of any Potential Default or Event of Default, any payment (whether made voluntarily or involuntarily, by offset of any deposit or other indebtedness or otherwise) of any Indebtedness owing by a Borrower to any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer shall be applied to the Obligations, Swing Line Obligations or Letter of Credit Obligations, as the case may be, owing to such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer until the same shall have been paid in full before any thereof shall be applied to other 99 109 Indebtedness owing to that Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer. 9.13 REMEDIES CUMULATIVE. The above-stated remedies are not intended to be exhaustive and the full or partial exercise of any of such remedies shall not preclude the full or partial exercise of any other remedy by the Administrative Agent under this Agreement, under any Loan Document, or at equity or under law. SECTION 10 BORROWER GUARANTY. 10.1 DOMESTIC BORROWER CROSS-GUARANTY. To induce the Banks to make the Loans to the Borrowers, the Designated Swing Line Lenders to make Swing Line Loans to the designated Borrowers, and the Designated Letter of Credit Issuers to issue Letters of Credit, and in consideration thereof, each of the Borrower Guarantors hereby unconditionally and irrevocably: (a) guarantees, jointly and severally, to the Administrative Agent and the Banks the due and punctual payment in immediately available funds of all Obligations owing by all Borrowers, all Swing Line Exposure and LC Exposure of the Banks with respect to all Borrowers, all Swing Line Obligations owing by all Borrowers to the Designated Swing Line Lenders, all Letter of Credit Obligations owing by all Borrowers owing to the Designated Letter of Credit Issuers, all Designated Hedge Obligations owing by all Borrowers and of all other sums now or hereafter owed by any other Borrower to the Administrative Agent or any of the Banks, Designated Swing Line Lenders or Designated Letter of Credit Issuers under this Agreement or any of the Loan Documents (whether by acceleration or otherwise) and (b) agrees, jointly and severally, to pay any and all expenses which may be incurred by the Administrative Agent in enforcing its rights with respect to such Obligations (collectively, the "Guaranteed Obligations"). 10.2 MAXIMUM LIABILITY. Solely in the event it is necessary for the enforceability of a Borrower Guaranty, the maximum liability of a Borrower Guarantor under its Borrower Guaranty for Guaranteed Obligations of the other Borrowers or their Subsidiaries shall be the greatest amount which, after taking into consideration all other valid and enforceable debts and liabilities of such Borrower Guarantor (but giving full effect in such consideration to the subordinated status of the Senior Subordinated Notes pursuant to the Senior Subordinated Note Indenture), an applicable court has determined (after any appeals) would not render such Borrower Guarantor insolvent, unable to pay its debts as they become due, inadequately capitalized for the business which it intends to conduct (in all such cases, within the meaning of Section 548 of the Bankruptcy Code, 11 U.S.C. Section 101, et. seq., or any other similar state law), or unable to pay a judgment rendered upon a claim that is the subject of an action or proceeding pending at the time when the obligations of this Borrower Guaranty are incurred or increased. 10.3 GUARANTY UNCONDITIONAL. The obligations of the Borrower Guarantors under this Borrower Guaranty shall be, joint and several, irrevocable, unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of any advance under this Agreement or any Loan Document by operation of Law or otherwise; (ii) any modification or amendment of or supplement to this Agreement or any Loan Document; (iii) any 100 110 modification, amendment, waiver, release, non-perfection or invalidity of any direct or indirect security, or of any guarantee or other liability of any third party, of the Guaranteed Obligations of any Borrower or its Subsidiary; (iv) any change in the corporate existence, structure, or ownership of, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Borrower Guarantor or its assets or any resulting release or discharge of any of the Obligations of the Borrower Guarantors contained in this Agreement or any Loan Document; (v) the existence of any claim, set-off or other rights which any Borrower Guarantor may have at any time against the Administrative Agent, any Bank, any Designated Swing Line Lender, Designated Letter of Credit Issuer, Designated Hedge Creditor or any other Person, whether or not arising in connection with this Agreement or any Loan Document, provided, however, that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against any Borrower or its Subsidiary for any reason of this Agreement or any Loan Document or any provision of applicable law or regulation purporting to prohibit the payment by any Borrower under this Agreement or any Loan Document; or (vii) to the extent permitted by applicable Law, any other act or omission to act or delay of any kind by a Borrower Guarantor, the Administrative Agent, any Bank, any Designated Swing Line Lender, any Designated Letter of Credit Issuer, any Designated Hedge Creditor or any other Person or any other circumstance whatsoever that might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Guaranteed Obligations of any Borrower under this Section 10. 10.4 DISCHARGE; REINSTATEMENT. The Guaranteed Obligations of each Borrower Guarantor under this Section 10 shall remain in full force and effect until the Revolving Credit Commitments of the Banks, the Aggregate Swing Line Commitment of the Designated Swing Line Lenders and the obligations of the Designated Letter of Credit Issuer are terminated, and the Obligations, Swing Line Obligations and Letter of Credit Obligations and all amounts payable by any Borrower or any Subsidiary of any Borrower under this Agreement or any other Loan Document have been paid in full. If at any time any payment of any amount payable by Borrower Guarantor under this Section 10, any other section of this Agreement or other Loan Document is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of any Borrower Guarantor or otherwise, the other Borrower Guarantor's obligations under this Section 10 with respect to such payment shall be reinstated at such time as though such payment had become due but had not been made at such time. This Section 10 shall survive the termination of this Agreement until the payment in full of all amounts payable under this Agreement and any Loan Documents. 10.5 WAIVER. No Borrower Guarantor shall be entitled to enforce any remedy which the Administrative Agent, any Designated Swing Line Lender, any Designated Letter of Credit Issuer or any Bank now has or may hereafter have against any Borrower, any endorser or any Guarantor or other Borrower Guarantor in respect of all or any part of the Guaranteed Obligations paid by such Borrower Guarantor until all of the Obligations, Swing Line Obligations and Letter of Credit Obligations shall have been fully and finally paid to the Administrative Agent for the benefit of the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers and all commitments of the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers to the Borrowers terminated. Each Borrower Guarantor hereby waives any benefit of, and any right to participate in, any security or collateral given to the Administrative Agent for the benefit of the Banks, the Designated Swing Line Lenders or the Designated Letter of Credit Issuers to secure payment of the Guaranteed Obligations or any other liability of any Borrower, any Guarantor or any Borrower Guarantor to 101 111 the Administrative Agent or any Designated Swing Line Lender, Designated Letter of Credit Issuer or Bank. Each Borrower Guarantor also waives all setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Borrower Guaranty. Each Borrower Guarantor further waives all notices of the existence, creation or incurring of additional Obligations by any other Borrower, and also waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the Guaranteed Obligations is due, notices of any and all proceedings to collect all or any part of the Guaranteed Obligations, and, to the extent permitted by law, notices of exchange, sale, surrender or other handling of any Collateral given to the Administrative Agent for the benefit of the Banks, the Designated Swing Line Lenders or the Designated Letter of Credit Issuers to secure payment of the Guaranteed Obligations. 10.6 STAY OF ACCELERATION. If acceleration of the time for payment of any amount payable by any Borrower Guarantor under this Agreement or other Loan Document in respect of a Guaranteed Obligation is stayed upon the insolvency, bankruptcy or reorganization of any Borrower Guarantor all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the other Borrower Guarantors hereunder forthwith on demand by the Administrative Agent. 10.7 SUBROGATION AND CONTRIBUTION RIGHTS. If any Borrower Guarantor makes a payment in respect of the Guaranteed Obligations, it shall be subrogated to the rights, if any, of the payees against the other Borrower Guarantors with respect to such payment and shall have the rights of contribution set forth below against the other Borrower Guarantors; provided, however, that such Borrower Guarantor shall not enforce its rights to any payment by way of subrogation or by exercising its right of contribution until all the Obligations, Swing Line Obligations and Letter of Credit Obligations, as the case may be, owing to the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers shall have been finally paid in full and may not under applicable insolvency laws be required to be repaid by the Banks, the Designated Swing Line Lenders or the Designated Letter of Credit Issuers, as the case may be. (a) GUARANTEED OBLIGATION AND CONTRIBUTION PAYMENTS. Subject to all of the Obligations, Swing Line Obligations and Letter of Credit Obligations, as the case may be, owing to the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers having been finally paid in full and not subject to required repayment under applicable insolvency laws, each Borrower Guarantor shall make, and agrees with each of the other Borrower Guarantors (and the successors and assigns of such Borrower Guarantors) to make, payments in respect of the Obligations of such Borrower Guarantor to which such other Borrower Guarantors are subrogated or contribution payments to which such other Borrower Guarantors are entitled, such that, taking into account all such payments on account of subrogation or contribution rights: (i) each Borrower Guarantor shall have paid to the other Borrower Guarantors on account of such subrogation and contribution rights at some time after the date hereof, (A) all Obligations the benefit of which has 102 112 been received by such Borrower Guarantor or which relate to Obligations the benefit of which has been received by such Borrower Guarantor or (B) if the aggregate of all such payments by all Borrower Guarantors to all other Borrower Guarantors would exceed the outstanding Obligations, such Borrower Guarantor's pro rata share of the outstanding Obligations, in accordance with the amount of the benefit received by the Borrower Guarantor as described under subsection (a)(i)(A) hereinabove; and (ii) if there remain Obligations unpaid after application of the payments referred to above, the deficiency shall be shared among the Borrower Guarantors pro rata in proportion to their respective net worth on the effective date of this Agreement. (b) JOINDER; WAIVER. By executing an Additional Borrower Addendum, each signatory thereby becoming an additional Domestic Borrower shall be deemed to have agreed to all of the terms of this Section 10 as if an original signatory to this Agreement. No failure or delay by any Borrower Guarantor in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. SECTION 11 THE AGENTS. 11.1 THE ADMINISTRATIVE AGENT. Each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer irrevocably appoints the Administrative Agent to act as Administrative Agent under this Agreement and the other Loan Documents for the benefit of such Bank, Designated Swing Line Lenders and Designated Letter of Credit Issuers with full authority to take such actions, and to exercise such powers, on behalf of such Bank, Designated Swing Line Lenders and Designated Letter of Credit Issuers in respect of this Agreement and the other Loan Documents as are herein and therein respectively delegated to the Administrative Agent or as are reasonably incidental to those delegated powers. The Administrative Agent in such capacity shall be deemed to be an independent contractor of the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers. Each Designated Swing Line Lender, Designated Letter of Credit Issuer and each Bank hereby expressly agrees that, without first obtaining the prior written consent of the Administrative Agent or the Required Banks, no Designated Swing Line Lender, Designated Letter of Credit Issuer or Bank will take or cause to be taken, in respect of the Loans or the other Obligations hereunder, the Swing Line Obligations, the Letter of Credit Obligations or the Collateral, any enforcement or remedial action or remedy that is independent from the actions or remedies taken or to be taken by the Administrative Agent, except for any actions taken by a Designated Swing Line Lender, Designated Letter of Credit Issuer or any Bank which are necessary to preserve its rights in connection with any Event of Default described in Section 8.14 of this Agreement. 11.2 DESIGNATED EUROPEAN ADMINISTRATIVE AGENTS. Each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer irrevocably authorizes, and hereby confirms the appointment of, each Designated European Administrative Agent selected by the Administrative Agent, after consultation with the Borrower 103 113 Representative, to act as agent under this Agreement and the other Loan Documents for the benefit of such Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer with full authority to take such actions, and to exercise such powers, on behalf of such Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer in respect of this Agreement and the other Loan Documents as are herein and therein expressly delegated to each such Designated European Administrative Agent or as are reasonably incidental to those delegated powers. Each Designated European Administrative Agent acting in such capacity shall be deemed to be an independent contractor of the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers. 11.3 SYNDICATION AGENT. Each Bank and each of the Borrowers hereby irrevocably designates and appoints NCB as Syndication Agent to act as specified herein and in the other Loan Documents, and each such Bank hereby irrevocably authorizes the Syndication Agent to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform during the Syndication Period such duties as are expressly delegated to the Syndication Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. 11.4 NATURE OF APPOINTMENT. The Agents shall have no fiduciary relationship with any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer by reason of this Agreement and the other Loan Documents. The Agents shall not have any duty or responsibility whatsoever to any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer except those expressly set forth in this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, each Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer acknowledges that the Agents are acting as such solely as a convenience to the Banks and not as a manager of the commitments or the Obligations evidenced by the Notes. This Section 11 does not confer any rights upon the Borrowers or anyone else (except the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers), whether as a third party beneficiary or otherwise. 11.5 AGENTS AS BANKS; OTHER TRANSACTIONS. Each Agent's rights as a Bank under this Agreement and the other Loan Documents shall not be affected by its serving as an Agent hereunder. Each of the Agents and its Affiliates may generally transact any banking, financial, trust, advisory or other business with the Borrowers (including, without limitation, the acceptance of deposits, the extension of credit and the acceptance of fiduciary appointments) without notice to the Banks, Designated Swing Line Lenders or Designated Letter of Credit Issuers, without accounting to the Banks, Designated Swing Line Lenders or Designated Letter of Credit Issuers and without prejudice to such Agent's rights as a Bank under this Agreement and the other Loan Documents except as may be expressly required under this Agreement. 11.6 INSTRUCTIONS FROM BANKS. No Agent shall be required to exercise any discretion or take any action as to matters not expressly provided for by this Agreement and the other Loan Documents (including, without limitation, collection and enforcement actions in respect of any Obligations under the Notes or this Agreement and any collateral therefor) except that the Administrative Agent and Designated European Administrative Agent, as the case may be, shall take such action or omit to 104 114 take such action as may be reasonably requested of it in writing by the Required Banks with instructions to the extent consistent with the terms of this Agreement and the other Loan Documents and which actions and omissions shall be binding upon all of the Banks, Designated Swing Line Lenders or Designated Letter of Credit Issuers; provided, however, that no such Agent shall be required to act (or omit any act) if, in its judgment, any such action or omission might expose such Agent to personal liability or might be contrary to this Agreement, any Loan Document or any applicable Law. 11.7 BANK'S DILIGENCE. Each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer: (a) represents and warrants that it has made its decision to enter into this Agreement and the other Loan Documents and (b) agrees that it will make its own decision as to taking or not taking future actions in respect of this Agreement and the other Loan Documents; in each case without reliance on the Agents or any other Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer and on the basis of its independent credit analysis and its independent examination of and inquiry into such documents and other matters as it deems relevant and material. 11.8 NO IMPLIED REPRESENTATIONS. The Agents shall not be liable for any representation, warranty, agreement or obligation of any kind of any other party to this Agreement or anyone else, whether made or implied by the Borrowers in this Agreement or any Loan Document or by a Bank, a Designated Swing Line Lender or a Designated Letter of Credit Issuer in any notice or other communication or by anyone else or otherwise. 11.9 SUB-AGENTS. The Administrative Agent may employ agents and shall not be liable (except as to money or property received by it or its agents) for any negligence or willful misconduct of any such agent selected by it with reasonable care. 11.10 AGENTS' DILIGENCE. No Agent shall not be required: (a) to keep itself informed as to anyone's compliance with any provision of this Agreement or any Loan Document, (b) to make any inquiry into the properties, financial condition or operation of the Borrowers or any other matter relating to this Agreement or any Loan Document, (c) to report to any Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer any information (other than which this Agreement or any Loan Document expressly requires to be so reported) that such Agent or any of its Affiliates may have or acquire in respect of the properties, business or financial condition of the Borrowers or any other matter relating to this Agreement or any Loan Document or (d) to inquire into the validity, effectiveness or genuineness of this Agreement or any Loan Document. 11.11 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge of any Potential Default or Event of Default unless and until it shall have received a written notice describing it and citing the relevant provision of this Agreement or any Loan Document. The Administrative Agent shall give each Bank reasonably prompt notice of any such written notice except, of course, to any Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer that shall have given the written notice. 105 115 11.12 LIABILITY OF AGENTS. No Agent (acting in its capacity as an Agent) nor any of its directors, officers, employees, attorneys, and other agents acting for such Agent in such capacity shall be liable for any action or omission on their respective parts except for gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each of the Agents: (a) may treat the payee of any Note as the holder thereof until such Agent receives a fully executed copy of any assignment with respect thereto, signed by such payee and in form satisfactory to such Agent; (b) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts which have been selected by such Agent with reasonable care; (c) makes no warranty or representation to any Bank and shall not be responsible to any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer for any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document, including, without limitation, the truth of the statements made in any certificate delivered by the Borrowers under Section 2 or Section 3 of this Agreement or in any Credit Request, Rate Continuation/Conversion Request, Reimbursement Agreement or any other similar notice or delivery, such Agent being entitled for the purposes of determining fulfillment of the conditions set forth therein to rely conclusively upon such certificates; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement, the Notes or any other Loan Document or to inspect the property (including the books and records) of the Borrowers; (e) shall not be responsible to any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, or collateral covered by any agreement or any other Loan Document and (f) shall incur no liability under or in respect of this Agreement, the Notes or any other Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed by it in good faith to be genuine and correct and signed or sent by the proper party or parties. No Agent nor any of its directors, officers, employees or agents shall have any responsibility to the Borrowers on account of the failure of or delay in performance or breach by any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer of any of its obligations hereunder or to any Bank on account of the failure of or delay in performance or breach by any other Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer or the Borrowers of any of their respective obligations hereunder or under any Loan Document or in connection herewith or therewith. The Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers each hereby acknowledge that no Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement, the Notes or any other Loan Document unless it shall be requested in writing to do so by the Required Banks. 11.13 INDEMNITY OF AGENTS. The Banks, Designated Swing Line Lender or Designated Letter of Credit Issuer shall indemnify each of the Agents, in its capacity as an Agent (to the extent such Agent is not otherwise reimbursed by the Borrowers), from and against: (a) any loss or liability (other than any caused by such Agent's gross negligence or willful misconduct) incurred by such Agent (in its capacity as an Agent) as such in respect of this Agreement, the Notes or any Loan Document and (b) any out-of-pocket expenses incurred by such Agent in defending itself or otherwise related to this Agreement, the Notes or any Loan Document (other than any caused by such Agent's gross negligence or willful misconduct) including, without limitation, reasonable fees and disbursements of legal counsel of its own selection (including, without limitation, the 106 116 reasonable interdepartmental charges of its salaried attorneys) in the defense of any claim against it or in the prosecution of its rights and remedies as such Agent (other than the loss, liability or costs incurred by such Agent in the defense of any claim against it by the Banks, the Designated Swing Line Lenders or the Designated Letter of Credit Issuers arising in connection with its actions in its capacity as an Agent); provided, however, that each Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer shall be liable for only its Ratable Portion (calculated to include the commitments or outstandings of such Designated Swing Line Lender or Designated Letter of Credit Issuer, as the case may be) of the whole loss or liability. 11.14 RESIGNATION OF AGENT. The Administrative Agent may resign as Administrative Agent for any reason effective twenty (20) Business Days after giving notice thereof to each Designated European Administrative Agent, Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer and the Borrower Representative. If the Administrative Agent shall resign as Administrative Agent under this Agreement, the Required Banks shall appoint from among the Banks (other than the Bank that has resigned) a successor Administrative Agent for the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers which successor Administrative Agent shall be reasonably acceptable to the Borrower Representative. If, however, in the case of resignation by the Administrative Agent, no successor Administrative Agent shall have been appointed by the time such resignation becomes effective, then the retiring Administrative Agent may, on behalf of the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers, appoint a successor Administrative Agent from among the remaining Banks. Upon appointment (whether effected by the Required Banks or the retiring Administrative Agent on behalf of the Banks) and acceptance of such appointment as "Administrative Agent," the successor Administrative Agent shall succeed to the rights, powers and duties of the Administrative Agent, and the terms "Administrative Agent" and "Agent," as the case may be, shall mean such successor Administrative Agent, effective upon its appointment and acceptance, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holder of the Notes. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of Section 11.13 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. 11.15 RESIGNATION OF DESIGNATED EUROPEAN ADMINISTRATIVE AGENTS. A Designated European The Administrative Agent may resign as such for any reason effective twenty (20) Business Days after giving notice thereof to the Administrative Agent, and each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer and the Borrower Representative. If a Designated European Administrative Agent shall resign as such Agent under this Agreement, the Administrative Agent shall appoint from among the Banks (other than the Bank that has resigned) a successor Designated European Administrative Agent. which successor Designated European Administrative Agent shall be reasonably acceptable to the Borrower Representative. Upon appointment and acceptance of such appointment as "Designated European Administrative Agent," the successor Designated European Administrative Agent shall succeed to the rights, powers and duties of the resigning Designated European Administrative Agent, and the terms "Designated European Administrative Agent" and "Agent," as the case may be, shall mean such successor Designated European Administrative Agent, effective upon its appointment and acceptance, and the former Designated European Administrative Agent's rights, powers and duties as such shall be terminated, without any other or further act or deed on the part of such former Designated European Administrative Agent or any of the parties to this Agreement or any holder of the Notes. After any retiring 107 117 Designated European Administrative Agent's resignation hereunder as such, the provisions of Section 11.13 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Designated European Administrative Agent under this Agreement. SECTION 12 TRANSFERS AND ASSIGNMENTS. 12.1 TRANSFER OF COMMITMENTS. Each Bank shall have the right at any time or times to transfer to another financial institution that is an Eligible Assignee, without recourse, all or, if less than all, any fixed percentage of (which percentage, with the consent of the Administrative Agent to be exercised in its sole discretion but uniformly with respect to all of the Banks, does not have to be pro rata and may vary in percentage among the Revolving Credit Commitment and outstanding Revolving Credit Loans of such Bank and the outstanding Term Loan of such Bank but the assigned portion resulting therefrom must in each case be at least equal to $5,000,000 or an integral multiple of $1,000,000 in excess thereof), such Bank's rights and obligations under this Agreement and the other Loan Documents, including, without limitation, such Bank's Commitments, any Loan made by such Bank, any Note executed in favor of such Bank, any participations in Letters of Credit and any participations purchased by the Bank pursuant to Section 9.12 of this Agreement; provided, however, in each such case, that the transferor and the transferee shall have complied with the following requirements: (a) PRIOR CONSENT. Transfers (other than transfers by any Bank to any Affiliate of such Bank or to any other Bank which is not a Defaulting Lender) to any Eligible Assignee may be consummated pursuant to this Section 12 only upon the prior written consent of the Administrative Agent and, unless an Event of Default has occurred which is continuing and has not been waived in accordance with Section 14.1 hereof, the Borrower Representative on behalf of the Borrowers, which shall not be unreasonably withheld or delayed. Notwithstanding anything to the contrary, any Bank may at any time (i) assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank, or (ii) create a security interest in all or any portion of such rights in favor of any Federal Reserve Bank, in each case in accordance with Regulation A or the Board of Governors of the Federal Reserve System, and no such assignment or creation shall release such assigning Bank from its obligations hereunder. (b) AGREEMENT; TRANSFER FEE. The transferor: (i) shall remit to the Administrative Agent an administrative fee of Three Thousand Five Hundred Dollars ($3,500) and (ii) shall cause the transferee to execute and deliver to the Borrower Representative, the Administrative Agent and each Bank (A) an Assignment Agreement, substantially in the form of Exhibit J attached hereto, and otherwise in form and substance satisfactory to the Administrative Agent and its counsel (an "Assignment Agreement"), together with the consents and releases referenced therein and (B) such additional amendments, assurances and other writings as the Administrative Agent may reasonably require to effect such transfer. (c) NO PROHIBITED TRANSACTION. The transferee shall be required to represent and warrant that its purchase shall not constitute a "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code). 108 118 (d) NOTES. The Borrowers shall execute and deliver: (i) to the Administrative Agent, the transferor and the transferee, any consent or release (of all or a portion of the obligations of the transferor) to be delivered in connection with the Assignment Agreement, (ii) if a Bank's entire interest in its Commitments and in all of its Loans have been transferred, to the transferee appropriate Notes against return of the Notes (each marked "replaced") held by the transferor and (iii) if only a portion of a Bank's interest in its Commitments and Loans has been transferred, new Notes to each of the transferor and the transferee against return of the original such Notes of the transferor (each marked "replaced") held by the transferor; provided, that, simultaneously with the Borrower's delivery of new Notes pursuant to this Section 12(c), the transferor Bank will deliver to the Borrowers any note being replaced in whole or in part, and each such note delivered by the transferor Bank shall be conspicuously marked "replaced" when so delivered. (e) PARTIES. Upon satisfaction of the requirements of this Section 12.1, including the payment of the fee and the delivery of the documents set forth in Section 12.1(b) above, (i) the transferee shall become and thereafter be deemed to be a "Bank" for the purposes of this Agreement and (ii) the transferor (A) shall continue to be a "Bank" for the purposes of this Agreement only if and to the extent that the transfer shall not have been a transfer of its entire interest in its Commitments and Loans, (B) shall cease to be and thereafter shall no longer be deemed to be a "Bank" in the case of any transfer of its entire interest in its Commitments and Loans and (C) the signature pages hereto and Annex I hereto shall be automatically amended, without further action, to reflect the result of any such transfer. 12.2 SALE OF PARTICIPATIONS. Each Bank shall have the right at any time or times to sell one or more participations or subparticipations to a financial institution in all or, if less than all, any constant fixed percentage of: such Bank's Commitments, any Loan made by such Bank, any Note executed in favor of such Bank, any participation by such Bank in a Letter of Credit and any participations, if any, purchased by such Bank pursuant to 9.12 of this Agreement or this Section 12; provided, however, in each such case, that the transferor and the transferee shall have complied with the following requirements: (a) BENEFITS OF PARTICIPANT. The provisions of Section 13 of this Agreement shall inure to the benefit of each purchaser of a participation or subparticipation (provided that (i) each such participant shall look solely to the seller of its participation for those benefits, (ii) no such seller (whether or not a Bank) shall have a claim against the Borrowers of any kind whatsoever resulting from such benefits, and (iii) the Borrowers' liabilities, if any, under any of those sections shall not be increased as a result of the sale of any such participation) and Administrative Agent shall continue to distribute payments pursuant to this Agreement as if no participation has been sold. (b) RIGHTS RESERVED. In the event any Bank shall sell any participation or subparticipation, that Bank shall, as between itself and the purchaser, retain all of its rights (including, without 109 119 limitation, rights to enforce against the Borrowers this Agreement and the other Loan Documents) and duties pursuant to this Agreement and the other Loan Documents, including, without limitation, that Bank's right to approve any waiver, consent or amendment pursuant to Section 14.1 of this Agreement and such purchaser shall not be a Bank for any purposes of this Agreement and the other Loan Documents, except if and to the extent that any such waiver, consent or amendment would (A) reduce any fee or commission allocated to the participation or subparticipation, as the case may be, (B) reduce the amount of any principal payment on any Loan allocated to the participation or subparticipation, as the case may be, or reduce the principal amount of any Loan so allocated or the rate of interest payable thereon, (C) extend the time for payment of any amount allocated to the participation or subparticipation, as the case may be, or (D) result in the release of a substantial portion of the Collateral. (c) NO DELEGATION. No participation or subparticipation shall operate as a delegation of any duty of the seller of such participation or subparticipation. Under no circumstance shall any participation or subparticipation be deemed a novation in respect of all or any part of the selling Bank's obligations pursuant to this Agreement. (d) NO PROHIBITED TRANSACTION. Each purchaser of a participation or subparticipation shall be required to represent and warrant that its purchase shall not constitute a "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code). 12.3 CHANGE OF LENDING OFFICE; REPLACEMENT OF BANKS. (a) CHANGE OF LENDING OFFICE. Each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer agrees that, upon the occurrence of any event giving rise to the operation of any of Sections 2.12(k), 2.18, 13.1 or 13.3 with respect to such Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer it will, if requested by a Borrower, use reasonable efforts (subject to overall policy considerations of such Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer) to designate another Lending Office for any Loans or Commitment affected by such event, provided that such designation is made on such terms that such Bank and its Lending Office suffer no material economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such section. All terms of this Agreement shall apply to any Lending Office and the Loans and any Notes issued hereunder shall be deemed held by each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer for the benefit of its Lending Office. (b) REPLACEMENT OF BANKS. If any Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer requests any compensation, reimbursement or other payment under any of Sections 2.12(k), 2.18 or 13.1 with respect to such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, or if the Borrower is required to pay any additional amount to any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer or governmental authority pursuant to Section 13.3, or if any Bank is a "Defaulting Lender" hereunder, or if any Bank otherwise fails to fund its Ratable Portion of Revolving Credit Borrowings or the participation purchase price payable by such Bank for its participating interest hereunder as 110 120 specified in Section 2.5 hereof, or if any Bank notifies the Administrative Agent that it is exercising any right under this Agreement not to fund or maintain a LIBOR Rate Loan denominated in Dollars or in an Alternative Currency which the other Banks are willing or prepared to fund or maintain, then the Borrowers may, at their sole expense and effort, upon notice to such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer and the Administrative Agent, require such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, as the case may be, to assign and delegate, without recourse (in accordance with the restrictions contained in Section 12.1), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Bank, if a Bank accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld, (ii) such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts, including any breakage compensation under Section 13.4 hereof), and (iii) in the case of any such assignment resulting from a claim for compensation, reimbursement or other payments required to be made under any of Sections 2.12(k), 2.18 or 13.1 with respect to such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, or resulting from any required payments to any Bank or governmental authority pursuant to Section 13.3, such assignment will result in a reduction in such compensation, reimbursement or payments. No Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer shall be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. (c) EFFECT ON RIGHTS AND OBLIGATIONS. Nothing in this Section 12.3 shall affect or postpone any of the obligations of any Borrower or the right of any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer provided in any of Sections 2.12(k), 2.18 13.1 or 13.3. 12.4 CONFIDENTIALITY. The Administrative Agents, each Designated Swing Line Lender, each Designated Letter of Credit Issuer and each Bank hereby agree to use reasonable efforts to hold all non-public information obtained pursuant to the requirements of this Agreement and the other Loan Documents and appropriately designated in writing to the Administrative Agent by the Borrower Representative as being confidential information in accordance with the customary procedure of the Administrative Agents, such Designated Swing Line Lender, Designated Letter of Credit Issuer or Bank, as the case may be, for handling confidential information of this nature and in accordance with safe and sound banking practices, except that this Section shall not preclude any Administrative Agent, any Designated Swing Line Lenders, any Designated Letter of Credit Issuer or any Bank from furnishing any such confidential information: (i) subject to the Borrower Representative's receipt of prior notice from such Administrative Agent, such Designated Letter of Credit Issuer or such Bank, as the case may be, if permitted under applicable law and such legal proceedings, to the extent which may be required by subpoena or similar order of any court of competent jurisdiction, (ii) to the extent such information is required to be disclosed to any regulatory or administrative governmental agency or commission having any regulatory authority over such Administrative Agent, such Designated Swing Line Lender, such Designated Letter of Credit Issuer or Bank or its securities, (iii) to any other party to this Agreement, (iv) to any Affiliate of the such Administrative Agent, such Designated Swing Line 111 121 Lender, such Designated Letter of Credit Issuer or Bank so long as such Affiliate agrees to be bound in writing by the provisions of this Section 12.4 prior to the time of such disclosure and so long as such information is received in connection with customary banking practices, (v) to any actual or prospective transferee, participant or subparticipant of all or part of a Bank's rights arising out of or in connection with the Loan Documents and this Agreement or any thereof so long as such prospective transferee, participant or subparticipant to whom disclosure is made agrees in writing to be bound by the provisions of this Section 12.4 prior to the time of such disclosure, (vi) to anyone if it shall have been already publicly disclosed (other than by such Administrative Agent, any other Administrative Agent, such Designated Swing Line Lender, such Designated Letter of Credit Issuer or such Bank, as the case may be, in contravention of this Section 12.4) prior to the time of such disclosure, (vii) to the extent reasonably required in connection with the preparation, negotiation or administration of this Agreement and the other Loan Documents or the exercise of any right or remedy under this Agreement or any other Loan Document, to the counsel, auditors, professional advisors and consultants, and accountants to such Administrative Agent, such Designated Swing Line Lender, such Designated Letter of Credit Issuer or the Banks, who have a need to know such information in accordance with customary banking practices and requirements and who receive the information having been made aware of the restrictions set forth herein and (ix) to the extent reasonably required in connection with any legal proceedings instituted by or against such Administrative Agent, such Designated Swing Line Lender, such Designated Letter of Credit Issuer or any Bank in its respective capacities as such Administrative Agent, the Designated Letter of Credit Issuer or a Bank under this Agreement; provided, further that for any disclosure pursuant to clauses (i), (ii), (vii) or (ix) hereof, such Administrative Agent, such Designated Swing Line Lender, such Designated Letter of Credit Issuer or such disclosing Bank, as the case may be, shall (x) use reasonable efforts to disclose only that portion of the confidential information as it is legally required, in the opinion of counsel, to disclose and (y) to the extent possible under the applicable proceeding, at the Borrowers' expense, request a protective order as to the confidentially thereof. SECTION 13 INDEMNITIES. 13.1 INCREASED COSTS. If, after the Effective Date of this Agreement, (a) the introduction of any Law, rule or regulation or any change therein, (b) any change in the interpretation or administration of any Law, rule or regulation by any central bank or other governmental authority or (b) the compliance by any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer with any guideline, request or directive from any central bank or other governmental authority (whether or not having the force of Law) shall increase the cost to any Bank or Designated Swing Line Lender (other than any increase in the cost of the overhead of such Bank or Designated Swing Line Lender) of agreeing to make or making, funding or maintaining Loans to a Borrower or the cost to any Designated Letter of Credit Issuer or Bank of issuing, maintaining or participating in any Letter of Credit, then such Borrower shall from time to time, upon demand by such Bank (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer additional amounts sufficient to indemnify such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer for such increased cost. 13.2 RISK-BASED CAPITAL. If any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer shall have determined that after the Effective Date, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency 112 122 charged by law with the interpretation or administration thereof, or compliance by such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer or the parent corporation of any thereof with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank, or comparable agency, in each case made subsequent to the Effective Date, has or would have the effect of reducing by an amount reasonably deemed by such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer to be material to the rate of return on the capital or assets of such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer or the parent corporation of any thereof as a consequence of the commitments or obligations of such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer hereunder to a level below that which such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer or the parent corporation of any thereof could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration policies of such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer or the parent corporation of any thereof with respect to capital adequacy), then from time to time, within 15 days after demand by such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer or the parent corporation of any thereof for such reduction. Each Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer upon determining in good faith that any additional amounts will be payable pursuant to this section 13.2, will give prompt written demand therefor. 13.3 TAXES. (a) TAXES; WITHHOLDING. Any and all payments by the Borrowers hereunder, under the Notes or the other Loan Documents shall be made, in accordance with the provisions of Section 2, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the Laws of which such Bank is organized or is doing business, or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrowers shall be required by Law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank, any Designated Swing Line Lender, any Designated Letter of Credit Issuer or any Administrative Agent: (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 13.3) such Bank receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrowers shall make such deductions and (iii) the Borrowers shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Law. All such Taxes shall be paid by the Borrowers prior to the date on which penalties attach thereto or interest accrues thereon; provided, however, that, if any such penalties or interest become due, the Borrowers shall make prompt payment thereof to the appropriate governmental authority. The Borrowers shall indemnify each of the Administrative Agents and each Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer for the full amount of such Taxes (including any Taxes on amounts payable under this Section 13.3(a) paid by such Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer and any Administrative Agent and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. Any indemnification 113 123 payment shall be made within thirty (30) days from the date such Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer or any such Administrative Agent makes written demand therefor. (b) STAMP TAXES. The Borrowers agree to pay, and will indemnify each Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer and the Administrative Agents for, any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) OTHER TAXES. Except as specifically limited by Section 13.3(a), the Borrowers will indemnify each Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer and Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 13.3) paid by such Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer or Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Any indemnification payment shall be made within 30 days from the date such Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer or such Administrative Agent (as the case may be) makes written demand therefor. (d) REQUEST FOR REFUND. At the reasonable request of the Borrower Representative, each Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer or Administrative Agent, as the case may be, shall apply at the applicable Borrower's expense for a refund in respect of Taxes or Other Taxes previously paid by such Borrowers pursuant to this Section 13.3 if in the opinion of such Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer or Administrative Agent there is a reasonable basis for such refund. Notwithstanding the foregoing, none of the Banks, Designated Swing Line Lenders, Designated Letter of Credit Issuers or Administrative Agent shall be obligated to pursue such refund if, in its sole good faith judgment, such action would be disadvantageous to it, but shall be required to cooperate in good faith with the Borrowers if the Borrowers should choose to pursue such refund. If any Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer or Administrative Agent subsequently receives from a taxing authority a refund of any Tax previously paid by the Borrowers and for which the Borrowers has indemnified the Bank pursuant to this Section 13.3, such Bank, Designated Swing Line Lender, Designated Letter of Credit Issuer or Administrative Agent shall within thirty (30) days after receipt of such refund, and to the extent permitted by applicable law, pay to the Borrowers the net amount of any such recovery after deducting taxes and expenses attributable thereto. (e) EXEMPTION CERTIFICATE. Not later than: (a) the Closing Date, (b) in the case of any bank or financial institution that becomes a Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer after the Closing Date, the date of the instrument of assignment 114 124 pursuant to which such bank or financial institution became a Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, (c) annually on each Anniversary Date thereafter or (d) such other times as the Administrative Agent or the Borrower Representative may reasonably request: (i) each Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer organized under the laws of a jurisdiction outside the United States shall provide the Administrative Agent and the Borrower Representative with duly completed copies of Form 1001 or Form 4224 or any successor form prescribed by the Internal Revenue Service of the United States certifying that such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer is exempt from United States withholding taxes with respect to all payments to be made to such Bank hereunder or other document satisfactory to the Borrowers and the Administrative Agent indicating that all payments to be made to such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer hereunder are not subject to such taxes and (ii) each other Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer shall provide the Administrative Agent and the Borrower Representative with a written statement which certifies that such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer is not a non-resident alien or foreign corporation and which otherwise satisfies Treasury Regulation Section 1.1441-5(b) or any successor regulation under the Internal Revenue Code (each such certificate or statement, an "Exemption Certificate"). Unless the Administrative Agent and the Borrower Representative have received an Exemption Certificate from such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, the Borrowers, or the Administrative Agent if the Borrowers have not withheld, may withhold taxes from such payments at the applicable statutory rate (subject, in the case of the Borrowers to the requirements of Section 13.3(a) above); provided, however, that, if the Borrowers have withheld, the Borrower Representative shall so notify the Administrative Agent. Any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer which ceases to be exempt from United States withholding taxes shall notify the Administrative Agent and the Borrower Representative promptly thereof. (f) FURNISHING OF CERTIFICATE. Within 30 days after the date of any payment of Taxes, the Borrower Representative will furnish to the Administrative Agent, at its address referred to in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement, the original or a certified copy of a receipt evidencing payment thereof. If Taxes ever become payable in respect of any payment hereunder or under the Notes made during a Fiscal Quarter, thereafter the Borrower Representative will furnish to the Administrative Agent, within thirty (30) days after the end of such Fiscal Quarter, at such address, a certificate from the Borrowers stating that any payments made during such Fiscal Quarter are exempt from or not subject to Taxes. (g) FILINGS TO CLAIM U.K. WITHHOLDING EXEMPTION OR REDUCTION. The Banks listed on the signature pages hereof as Banks on the Closing Date agree to submit promptly after the Closing Date to the taxing authority of the country in which such Bank is resident for tax purposes (with a copy to the Administrative Agent and Instron, Ltd.), for certification and forwarding by such taxing authority to the appropriate United Kingdom taxing authority, two copies of Form "Claim on Behalf of a United States Domestic Corporation to Relief from United Kingdom Income Tax on Interest and Royalties Arising in the United Kingdom" (or its counterpart for jurisdictions other than the United States), or any successor forms (wherein such Bank claims entitlement to complete exemption from or reduced rate of United Kingdom withholding tax on interest paid by such Borrower hereunder) and to provide successor 115 125 forms thereto if any previously delivered form is found to be incomplete or incorrect in any material respect or upon the obsolescence of any previously delivered form. Each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer becoming such after the Closing Date that is managed and controlled from or incorporated under the laws of any jurisdiction other than the United Kingdom and which is making a Loan to Instron, Ltd. through a lending branch or lending office located outside the United Kingdom agrees to submit on or before the time of becoming such a Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer to the taxing authority of the country in which such Bank is resident for tax purposes on or prior to becoming Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer to the taxing authority of the country in which such Bank is resident for tax purposes (with a copy to the Administrative Agent and Instron, Ltd.), for certification and forwarding by such taxing authority to the appropriate United Kingdom taxing authority, two copies of Form "Claim on Behalf of a United States Domestic Corporation to Relief from United Kingdom Income Tax on Interest and Royalties Arising in the United Kingdom" (or its counterpart for jurisdictions other than the United States), or any successor forms (wherein such Bank claims entitlement to complete exemption from or reduced rate of United Kingdom withholding tax on interest paid by such Borrower hereunder) and to provide successor forms thereto if any previously delivered form is found to be incomplete or incorrect in any material respect or upon the obsolescence of any previously delivered form. Unless the Administrative Agent and the Borrower Representative have received a copy of the Claim on behalf of a United States Domestic Corporation to Relief from United Kingdom Income Tax on Interest and Royalties Arising in the United Kingdom" (or its counterpart for jurisdictions other than the United States) from such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, Instron, Ltd., or the Designated European Administrative Agent if Instron, Ltd. has not withheld, may withhold taxes from such payments at the applicable statutory rate (subject, in the case of Instron, Ltd. to the requirements of Section 13.3(a) above); provided, however, that, if Instron, Ltd. have withheld, the Borrower Representative shall so notify the Administrative Agent or, if applicable, the Designated European Administrative Agent. Any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer which ceases to be exempt from United Kingdom withholding taxes shall notify the Administrative Agent or such Designated European Administrative Agent and the Borrower Representative promptly thereof. (h) RELATED TAX EXEMPTION FILINGS. Upon the written request of any Borrower, each Bank promptly will provide to such Borrower and to the Administrative Agent, or file with the relevant taxing authority (with a copy to the applicable Administrative Agent) such form, certification or similar documentation that it is legally able to provide (each duly completed, accurate and signed) as is required by the relevant jurisdiction in order to obtain an exemption from, or reduced rate of Taxes or Other Taxes to which such Bank or the Administrative Agent is entitled pursuant to an applicable tax treaty or the law of the relevant jurisdiction; provided, however, such Bank will not be required to (i) disclose information which in its reasonable judgment it deems confidential or proprietary or (ii) incur a disadvantage if such disadvantage would, in its reasonable judgment, be substantial. (i) U.K. TAX CREDITS If and to the extent that any Bank that is either a Non-UK Lender or a UK Lender is able, in its sole opinion, to apply or otherwise take advantage of any offsetting 116 126 Tax credit or other similar Tax benefit out of or in conjunction with any deduction, withholding or payment which gives rise to an obligation on Instron, Ltd. to pay any additional amount pursuant to paragraph (a) or (b) of this Section 13.3 such Bank shall, to the extent that in its sole opinion it can do so without prejudice to the retention of the amount of such credit or benefit and without any other adverse Tax consequences for that Bank, reimburse to Instron, Ltd., at such time as such Tax credit or benefit shall have actually been received by that Bank such amount as that Bank shall, in its sole opinion, have determined to be attributable to the relevant deduction, withholding or payment and as will leave it in no better or worse position in respect of its worldwide Tax liabilities than it would have been in if the payment of such additional amount had not been required. (j) SURVIVAL OF PROVISION. Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and liabilities of the Borrowers contained in this Section 13.3 shall survive the payment in full of the Obligations. 13.4 LOSSES. If any payment of principal of, or Rate Conversion or Rate Continuation of, any LIBOR Rate Loan or Money Market Rate Loan, as the case may be, is not paid when due or is made on a day other than on the last day of an Interest Period relating to such Loan, as a result of a payment or Rate Conversion or Rate Continuation pursuant to the provisions of Section 2.11 of this Agreement or acceleration of the maturity of the Revolving Credit Notes or Swing Line Notes pursuant to Section 9 of this Agreement or for any other reason, the Borrowers shall, upon demand by any Bank or Designated Swing Line Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Bank or Designated Swing Line lender, as the case may be, any amounts required to compensate such Bank or Designated Swing Line Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or Rate Conversion or Rate Continuation, including, without limitation, any loss, cost or expense (other than any expenses directly attributable to loan origination efforts) incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank or Designated Swing Line Lender to fund or maintain such Loan. 13.5 INDEMNIFICATION FOR REQUESTS. Whenever a Borrower: (a) shall revoke any Credit Request or Rate Conversion/Continuation Request involving any LIBOR Rate Loan, (b) shall for any other reason fail to borrow pursuant to any such Credit Request, Swing Line Request or Rate Conversion/Continuation Request or otherwise comply therewith, (c) shall fail to fulfill, on or before the date specified in any such request, the applicable conditions set forth in Section 3 of this Agreement or (d) shall fail to honor any prepayment notice with respect to LIBOR Rate Loans, then, in each case on any Bank's or Designated Swing Line Lender's demand, such Borrower shall indemnify each Bank, Designated Swing Line Lender and Administrative Agent against any loss, cost or expense incurred by such Bank, Designated Swing Line Lender or Administrative Agent as a result of any such failure by such Borrower, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank, Designated Swing Line Lender or Administrative Agent to fund the LIBOR Rate Loan or Money Market Rate Loans, as the case may be, to be made by such Bank, Designated Swing Line Lender or Administrative Agent in connection with such request when such LIBOR Rate Loan, as a result of such failure by such Borrower, is not made on such date. 117 127 13.6 GENERAL INDEMNITY. The Borrowers shall indemnify and hold harmless the each Administrative Agent and each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer, and the respective directors, officers, employees and Affiliates thereof, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever including, without limitation, reasonable fees and disbursements of counsel and settlements costs, which may be imposed on, incurred by, or asserted against any such Administrative Agent, any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, or the respective directors, officers, employees and Affiliates thereof in connection with any investigative, administrative or judicial proceeding (whether such Administrative Agent or such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer is or is not designated as a party thereto) directly or indirectly relating to or arising out of this Agreement or any other Loan Document, the transactions contemplated thereby, or any actual or proposed use of proceeds hereunder or thereunder, except that none of the Administrative Agents nor any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, nor any such directors, officers, employees and Affiliates thereof shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. 13.7 ENVIRONMENTAL INDEMNITY. Each of the Borrowers shall, at its sole cost and expense, indemnify, defend and save harmless each of the Administrative Agents, each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer (and each of their respective officers, directors, employees, Administrative Agents, representatives and contractors and any subsequent owner of the Collateral who purchases Collateral through the Bank or pursuant to any enforcement action by the Bank) from and against any and all damages, losses, liabilities, obligations, penalties, claims, litigations, demands, defenses, judgments, suits, actions, proceedings, costs, disbursements and/or expenses (including, without limitation, reasonable attorneys' and experts' fees, expenses and disbursements) of any kind or nature whatsoever which may at any time be imposed upon, incurred by or asserted against any of such indemnified Persons directly or indirectly relating to, resulting from or arising out of: (i) Environmental Claims against such Borrower, (ii) a material misrepresentation or inaccuracy in any representation or warranty contained in this Agreement relating to any environmental matters applicable to such Borrower or (iii) a breach or failure to perform any covenant made by such Borrower in this Agreement with respect to environmental matters which continues uncured after the expiration of any applicable grace period. Each of the Borrowers will pay any sums owing by such Borrower to each Administrative Agent and each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer pursuant to this indemnification obligation five (5) days after demand by the Administrative Agent, on behalf of any such Administrative Agent, Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, together with interest on such amount accruing from and after the expiration of such period at the default rate of interest hereunder. 13.8 CERTIFICATE FOR INDEMNIFICATION. Each demand by an Administrative Agent, or a Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer for payment pursuant to this Section 13 shall be accompanied by a certificate setting forth the reason for the payment, the amount to be paid, and the computations and assumptions in determining the amount, which certificate shall, absent manifest error, be presumed to be correct. In determining the amount of any such payment thereunder, each Administrative Agent and each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer may use reasonable averaging and attribution methods, so 118 128 long as such methods are set forth in the certificate referred to in the preceding sentence. The failure to give any such notice shall not release or diminish any of the Borrower's obligations to pay additional amounts pursuant to this Section 13 upon the subsequent receipt of such notice. 13.9 DUTY TO MITIGATE; STANDARD TREATMENT; REIMBURSEMENT LIMITATION PERIOD. Each Administrative Agent and each Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer seeking payment pursuant to this Section 13 shall use reasonable efforts and take all reasonable actions to avoid the cause of the payment and to minimize the amount thereof. Each Bank agrees that it will not seek compensation or reimbursement provided for in this Section 13 unless such Administrative Agent, Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, as the case may be, as a matter of policy intends generally to seek comparable compensation or reimbursement from other borrowers similarly situated and similarly documented financial accommodations. Notwithstanding anything in this Agreement to the contrary, none of the Administrative Agents nor any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, as the case may be, shall be entitled to compensation or payment or reimbursement of other amounts under Sections 2.18, 13.1 or 13.2 for any amounts incurred or accruing more than 180 days prior to the giving of notice to the Borrower Representative of additional costs or other amounts of the nature described in such Sections. SECTION 14 GENERAL. This Agreement and the other Loan Documents shall be governed by the following provisions: 14.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this Agreement or the Notes or any other Loan Document, nor consent to any departure by the Borrowers therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Banks (or, if unanimous consent of all Banks is required herein, all of the Banks (other than a Bank which is a Defaulting Lender), the Administrative Agent, the Designated European Administrative Agent, the Borrowers, and, only with respect to amendments and waivers of, or consents regarding, provisions of this Agreement directly affecting the rights of any Designated Swing Line Lender or any Designated Letter of Credit Issuer, by such Designated Swing Line Lender or Designated Letter of Credit Issuer, as the case may be, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Unanimous consent of all Banks (other than a Bank which is a Defaulting Lender) shall be required with respect to (a) the extension of maturity of any Note, or the extension of the payment date for interest, principal and/or fees thereunder, or (b) any reduction in fees hereunder or the rate of interest on the Notes (other than a reduction by virtue of a waiver of an Event of Default, as contemplated in Sections 2.16(e) and 2.13(b)), or in any amount of principal or interest due on any Note, or in the manner of pro rata application of any payments made by the Borrowers to the Banks hereunder, or (c) any change in any percentage voting requirement in this Agreement, or (d) any amendment changing the dollar amount or percentage of the Banks' Commitments or any Bank's Commitment, or (e) any change in the amount of, or extension of the payment date for, any fees payable under Section 2.16 of this Agreement, or (f) any change in the definitions "Collateral" or "Required Banks" under this Agreement, or (g) any change in any provision of this Agreement which requires all of the Banks to take any action under such provision, (h) the release of all or any substantial portion of the Collateral, or (i) the release of all or substantially all of the Collateral or the release of any Borrower Guarantor, any Guaranty by a Borrower of any Letter of Credit Obligor or any other Guarantor or (j) any change in Section 11, Sections 12.1 or 12.2, 119 129 Section 13 or this Section 14.1 itself. Notice of amendments or consents ratified by the Banks hereunder shall immediately be forwarded by the Administrative Agent to the Borrower Representative, any Designated European Administrative Agent and to all Banks. Each Bank or other holder of a Note, Designated European Administrative Agent, Designated Swing Line Lender and Designated Letter of Credit Issuer shall be bound by any amendment, waiver or consent obtained as authorized by this Section 14.1, regardless of its failure to agree thereto. 14.2 GENERAL APPOINTMENT AS ATTORNEY-IN-FACT. In addition to the provisions of Sections 9.5 of this Agreement, each of the Borrowers hereby irrevocably constitutes and appoints the Administrative Agent and any officer or Administrative Agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Borrower and in the name of such Borrower or in its own name, from time to time following the occurrence of an Event of Default which is continuing (unless waived in accordance with Section 14.1 of this Agreement), in the Administrative Agent's reasonable discretion, for the purpose of carrying out the terms of this Agreement, without notice (except as specifically provided herein) to or assent by the Borrowers, to take to the extent permitted by law any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, including, without limiting the generality of the foregoing, the power and right, on behalf of such Borrower, to do the following: (a) to pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against the Collateral, to effect any repairs or any insurance, called for by the terms of this Agreement and to pay all or any part of the premiums therefor and the costs thereof, and otherwise to itself perform or comply with, or otherwise cause performance or compliance with, any of the covenants or other agreements of such Borrower contained in this Agreement which such Borrower has failed to perform or with which such Borrower has not complied; (b) upon notice to such Borrower, to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce any other right in respect of any Collateral; (c) upon notice to such Borrower, to defend any suit, action or proceeding brought against such Borrower with respect to any Collateral; (d) upon notice to such Borrower, to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; (e) to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral generally as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes; and (f) to do, at the Administrative Agent's option and such Borrower's expense, at any time, or from time to time, all acts and things which the Administrative Agent reasonably deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as such Borrower might do. Each of the Borrowers hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable. (a) ADMINISTRATIVE AGENT NOT LIABLE. The powers conferred on the Administrative Agent hereunder are solely to protect its interests in the Collateral and shall not impose any duty upon it to exercise any such powers. The Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers and neither it nor any of its officers, directors, employees or Administrative Agents shall be responsible to the Borrowers for any act or failure to act, except for its own gross negligence or willful misconduct. 120 130 (b) PERFORMANCE BY ADMINISTRATIVE AGENT OF THE BORROWERS' OBLIGATIONS. If a Borrower fails to perform or comply with any of its agreements contained herein and an Event of Default shall have occurred which is continuing and has not been waived in accordance with Section 14.1 hereof, and the Administrative Agent shall itself perform or comply, or otherwise cause performance or compliance, with such agreement, the expenses of the Administrative Agent incurred in connection with such performance or compliance, together with interest thereon at the highest rate of interest that would from time to time apply to any Type of Borrowing under Section 2.14, shall be payable by such Borrower to the Administrative Agent on demand and upon the expiration of five (5) calendar days after such demand such Borrower shall be deemed to have delivered a Deemed Credit Request in the relevant amounts. The Administrative Agent will notify the Borrower Representative as soon as it is practicable of any action taken by it of the nature referred to herein. 14.3 JUDGMENT CURRENCY. (a) CONVERSION. If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given. (b) DISCHARGE. The obligations of each Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with the normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due the Applicable Creditor in the Agreement Currency, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrowers contained in this Section 14.3 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. (c) COSTS OF CONVERSION. For purposes of determining the equivalent in one currency as provided in this section, such amount shall include any premium and costs payable in connection with the conversion into or from the Judgment Currency. 14.4 CUMULATIVE PROVISIONS. Each right, power or privilege specified or referred to in this Agreement is in addition to and not in limitation of any other rights, powers and privileges that the 121 131 Administrative Agent and the Banks may otherwise have or acquire by operation of Law, by other contract or otherwise. 14.5 EFFECTIVE AGREEMENT; BINDING EFFECT. This Agreement shall become effective on the date and as of the time (the "Effective Date") on and as of which each of the Borrowers, each of the Banks, Designated Swing Line Lenders and Designated Letter of Credit Issuers, and any European Administrative Agents shall have signed a copy hereof (whether the same or different copies) and, in the case of each of the Borrowers shall have delivered the same to the Administrative Agent at the address specified in Section 14.13 or, in the case of the Banks, the Designated Swing Line Lenders, the Designated Letter of Credit Issuers, and any European Administrative Agents, shall have given to the Administrative Agent telephonic (confirmed in writing), written telex or facsimile transmission notice (actually received) at such office that the same has been signed and mailed to it. As of the Effective Time, this Agreement shall be binding upon and inure to the benefit of the Borrowers, the Administrative Agents, the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers, and their respective successors and assigns, except that the Borrowers shall not have the right to assign its rights hereunder or any interest herein without the prior unanimous written consent in accordance with Section 14.1 hereof of the Administrative Agent, the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers. 14.6 COSTS AND EXPENSES. Each of the Borrowers agrees to pay on demand all reasonable costs and expenses of: (a) the Administrative Agent (including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent) in connection with (i) the preparation, execution, delivery, administration, modification, amendment and waiver of this Agreement or the other Loan Documents and (ii) the arrangement on or after the Closing Date of a syndicate of Banks to purchase a portion of the Commitments (including travel and administration expenses of the Administrative Agent and Syndication Agent); provided, however, that the Borrowers shall not be responsible to pay for any costs or expenses of the Designated Swing Line Lenders, the Designated Letter of Credit Issuers or the Banks (including, without limitation, the fees and out-of-pocket expenses of counsel to the Designated Swing Line Lenders, the Designated Letter of Credit Issuers and the Banks) in connection with any of the matters specified in clauses (a)(i) and (ii) above and (b) the Administrative Agent, any other Agent, the Designated Swing Line Lenders, the Designated Letter of Credit Issuers and the Banks (including, without limitation, the reasonable fees and out-of-pocket expenses of counsel to the Administrative Agent, such other Agents, the Designated Swing Line Lenders, the Designated Letter of Credit Issuers and the Banks) in connection with the enforcement of, the exercise of remedies under, or the preservation of rights and remedies under this Agreement or any of the other Loan Documents (including any collection, bankruptcy or other enforcement proceedings arising with respect to such Borrower, this Agreement, or any Event of Default under this Agreement). 14.7 SURVIVAL OF PROVISIONS. All representations and warranties made in or pursuant to this Agreement shall survive the execution and delivery of this Agreement and of the Notes. The provisions of Section 12.4 and Section 13 of this Agreement shall survive the payment of the Obligations and any other Indebtedness owed by the Borrowers hereunder and the termination of this Agreement (whether by acceleration or otherwise). 122 132 14.8 CAPTIONS. The several captions to different Sections and the respective subsections thereof are inserted for convenience only and shall be ignored in interpreting the provisions of this Agreement. 14.9 SHARING OF INFORMATION. Subject to the provisions of Section 12.4, each Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer shall have the right to furnish to its Affiliates, its accountants, its employees, its officers, its directors, its legal counsel, potential participants, and to any governmental agency having jurisdiction over such Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer information concerning the business, financial condition, and property of the Borrowers, the amount of the Loans of the Borrowers hereunder, and the terms, conditions and other provisions applicable to the respective parts thereof. 14.10 INTEREST RATE LIMITATION. Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges that are treated as interest under applicable law as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, taken, received or reserved by any Bank or any Designated Swing Line Lender shall exceed the maximum lawful rate that may be contracted for, charged, taken, received or reserved by the Bank in accordance with applicable law (the "Maximum Lawful Rate"), then so long as the Maximum Lawful Rate would be so exceeded, the rate of the rate of interest and all such charges payable, contracted for, charged, taken, received or reserved in respect of the Loans of the Banks or the Designated Swing Line Lenders to the Borrowers shall be equal to the Maximum Lawful Rate; provided, that, if any time thereafter the applicable interest rate, together with all fees and charges that are treated as interest under applicable law as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, taken, received or reserved by the Banks shall be less than the Maximum Lawful Rate, the Borrowers shall continue to pay such interest and fees hereunder at the Maximum Lawful Rate until such time as the total interest received by the Administrative Agent for the benefit of the Banks and the Designated Swing Line Lenders, is equal to the total interest and fees that would have been received had the interest rate payable hereunder been (but for the operation of this Section 14.10) the interest rate payable since the Closing Date as otherwise provided in this Agreement. Thereafter, interest payable hereunder shall be paid at the rate(s) of interest and the charges provided in Section 2.13 of this Agreement, unless and until the rate of interest again exceeds the Maximum Lawful Rate, and at that time this Section 14.10 shall again apply. In no event shall the total interest, together with all fees and charges that are treated like interest, received by any Bank or Designated Swing Line Lender pursuant to the terms hereof exceed the amount which such Bank or Designated Swing Line Lender could lawfully have received had the interest and such fees and charges due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. If, notwithstanding the provisions of this Section 14.10, a court of competent jurisdiction shall finally determine that a Bank or Designated Swing Line Lender has received interest, or fees and charges that are treated like interest, hereunder in excess of the Maximum Lawful Rate, the Administrative Agent shall, to the extent permitted by applicable Law, promptly apply such excess to the principal amounts owing to such Bank or Designated Swing Line Lender and thereafter shall refund any excess to the Borrowers or as a court of competent jurisdiction may otherwise order. 123 133 14.11 LIMITATION OF LIABILITY. To the extent permitted by applicable law, no claim may be made by the Borrowers, the Administrative Agent, any other Agent, any Designated Swing Line Lender, any Designated Letter of Credit Issuer, any Bank or any other Person against the Administrative Agent, any such Designated Swing Line Lender, Designated Letter of Credit Issuer or Bank, or the Affiliates, directors, officers, employees, Administrative Agents, attorneys and consultants of any of them, for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith; and the Administrative Agent, the Designated Swing Line Lenders, the Designated Letter of Credit Issuers, the Borrowers and the Banks hereby waive, release and agree not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. 14.12 ILLEGALITY. If any provision in this Agreement or any other Loan Document shall for any reason be or become illegal, void or unenforceable, that illegality, voidness or unenforceability shall not affect any other provision. 14.13 NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and shall be given solely: (a) by hand delivery or by overnight courier delivery service, with all charges paid, (b) by facsimile transmission, if confirmed same day in writing by first class mail mailed, or (c) by registered or certified mail, postage prepaid and addressed to the parties. For the purposes of this Agreement, such notices shall be deemed to be given and received: (i) if by hand or by overnight courier service, upon actual receipt, (ii) if by facsimile transmission, upon receipt of machine-generated confirmation of such transmission (and provided the above-stated written confirmation is sent) or (iii) if by registered or certified mail, upon the first to occur of actual receipt or the expiration of 48 hours after deposit with the U.S. Postal Service; provided, however, that notices from the Borrower Representative to Administrative Agent, the Designated European Administrative Agent the Banks, the Designated Swing Line Lenders or the Designated Letter of Credit Issuers pursuant to any of the provisions hereof, including without limitation Section 2 and Section 7.1 of this Agreement, shall not be effective until actually received by the Administrative Agent, the Designated European Administrative Agent, the Banks, the Designated Swing Line Lenders or the Designated Letter of Credit Issuers, as the case may be. Notices or other communications hereunder shall be addressed, if to the Borrowers, to the address specified on the signature pages of this Agreement; if to the Administrative Agent, to the Notice Office of the Administrative Agent specified on the signature pages of this Agreement; if to any Designated European Administrative Agent, to the Notice Office of such Designated European Administrative Agent specified on the signature pages of the joinder agreement pursuant to which such Designated European Administrative Agent is selected and becomes a party to this Agreement; if to a Bank, to the Notice Office of such Bank specified on the signature pages of this Agreement or, if such Bank shall have become a party hereto pursuant to Section 12.1, in the most recent Assignment Agreement to which such Bank is a party; if to the Designated Swing Line Lender, to the Notice Office of such Designated Swing Line Lender specified on the signature pages of this Agreement and, if to the Designated Letter of Credit Issuer, to the Notice Office of such Designated Letter of Credit Issuer specified on the signature pages of this Agreement. 124 134 14.14 GOVERNING LAW. This Agreement and the other Loan Documents and the respective rights and obligations of the parties hereto shall be governed by and construed in accordance with the internal laws of the State of Ohio (without giving effect to the conflict of laws rules thereof and except to the extent perfection of the Administrative Agent's security interests and Liens and the effect thereof are otherwise governed pursuant to the UCC or the applicable Law of any foreign jurisdiction). 14.15 ENTIRE AGREEMENT. This Agreement and the other Loan Documents referred to in or otherwise contemplated by this Agreement set forth the entire agreement of the parties as to the transactions contemplated by this Agreement. 14.16 JURY TRIAL WAIVER. EACH OF THE BORROWERS, THE ADMINISTRATIVE AGENT, EACH OF THE DESIGNATED SWING LINE LENDERS, EACH OF THE DESIGNATED LETTER OF CREDIT ISSUERS AND EACH OF THE BANKS WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE BORROWERS, THE ADMINISTRATIVE AGENT, THE DESIGNATED SWING LINE LENDERS, THE DESIGNATED LETTER OF CREDIT ISSUERS AND THE BANKS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. 14.17 JURISDICTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY OHIO STATE COURT OR FEDERAL COURT OF THE UNITED STATED OF AMERICA SITTING IN CUYAHOGA COUNTY, OHIO, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH OHIO STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION. 125 135 14.18 VENUE; INCONVENIENT FORUM. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT IN ANY OHIO STATE OR FEDERAL COURT SITTING IN OHIO. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. EACH OF THE BORROWERS CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE. 14.19 EXECUTION IN COUNTERPARTS; EXECUTION BY FACSIMILE. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart hereof by facsimile shall be effective as manual delivery of such counterpart; provided, however, that, each party hereto will promptly thereafter deliver counterpart originals of such counterpart facsimiles delivered by or on behalf of such party. [REMAINDER OF PAGE INTENTIONALLY BLANK] 126 136 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers or Administrative Agents thereunto duly authorized, as of the date first above written. INSTRON CORPORATION By: /s/ John R. Barrett ------------------------------ John R. Barrett, Vice President ADDRESS FOR NOTICES: Instron Corporation 100 Royall Street Canton, MA 02021 Attention: President Telephone: (781) 828-2500 Telecopy: (781) 575-5765 With a copy to: Kirtland Capital Partners III L.P. 2550 SOM Center Road, Suite 105 Willoughby Hills, OH 44094 Attention: Thomas N. Littman Telephone: 440-585-9010 Telecopy: 440-585-9699 127 137 INSTRON, LTD. By: /s/ John R. Barrett -------------------------------------------- John R. Barrett, Duly Authorized Attorney ADDRESS FOR NOTICES: Instron Corporation, as Borrower Representative 100 Royall Street Canton, MA 02021 Attention: President Telephone: (781) 828-2500 Telecopy: (781) 575-5765 With a copy to: Instron, Ltd. Coronation Road High Wycombe Bucks, HP12 3SY United Kingdom Attention: Managing Director Telephone: 44-1494-464-646 Telecopy: 44-1494-456-123 128 138 INSTRON SCHENCK TESTING SYSTEMS, GMBH By: /s/John R. Barrett -------------------------------------------- John R. Barrett, Duly Authorized Attorney ADDRESS FOR NOTICES: Instron Corporation, as Borrower Representative 100 Royall Street Canton, MA 02021 Attention: President Telephone: (781) 828-2500 Telecopy: (781) 575-5765 With a copy to: Instron Schenck Testing Systems, GmbH Landwehrstrasse 55 Darmstadt D64293 Federal Republic of Germany Attention: ________________ Telephone: _______________ Telecopy: ________________ 129 139 INSTRON WOLPERT GMBH By: /s/ John R. Barrett -------------------------------------------- John R. Barrett, Duly Authorized Attorney ADDRESS FOR NOTICES: Instron Corporation, as Borrower Representative 100 Royall Street Canton, MA 02021 Attention: President Telephone: (781) 828-2500 Telecopy: (781) 575-5765 With a copy to: Instron Wolpert GmbH Landwehrstrasse 55 Darmstadt D64293 Federal Republic of Germany Attention: Managing Director Telephone: 49-69-6151-324-700 Telecopy: 49-69-6151-324-900 130 140 THE ADMINISTRATIVE AGENT NATIONAL CITY BANK, as Administrative Agent By: /s/ Donald B. Hayes ----------------------------------------- Donald B. Hayes, Senior Vice President PAYMENT OFFICE: National City Bank, as Administrative Agent National City Bank, Administrative Agent Services 1900 East 9th Street Cleveland, Ohio 44114 Attention: Kim Stephenson Telephone: (216) 575-2398 Telecopy (216)-222-0012 NOTICE OFFICE: National City Bank, as Administrative Agent National City Center 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Donald B. Hayes, SVP. Telephone (216) 575-2120 Telecopy: (216) 575-9396 131 141 NATIONAL CITY BANK, as the Designated U.S. Letter of Credit Issuer By: /s/ Donald B. Hayes --------------------------------------------- Donald B. Hayes, Senior Vice President LENDING OFFICE: National City Bank, as the Designated U.S. Letter of Credit Issuer 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Kim Stephenson Telephone: (216) 575-2398 Telecopy (216)-222-0012 NOTICE OFFICE: National City Bank, as the Designated U.S. Letter of Credit Issuer National City Center 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Donald B. Hayes, SVP. Telephone (216) 575-2120 Telecopy: (216) 575-9396 132 142 THE BANKS NATIONAL CITY BANK, as a Bank By: /s/ Donald B. Hayes ---------------------------------------- Donald B. Hayes, Senior Vice President LENDING OFFICE: National City Bank, as a Bank 1900 East 9th Street Cleveland, Ohio 44114 Attention: Kim Stephenson Telephone: (216) 575-2398 Telecopy (216)-222-0012 NOTICE OFFICE: National City Bank, as a Bank National City Center 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Donald B. Hayes, SVP. Telephone (216) 575-2120 Telecopy: (216) 575-9396 133 143 134 144 ANNEX I TO CREDIT AND SECURITY AGREEMENT DATED AS OF SEPTEMBER 29, 1999, AMONG THE BORROWERS, THE ADMINISTRATIVE AGENT (AND THE DESIGNATED EUROPEAN ADMINISTRATIVE AGENTS, THE BANKS, THE DESIGNATED SWING LINE LENDERS AND THE DESIGNATED LETTER OF CREDIT ISSUERS, AS DESIGNATED HEREUNDER) REVOLVING CREDIT COMMITMENTS AND PERCENTAGES OF THE BANKS
Bank Revolving Credit Percentage Term Loan Commitment Percentage Total Commitment National City Bank $50,000,000 100% $30,000,000 100% 100% Totals: $50,000,000 100% $30,000,000 100% $80,000,000
I-1 145 ANNEX II TO CREDIT AND SECURITY AGREEMENT DEFINITIONS As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ACCOUNTS" means "accounts" (as defined in the UCC) including, without limitation, all present and future rights to payment for goods sold or leased or for services rendered, which are not evidenced by Instruments or Chattel Paper, and whether or not they have been earned by performance. "ACCOUNT DEBTOR" means any Person who is or becomes obligated to a Borrower under, with respect to, or on account of an Account. "ACCUMULATED FUNDING DEFICIENCY" has the meaning ascribed thereto in section 302(a)(2) of ERISA. "ACQUISITION" means and includes (i) any acquisition on a going concern basis (whether by purchase, lease or otherwise) of any facility and/or business operated by a Person which is not a Subsidiary of a Borrower and (ii) any acquisition of all or a majority interest in the outstanding equity or other similar interests in any corporate Person or limited liability company Person (whether by merger, stock purchase, creation of a corporate joint venture or otherwise). "ACQUISITION COMPANY" means ISN Acquisition Corporation, a Massachusetts corporation. "ADDITIONAL BORROWER ADDENDUM" means the Additional Borrower Addendum , the form of which is set forth as Annex V to this Agreement, whereby a signatory thereto becomes Borrower hereunder pursuant to Section 1.4 of this Agreement. "ADMINISTRATIVE AGENT" means National City Bank, a national banking association, in its capacity as Administrative Agent for the Banks, each Designated Swing Line Lender, each Designated Letter of Credit Issuer and any Designated Hedge Creditor. "ADVANTAGE" means any payment (whether made voluntarily or involuntarily, by offset of any deposit or other Indebtedness or otherwise) received by a Bank in respect of the Obligations if the payment results in any other Bank's having more than its Ratable Portion of the Obligations in question. "AFFILIATE" means, with respect to a specified Person, any other Person: (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such specified Person, (b) which beneficially owns or holds with power to vote five percent (5%) or more of any class of the voting stock of such specified Person, (c) five percent (5%) or more of the voting stock of which other Person is beneficially owned or held by such specified Person, or (d) who is an executive officer or director of such specified Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. II-1 146 "AGENTS" means any and all of the Administrative Agent, any Designated European Administrative Agent and the Syndication Agent. "AGENT FEE LETTER" means that certain letter executed by the Borrowers and the Administrative Agent, dated May 3, 1999. "AGGREGATE SWING LINE COMMITMENT" has the meaning specified in Section 2.7(a) of this Agreement. "AGREEMENT" means this Credit and Security Agreement and each amendment, supplement or modification, if any, to this Credit and Security Agreement. "ALTERNATE BASE RATE" means, for any day, a rate per annum equal to the higher of: (a) the rate of interest which is established from time to time by NCB at its principal office in Cleveland, Ohio as its "prime rate" or "base rate" in effect, such rate to be adjusted automatically, without notice, as of the opening of business on the effective date of any change in such rate (it being agreed that: (i) such rate is not necessarily the lowest rate of interest then available from NCB on fluctuating rate loans and (ii) such rate may be established by NCB by public announcement or otherwise) and (b) the Federal Funds Effective Rate in effect on such day plus one half of one percent (1/2 of 1%) per annum. "ALTERNATE BASE RATE LOAN" means a Loan, denominated in Dollars, which bears interest as provided in Section 2.13(a)(i) of this Agreement. "ALTERNATE BASE RATE BORROWING" means a Borrowing consisting of Alternate Base Rate Loans. "ALTERNATE CURRENCY" means and includes: (i) German Marks, Pounds Sterling and Euros, if at the time of any Credit Request applicable thereto, such currency is readily and freely transferable and convertible into Dollars; and (ii) any other lawful currency other than Dollars which at the time of any Credit Request applicable thereto is readily and freely transferable and convertible into Dollars and which (A) in the case of any Revolving Loans to be denominated in such Alternate Currency, is acceptable to all of the Banks with Revolving Credit Commitments, (B) in the case of any Swing Line Loans to be denominated in such Alternate Currency, is acceptable to the applicable Designated Swing Line Lender and all of the Banks, and (C) in the case of any Letter of Credit which is payable in such Alternate Currency, is acceptable to applicable Designated Letter of Credit Issuer and all of the Banks. "ALTERNATE CURRENCY LC EXPOSURE" means, with respect to any Bank, at any time of determination, such Bank's Ratable Portion of the sum of: (a) the aggregate undrawn amount of all Letters of Credit outstanding at such time that are issued in Alternate Currency denominations, plus (b) the aggregate amount that has been drawn under such Letters of Credit issued in Alternate Currency denominations for which the applicable Designated Letter of Credit Issuer or the Banks, as the case may be, have not at such time been reimbursed by the Borrower. "ALTERNATE CURRENCY SWING LINE EXPOSURE" means, with respect to any Bank, at any time of determination, such Bank's Ratable Portion of the aggregate principal II-2 147 amount of Swing Line Loans denominated in Alternate Currencies outstanding at such time that have been advanced by all of the Designated Swing Line Lenders to all of the Borrowers "ALTERNATE CURRENCY SUBLIMIT" has the meaning specified in Section 2.1(a). "APPLICABLE FEE PERCENTAGE" means, (a) from the Closing Date until April 1, 2000, a percentage equal to (i) 3.00% per annum with respect to the risk participation fee payable on outstanding Letters of Credit under Section 2.16(d)(i), and (ii) 0.50% per annum with respect to the unused commitment fee payable under Section 2.16(c), and (b) with respect to any Fee Percentage Adjustment Date commencing on and after April 1, 2000, the applicable percentage corresponding to the Consolidated Total Funded Debt to Adjusted EBITDA Ratio set forth below (determined on the basis of the Consolidated Total Funded Debt to Adjusted EBITDA Ratio for the Testing Period ending on the Fee Percentage Determination Date applicable to such Fee Percentage Adjustment Date):
--------------------------------------------------------------- Consolidated Total Applicable Unused Applicable Letter Funded Debt to Commitment Fee of Credit Fee Adjusted EBITDA Ratio Percentage Percentage --------------------------------------------------------------- > 3.75 to 1 0.500% 3.00% --------------------------------------------------------------- > 3.00 to 1 but 0.50% 2.75% "APPLICABLE MARGIN" means (i) from the Closing Date until April 1, 2000, 3.00% per annum with respect to LIBOR Rate Loans comprising a Revolving Credit Borrowing, a Term Loan Borrowing or a Swing Line Loan and 1.50% per annum with respect to Alternate Base Rate Loans comprising a Revolving Credit Borrowing or a Term Loan Borrowing, and (ii) with respect to any Margin Adjustment Date commencing on and after April 1, 2000, the percentage per annum applicable to Alternate Base Rate Loans or LIBOR Rate Loans, as the case may be, corresponding to the Consolidated Total Funded Debt to Adjusted EBITDA Ratio set forth below (determined on the basis of the Consolidated Total Funded Debt to Adjusted EBITDA Ratio for the Testing Period ending on the Margin Determination Date applicable to such Margin Adjustment Date):
----------------------------------------------------------------------------------- Consolidated Total Funded LIBOR Rate Loan Alternate Base Rate Loan Debt to Adjusted EBITDA Ratio ----------------------------------------------------------------------------------- > 3.75 to 1 3.00% 1.50% ----------------------------------------------------------------------------------- > 3.00 to 1 but 2.75% 1.25% II-3 148 "ASSIGNMENT AGREEMENT" has the meaning specified in Section 12.1(b). "BANKS" means the financial institutions listed on the signature pages hereof as "Banks" and the successors thereto and assignees thereof. "BORROWER" means any of the Borrowers and such other Wholly-Owned Subsidiaries of any Borrower as may from time to time execute an Additional Borrower Addendum which is accepted by the Administrative Agent and the Lenders pursuant to Section 1.4 of this Agreement and otherwise satisfies the terms and conditions of this Agreement. "BORROWER GUARANTOR" means each Domestic Borrower with respect to the Obligations owing to the Banks by the other Borrowers and expressly excludes any Foreign Borrower. "BORROWER GUARANTY" means the joint and several obligation of each Borrower Guarantor to pay the Obligations of the other Borrowers pursuant to Section 10 of this Agreement. "BORROWER REPRESENTATIVE" means Instron Corporation. "BORROWERS" means each of Instron Corporation, Instron, Ltd., Instron Wolpert GmbH and Instron Schenck Testing Systems, GmbH and such other Wholly-Owned Subsidiaries of any Borrower as may from time to time execute an Additional Borrower Addendum which is accepted by the Administrative Agent and the Banks pursuant to Section 1.4 of this Agreement and otherwise satisfies the terms and conditions of this Agreement. "BORROWING" means a group of Loans of a single Type, denominated in a single currency, made by the Banks on a single date and as to which a single Interest Period is in effect (i.e., any group of Loans made by the Banks of a different Type, or having a different Interest Period (regardless of whether such Interest Period commences on the same date as another Interest Period), or made on a different date shall be considered to comprise a different Borrowing). "BORROWING BASE" means, at any date of determination, an amount not in excess of an amount equal to the sum of: (i) eighty-five percent (85%) of the amount due and owing on the Eligible Accounts of the Borrowers, plus ---- (ii) fifty percent (50%) of the cost or market value (whichever is lower) of the Eligible Inventory of the Borrowers; provided, however, that the above-stated advance rates shall be subject to, and the Administrative Agent hereby reserves the right and shall be entitled to, upon receipt of: (i) inventory audit and receivable testing (which shall be conducted promptly and by a Person reasonably satisfactory to the Administrative Agent) and (ii) an asset based field examination and collateral audit of each of the Borrowers, which shall be in each case be conducted promptly after the Closing Date and shall otherwise be in substance satisfactory to the Administrative Agent, in its reasonable discretion, to adjust the advance rates above specified to the extent deemed appropriate by the Administrative Agent, in the good faith exercise of customary credit judgment. II-4 149 "BORROWING BASE CERTIFICATE" has the meaning specified in Section 7.1(c)(iii) of this Agreement. "BUSINESS DAY" means: (i) for purposes other than those covered by clause (ii), (iii) or (iv) below, a day of the year on which banks are not required or authorized to close in the city in which the applicable Lending and Payment Office of the Administrative Agent, the applicable Designated Swing Line Lender or applicable Designated Letter of Credit Issuer, as the case may be, is located, and (ii) if the applicable Business Day is relevant to notices and determinations in connection with, and payments of principal and interest on, LIBOR Rate Loans denominated in Dollars, a day of the year which is a Business Day described in clause (i) above and which is also a day on which dealings in Dollar deposits are carried on in the London interbank market and banks are open for business in London, (iii) if the applicable Business Day is relevant to notices and determinations in connection with, and payments of principal and interest on, LIBOR Rate Loans or Swing Line Loans denominated in an Alternate Currency, a day of the year which is a Business Day described in clause (i) and (ii) above and which is also a day on which banks are open for general banking business in the city which is the principal financial center of the country of issuance of such Alternate Currency, or (iv) if the applicable Business Day is relevant to notices and determinations in connection with, and payments of principal and interest on, LIBOR Rate Loans or Swing Line Loans denominated in the Euro (or any National Currency Unit), a day of the year which is a Business Day described in clause (i), (ii) and (iii) above and which is also TARGET Operating Day. "CASH EQUIVALENT" means (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (PROVIDED that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) U.S. dollar denominated time deposits, certificates of deposit and bankers' acceptances of (x) any Bank or (y) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank, an "Approved Lender"), in each case with maturities of not more than 90 days from the date of acquisition, (iii) commercial paper issued by any Bank or Approved Lender or by the parent company of any Banks or Approved Lender and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long term unsecured debt rating of at least A or A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be, and in each case maturing within 90 days after the date of acquisition and (iv) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (i) through (iii) above. "CAPITAL EXPENDITURES" means any and all amounts invested, expended or incurred (including Indebtedness under Capitalized Leases) by a Person in respect of the purchase, acquisition, improvement, renovation or expansion of any land and depreciable or amortizable property of such Person (including, without limitation, expenditures required to be capitalized in accordance with GAAP), each as determined on a consolidated basis in accordance with GAAP; provided, however, that, in the case of Instron Corporation and its consolidated Subsidiaries, a "Capital Expenditure" resulting from a Permitted Acquisition will be excluded in determining the aggregate amount Capital Expenditures of Instron Corporation and its consolidated Subsidiaries. II-5 150 "CAPITALIZED LEASE OBLIGATIONS" means all obligations under Capitalized Leases of a Person in each case taken into account in the amount thereof accounted for as liabilities identified as "capitalized lease obligations" (or any similar words) on a consolidated balance sheet of such Person and its Subsidiaries, as determined on a consolidated basis in accordance with GAAP. "CAPITALIZED LEASES" means, in respect of any Person, any lease of property imposing obligations on such Person, as lessee of such property, which are required in accordance with GAAP to be capitalized on a balance sheet of such Person. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. Sections 9601 et seq. "CHANGE IN CONTROL" means: from and after the Closing Date (i) the ceasing of Instron Corporation to have record and beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) or control of ninety-five percent (95%) (on a fully-diluted basis, disregarding any director qualifying share ownership) of the combined voting power or economic benefit of the then outstanding equity interests of Instron, Ltd. and Instron GmbH (or any successor, by operation of law or otherwise, or assign thereof) entitled to vote generally in the election of directors or their foreign equivalents, as the case may be, of such Borrowers, (ii) the ceasing of Instron, Ltd. to have record and beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) or control of ninety-five percent (95%) (on a fully-diluted basis, disregarding any director qualifying share ownership) of the combined voting power or economic benefit of the then outstanding equity interests of Instron International, Ltd., (iii) the ceasing of Instron International, Ltd. to have record and beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) or control of ninety-five percent (95%) (on a fully-diluted basis, disregarding any director qualifying share ownership) of the combined voting power or economic benefit of the then outstanding equity interests of Instron Wolpert GmbH (or any successor, by operation of law or otherwise, or assign thereof) entitled to vote generally in the election of directors or their foreign equivalents, as the case may be, of such Borrowers, (iii) the ceasing of Instron GmbH to have record and beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) or control of ninety-five percent (95%) (on a fully-diluted basis, disregarding any director qualifying share ownership) of the combined voting power or economic benefit of the then outstanding equity interests of Instron Schenck Testing Systems, GmbH (or any successor, by operation of law or otherwise, or assign thereof) entitled to vote generally in the election of directors or their foreign equivalents, as the case may be, of such Borrowers, (iv) the ceasing of Kirtland Capital and Affiliates thereof to have record and beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) or control of more than fifty percent (50%) (on a fully-diluted basis, disregarding any director qualifying share ownership) of the combined voting power or economic benefit of the then outstanding equity interests of Instron Corporation (or any successor, by operation of law or otherwise, or assign thereof) entitled to vote generally in the election of directors; or (iv) individuals who constitute the board of directors of Instron Corporation on the Closing Date (each an "Incumbent Board") shall cease to constitute for any reason at least a majority of the Board of Directors of such Person at any time; provided, that any Person becoming a director subsequent to the date hereof whose election (or nomination for election) was approved by a vote of at least 60% of the directors comprising an II-6 151 Incumbent Board shall be considered for purposes hereof as though such Person was a member of such Incumbent Board (and the former member of such Incumbent Board who has been replaced thereby shall thereupon no longer be considered to be a member of such Incumbent Board). "CHARTER DOCUMENTS" means, as to any Person (other than a natural person), the charter, certificate or articles of incorporation, by-laws, regulations, general or limited partnership agreement, certificate of limited partnership, certificate of formation, operating agreement, or other similar organizational or governing documents of such Person. "CHATTEL PAPER" means "chattel paper" as defined in the UCC. "CLOSING DATE" means the date and the time as of which the initial Borrowings are made under this Agreement. "COLLATERAL" means, collectively, the Domestic Borrower Collateral and the U.K. Collateral. "COMMITMENT" means, with respect to any Bank, such Bank's Revolving Credit Commitment, if any, or its Term Commitment, if any, or any or all of such Commitments of such Bank, as applicable. "CONSOLIDATED ADJUSTED EBITDA" means, with respect to a Person, for any period, (a) Consolidated EBIT of such Person and its consolidated Subsidiaries for such period; plus (b) the sum (without duplication) of the amounts taken into account for such period in determining such Consolidated EBIT of (i) Consolidated Depreciation Expense of such Person and its consolidated Subsidiaries for such period, (ii) Consolidated Amortization Expense of such Person and its consolidated Subsidiaries for such period, and (iii) Consolidated Non-Cash Expenses of such Person and its consolidated Subsidiaries for such period, all as determined on a consolidated basis in accordance with GAAP; provided, however, that, notwithstanding anything to the contrary contained herein, the Consolidated Adjusted EBITDA of Instron Corporation and its consolidated Subsidiaries: (A) shall be increased for any Testing Period ending as of or prior to the Fiscal Quarter ended December 31, 1999, for purposes of determining compliance with those financial covenants set forth in Sections 7.4 during such Testing Period, by the amount of (a) with respect to the Fiscal Quarter ending on March 31, 1999, $200,000, (b) with respect to the Fiscal Quarter ending on June 30, 1999, $200,000, and (c) with respect to the Fiscal Quarter ending on September 30, 1999, $200,000; and (B) shall include for any Testing Period the appropriate financial items for any Person or business unit of a Person which has been acquired by the Borrowers on a going concern basis, for the portion of such Testing Period prior to the date of acquisition; provided that in so including financial items for such Person or business unit for any period prior to the date of acquisition, such items shall be included based on an assumed contribution to Consolidated Adjusted EBITDA acceptable to the Required Banks in their reasonable credit judgment; and (C) shall exclude for any Testing Period the appropriate financial items for any Person or business unit of a Person which has been disposed of by the Borrowers, for the portion of such Testing Period prior to the date of disposition; provided that in so excluding financial items for such Person or business unit for any period prior to the date II-7 152 of disposition, such items shall be excluded based on an assumed contribution to Consolidated Adjusted EBITDA acceptable to the Required Banks in their reasonable credit judgment. "CONSOLIDATED AMORTIZATION EXPENSE" means, with respect to a Person, for any period, all amortization expenses of such Person and its consolidated Subsidiaries during such period, as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED CAPITAL EXPENDITURES" means, with respect to a Person for any period, all Capital Expenditures of such Person and its consolidated Subsidiaries during such period, as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED DEPRECIATION EXPENSE" means, with respect to a Person, for any period, all depreciation expenses of such Person and its consolidated Subsidiaries during such period, as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED EBIT" means, with respect to a Person, for any period, (a) Consolidated Net Income of such Person and its consolidated Subsidiaries for such period; plus (b) the sum (without duplication) of the amounts taken into account for such period in determining such Consolidated Net Income of (i) Consolidated Interest Expense of such Person and its consolidated Subsidiaries for such period, (ii) Consolidated Income Tax Expense of such Person and its consolidated Subsidiaries for such period, (iii) amortization or write-off of deferred financing costs of such Person and its consolidated Subsidiaries for such period, (iv) with respect to Instron Corporation and its Consolidated Subsidiaries for any period, the amortization for such period of the original issue discount incurred with respect to the Senior Subordinated Notes, (v) Recapitalization Expenses and Costs, (vi) Kirtland Capital Management Fees and fees paid to the Board of Directors of Instron Corporation paid during such period not to exceed $600,000 and (vii) extraordinary losses and losses on sales of assets (other than sales of Inventory in the ordinary course of business of such Person or its consolidated Subsidiaries) and other non-recurring non-cash losses; less (c) the sum (without duplication) of the amounts taken into account for such period in determining such Consolidated Net Income of (i) gains on sales of assets (other than sales of Inventory in the ordinary course of business of such Person or its consolidated Subsidiaries) and (ii) other extraordinary gains and other non-recurring non-cash gains; all as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED EBIT TO CONSOLIDATED INTEREST EXPENSE RATIO" means, with respect to a Person, as at the end of any Fiscal Quarter, the ratio of: (a) Consolidated EBIT of such Person and its consolidated Subsidiaries for the Testing Period then ended to (b) the Consolidated Interest Expense of such Person and its consolidated Subsidiaries for the Testing Period then ended. "CONSOLIDATED EXCESS CASH FLOW" means, with respect to a Person, for any period of determination, the excess of: (a) the Consolidated Adjusted EBITDA of such Person and its consolidated Subsidiaries for such period over (b) the sum of (i) the Consolidated Fixed Charges of such Person and its consolidated Subsidiaries for such period plus (ii) any decrease (or minus any increase) in Consolidated Working Capital from the last day of the immediately preceding period to the last day of such period plus (iii) any voluntary prepayment of outstanding Term Loans pursuant to 2.10(d) during such period. "CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to a Person, for any Testing Period, the ratio of: (x) the Consolidated Adjusted EBITDA of such II-8 153 Person and its consolidated Subsidiaries for such period to (y) the Consolidated Fixed Charges of such Person and its consolidated Subsidiaries for such period, as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED FIXED CHARGES" means, with respect to a Person, for any period of determination, the sum of: (a) the Consolidated Interest Expense of such Person and its consolidated Subsidiaries for such period, plus (b) the Consolidated Income Tax Expense of such Person and its consolidated Subsidiaries during such period, plus (c) the Consolidated Capital Expenditures of such Person and its consolidated Subsidiaries for such period, plus (d) all scheduled principal payments (including the principal payment portion of any scheduled Capitalized Lease rental payments) of such Person and its consolidated Subsidiaries made during such period with respect to the Consolidated Total Funded Debt, all as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INCOME TAX EXPENSE" means, with respect to a Person, for any period, all taxes (based on the net income of such Person and its consolidated Subsidiaries for such period) paid in cash during such period (including, without limitation, any additions to such taxes and any penalties and interest with respect thereto), all as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, with respect to a Person, for any period, (a) the net amount of interest expense of such Person and its consolidated Subsidiaries paid in cash during such period on the aggregate outstanding principal amount of the Indebtedness of such Person and its consolidated Subsidiaries plus (b) any capitalized interest of such Person and its consolidated Subsidiaries which accrued during such period, plus (c) the interest payment portion of any Capitalized Lease rental payment of such Person and its consolidated Subsidiaries made during such period, all as determined on a consolidated basis in accordance with GAAP, and excluding, with respect to Instron Corporation and its Consolidated Subsidiaries for any Testing Period, the amortization for such Testing Period of the original issue discount incurred with respect to the Senior Subordinated Notes. "CONSOLIDATED NET INCOME" means, with respect to a Person, for any period, the net income (or loss) of such Person and its consolidated Subsidiaries for such period (after taxes and extraordinary items but without giving effect to any expense related to the fair market value adjustment of inventory) taken as a single accounting period determined on a consolidated basis in conformity with GAAP; provided, however, that there shall be excluded from Consolidated Net Income of Instron Corporation and its consolidated Subsidiaries: (i) the income, (or loss) of any entity (other than the consolidated Subsidiaries of Instron Corporation) in which Instron Corporation or any such consolidated Subsidiaries has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Instron Corporation or any of its consolidated Subsidiaries during such period, and (ii) the income of any Subsidiary of Instron Corporation or any of its consolidated Subsidiaries to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary. "CONSOLIDATED NET WORTH" means, with respect to a Person, as of the date of determination, all amounts that would be included under the caption "total shareholders' equity" (or any like caption) on a consolidated balance sheet of such Person and its consolidated Subsidiaries as at such date (and including in such amount the amount in II-9 154 respect of any preferred stock of such Person), all as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED NON-CASH EXPENSES" means, with respect to a Person, for any period, the non-cash expenses of such Person and its consolidated Subsidiaries for such period (for the purposes of this definition, excluding any capitalized interest and deferred taxes and any write-offs of previously capitalized finance costs), all as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED SENIOR FUNDED DEBT" means, with respect to a Person, at any date of determination, (a) Consolidated Total Funded Debt of such Person and its consolidated Subsidiaries less, (b) in the case of Instron Corporation and its consolidated Subsidiaries, the then outstanding principal amount of Subordinated Debt owing by any Borrower or any Subsidiary thereof, all as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED SENIOR FUNDED DEBT TO ADJUSTED EBITDA RATIO" means, with respect to a Person, as at the end of any Fiscal Quarter, the ratio of: (a) the aggregate principal amount of the Consolidated Senior Funded Debt of such Person and its Subsidiaries outstanding as of the end of such Fiscal Quarter to (b) the Consolidated Adjusted EBITDA of such Person and its consolidated Subsidiaries for the Testing Period then ended. "CONSOLIDATED TOTAL FUNDED DEBT" means, with respect to a Person, at any date of determination, without duplication, all Indebtedness of such Person and its consolidated Subsidiaries which consists of: (a) Indebtedness for borrowed money, (b) bonds, notes, debentures and similar debt securities, (c) the deferred purchase price of capital assets or services which in accordance with GAAP would be shown on the liability side of a consolidated balance sheet of such Person and its consolidated Subsidiaries, (d) all Capitalized Lease Obligations, (e) the present value, determined on the basis of the implicit interest rate, of all basic rental obligations under all synthetic leases (i.e. leases accounted for by the lessee as operating leases under which the lessee is the "owner" of the leased property for Federal income tax purposes), (f) all obligations of such Person as an account party in respect of letters of credit, banker's acceptances, Demand Guarantees and Contract Guarantees (in each case valued at the stated face amount there for, to the extent less, the stated or determinable amount (or where not so stated or determinable, the reasonably anticipated liability with respect to which such letters of credit, banker's acceptances, Demand Guarantees and Contract Guarantees were issued as determined in good faith by the Board of Directors of Instron Corporation); provided, however, that, for all purposes of this Agreement including determining the Borrowers' compliance with Sections 7.4(d) and 7.4(e) hereof and determining the Applicable Fee Percentage and the Applicable Margin, obligations of the Borrowers and the Subsidiaries thereof as account party in respect of (x) any unsecured Existing Letters of Credit comprised of Demand Guarantees or Contract Guarantees, (y) any unsecured renewals, extensions or replacements thereof, and (z) any unsecured Demand Guarantees or Contract Guarantees issued after the Effective Date which are not Letters of Credit issued hereunder (in each case, valued at the stated face amount thereof or, to the extent less, the stated or determinable amount (or where not so stated or determinable, the reasonably anticipated liability with respect to which such Existing Letter of Credit, renewals, extensions or replacements or subsequently issued Demand Guarantees or Contract Guarantees were issued as determined in good faith by the Board of Directors of Instron Corporation) to the extent the aggregate thereof is not in excess of the amount of such obligations permitted by Section 7.3(b)(ix) or Section ERROR! REFERENCE SOURCE NOT FOUND. hereof, shall not be considered as Consolidated Total Funded Debt of Instron and II-10 155 its Consolidated Subsidiaries, (g) all net obligations of such Person under Hedge Agreements, (h) the full outstanding value of trade accounts receivable sold with full or limited recourse (other than sales of delinquent accounts receivable for collection purposes), (i) the stated value, or liquidation value (if higher), of all Redeemable Stock of such Person, and (j) in the case of Instron Corporation and its consolidated Subsidiaries, including the then outstanding principal amount of all Loans owing by each of the Borrowers to the Banks under this Agreement and all Subordinated Debt owing by any of the Borrowers, all as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED TOTAL FUNDED DEBT TO ADJUSTED EBITDA RATIO" means, with respect to a Person, as at the end of any Fiscal Quarter, the ratio of: (a) the aggregate principal amount of the Consolidated Total Funded Debt of such Person and its Subsidiaries outstanding as of the end of such Fiscal Quarter to (b) the Consolidated Adjusted EBITDA of such Person and its Subsidiaries for the Testing Period then ended. "CONSOLIDATED WORKING CAPITAL" means, with respect to a Person, as of any date of determination, the excess of consolidated current assets of such Person and its Subsidiaries on such date over the consolidated current liabilities of such Person and its Subsidiaries on such date, all as determined on a consolidated basis in accordance with GAAP. "CONTRACT GUARANTEE" means any guarantee or other payment undertaking for the payment of money on presentation, in conformity with the terms of such undertaking, supported by a judicial or arbitral award justifying the claim for payment under the contract guarantee and otherwise constituting a contract guarantee subject to the Uniform Rules for Contract Guarantees (1978), International Chamber of Commerce Publication No. 325, and any subsequent revisions thereof. "CONTROL ACCOUNT" has the meaning set forth in Section 2.17(c) of this Agreement. "COST OF FUNDS RATE" means the interest rate per annum determined from time to time by the Designated Swing Line Lender as its cost of funds, which rate may not be the lowest cost of funds available to the Designated Swing Line Lender, in any one or more money market to which the Designated Swing Line Lender may have access which Cost of Funds Rate shall be a fluctuating rate per annum (computed on the basis of a year of 360 days for actual number of days elapsed) and shall change automatically from time to time effective as of the time each such change in such Cost of Funds rate is effective. "CREDIT EVENT" means: (a) the making of a Revolving Credit Loan by any Bank, (b) the making of any Swing Line Loan by any Designated Swing Line Lender, (c) the issuance of any Letter of Credit by a Designated Letter of Credit Issuer and the participation by the Banks in the risk thereof, (d) the delivery by the Borrower of: (w) a Credit Request requesting a Revolving Credit Borrowing, (x) a Swing Line Loan Request requesting a Swing Line Loan, (y) a Letter of Credit Request requesting a Letter of Credit or (z) a Rate Conversion/ Continuation Request requesting the conversion or continuation with respect to a LIBOR Rate Borrowing, or (e) a Rate Conversion or Rate Continuation pursuant to such a Rate Conversion/Continuation Request. "CREDIT REQUEST" means a request (i) for a Revolving Credit Borrowing made in accordance with Section 2.2(a), in the form attached hereto as Exhibit B-1 and incorporated herein by reference. II-11 156 "DEEMED CREDIT REQUEST" has the meaning specified in Section 2.2(b) of this Agreement. "DEFAULTING LENDER" means any Bank with respect to which a Lender Default is in effect. "DEFAULT UNDER ERISA" means: (a) the occurrence or existence of a material Accumulated Funding Deficiency in respect of any Employee Benefit Plan within the scope of Section 302(a) of ERISA, or (b) any failure by Borrower or any Subsidiary to make a full and timely payment of premiums required by Section 4001 of ERISA in respect of any Employee Benefit Plan, or (c) the occurrence or existence of any material liability under Section 4062, 4063, 4064, 4069, 4201, 4217 or 4243 of ERISA in respect of any Employee Benefit Plan, or (d) the occurrence or existence of any material breach of any other law or regulation in respect of any such Employee Benefit Plan, or (e) the institution or existence of any action for the forcible termination of any such Employee Benefit Plan which is within the scope of Section 4001(a)(3) or (15) of ERISA. "DEMAND GUARANTEE" means any guarantee or other payment undertaking for the payment of money on presentation, in conformity with the terms of such undertaking, of a written demand for payment and such other documents as may be specified in such Demand Guarantee and otherwise constituting a demand guarantee subject to the Uniform Rules for Demand Guarantees (1992 Revision), International Chamber of Commerce Publication No. 458, and any subsequent revisions thereof. "DESIGNATED EUROPEAN ADMINISTRATIVE AGENT" means each Bank, in its capacity as Designated European Administrative Agent pursuant to the terms of this Agreement, as the Administrative Agent, with the consent of the Borrowers, has designated to act as Designated European Administrative Agent for Foreign Borrowers specified by the Administrative Agent pursuant to Section 11.2 of this Agreement and which becomes a party to this Agreement pursuant to a joinder agreement executed by such Designated European Administrative Agent in form and substance satisfactory to the Administrative Agent and pursuant to which such Designated European Administrative Agent becomes a party to this Agent in such capacity. "DESIGNATED EUROPEAN CONTROL ACCOUNT" has the meaning set forth in 2.17(d) of this Agreement. "DESIGNATED GERMAN LETTER OF CREDIT ISSUER" means the Bank or Banks, in the capacity as a Designated Letter of Credit Issuer for Letters of Credit (including Demand Guarantees and Contract Guarantees), designated by the Administrative Agent from time to time, in its sole discretion in consultation with the applicable Designated European Administrative Agent designated for such Borrowers and with the consent of such Borrowers, to issue such Letters of Credit to Instron Schenck Testing Systems, GmbH, Instron Wolpert GmbH, and Foreign Subsidiaries (other than U.K. Foreign Subsidiaries) thereof, and each successor and assign thereof. "DESIGNATED GERMAN SWING LINE LENDER" means the Bank or Banks, in the capacity as a Designated Swing Line Lender, designated by the Administrative Agent from time to time, in its sole discretion in consultation with the applicable Designated European Administrative Agent designated for such Borrowers and with the consent of such Borrowers, to advance Swing Line Loans to Instron Schenck Testing Systems, GmbH, Instron Wolpert GmbH, and Foreign Subsidiaries (other than U.K. Foreign Subsidiaries) thereof, and its successors and assigns. II-12 157 "DESIGNATED HEDGE AGREEMENT" means any Hedge Agreement to which a Borrower is a party which, pursuant to a written instrument signed by the Administrative Agent, has been designated as a Designated Hedge Agreement so that credit exposure of the counterparty thereunder with respect to a Borrower and the will be entitled to share in the benefits of the grant of security interests by such Borrower set forth in Section 4.1 of this Agreement under Designated Hedge Agreements. The Administrative Agent may, without the approval or consent of the Banks, designate a Hedge Agreement as a Designated Hedge Agreement if the counterparty is a Bank or an Affiliate of a Bank and the maximum credit exposure of such counterparty under such Hedge Agreement to the applicable Borrower is reasonably determined by the Administrative Agent, in accordance with its own customary valuation practices, not to exceed $3,000,000; provided, however, that if the counterparty is not a Bank or an Affiliate of a Bank, or such maximum credit exposure is so determined by the Administrative Agent to be greater than $3,000,000, the Administrative Agent shall only designate the Hedge Agreement involving such counterparty as a Designated Hedge Agreement if the Administrative Agent is instructed to do so by the Required Banks. The Administrative Agent may impose as a condition to any designation of a Designated Hedge Agreement a requirement that the counterparty enter into an intercreditor or similar agreement with the Administrative Agent under which recoveries from the Borrowers with respect to such Designated Hedge Agreement will be shared in a manner consistent with the provisions of Section 9.4(d) of this Agreement. "DESIGNATED HEDGE CREDITOR" means the counterparty to any Hedge Agreement to which any Borrower is a party which has been designated by the Administrative Agent in accordance with this Agreement as a Designated Hedge Agreement. "DESIGNATED HEDGE OBLIGATIONS" means the obligations of a Borrower to the Designated Hedge Creditor under any Designated Hedge Agreement. "DESIGNATED LETTER OF CREDIT ISSUER" means, unless otherwise agreed by the Borrower Representative, the Required Banks and the Administrative Agent (and except for Existing Letters of Credit which remain outstanding for all purposes as Letters of Credit hereunder pursuant to the terms of Section 2.12(b) hereof and which have been issued to a Borrower by a Designated Letter of Credit Issuer not otherwise designated for such Borrower), (a) with respect to Letters of Credit issued or to be issued to Domestic Borrowers and Domestic Subsidiaries, the Designated U.S. Letter of Credit Issuer, (b) with respect to Letters of Credit issued or to be issued to Instron Schenck Testing Systems, GmbH, Instron Wolpert GmbH, and Foreign Subsidiaries (other than U.K. Foreign Subsidiaries) thereof, the Designated German Letter of Credit Issuer or its Lending Installation, (c) with respect to Letters of Credit issued or to be issued to Instron, Ltd. and U.K. Foreign Subsidiaries, the Designated U.K. Letter of Credit Issuer or its Lending Installation, and (d) each other Bank that is requested and agrees to act as a Designated Letter of Credit Issuer by the Borrower Representative and is approved by the Administrative Agent which approval shall not be unreasonably be withheld. "DESIGNATED SWING LINE LENDER" means, unless otherwise agreed by the Borrower Representative, the Required Banks and the Administrative Agent, (a) with respect to Swing Line Loans to Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH, the Designated German Swing Line Lender, and (b) with respect to Swing Line Loans advanced or to be advanced to Instron, Ltd., the Designated U.K. Swing Line Lender "DESIGNATED U.K. LETTER OF CREDIT ISSUER" means the Bank or Banks, in the capacity as a Designated Letter of Credit Issuer for Letters of Credit (including Demand II-13 158 Guarantees and Contract Guarantees), designated by the Administrative Agent from time to time, in its sole discretion in consultation with the applicable Designated European Administrative Agent designated for such Borrowers and with the consent of such Borrowers, to issue such Letters of Credit to Instron, Ltd. and U.K. Foreign Subsidiaries, and each successor and assign thereof. "DESIGNATED U.K. SWING LINE LENDER" means the Bank or Banks, in the capacity as a Designated Swing Line Lender, designated by the Administrative Agent from time to time, in its sole discretion in consultation with the applicable Designated European Administrative Agent designated for such Borrowers and with the consent of such Borrowers, to advance Swing Line Loans to Instron, Ltd. and the U.K. Foreign Subsidiaries thereof, and its successors and assigns. "DESIGNATED U.S. LETTER OF CREDIT ISSUER" means NCB in its capacity as a Designated Letter of Credit Issuer for Letters of Credit, and its successors and assigns. "DISTRIBUTION" means, in respect of a Person, a payment made, liability incurred or other consideration given by such Person for the purchase, acquisition, redemption or retirement of any capital stock (whether added to treasury or otherwise) of such Person or as a dividend, return of capital or other distribution in respect of the capital stock of such Person (other than any stock dividend or stock split payable solely in capital stock of such Person). "DOLLARS" and the sign "$" each means lawful money of the United States. "DOMESTIC BORROWER COLLATERAL" has the meaning set forth in Section 4.1(a). "DOMESTIC BORROWERS" means Instron Corporation and each Domestic Subsidiary Borrower. "DOMESTIC PLEDGING BORROWER" means each Pledging Borrower that is also a Domestic Borrower. "DOMESTIC SUBSIDIARY" means any Subsidiary organized under the laws of the United States, any State thereof, the District of Columbia, or any United States possession, the chief executive office and principal place of business of which is located in, and which conducts the majority of its business within, the United States and its territories and possessions but excludes any such Subsidiary the majority*** of whose capital stock is owned directly or indirectly by a Foreign Subsidiary or by a Foreign Borrower. "DOMESTIC SUBSIDIARY BORROWERS" means each Domestic Subsidiary of Instron Corporation that is also a Borrower. "EFFECTIVE TIME" has the meaning specified in Section 14.5 of this Agreement. "ELIGIBLE ACCOUNTS" means only such Accounts of each of the Borrowers as the Administrative Agent, in its good faith business judgment, shall from time to time consider to be Eligible Accounts and, by way of example and not limitation, excluding Accounts which: (a) unless payment of such Accounts is guaranteed by a letter of credit in form and substance and issued by a financial institution reasonably satisfactory to the Administrative Agent and which has been transferred or assigned to the II-14 159 Administrative Agent as security for the Obligations, either: (i) remain unpaid more than ninety (90) days after the original due date of invoice or (ii) have an original due date greater than ninety (90) days after the original date of invoice; (b) have arisen from services performed by such Borrower to or for the Account Debtor outside the ordinary course of business; (c) have arisen from the sale by such Borrower of goods where such goods have not been shipped or delivered to the Account Debtor; (d) have arisen from transactions which are not complete, are not bona fide, or require further acts on the part of such Borrower to make such Account payable by the Account Debtor; (e) have arisen in connection with sales of goods which were shipped or delivered to the Account Debtor on other than an absolute sale basis, such as shipments or deliveries made on consignment, a sale or return basis, a guaranteed sale basis, a bill and hold basis, or on the basis of any similar understanding; (f) have arisen in connection with sales of goods which were, at the time of sale thereof, subject to any Lien, except the security interest in favor of the Administrative Agent created by the Loan Documents; (g) are subject to any provision prohibiting assignment or requiring notice of or consent to such assignment; (h) are subject to any Lien other than the Liens described in Section 7.3(d)(i), (iii) above (v) above, or (vii) above; (i) are Accounts with respect to which the Account Debtor is currently asserting setoff, counterclaim, defense, allowance, dispute, or adjustment rights to the extent of such setoff, counterclaim, defense, allowance, dispute, or adjustment rights, or are Accounts that have arisen in connection with the sale of goods which have been returned, rejected, repossessed, lost or damaged; (j) are owed from an Account Debtor of which such Borrower has received notice that such Account Debtor is the subject of Financial Impairment or has suspended normal business operations, dissolved, liquidated or terminated its existence; (k) are owed by any Account Debtor located in New Jersey or Minnesota unless such Borrower has filed all legally required Notice of Business Activities Reports with the New Jersey Department of Taxation or the Minnesota Department of Revenue, respectively; (l) are Accounts with respect to which the Account Debtor is located in any state which requires that such Borrower, in order to sue any Person in such state's courts, either (i) qualify to do business in such state prior to the time the claim against such Person arises or prior to the time such Borrower first does business within such state, as applicable or (ii) file a report with the taxation division of such state for the then current year, unless such Borrower has fulfilled such requirements to the extent applicable for the then current year; II-15 160 (m) are evidenced by Chattel Paper or any Instrument of any kind (including, without limitation, any promissory notes); (n) are Accounts with respect to which any of the representations, warranties, covenants and agreements contained in this Agreement or any of the other Loan Documents are not or have ceased to be complete and correct or have been breached; (o) are Accounts with respect to which the Account Debtor is also a supplier or creditor of such Borrower, except to the extent that, in each case, the aggregate amount owed such Borrower by such Account Debtor exceeds the aggregate amount owed to such Account Debtor by such Borrower; (p) are Accounts with respect to which the Administrative Agent does not have a first priority, perfected security interest; (q) represent a progress billing or have had the time for payment extended by such Borrower without the consent of the Administrative Agent (for the purposes hereof, "progress billing" means any invoice for goods sold or leased or services rendered under a contract or agreement pursuant to which the Account Debtor's obligation to pay such invoice is conditioned upon such Borrower's completion of any further performance under the contract or agreement); (r) are owed by the United States or any department, agency, or instrumentality thereof unless such Borrower has complied with the Federal Assignment of Claims Act in respect of the Administrative Agent's security interest therein as granted hereunder; (s) are owed by any State or any department, agency, or instrumentality thereof unless such Borrower has complied with any applicable statutory or regulatory requirements thereof in respect of the Administrative Agent's security interest therein as granted hereunder; (t) are owed to such Borrower by an Affiliate of such Borrower; (u) are owed by an Account Debtor with respect to which more than twenty-five percent (25%) of the balances then outstanding on Accounts owed by such Account Debtor and its Affiliates to such Borrower have remained unpaid for more than ninety (90) days from the dates of their original due dates, as applicable; or (v) are, in the Administrative Agent's good faith judgment, Accounts of an Account Debtor which is deemed to be an unacceptable credit risk or Accounts which are otherwise deemed unacceptable (the Administrative Agent using reasonable efforts to notify the Borrower Representative of any such determination under this clause (v) at least five (5) Business Days prior to excluding the Accounts excluded under this clause (v), but having no liability for any damages arising out of any failure to so notify the Borrower Representative). "ELIGIBLE ASSIGNEE" means (a) a Bank or any Affiliate thereof; (b) a commercial bank having total assets in excess of $1,000,000,000; (c) a savings and loan association or savings bank organized under the laws of the United States or any state thereof having total assets in excess of $1,000,000,000; or (d) a finance company, insurance company, other financial institution or fund acceptable to the Administrative Agent and the II-16 161 Borrower Representative, which acceptance shall not be unreasonably withheld; provided that each Person described in each of the foregoing clauses (a) through (d) shall have provided to the Borrower Representative and the Administrative Agent or Designated European Administrative Agent to the extent a Designated European Administrative Agent h as been designated for Instron, Ltd. or such other Foreign Borrower, (i) if such Person is organized under the laws of a jurisdiction outside the United States, duly completed copies of Form 1001 or Form 4224 or any successor form prescribed by the Internal Revenue Service of the United States certifying that such Person is exempt from United States withholding taxes with respect to all payments to be made to such Person if such Person were to become a Bank hereunder or other documents satisfactory to the Borrower and the Administrative Agent indicating that all payments to be made to such Person if such Person were to become a Bank hereunder are not subject to such taxes and, if any such forms or other documents are so provided, such Person was eligible under applicable law at the time such information was so provided to make such provision and (ii) for any other Person, an Exemption Certificate (as defined in Section 13.3(e)) and (iii) if such Person is managed and controlled from or incorporated under the laws of any jurisdiction other than the United Kingdom and which is making a Loan to Instron Ltd. through a lending branch or lending office located outside the United Kingdom, duly submitted copies of Form "Claim on behalf of a United States Domestic Corporation to Relief from United Kingdom Income Tax on Interest and Royalties Arising in the United Kingdom (or its counterpart for jurisdictions other than the United States) and (iv) if such Person has filed in any other relevant jurisdiction to the extent legally possible for such Person to so file, such filing or documentation required to request exemption form withholding in such jurisdiction. "ELIGIBLE INVENTORY" means only such Inventory of each of the Borrowers, valued at the lower of cost (on a first in, first out basis) or market, as the Administrative Agent, in its good faith judgment, shall from time to time consider to be Eligible Inventory and, by way of example and not limitation, excluding Inventory which: (a) consists of obsolete, damaged, defective, unmerchantable, spoiled, outdated or unsaleable items; (b) consists of: goods not held for sale (such as, without limitation, any labels, packaging, lubricants, maintenance items and supplies and any Inventory used in connection with research and development), any work-in-process, or any other Inventory which is not raw material or finished goods held for resale; (c) are subject to any Lien other than the Liens described in Section 7.3(d)(i), (iii) above (v) above, or (vii) above; (d) is not subject to a first priority, perfected security interest in favor of the Administrative Agent (other than Inventory consisting of finished goods designated as "shipped not invoiced"); (e) is located at a location not owned by such Borrower and for which such Borrower has not delivered to the Administrative Agent an appropriate landlord or warehouseman's waiver, in form and substance reasonably satisfactory to the Administrative Agent; (f) is in the possession of a bailee or other third Person including Inventory held by a third party for processing or Inventory purchased by but not yet delivered to such Borrower and for which such Borrower has not delivered to II-17 162 the Administrative Agent an appropriate bailee's waiver, in form and substance reasonably satisfactory to the Administrative Agent; (g) is held by such Borrower on consignment or Inventory held by or placed into the possession of a third Person for sale or display by that Person; (h) is located outside of the United States unless such Inventory is located in the United Kingdom or the Federal Republic of Germany and the Administrative Agent has a first priority Lien perfected to the satisfaction of the Administrative Agent in such Inventory; (i) is manufactured, produced or purchased pursuant to any contract with the United States government, any agency or instrumentality thereof or prime contractor thereof, which contract provides for progress or Loan payments to the extent such Inventory is identified to such contract; or (j) is, in the Administrative Agent's good faith judgment, Inventory which is otherwise deemed ineligible (the Administrative Agent using reasonable efforts to notify the Borrower representative of any such determination under this clause (j) at least five (5) Business Days prior to excluding the Inventory excluded under this clause (j), but having no liability for any damages arising out of any failure to so notify the Borrower Representative). "EMPLOYEE BENEFIT PLAN" means an "employee benefit plan" as defined in Section 3(3) of ERISA of a Borrower or any of its ERISA Affiliates or any "multiemployer plan" as defined in Section 4001(a)(3) of ERISA or any "pension plan" as defined in Section 3(2) of ERISA or any "welfare plan" as defined in Section 3(1) of ERISA. "EMU" means Economic and Monetary Union as contemplated in the Treaty on European Union. "EMU LEGISLATION" means legislative measures of the European Council (including European Council regulations) for the introduction of, changeover to or operation of a single or unified European currency (whether known as the Euro or otherwise), being in part the implementation of the third stage of EMU. "ENVIRONMENTAL CLAIMS" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, complaints, liens, notices of non-compliance, requests for information, investigations, proceedings, consent orders or consent agreements relating in any way to any Environmental Law or any Environmental Permit, instituted by any Person, including, without limitation, (a) by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law or (b) by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health or the environment. "ENVIRONMENTAL LAWS" means any foreign, federal, state or local law, regulation, ordinance, or order pertaining to the protection of the environment and the health and safety of the public, including (but not limited to) CERCLA, RCRA, the Hazardous Materials Transportation Act, 49 USC Sections 1801 et seq., the Federal Water Pollution Control Act (33 USC Sections 1251 et seq.), the Toxic Substances Control Act (15 USC Sections 2601 et seq.) and the Occupational Safety and Health Act (29 USC Sections 651 et seq.), and II-18 163 all similar foreign, state, regional or local laws, treaties, regulations, statutes or ordinances, common law, civil laws, or any case precedents, rulings, requirements, directives or requests having the force of law of any foreign or domestic governmental authority, agency or tribunal, and all foreign equivalents thereof, as the same have been or hereafter may be amended, and any and all analogous future laws, treaties, regulations, statutes or ordinances, common law, civil laws, or any case precedents, rulings, requirements, directives or requests having the force of law of any foreign or domestic governmental authority, agency or tribunal and the regulations promulgated pursuant thereto, which governs: (a) the existence, cleanup and/or remedy of contamination on property; (b) the emission or discharge of Hazardous Materials into the environment; (c) the control of hazardous wastes; (d) the use, generation, transport, treatment, storage, disposal, removal or recovery of Hazardous Materials; or (e) the maintenance and development of wetlands. "ENVIRONMENTAL PERMITS" means all permits, approvals, certificates, notifications, identification numbers, licenses and other authorizations required under any applicable Environmental Laws or necessary for the conduct of business. "ENVIRONMENTAL REMEDIATION" means any curative measure taken in respect of any non-compliance with, or otherwise related to, any Environmental Law. "EQUIPMENT" means "equipment" (as defined in the UCC) and fixtures (as defined in the UCC) including, without limitation, all machinery, equipment, furniture, furnishings, fixtures, and packaging production equipment, parts, material handling equipment, supplies, aircraft and motor vehicles (titled and untitled) of every kind and description, now or hereafter owned by a Borrower, or in which such Borrower may have or may hereafter acquire any interest, wheresoever located. "ERISA" means the Employee Retirement Income Security Act of 1974 (Public Law 93-406), as amended, and in the event of any amendment affecting any section thereof referred to in this Agreement, that reference shall be a reference to that section as amended, supplemented, replaced or otherwise modified. "ERISA AFFILIATE" of any Person means any other Person that is under common control with such Person within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes such Person and which is treated as a single employer under Sections 414(b) or (c) of the Internal Revenue Code. In addition, for provisions of this Agreement that relate to Section 412 of the Internal Revenue Code, the term "ERISA Affiliate" of any Person shall mean any other Person aggregated with such Person under Sections 414(b), (c), (m) or (o) of the Internal Revenue Code. "ERISA REGULATOR" means any governmental agency (such as the Department of Labor, the Internal Revenue Service and the Pension Benefit Guaranty Corporation) having any regulatory authority over any Employee Benefit Plan. "EURO" means the single currency of Participating Member States of the European Union, which shall be an Alternate Currency under this Agreement. "EUROCURRENCY RESERVE PERCENTAGE" means, for any Interest Period in respect of any LIBOR Rate Loan, as of any date of determination, the aggregate of the then stated maximum reserve percentages (including any marginal, special, emergency or supplemental reserves), expressed as a decimal, applicable to such Interest Period (if more than one such percentage is applicable, the daily average of such percentages for those days in such Interest Period during which any such percentages shall be so II-19 164 applicable) by the Board of Governors of the Federal Reserve System, any successor thereto, or any other banking authority, domestic or foreign, to which the Administrative Agent or any Bank may be subject in respect to eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board) or in respect of any other category of liabilities including deposits by reference to which the interest rate on LIBOR Rate Loans is determined or any category of extension of credit or other assets that include the LIBOR Rate Loans. For purposes hereof, such reserve requirements shall include, without limitation, those imposed under Regulation D of the Federal Reserve Board and the LIBOR Rate Loans shall be deemed to constitute Eurocurrency Liabilities subject to such reserve requirements without benefit of credits for proration, exceptions or offsets which may be available from time to time to any Bank under said Regulation D. "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURO UNIT" means a currency unit of the Euro. "EVENT OF DEFAULT" has the meaning specified in Section 8 of this Agreement. "EXCHANGE RATE" means, on any date, (a) with respect to any Alternate Currency in relation to Dollars, the rate at which such Alternate Currency may be exchanged into Dollars, as set forth on such date on the relevant Reuters currency page at or about 11:00 a.m. London time, on such date, (b) with respect to Dollars in relation to any specified Alternate Currency, the rate at which Dollars may be exchanged into such Alternate Currency, as set forth on such date on the relevant Reuters currency page at or about 11:00 a.m. London time, on such date, and (c) with respect to any Alternate Currency in relation to any other Alternate Currency, the rate at which such Alternate Currency may be exchanged into such other Alternate Currency, as set forth on such date on the relevant Reuters currency page at or about 11:00 a.m. London time, on such date, provided, however, that in the event that any of the foregoing rates does not appear on any Reuters currency page, the "Exchange Rate" with respect to such currency shall be determined by reference to such other publicly available service for exchange rates as may be agreed upon by the Administrative Agent and Instron Corporation or, in the absence of such agreement, such "Exchange Rate" shall instead be the Administrative Agent's spot rate of exchange in the market which its foreign currency exchange operations are then being conducted, at or about 10:00 A.M., local time in such market, on such date for such currencies, for delivery two (2) Business Days later; provided, further, that if at the time of any such determination, no such spot rate can be reasonably quoted, the Administrative Agent may use any reasonable method as it deems applicable to determine such rate, and such determination shall be conclusive absent manifest error. "EXISTING CREDIT FACILITIES" means each agreement, document or instrument set forth in the Supplemental Schedule and evidencing Existing Indebtedness for borrowed money of any of the Borrowers, and all instruments, agreements and other documents executed in connection therewith, other than those which are unsecured and which evidence in the aggregate less than One Million Dollars ($1,000,000), in each case as the same have been amended, supplemented or otherwise modified through the Closing Date. "EXISTING INDEBTEDNESS" means all Indebtedness of the Borrowers and the Subsidiaries thereof outstanding under the Existing Credit Facilities. II-20 165 "EXISTING LETTERS OF CREDIT" means letters of credit, Demand Guarantees and Contract Guarantees outstanding on the Closing Date which will continue in effect after the Closing Date. "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest one hundredth of one percent (1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided, however, that: (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Effective Rate for such day shall be such a rate on such transactions on the immediately preceding Business Day as so published on the next succeeding Business Day and (b) if such rate is not so published for any Business Day, the Federal Funds Effective Rate for such Business Day shall be the average of quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent. "FEE PERCENTAGE ADJUSTMENT DATE" has the meaning specified in Section 2.16(e) of this Agreement. "FEE PERCENTAGE DETERMINATION DATE" has the meaning specified in Section 2.16(e) of this Agreement. "FINANCIAL IMPAIRMENT" means, in respect of a Person, the distressed economic condition of such Person manifested by any one or more of the following events: (a) the discontinuation of the business of the Person; (b) the Person generally ceases or is generally unable or admits in writing its inability, generally, to make timely payment upon the Person's debts, obligations, or liabilities as they mature or come due; (c) the assignment by the Person for the benefit of creditors; (d) the voluntary institution by the Person of, or the consent granted by the Person to the involuntary institution of (whether by petition, complaint, application, default, answer (including, without limitation, an answer or any other permissible or required responsive pleading admitting: (i) the jurisdiction of the forum or (ii) any material allegations of the petition, complaint, application, or other writing to which such answer serves as a responsive pleading thereto), or otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation, receivership, trusteeship, or similar proceeding pursuant to or purporting to be pursuant to any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation, receivership, trusteeship, or similar law of any jurisdiction; (e) the voluntary application by the Person for or consent granted by the Person to the involuntary appointment of any receiver, trustee, or similar officer (i) for the Person or (ii) of or for all or any substantial part of the Person's property; or (f) the commencement or filing against a Person, without such Person's application, approval or consent, of an involuntary proceeding or an II-21 166 involuntary petition seeking: (a) liquidation, reorganization or other relief in respect of such Person, its debts or all or a substantial part of its assets under any Federal, state or foreign bankruptcy, insolvency, receivership, or similar law now or hereafter in effect or (b) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for such Person or for a substantial part of its assets, and, in any such case, either (i) such proceeding or petition shall continue without dismissal for sixty (60) days or (ii) an order or decree approving or ordering any of the foregoing shall be entered. "FISCAL MONTH" means any of the twelve consecutive monthly fiscal accounting periods collectively forming a Fiscal Year of Instron Corporation. "FISCAL QUARTER" means any of the four consecutive three-month fiscal accounting periods collectively forming a Fiscal Year of Instron Corporation. "FISCAL YEAR" means regular annual accounting period for federal income tax purposes of Instron Corporation and its consolidated Subsidiaries which is currently established as ending December 31. "FOREIGN SUBSIDIARY" means any Subsidiary (i) which is not incorporated in the United States and substantially all of whose assets and properties are located, or substantially all of whose business is carried on, outside the United States, (ii) substantially all of whose assets consist of investments in Subsidiaries that are Foreign Subsidiaries as defined in clause (i) of this definition , or (iii) which is a majority owned Subsidiary of a Foreign Subsidiary or a Foreign Borrower. "FOREIGN BORROWER" means each Foreign Subsidiary of Instron Corporation that is also a Borrower. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board, the American Institute of Certified Public Accountants and the Financial Accounting Standards Board or in such other statements by such other entity as may be in general use by significant segments of the accounting profession. "GENERAL INTANGIBLES" means all "general intangibles" (as defined in the UCC) of a Borrower including, without limitation, all present and future choses in action, causes of action and all other intangible personal property of such Borrower of every kind and nature (other than Accounts), now or hereafter arising, all corporate or other business records; inventions, designs, blueprints, patents and patent applications, trademarks and trademark applications, trade names, trade secrets, goodwill, registrations, copyrights, licenses, franchises, customer lists, tax refunds, tax refund claims, rights and claims against carriers and shippers, and rights to indemnification. "GERMAN COLLATERAL" means such personal property and assets of Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH (including book accounts and inventory stock thereof), as are defined in the German Collateral Documents. "GERMAN COLLATERAL DOCUMENTS" means, collectively, (i) each Security Transfer Agreement, each dated as of the date hereof and executed by Instron Schenck Testing Systems, GmbH or Instron Wolpert GmbH, as the case may be, in favor of the Administrative Agent, with respect to the accounts of Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH specified therein and substantially in the form attached hereto as Exhibit F-3, (ii) that certain Share Pledge, dated as of the date hereof, II-22 167 executed in favor of the Administrative Agent by Instron Corporation, with respect to the capital stock of Instron GmbH and (iii) such other agreements, documents and instruments executed in connection with the German Collateral Documents, in each case, as the same may from time to time be amended, supplemented or otherwise modified. "GUARANTOR" means a Person obligated in respect of any Guaranty Obligations. "GUARANTEED OBLIGATIONS" has the meaning specified in Section 10.1 of this Agreement. "GUARANTY OBLIGATIONS" means, with respect to any Person, without duplication, any obligation of such Person guaranteeing any Indebtedness ("primary Indebtedness") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether contingent, (a) to purchase any such primary Indebtedness or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary Indebtedness or (ii) to maintain working capital or equity capital of the primary obligor or otherwise maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary Indebtedness of the ability of the primary obligor to make payment of such primary Indebtedness, or (d) otherwise to assure or hold harmless the owner of such primary Indebtedness against loss in respect thereof; provided, however, that (i) the term "Guaranty Obligations" shall not include endorsements of instruments for deposit or collection in the ordinary course of business and (ii) for purposes of this definition, the amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary Indebtedness in respect of which such Guaranty Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "HAZARDOUS MATERIAL" means and includes: (a) any asbestos or other material composed of or containing asbestos which is, or may become, even if properly managed, friable, (b) petroleum and any petroleum product, including crude oil or any fraction thereof, and natural gas or synthetic natural gas liquids or mixtures thereof, (c) any hazardous, toxic or dangerous waste, substance or material defined as such in (or for purposes of) CERCLA or RCRA, any so-called "Superfund" or "Superlien" law, or any other applicable Environmental Laws, and (d) any other substance whose generation, handling, transportation, treatment or disposal is regulated pursuant to any Environmental Laws. "HEDGE AGREEMENT" means any interest rate swap agreement, any interest rate cap agreement, any interest rate collar agreement, or similar agreement or arrangement designed to protect against in interest rate exposure, with a financial institution or institutions reasonably acceptable to the Administrative Agent, and which conforms to ISDA (or any successor) standards. "INDEBTEDNESS" means, with respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, notes, debentures and similar debt securities or instruments, (c) all obligations of such Person for the deferred purchase price of capital assets or services which in accordance with GAAP would be shown on the liability side of a sheet of such Person, (d) all obligations of such Person to pay a specified purchase for goods or services whether yet delivered or accepted (i.e. take or pay or similar purchase obligation), (e) all of the principal portion of Capitalized Lease Obligations of such II-23 168 Person, (f) the present value, determined on the basis of the implicit interest rate, of all basic rental obligations under all synthetic leases (i.e. leases accounted for by the lessee as operating leases under which the lessee is the "owner" of the leased property for Federal income tax purposes), (g) all obligations of such Person as an account party in respect of letters of credit, banker's acceptances, Demand Guarantees or Contract Guarantees (in each case, valued at the stated face amount thereof or, to the extent less, the stated or determinable amount (or where not so stated or determinable, the reasonably anticipated liability in respect of which such letters of credit, banker's acceptances, Demand Guarantees or Contract Guarantees were issued, as determined by such Person in good faith) of liability supported thereby) and excluding, for purposes of the definition of "Indebtedness" under this Agreement, obligations of the Borrowers and the Subsidiaries thereof as account party in respect of (i) any unsecured Existing Letters of Credit comprised of Demand Guarantees or Contract Guarantees, (ii) any unsecured renewals, extensions or replacements thereof, and (iii) any unsecured Demand Guarantees or Contract Guarantees issued after the Effective Date which are not Letters of Credit issued hereunder, (h) all net obligations of such Person under Hedge Agreements, (i) the full outstanding value of trade accounts receivable sold with full or limited recourse (other than sales of delinquent accounts receivable for collection purposes), (j) the stated value, or liquidation value (if higher), of all Redeemable Stock of such Person, (k) all liabilities of such Person in respect of unfunded vested benefits under plans covered by Title IV of ERISA, (l) any Indebtedness of a second party secured by a Lien encumbering any property owned or being acquired by such Person even if the full faith and credit of the Person is not pledged to the payment thereof, and (m) all Guaranty Obligations of such Person and (n) in the case of the Borrowers, including, without limitation, the then outstanding principal amount of all Loans owing by the Borrowers to the Banks under this Agreement and all Subordinated Debt owing by any of the Borrowers; provided, however, that neither trade accounts payable nor accrued expenses arising in the ordinary course of business of such Person , nor obligations in respect to insurance policies or performance or surety bonds which themselves are not guarantees of Indebtedness (nor draft, acceptances, or similar instruments evidencing the same nor obligations in respect of letter of credit supporting the payments of the same), shall constitute Indebtedness. "INSTRUMENTS" means "instruments" as defined by the UCC of a Borrower. "INTELLECTUAL PROPERTY" means all inventions, designs, patents, and applications therefor, trademarks, service marks, trade names, and registrations and applications therefor, copyrights, any registrations therefor, and any licenses thereof, whether now owned or existing or hereafter arising or acquired. "INTEREST PERIOD" means, for each LIBOR Rate Loan comprising a Borrowing, the period commencing on the date of such LIBOR Rate Loan or the date of the Rate Conversion, Rate Continuation of any Loans into such LIBOR Rate Loan and ending on the numerically corresponding day of the period selected by the Borrower Representative pursuant to the provisions hereof and each subsequent period commencing on the last day of the immediately preceding Interest Period in respect of such LIBOR Rate Loan and ending on the last day of the period selected by the Borrower Representative pursuant to the provisions hereof; provided, however, that the duration of each such Interest Period shall be one, two, three or six months, in each case as the Borrower Representative may select by delivery to the Administrative Agent or applicable Designated European Administrative Agent designated for a Borrower to which such LIBOR Rate Loan is being advanced of a Credit Request therefor in accordance with Section 2.2(a) of this Agreement or a Rate Conversion/Continuation Request in accordance with Section 2.11 of this Agreement; provided, further, that, during the Syndication Period, if the Borrower II-24 169 Representative selects Interest Periods of greater than one month, the Borrowers shall be obligated to reimburse the Banks and Designated Swing Line Lenders pursuant to Section hereof for any prepayment of LIBOR Rate Loans made on other than the last day of such Interest Periods resulting from completion of the Syndication Period as determined by the Syndication Agent and; provided, further, that: (i) the Interest Period for each LIBOR Rate Loan comprising part of the same Borrowing shall be of the same duration; (ii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the immediately preceding Business Day; (iii) if the Interest Period commences on a Business Day for which there is no numerical equivalent in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of that calendar month; (iv) no Interest Period may end on a date later than the Revolving Credit Termination Date; and (v) with respect to LIBOR Rate Loans comprising any outstanding Term Borrowing, no Interest Period may end on a date later than any Term Loan Repayment Date unless, after giving effect to such selection, the aggregate unpaid principal amount of the Alternate Base Rate Loans comprising Term Borrowings, together with the aggregate unpaid principal amount of LIBOR Rate Loans comprising Term Borrowings which have an Interest Period ending on or prior to such Term Loan Repayment Date, shall be at least equal to that portion of the aggregate principal amount of such Term Borrowing due and payable on and prior to such Repayment Date. "INVENTORY" means all "inventory" (as defined in the UCC) now owned or hereafter acquired by the Borrowers including, without limitation, all goods, merchandise, work-in-process, raw materials, finished goods, and inventory held for lease to other Persons, all other materials, supplies, and tangible personal property of any kind, nature, or description held for sale or lease or for display or demonstration, or furnished or to be furnished under contracts of service, or which are or which might be used or consumed in connection with the manufacturing, packing, shipping, advertising, selling, leasing, or furnishing of such goods, merchandise, or other personal property, all documents of title or other documents pertaining thereto, and all proceeds of the foregoing. "INVESTMENT PROPERTY" means all "Investment Property" (as defined in the UCC from and after January 1, 1998), including, without limitation, interests in money market funds or other mutual funds, now or hereafter acquired by the Borrowers. "KIRTLAND CAPITAL" means Kirtland Capital Partners III L.P., an Ohio limited partnership, and its Affiliates. II-25 170 "LAW" means any law, treaty, regulation, statute or ordinance, common law, civil law, or any case precedent, ruling, requirement, directive or request having the force of law of any foreign or domestic governmental authority, agency or tribunal. "LC EXPOSURE" means, with respect to any Bank, at any time of determination, such Bank's Ratable Portion of the sum of: (a) the aggregate undrawn amount of all Letters of Credit outstanding at such time, plus (b) the aggregate amount that has been drawn under such Letters of Credit for which the applicable Designated Letter of Credit Issuer (or the Banks, pursuant to any participation therein), has not at such time been reimbursed by the Borrowers or the applicable Letter of Credit Obligor. "LENDER DEFAULT" means (i) the refusal (which has not been retracted) of a Bank in violation of its obligations under this Agreement to make available to the Administrative Agent its Ratable Portion of any Revolving Credit Borrowing hereunder or to fund any portion of the participation purchase price payable by such Bank for its participating interests hereunder or (ii) the notification to the Administrative Agent or any Borrower by a Bank that such Bank does not intend to comply with its obligations hereunder to make available to the Administrative Agent its Ratable Portion of any Revolving Credit Borrowing hereunder or to fund any portion of the participation purchase price payable by such Bank for its participating interests hereunder, in either and each case, as a result of the appointment of a receiver or conservator with respect to such Bank at the direction of any regulatory agency or authority. "LENDING INSTALLATION" means, with respect to a Bank, the branch, Subsidiary or Affiliate of such Bank specified under the name of such Bank on the signature pages hereto or as otherwise selected by such Bank pursuant to Section of this Agreement, or such other branch, Subsidiary or Affiliate as such Bank may from time to time specify in writing to the Borrower Representative, the Administrative Agent and the Banks as its Lending Installation. "LENDING OFFICE" means, with respect to any Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer, the office of such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer specified as its "Lending Office" under its name on the signature pages hereto, or such other office of such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer as such Bank, Designated Swing Line Lender or Designated Letter of Credit Issuer may from time to time specify in writing to the Borrower Representative and the Administrative Agent as the office at which Revolving Credit Loans, Swing Line Loans or Letters of Credit are to be made, issued and maintained, as the case may be. "LETTER OF CREDIT" means: (i) each documentary standby letter of credit for the account of a Borrower or any of its Subsidiaries issued by the Designated Letter of Credit Issuer designated for such Borrower and such Subsidiaries pursuant to the terms of this Agreement, (ii) each Demand Guarantee for the account of such Borrower or Subsidiaries pursuant to the terms of this Agreement and (iii) each Contract Guarantee for the account of such Borrower or Subsidiaries pursuant to the terms of this Agreement, in each case in support or guarantee of (x) worker compensation obligations, liability insurance, releases of contract retention obligations, contract tender or bid performance obligations, obligations for repayment of advance payments, contract performance obligations, and other bonding obligations of such Borrower or such Subsidiaries incurred in the ordinary course of business thereof and consistent with past practices thereof and (y) such other standby obligations of such Borrower and such Subsidiaries incurred in the ordinary course of business thereof and consistent with past practices thereof. II-26 171 "LETTER OF CREDIT COLLATERAL ACCOUNT" has the meaning set forth in Section 9.8. "LETTER OF CREDIT OBLIGORS" has the meaning set forth in Section 2.12. "LETTER OF CREDIT OBLIGATIONS" means (a) the obligations of a Borrower to reimburse the Designated Letter of Credit Issuer hereunder, (b) all fees owing to such Designated Letter of Credit Issuer under this Agreement and the other Loan Documents, (c) any costs and expenses reimbursable to such Designated Letter of Credit Issuer pursuant to Section 14.6 of this Agreement; and (d) taxes, Other Taxes, compensation, indemnification obligations or other amounts owing by such Borrower to the Designated Letter of Credit Issuer under this Agreement, the reimbursement agreement executed of such Designated Letter of Credit Issuer or any other Loan Document, and (d) any amounts owing by such Borrower as a Borrower Guarantor with respect to its guaranty of the Guaranteed Obligations owing by the other Borrowers to the Banks or as a guarantor of the obligations of other Letter of Credit Obligors under Section 2.12(l). "LIBOR RATE LOAN" means a Loan, denominated in Dollars or in an Alternate Currency, which bears interest as provided in Section 2.13(a)(ii) of this Agreement. "LIBOR RATE BORROWING" means a Borrowing consisting of LIBOR Rate Loans. "LIEN" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "LOAN" means a Revolving Credit Loan, Term Loan or Swing Line Loan. "LOAN ACCOUNT" has the meaning set forth in Section 2.1(c). "LOAN DOCUMENTS" means this Agreement, any note, mortgage, deed of trust, security agreement, or other lien instrument, reimbursement agreement, financial statement, audit report, environmental audit, notice, request of Loan, Hedge Agreement, cash management agreement, officer's certificate or other writing of any kind which is now or hereafter required to be delivered by or on behalf of the Borrowers to the Administrative Agent, the Designated Swing Line Lenders, the Designated Letter of Credit Issuers or the Banks (or any of their respective Affiliates) in connection with this Agreement, including, without limitation, the Revolving Credit Notes, the Swing Line Notes, and the other writings referred to in Section 2 and Section 3 of this Agreement. "LONDON INTERBANK OFFERED RATE" means, for any Interest Period with respect to a LIBOR Rate Borrowing, the quotient (rounded upwards, if necessary, to the nearest one sixteenth of one percent (1/16th of 1%) of: (x) the per annum rate of interest, determined by the Administrative Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) as of approximately 11:00 a.m. (London time) two Business Days prior to the beginning of such Interest Period pertaining to such LIBOR Rate Loan, appearing on page 3750 or 3740 (or other applicable page with respect to Alternate Currency) of the Dow Jones Telerate Screen (or any successor or substitute page of such Service, or any successor to or substitute for such Service providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to deposits in Dollars or in the applicable Alternate Currency in the London interbank market) as the rate in the London interbank market for deposits in Dollars or the applicable Alternate Currency in II-27 172 immediately available funds with a maturity comparable to such Interest Period divided by (y) a number equal to 1.00 minus the Eurocurrency Reserve Percentage. In the event that such rate quotation is not available for any reason, then the rate (for purposes of clause (x) hereof) shall be the rate, determined by the Administrative Agent as of approximately 11:00 a.m. (London time) two Business Days prior to the beginning of such Interest Period pertaining to such LIBOR Rate Loan, to be the average (rounded upwards, if necessary, to the nearest one sixteenth of one percent (1/16th of 1%)) of the per annum rates at which deposits in Dollars or the applicable Alternate Currency in immediately available funds in an amount comparable to NCB's Ratable Portion of such LIBOR Borrowing and with a maturity comparable to such Interest Period are offered to the prime banks by leading banks in the London interbank market. The London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Percentage. "MANAGEMENT AGREEMENT" means that certain Advisory Services Agreement between Instron Corporation and Kirtland Capital Partners, Ltd., dated as of the date hereof. "MARGIN ADJUSTMENT DATE" has the meaning specified in Section 2.13(b)(i) of this Agreement. "MARGIN DETERMINATION DATE" has the meaning specified in Section 2.13(b)(i) of this Agreement. "MARGIN STOCK" has the meaning specified in Section 6.20. "MATERIAL ADVERSE EFFECT" means a material adverse effect on: (a) the business, properties, operations or condition (financial or otherwise) of the Borrowers and the Subsidiaries thereof taken as a whole, (b) a material portion of the Collateral or any portion of the Collateral exceeding Five Million Dollars ($5,000,000), (c) a Borrower's ability to repay the Obligations of such Borrower, (d) enforceability or perfection of the Administrative Agent's security interest and Lien on any of the Collateral or the priority thereof, or (e) the legality, validity or enforceability of this Agreement or the other Loan Documents "MATERIAL BUSINESS AGREEMENT" means each agreement of a Borrower (not including Material License Agreements) the termination (other than due to the natural expiration of the term thereof) of which would reasonably be expected to result in a Material Adverse Effect. "MATERIAL LICENSE AGREEMENT" means each license agreement of a Borrower in respect of Third Party Intellectual Property set forth on the Supplemental Schedule as being a license agreement the termination (other than due to the natural expiration of the term thereof) of which would reasonably be expected to result in a Material Averse Effect. "MATERIAL OWNED OR LEASED REAL PROPERTY" has the meaning, in respect of a Domestic Pledging Borrower and Instron, Ltd. as specific in Section 5.1 of this Agreement. "MATERIAL RECOVERY EVENT" means (a) any casualty loss in respect of asset of a Borrower covered by casualty insurance, (b) any compulsory transfer or taking under threat of compulsory transfer of any asset of a Borrower with a fair market value in excess of Five Million Dollars ($5,000,000) by any agency, department, authority, II-28 173 commission, board, instrumentality or political subdivision of the United States, any state or municipal government, and (c) any recovery in good funds by a Borrower by reason of a nonappealable judgment against any other Person in excess of $5,000,000 to the full extent thereof. "MATERIAL SUBSIDIARY" means, at any time, with reference to any Person, any Subsidiary of such Person (x) that has assets at such time comprising 5% or more of the consolidated assets of such Person and its Subsidiaries (the consolidated assets of such Person being determined for purposes hereof on a consolidated basis with any Person with respect to which such Person is a Subsidiary) or (y) whose operations in the current fiscal year are expected to, or whose operations in the most recent fiscal year did (or would have if such Person had been a Subsidiary for such entire fiscal year), represent 10% or more of the consolidated earnings before interest, taxes, depreciation and amortization of such Person and its Subsidiaries (the consolidated earnings of such Person being determined for purposes hereof on a consolidated basis with any Person with respect to which such Person is a Subsidiary) for such fiscal year. "MAXIMUM LAWFUL RATE" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND.. "MERGER" means the merger of Acquisition Company with and into Instron Corporation, such that Instron Corporation is the surviving corporation, as contemplated by the Merger Agreement. "MERGER AGREEMENT" means that certain Agreement and Plan of Merger, among Instron Corporation, Kirtland Capital and Acquisition Company, dated as of May 6, 1999, executed in connection with the Merger. "MERGER DOCUMENTS" means the Merger Agreement and any other writings or documents executed at any time in connection with the Merger, as the same may from time to time be amended, supplement or otherwise modified. ""MONEY MARKET RATE LOANS" means the Swing Line Loans, denominated in Dollars or, to the extent acceptable to the applicable Designated Swing Line Lender, in an Alternate Currency, and bearing interest at the Quoted Money Market Rate. "MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a "multiemployer plan" as such term is defined in section 4001(a)(3) of ERISA. "NATIONAL CURRENCY UNIT" means a unit of any Alternate Currency (other than a Euro Unit) of a Participating Member State. "NCB" means National City Bank, a national banking association, in its capacity as a Bank hereunder. "NET PROCEEDS" means (a) the cash proceeds (including cash proceeds subsequently received in respect of non-cash consideration initially received) from any sale, transfer or other disposition of assets of a Borrower or any Subsidiaries thereof to a Person (other than: (i) any sale of Inventory in the ordinary course, (ii) disposition in the ordinary course of such Borrower's or Subsidiaries' business of assets that are obsolete, worn out or no longer used or useful in such Borrower's or Subsidiaries business, (iii) disposition of capital assets the proceeds of which (net of taxes payable with respect to the disposition and the reasonable costs and expenses of sale) are reinvested within a reasonable period of time in capital assets of such Borrower or Domestic Subsidiaries of such Borrower (in the case of a sale by a Domestic Borrower or Domestic Subsidiaries II-29 174 thereof) or such Borrower, any other Borrower or any Domestic Subsidiaries or Foreign Subsidiaries (in the case of a sale by a Foreign Borrower or the Foreign Subsidiaries thereof, (iv) any sale, transfer or other disposition of assets of a Borrower or Subsidiary to any other Borrower or Subsidiary or (v) any sale of assets pursuant to a sale leaseback transaction to the extent permitted by Section ERROR! REFERENCE SOURCE NOT FOUND. hereof) to the extent that such sale proceeds (in each of the above cases, net of (x) selling expenses, including without limitation any reasonable broker's fees or commissions, costs of discontinuing operations associated with such assets and sales, transfer and similar taxes and (y) the repayment of any Indebtedness secured by a purchase money Lien on such assets that is permitted under this Agreement) exceeds Five Million Dollars ($5,000,000) in any Fiscal Year of Instron Corporation and its consolidated Subsidiaries and only to the extent of such excess; (b) the cash proceeds from the issuance and/or sale of equity or debt securities of any Borrower pursuant to any public offering or private placement, net of transaction costs (net of customary fees, costs and expenses including, without limitation, underwriters' or placement Administrative Agents' discounts and commissions and transfer and similar taxes) (excluding any (i) proceeds from the issuance or sale of equity or debt securities in connection with a Permitted Acquisition and (ii) proceeds from the issuance of any equity or debt securities pursuant to compensation plans for employees or executive officers of the Borrowers and the Subsidiaries thereof and (iii) proceeds from the issuance of the Senior Subordinated Notes), (c) the cash proceeds from any additional Indebtedness (excluding the Indebtedness evidenced by the Senior Subordinated Notes) permitted hereunder to the extent such proceeds, when aggregated for the purposes of this clause (c) with the debt securities referred to in clause (b) hereof, exceed Five Million Dollars ($5,000,000) and only to the extent of such excess, and (d) the cash proceeds from any Material Recovery Event (net of any amounts in respect of insurance proceeds or proceeds of compulsory takings which are reinvested in repair or replacement of the capital assets of a Borrower or the Subsidiaries thereof which were subject to such casualty or taking). "NON-COMPLIANCE NOTICE" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "NOTES" means, collectively, each Revolving Credit Note executed and delivered by a Borrower in favor of a Bank under this Agreement, each Term Note executed and delivered by a Borrower in favor of a Bank under this Agreement and each Swing Line Note executed and delivered by a Borrower to a Designated Swing Line Lender under this Agreement. "NOTICE OFFICE" means (i) with respect to the Administrative Agent, such office of the Administrative Agent specified as its "Notice Office" under its name on the signature pages hereto, or such other office, located in a city in the United States Eastern Time Zone, as the Administrative Agent may from time to time specify in writing to the Borrower Representative, the Banks, the Designated Swing Line Lenders and the Designated Letters of Credit Issuers as the office to which notices to the Administrative Agent are to be given by the Borrower II-30 175 Representative, the Banks, the Designated Swing Line Lenders and the Designated Letters of Credit Issuers, as the case may be, (ii) with respect to each Designated European Administrative Agent, such office of such Designated European Administrative Agent specified as its "Notice Office" under its name on the signature pages hereto, or such other office, located in a city in the United Kingdom or the Federal Republic of Germany, as the Designated European Administrative Agent may from time to time specify in writing to the Borrower Representative, the Administrative Agent, the Banks, the Designated Swing Line Lenders and the Designated Letters of Credit Issuers as the office to which notices to such Designated European Administrative Agent are to be given by the Borrower Representative, the Administrative Agent, the Banks, the Designated Swing Line Lenders and the Designated Letters of Credit Issuers, as the case may be, and (iii) with respect to each Bank, each Designated Swing Line Lender and each Designated Letter of Credit Issuer, such office thereof specified as its "Notice Office" under its name on the signature pages hereto, or such other office as such Bank, Designated Swing Line Lender and Designated Letter of Credit Issuer may from time to time specify in writing to the Borrower Representative, the Administrative Agent, the other Banks, the Designated Swing Line Lenders and the Designated Letters of Credit Issuers as the office to which notices thereto are to be given by the Borrower Representative, the Banks, the Designated Swing Line Lenders and the Designated Letters of Credit Issuers, as the case may be. "OBLIGATED BANK" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "OBLIGATIONS" means the present and future obligations of each of the Borrowers to the Banks under this Agreement or any other Loan Document, including, without limitation: (a) with respect to the outstanding principal and accrued interest (including interest accruing after a petition for relief under the federal bankruptcy laws has been filed) in respect of any Revolving Credit Loans or Term Loans advanced to such Borrower by the Banks plus the outstanding Swing Line Exposure of the Banks plus the outstanding LC Exposure of the Banks and reimbursement obligations of each such Borrower with respect to the LC Exposure, (b) all fees owing to the Designated Letter of Credit Issuer, the Banks or the Administrative Agent under this Agreement and the other Loan Documents, (c) any amounts owing by such Borrower as a Borrower Guarantor with respect to its guaranty of the Guaranteed Obligations owing by the other Borrowers to the Banks or as a guarantor of the obligations of other Letter of Credit Obligors under Section ERROR! REFERENCE SOURCE NOT FOUND., (d) any costs and expenses reimbursable to the Banks, the Designated Letter of Credit Issuer, the Administrative Agent and each Designated European Administrative Agent pursuant to Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement, and (e) taxes, Other Taxes, compensation, indemnification obligations or other amounts owing by the Borrowers to the Administrative Agent, the Designated Letter of Credit Issuer or the Banks under this Agreement, the Notes or any Loan Document. "OFFERING" means the offering by Instron Corporation of the Senior Subordinated Notes pursuant to Section 144A of the Securities Act of 1933. "OPERATING ACCOUNT" means, with respect to each of the Borrowers, the account described in the Supplemental Schedule and maintained by and in the name of such Borrower: (i) with National City Bank, for the purposes of disbursing the proceeds of Revolving Credit Loans and Term Loans which account shall in no case be a payroll account, (ii) with National City Bank or the Designated European Administrative Agent, if applicable, for purposes of disbursing the proceeds of Revolving Credit Loans and Swing Line Loans to Instron, Ltd. which account shall in no case be a payroll account, and (iii) with National City Bank or the Designated European Administrative Agent, if applicable, for purposes of disbursing the proceeds of Revolving Credit Loans and Swing Line Loans to Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH, respectively. "OTHER TAXES" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "PARTICIPATING MEMBER STATE" means each state so described in any EMU Legislation. "PAYMENT OFFICE" means (i) with respect to the Administrative Agent, such office of the Administrative Agent specified as its "Payment Office" under its name on the II-31 176 signature pages hereto, or such other office, located in a city in the United States Eastern Time Zone, as the Administrative Agent may from time to time specify in writing to the Borrower Representative, the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers, as the case may be, as the office to which payments are to be made by the Borrowers or funds made accessible to the Administrative Agent by the Banks, as the case may be, and (ii) with respect each Designated European Administrative Agent, such office of such Designated European Administrative Agent specified as its "Payment Office" under its name on the signature pages hereto, or such other office, located in a city in the United Kingdom or the Federal Republic of Germany, as such Designated European Administrative Agent may from time to time specify in writing to the Borrower Representative, the Administrative Agent, the Banks, the Designated Swing Line Lenders and the Designated Letter of Credit Issuers, as the case may be, as the office to which payments are to be made by Borrowers as to which such Designated European Administrative Agent is designated or funds made accessible to such Designated European Administrative Agent by the Banks or Swing Line Lenders, as the case may be. "PBGC" means the Pension Benefit Guaranty Corporation or any other governmental authority succeeding to any of its functions. "PERMISSIBLE SENIOR SUBORDINATED NOTE AMOUNT" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "PERMITTED ACQUISITION" shall mean and include any Acquisition as to which all of the following conditions are satisfied: (i) the Acquisition does not involve the Acquisition of a Person which is (A) a general partnership, general partner of a limited partnership or is otherwise a Person as to which limited liability is unavailable to the holders of its equity or other similar interests therein or (B) a limited partnership interest, or (C) a trust or unincorporated association, or (D) without the consent of the Required Banks, a person having an equity interest or other similar interest held by a foreign government or any political subdivision or agency thereof; (ii) such Acquisition (A) involves a line or lines of business which is complementary to the lines of business in which the Borrowers and their Subsidiaries, considered as an entirety, are engaged on the Closing Date, and (B) involves a line or lines of business which has generated a positive earnings before interest, income taxes, depreciation and amortization for its most recently completed four full fiscal quarters for which financial information is available, unless the Required Banks specifically approve or consent to such Acquisition in writing; (iii) such Acquisition is not actively opposed by the board of directors (or similar governing body) of the selling Person or the person whose equity interests are to be acquired, unless all of the Banks specifically approve or consent to such Acquisition in writing; (iv) in the case of an Acquisition by virtue of which the Person acquired becomes a Subsidiary of a Borrower or a Subsidiary thereof, the aggregate consideration for any such Acquisition (including any Permitted Subordinated Acquisition Indebtedness and the Permitted Assumed Acquisition Indebtedness (without duplication) any such acquired Person) II-32 177 does not exceed $7,500,000, in each case, unless the Required Banks specifically approve or consent in writing to a greater aggregate consideration for such Acquisition;. (v) the Borrowers would, after giving effect to such Acquisition, on a pro forma basis, be in compliance with the financial covenants contained in Section ERROR! REFERENCE SOURCE NOT FOUND.; and (vi) at least 10 Business Days prior to the completion of such transaction the Borrowers shall have delivered to the Administrative Agent a certificate of a Responsible Officer of Instron Corporation demonstrating, in reasonable detail, the computations necessary to show compliance with the financial covenants contained in Section ERROR! REFERENCE SOURCE NOT FOUND. on a pro forma basis, such pro forma calculations being determined as if (x) such Acquisition had been completed at the beginning of the most recent Testing Period for which financial information for the Borrowers and the business of Person to be acquired is available and has been delivered to the Bank at least 10 Business Days prior to the completion of such transaction (which shall in the case of the acquired business include audited financial statements for the most recent fiscal year, unless the same are unavailable and unaudited financial statements are acceptable to the Required Banks), and (y) any such Indebtedness, or other Indebtedness incurred to finance such Acquisition, had been outstanding for such entire Testing Period. "PERMITTED ACQUISITION INVESTMENTS" means investments in the capital of any Subsidiary or Person (acquired in a Permitted Acquisition which does not become a Subsidiary by virtue of a Permitted Acquisition) by Instron Corporation or any other Subsidiaries thereof the proceeds of which are used in connection with a Permitted Acquisition. "PERMITTED ACQUISITION LIEN" means any Lien on assets acquired in connection with a Permitted Acquisition; provided, however, that the Indebtedness secured by such Lien shall not exceed the amount permitted under Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement, shall be expressly limited to the assets acquired in the Permitted Acquisition, and shall in no event secure Permitted Subordinated Acquisition Indebtedness. "PERMITTED ASSUMED ACQUISITION INDEBTEDNESS" means principal amount of any assumed Indebtedness of a Person acquired pursuant to a Permitted Acquisition which is assumed by Instron Corporation or any Subsidiaries thereof in connection with the Permitted Acquisition to the extent such assumption is permitted by the definition of "Permitted Acquisition) set forth in this Agreement. "PERMITTED SUBORDINATED ACQUISITION INDEBTEDNESS" means unsecured Indebtedness incurred by the Borrowers or any Subsidiaries thereof in connection with a Permitted Acquisition in favor of the Person who is the seller with respect to the Permitted Acquisition; provided, however, that such seller shall agree to be expressly subordinate and junior in right of payment and action to the payment and performance in full of the Obligations, Swing Line Obligations, Letter of Credit Obligations and Designated Hedge Obligations and which subordination is evidenced by written agreement in form and substance satisfactory to the Administrative Agent. "PERSON" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, II-33 178 an entity joint venture or other entity, or a government or any political subdivision or agency thereof. "PLEDGING BORROWER" means (a) with respect to the Domestic Borrower Collateral, each Domestic Borrower, (b) with respect to the U.K. Collateral, Instron, Ltd. and (c) with respect to the German Collateral, Instron Schenck Testing Systems, GmbH and Instron Wolpert GmbH. "POTENTIAL DEFAULT" means an event, condition or thing which with the lapse of any applicable grace period or with the giving of notice or both would constitute, an Event of Default referred to in ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement and which has not been appropriately waived in accordance with Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement or fully corrected, prior to becoming an actual Event of Default. "PROCEEDS" means all "proceeds" (as defined in the UCC) of any and all of the Collateral or of any Proceeds made or due and payable to a Borrower from time to time including, without limitation, all proceeds in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of such collateral by any governmental body, authority, bureau or agency (or any Person acting under color of governmental authority) and, to the extent not otherwise included, all payments under insurance (and, in the case of the Administrative Agent, whether or not the Administrative Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of such collateral. "PRODUCTS" means property directly or indirectly resulting from any manufacturing, processing, assembling or commingling of any Inventory. "PROPERTIES" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "QUOTED MONEY MARKET RATE" means, for any Swing Line Loan to a Borrower, a rate per annum equal to the fixed or floating interest rate quoted by the Designated European Administrative Agent for such Borrower as such quotation is provided in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement as applicable to Swing Line Loans made on or prior to a date specified in the quote and having a maturity contemplated by such Designated European Administrative Agent with such quotation being obtained by the Borrower Representative from such Designated European Administrative Agent. "RATABLE BORROWER SHARE" means, with respect to any Borrower, such amount of the Obligations hereunder that represents a good faith allocation by the Borrowers of all general fees, charges and other Obligations hereunder not specifically attributable to or the responsibility of a particular Borrower (Loans and Letters of Credit made to or for the account of a Borrower and interest thereon being specific to the Borrower affected thereby ) to each Borrower so that no Foreign Borrower shall have or be construed as having liability or responsibility for any Obligations of any Domestic Borrower or any other Foreign Borrower. "RATABLE PORTION" means, in respect of any Bank, the quotient (expressed as a percentage) obtained at any determination date by dividing: (x) the sum of such Bank's Revolving Credit Commitment at such time plus outstanding Term Loans at such time by (y) the sum of the aggregate amount of the Revolving Credit Commitments of all of the Banks at such time plus the aggregate outstanding Term Loans of all of the Banks; provided, however, that, if all of the Revolving Credit Commitments are terminated pursuant to the terms hereof, then, Ratable Portion means the quotient (expressed as a II-34 179 percentage) obtained at any determination date by dividing (x) the aggregate amount of such Bank's Revolving Credit Loans (and any participations in such Revolving Credit Loans) outstanding at such time plus Term Loans outstanding at such time by (y) the aggregate amount of Revolving Credit Loans (and such participations therein) of all of the Banks outstanding at such time plus the aggregate amount of Term Loans of all of the Banks outstanding at such time; provided, further, that to the extent any Bank does not have a constant but rather a variable percentage of the aggregate outstanding Revolving Credit Commitments (or aggregate outstanding Revolving Credit Loans upon termination of the Revolving Credit Commitments) of the Banks, the aggregate outstanding Term Loans of the Banks, such Bank's Ratable Portion shall be (I) calculated separately with respect to such Bank's percentage interest in the Revolving Credit Commitments (or Revolving Credit Loans upon such termination) and percentage interest in the Term Loans, and (II) for purposes of allocations pursuant to and determinations under this Agreement, such Bank's variable Ratable Portion as so calculated shall be applied separately where appropriate to the context of such allocation or determination with respect to outstanding Revolving Credit Commitments (or Revolving Credit Loans upon such termination) and\or outstanding Term Loans, as the case may be. "RATE CONTINUATION" means a continuation pursuant to Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement of LIBOR Rate Loans having a particular Interest Period as LIBOR Rate Loans having an Interest Period of the same duration. "RATE CONVERSION" means a conversion pursuant to Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement of Loans of one Type into Loans of another Type and, with respect to LIBOR Rate Loans, from one permissible Interest Period to another permissible Interest Period. "RATE CONVERSION/CONTINUATION REQUEST" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "RATE QUOTE REQUEST" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C. SectionSection 6901 et seq. "RECAPITALIZATION EXPENSES AND COSTS" means all nonrecurring fees, expenses and costs relating to the recapitalization of Instron Corporation pursuant to the Merger, the Offering and transactions contemplated by this Agreement incurred on or prior to the Effective Time, including, without limitation, any fees and expenses incurred in connection with the Offering, the Merger, and this Agreement, any compensation expense incurred in connection with the cancellation, retirement, or acceleration of vesting of stock options or restricted stock, modifications of existing employment agreements and expenses related to early extinguishment of debt. "REDEEMABLE STOCK" means, with respect to any Person, the capital stock or similar equity interests in such Person which (a) is by its terms subject to mandatory redemption, in whole or in part, pursuant to a sinking fund, scheduled redemption or similar provisions, at any time prior to the Revolving Credit Termination Date or (b) is otherwise required to be repurchased or retired on a scheduled date, upon the occurrence of any event or circumstance, at the option of the holder or holders thereof, or otherwise, prior to the Revolving Credit Termination Date other than repurchases pursuant to Stockholders Agreement. II-35 180 "REFUNDING NOTICE" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "REGULATORY CHANGE" means, as to any Bank, any change in United States federal, state or foreign Laws or regulations or the adoption or making of any interpretations, directives or requests of or under any United States federal, state or foreign Laws or regulations (whether or not having the force of Law) by any court or governmental authority charged with the interpretation or administration thereof. "REPORTABLE EVENT" means any of the events set forth in Section 4043 of ERISA excluding those events for which the requirement of notice has been waived by the PBGC. "REQUIRED BANKS" means, at any time, Banks (excluding, for purposes of this definition, Banks then constituting "Defaulting Lenders" under Section ERROR! REFERENCE SOURCE NOT FOUND.) having at least sixty six and two thirds percent (66 2/3%) of the aggregate amount of: the Revolving Credit Commitments of all of the Banks at such time plus the outstanding principal amount of the Terms Loans of all of the Banks outstanding at such time; provided, however, that, if all of the Revolving Credit Commitments are terminated pursuant to the terms hereof, then, the term "Required Banks" means Banks (excluding, for purposes of this definition, Banks then constituting "Defaulting Lenders" under Section ERROR! REFERENCE SOURCE NOT FOUND.) having at least sixty six and two thirds percent (66 2/3%) of the aggregate amount of the Revolving Credit Loans of all of the Banks outstanding at such time plus the aggregate outstanding principal amount of the Term Loans of all of the Banks outstanding at such time (excluding, for purposes of determining the aggregate outstanding Commitments of the Banks and the aggregate outstanding principal amount of Revolving Credit Loans and Term Loans of the Banks, as the case may be, outstanding at such time, the outstanding Revolving Credit Commitments and the outstanding principal amount of the Revolving Credit Loans and Term Loans, as the case may be, of any such Defaulting Lender). "REQUIRED REVOLVING CREDIT BANKS" means, at any time, Banks (excluding, for purposes of this definition, any Banks then constituting a "Defaulting Lender" under Section ERROR! REFERENCE SOURCE NOT FOUND.) having at least 66 2/3% of the aggregate outstanding Revolving Credit Commitments of all of the Banks at such time; provided, however, that, if the Revolving Credit Commitments are terminated pursuant to the terms hereof, then, the term "Required Lenders" shall mean Banks (excluding any Bank then constituting a Defaulting Lender) having at least 66 2/3% of the aggregate outstanding principal amount of the Revolving Credit Loans of all of the Banks outstanding at such time (excluding, for purposes of determining the aggregate amount of outstanding Commitments of the Banks and the aggregate outstanding principal amount of Revolving Credit Loans of the Banks, as the case may be, outstanding at such time, the outstanding Revolving Credit Commitment and the outstanding principal amount of Revolving Credit Loans of such Defaulting Lender outstanding at such time). "REQUIRED TERM BANKS" means, at any time, Banks (excluding, for purposes of this definition, any Bank then constituting a "Defaulting Lender" under Section ERROR! REFERENCE SOURCE NOT FOUND.) having at least 66 2/3% of the aggregate outstanding principal amount of the Term Loans of all of the Banks outstanding at such time (excluding, for purposes of determining the aggregate outstanding principal amount of Term Loans of the Banks outstanding at such time, the outstanding principal amount of Term Loans of such Defaulting Lender at such time). II-36 181 "RESPONSIBLE OFFICER" means, with respect to Instron Corporation, the Chief Executive Officer, President or Chief Financial Officer thereof. "REVOLVING CREDIT BORROWING" means a Borrowing consisting of Revolving Credit Loans. "REVOLVING CREDIT COMMITMENT" means, in respect of any Bank, the commitment of such Bank to Loan Revolving Credit Loans up to the amount set forth in Annex I. "REVOLVING CREDIT LOAN" means a Loan made by a Bank to a Borrower pursuant to Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement (whether made by a Bank pursuant to a Credit Request or by reason of a Deemed Credit Request). "REVOLVING CREDIT NOTE" means, with respect to the Borrowers, the promissory note of each Borrower (including without limitation any Borrower that becomes a Borrower after the Closing Date pursuant to an Additional Borrower Addendum), payable to the order of a Bank, in substantially the form of Exhibit A-1 hereto, and in the original principal amount of such Bank's Revolving Credit Commitment, evidencing the aggregate indebtedness of such Borrower to such Bank resulting from the Revolving Credit Loans made by such Bank, as each such promissory note may from time to time be amended, supplemented or otherwise modified. "REVOLVING CREDIT TERMINATION DATE" means April 1, 2005, or earlier if the Revolving Credit Commitments of the Banks are terminated pursuant to the terms of this Agreement. "SALES OFFICE" means any office of a Domestic Pledging Borrower or any Subsidiary thereof the primary functions of which are conducting sales operations and acting as the location for sales personal involved in such sales operations but excludes any office (i) at which are located the records pertaining to any Accounts or General Intangibles, (ii) which is also the location of the principal place of business of such Borrower or Subsidiary or the chief executive office thereof, (iii) at which is located Inventory other than immaterial amounts of Inventory used for sales purposes or (iv) at which Equipment (other than Equipment used in the ordinary course operation of the sale office) is located. "SENIOR SUBORDINATED NOTE INDENTURE" means that certain Indenture, dated as of September 29, 1999, between Instron Corporation, Norwest Bank Minnesota, National Association, as Trustee, and the Guarantors (as defined therein). as the same may from time to time be amended, supplement or otherwise modified. "SENIOR SUBORDINATED NOTES" means the 13.25% Senior Subordinated Notes due 2009 sold by Instron Corporation pursuant to the Offering in the aggregate original principal amount of $60,000,000. "SENIOR SUBORDINATED NOTE DOCUMENTS" means the Senior Subordinated Note Indenture, the Senior Subordinated Notes, the Warrant to Purchase 30,654 Shares of Common Stock executed in connection therewith, and any other writings or documents executed at any time in connection with the Senior Subordinated Notes, as the same may from time to time be amended, supplement or otherwise modified. "SOLVENT" means, with respect to any Person, as of any date of determination, that: (a) the fair value of the property of the Person as of such date is greater than the total II-37 182 amount of the liabilities (including contingent liabilities computed at the amount that, in light of all the facts and circumstances existing as of such date, represents the amount that can reasonably be expected to become an actual or matured liability) of the Person, (b) the present fair saleable value of the assets of the Person as of such date is not less than the amount that will be required to pay the probable liabilities of the Person on its debts as they become absolute and matured, (c) the Person is able to pay all liabilities of the Person as those liabilities mature, and (d) the Person does not have unreasonably small capital for the business in which it is engaged or for any business or transaction in which it is about to engage. The determination of whether a Person is Solvent shall take into account all such Person's assets and liabilities regardless of whether, or the amount at which, any such asset or liability is included on a balance sheet of such Person prepared in accordance with GAAP, including assets such as contingent contribution or subrogation rights, business prospects, distribution channels and goodwill. The determination of the sum of a Person's assets at a fair valuation or the present fair saleable value of a Person's assets shall be made on a going concern basis unless, at the time of such determination, the liquidation of the business in which such assets are used or useful is in process or is demonstrably imminent. In computing the amount of contingent or unrealized assets or contingent or unliquidated liabilities at any time, such assets and liabilities will be computed at the amounts which, in light of all the facts and circumstances existing at such time, represent the amount that reasonably can be expected to become realized assets or matured liabilities, as the case may be. In computing the amount that would be required to pay a Person's probable liability on its existing debts as they become absolute and matured, reasonable valuation techniques, including a present value analysis, shall be applied using such rates over such periods as are appropriate under the circumstances, and it is understood that, in appropriate circumstances, the present value of contingent liabilities may be zero. "SPC" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "STOCKHOLDERS AGREEMENT" means that certain Stockholders Agreement, dated as of September 29, 1999, among Instron Corporation and the stockholders of Instron. "SUBORDINATION AGREEMENT" means any written agreement by which Indebtedness of any Borrower or any Subsidiary thereof is expressly subordinated and made junior in right of payment and action to the payment and performance in full of the Obligations , Swing Line Obligations, Letter of Credit Obligations and Designated Hedge Obligations and which written subordination agreement is in form and substance satisfactory to the Administrative Agent. "SUBORDINATED DEBT" means the (a) Senior Subordinated Notes (including subordination of the above-referenced Warrants to Purchase 30,654 of Common Stock) and (b) all other Indebtedness (including the Indebtedness evidenced by the value of any Redeemable Stock issued by Instron Corporation) of the Borrowers or any Subsidiaries thereof, now or hereafter existing, that is expressly subordinated and junior in right of payment and action to the payment and performance in full of the Obligations and which subordination is evidenced by written agreement in form and substance satisfactory to the Administrative Agent. "SUBSIDIARY" means, in respect of a corporate Person at any time, a corporation or other business entity the shares constituting a majority of the outstanding capital stock (or other form of ownership) or constituting a majority of the voting power in any election of directors (or shares constituting both majorities) of which are (or upon the exercise of any outstanding warrants, options or other rights would be) owned directly or II-38 183 indirectly at such time by such Person or another Subsidiary of such Person or any combination of the foregoing. "SUBSIDIARY GUARANTOR" means any Domestic Subsidiary which has executed the Subsidiary Guaranty in favor of the Administrative Agent for the benefit of the Banks. "SUBSIDIARY GUARANTY" means the Subsidiary Guaranty dated as of the date hereof, substantially in the form attached hereto as Exhibit L-1 attached hereto, as the same may from time to time be amended, supplemented or otherwise modified. "SUBSIDIARY PLEDGE AGREEMENT" means the Subsidiary Pledge Agreement dated as of the date hereof, substantially in the form attached hereto as Exhibit D-1 attached hereto, as the same may from time to time be amended, supplemented or otherwise modified. "SUBSIDIARY SECURITY AGREEMENT" means the Subsidiary Security Agreement, dated as of the date hereof, substantially in the form attached hereto as Exhibit L-2 attached hereto, as the same may from time to time be amended, supplemented or otherwise modified "SUPPLEMENTAL SCHEDULE" means the schedule which is attached hereto as Annex III and is incorporated into this Agreement. "SWING LINE BORROWING" means, with respect to a Swing Line Loan, a Swing Line Loan to a Borrower consisting of a Quoted Money Market Rate Loan or a LIBOR Rate Loan, denominated in the same currency, made by a Designated Swing Line Lender to such Borrower on a single day and as to which a single maturity date is in effect (i.e., any Swing Line Loan made by a Designated Swing Line Lender, comprised of a different Type, made in a different currency, having a different maturity date (regardless of whether such maturity period commences on the same date as another selected maturity period), or made on a different date shall be considered to comprise a different Swing Line Borrowing). "SWING LINE EXPOSURE" means, with respect to any Bank, at any time of determination, such Bank's obligation to refund, or purchase a participation equal to, its Ratable Portion of the aggregate principal amount of Swing Line Loans outstanding at such time that have been advanced by all of the Designated Swing Line Lenders to all of the Borrowers. "SWING LINE LOAN ACCOUNT" has the meaning set forth in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "SWING LINE LOANS" means Loans made by a Designated Swing Line Lender to a Borrower pursuant to Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "SWING LINE NOTE" means, with respect to each Designated Swing Line Lender, the promissory note of the Borrower for which such Designated Swing Line Lender is designated payable to the order of such Designated Swing Line Lender, in substantially the form of Exhibit A-2 hereto, and in the original principal amount of the Designated Swing Line Lender Commitment of the Designated Swing Line Lender, evidencing the aggregate indebtedness of such Borrower to such Designated Swing Line Lender II-39 184 resulting from the Swing Line Loans made by the Designated Swing Line Lender to such Borrower. "SWING LINE OBLIGATIONS" means (a) the obligations of a Borrower to the Designated Swing Line Lender hereunder, (b) all fees owing to such Designated Swing Line Lender under this Agreement and the other Loan Documents, (c) any costs and expenses reimbursable to the Designated Swing Line Lender pursuant to Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement, and (d) taxes, Other Taxes, compensation, indemnification obligations and other amounts owing by such Borrower to the Designated Swing Line Lender under this Agreement, the Swing Line Note executed in favor of such Designated Swing Line Lender or any Loan Document. "SWING LINE REQUEST" has the meaning in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "SWING LINE TERMINATION DATE" means April 1, 2005, or earlier if the Aggregate Swing Line Commitment of the Designated Swing Line Lenders is terminated pursuant to the terms of this Agreement. "SYNDICATION AGENT" means NCB and shall include any successor to the Syndication Agent appointed pursuant to Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "SYNDICATION PERIOD" means the period commencing with the Effective Date and ending as of the earlier of (i) the date which is 120 days after the Effective Date or (ii) the date which the Syndication Agent determine, in its sole discretion (and notifies the Borrower Representative and the Administrative Agent) that the primary syndication by the initial Banks hereunder of portions of the Term Loans and Revolving Credit Commitments to new Banks has been completed and, during which Syndication Period, the Conditions Letter shall remain in effect and enforceable between the Syndication Agent and the Borrowers. "TERM BORROWING" means a Borrowing of LIBOR Rate Loans or Alternate Base Rate Loans by Instron Corporation from all of the Banks having Term Commitments which Borrowing comprises all or a portion of the Term Loan of each of such Banks to Instron Corporation. "TERM COMMITMENT" means, with respect to each Bank, (i) the amount, if any, set forth opposite such Bank's name in Annex I hereto as its Term Commitment or (ii) the amount, if any, set forth opposite such Bank's name in that certain Letter Allocating Initial Commitments to be executed as of the Syndication Date as its "Term Commitment," as either may be reduced from time to time pursuant to Sections ERROR! REFERENCE SOURCE NOT FOUND. and/or ERROR! REFERENCE SOURCE NOT FOUND. or ERROR! REFERENCE SOURCE NOT FOUND. hereof, or adjusted from time to time as a result of assignments to or from such Bank pursuant to Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "TERM LOAN" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. hereof and is a one time Loan made by a Bank on an amortizing term basis pursuant to Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "TERM LOAN MATURITY DATE" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement, or such earlier date on which the Term Commitments are terminated hereunder. "TERM LOAN REPAYMENT DATE" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. II-40 185 "TERM NOTE" means, with respect to each Bank, the promissory note of Instron Corporation payable to the order of such Bank, in substantially the form of Exhibit A-3 hereto, and in the original principal amount of the Term Commitment of such Bank, evidencing the Indebtedness of Instron Corporation to such Bank resulting from the Term Loan made by such Bank to Instron Corporation. "TAXES" has the meaning specified in Section ERROR! REFERENCE SOURCE NOT FOUND. of this Agreement. "TARGET OPERATING DAY" means any day that is not (i) a Saturday or Sunday, (ii) Christmas Day or New Year's Day or (iii) any other day on which the Trans-European Automated Real-time Gross Settlement Express Transfer system (or any successor settlement system) is not operating (as determined by the Administrative Agent). "TESTING PERIOD" means, for any determination, a single period consisting of the four consecutive fiscal quarters of a Person then last ended (whether or not such quarters are all within the same fiscal year), except that, if a particular provision of this Agreement indicates that a Testing Period shall be of a different specified duration, such Testing Period shall consist of the particular Fiscal Quarter or Fiscal Quarters of Instron Corporation and its consolidated Subsidiaries then last ended which are so indicated in such provision. "THIRD PARTY INTELLECTUAL PROPERTY" means any Intellectual Property not owned by the Borrowers. "TREATY ON EUROPEAN UNION" shall mean the Treaty of Rome of March 25, 1957, as amended by the Single European Act of 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992, and came into force on November 1, 1993), as amended from time to time. "TYPE" means, when used in respect of any Loan, the LIBOR Rate, the Alternate Base Rate or the Quoted Money Market Rate in effect in respect of such Loan. "UCC" means the Uniform Commercial Code in effect in the State of Ohio from time to time. "U.K. COLLATERAL" means, collectively, (i) the real property of Instron, Ltd., as specified in the U.K. Collateral Documents, and (ii) the personal property and assets of Instron, Ltd. (including, without limitation, all book accounts and inventory stock thereof), as defined in the U.K. Collateral Documents. "U.K. COLLATERAL DOCUMENTS" means, collectively, (i) that certain Debenture, dated as of the date hereof, executed by Instron, Ltd. in favor of the Administrative Agent, with respect to personal and real property of Instron, Ltd. specified therein and substantially in the form attached hereto as Exhibit F-2, (ii) that certain Share Charge, dated as of the date hereof, executed by Instron Corporation in favor of the Administrative Agent, with respect to the capital stock of Instron, Holdings, Ltd. owned thereby, and substantially in the form attached hereto as Exhibit D-2, (iii) to the extent requested by the Administrative Agent, that certain Third Party Charge of Shares, dated as of the date hereof, executed by Instron Holdings, Ltd. in favor of the Administrative Agent, with respect to the capital stock of Instron, Ltd. and owned thereby, and substantially in the form attached hereto as Exhibit D-4, and (iv) such other agreements, documents and instruments executed in connection with the U.K. Collateral Documents, II-41 186 in each case, as the same may from time to time be amended, supplemented or otherwise modified. "U.K. FOREIGN SUBSIDIARIES" means Instron, Ltd., Instron International, Ltd., Instron, Ltd., IST Enterprises, Ltd., IST, Ltd., Seven Furnaces, Ltd., IST Enterprises, Ltd., R.H.T., Ltd., and any other direct or indirect Subsidiary of Instron Corporation which is organized under the laws of the United Kingdom. "UNITED STATES" and "U.S." each means United States of America. "WITHDRAWAL LIABILITY" means (in respect of the Borrowers, Subsidiaries thereof and their ERISA Affiliates), at any date of determination, the amount equal to the aggregate present value (as defined in section 3 of ERISA) at such date of the amount claimed to have been incurred as a result of a withdrawal less any portion thereof as to which the Borrowers reasonably believes, after appropriate consideration of the possible adjustments arising under subtitle E of Title IV of ERISA, the Borrowers, Subsidiaries thereof and their ERISA Affiliates will have no liability; provided; however, that the Borrowers shall obtain promptly written advice from independent actuarial consultants supporting such determination. "WHOLLY-OWNED SUBSIDIARY" means, in respect of any Person, a Subsidiary of such Person at least 95% of whose capital stock (or other form of ownership), other than director's qualifying shares or similar interests, are owned directly or indirectly by such Person. II-42 187 ANNEX III TO CREDIT AND SECURITY AGREEMENT CONDITIONS PRECEDENT TO INITIAL LOANS 188 ANNEX IV TO CREDIT AND SECURITY AGREEMENT SUPPLEMENTAL SCHEDULE EX-12 9 EXHIBIT 12 1 Exhibit 12 RATIO OF EARNINGS TO FIXED CHARGES (in thousands)
Pro Forma Pro Forma Nine Months Ended --------- --------- Year Ended December 31, ----------------------- Year Nine Months ---------------------------------------------- Sept. 26, October 2, December 31, October 2, 1994 1995 1996 1997 1998 1998 1999 1998 1999 ------- -------- -------- -------- -------- ---------- ---------- ------------ ---------- Income (loss) before income taxes and losses from equity investees $6,979 $ 7,684 $ 7,475 $12,295 $21,140 $15,283 $(4,547) $ 6,585 $ (790) Add: Portion of rents representative of interest factor 1,127 1,248 1,116 1,232 1,333 1,287 1,270 1,333 1,270 Interest on indebtedness 1,300 1,490 1,548 1,465 1,175 819 1,097 12,990 9,743 Amortization of debt issuance costs -- -- -- -- -- -- -- 816 612 Accretion of debt discount -- -- -- -- -- -- -- 225 169 ------- -------- -------- -------- -------- ---------- ---------- ------------ ---------- Income as adjusted 9,406 10,422 10,139 14,992 23,648 17,389 (2,180) 21,724 11,004 ------- -------- -------- -------- -------- ---------- ---------- ------------ ---------- Fixed charges: Portion of rents representative of interest factor 1,127 1,248 1,116 1,232 1,333 1,287 1,270 1,333 1,270 Interest on indebtedness 1,300 1,490 1,548 1,465 1,175 819 1,097 12,990 9,743 Amortization of debt issuance costs -- -- -- -- -- -- -- 816 612 Accretion of debt discount -- -- -- -- -- -- -- 225 250 ------- -------- -------- -------- -------- ---------- ---------- ------------ ---------- Fixed charges 2,427 2,738 2,664 2,697 2,508 2,106 2,367 15,364 11,875 ------- -------- -------- -------- -------- ---------- ---------- ------------ ---------- Ratio of earnings to fixed charges 3.9 3.8 3.8 5.6 9.4 8.3 (A) 1.4 (B) ======= ======== ======== ======== ======== ========== ========== ============ ==========
(A) Due to the Company's loss in the nine month period ended October 2, 1999, the ratio coverage was less than 1:1. The Company must generate additional earnings of $187 to achieve a coverage ratio of 1:1. (B) Due to the Company's Pro Forma loss in the nine month period ended October 2, 1999, the ratio coverage was less than 1:1. The Company must generate additional pro forma earnings of $871 to achieve a coverage ratio of 1:1. EX-23.2 10 EXHIBIT 23.2 1 Exhibit 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form S-4 of Instron Corporation of our reports dated February 18, 1999 relating to the financial statements and financial statement schedule of Instron Corporation, which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP ------------------------------ PricewaterhouseCoopers LLP Boston, Massachusetts December 28, 1999 EX-24 11 EXHIBIT 24 1 Exhibit 24 ---------- DIRECTORS AND OFFICERS OF INSTRON CORPORATION AND ITS SUBSIDIARIES REGISTRATION STATEMENT ON FORM S-4 POWER OF ATTORNEY Each of the undersigned officers, directors, and other representatives of Instron Corporation, a Massachusetts corporation (the "Corporation"), and its subsidiaries, hereby constitutes and appoints Linton A. Moulding and John R. Barrett and each of them, with full power of substitution and resubstitution, as attorneys-in-fact or attorney-in-fact of the undersigned, for him and in his name, place and stead, to sign and file with the Securities and Exchange Commission under the Securities Act of 1933 (the "Securities Act") one or more Registration Statement(s) on Form S-4 relating to the registration of the offering for exchange of the 13 1/4% Senior Subordinated Notes due 2009 of the Corporation, with any and all amendments, supplements and exhibits thereto, including pre-effective and post-effective amendments or supplements or any additional registration statement filed pursuant to Rule 462 promulgated under the Securities Act, with full power and authority to do and perform any and all acts and things whatsoever that any of said attorneys or their substitutes may deem necessary or desirable, in his or their sole discretion, with any such act or thing being hereby ratified and approved in all respects without any further act or deed whatsoever. EXECUTED as of December 28, 1999. /s/ Yayha Gharagozlou /s/ Sjomua Izumi - ---------------------------- ------------------------------ Yayha Gharagozlou Sjomua Izumi /s/ Arthur D. Hindman /s/ Raymond Lancaster - ---------------------------- ------------------------------ Arthur D. Hindman Raymond Lancaster /s/ Thomas N. Littman /s/ Robert C. Marini - ---------------------------- ------------------------------ Thomas N. Littman Robert C. Marini /s/ James M. McConnell /s/ Linton A. Moulding - ---------------------------- ------------------------------ James M. McConnell Linton A. Moulding /s/ Yasuhisa Okamoto - ---------------------------- ------------------------------ Yasuhisa Okamoto John F. Turben /s/ Dennis J. Moore - ---------------------------- Dennis J. Moore EX-25 12 EXHIBIT 25 1 Exhibit 25 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ----------------------------- ___ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b) (2) NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) A U.S. NATIONAL BANKING ASSOCIATION 41-1592157 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national Identification No.) bank) SIXTH STREET AND MARQUETTE AVENUE Minneapolis, Minnesota 55479 (Address of principal executive offices) (Zip code) Stanley S. Stroup, General Counsel NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 (612) 667-1234 (Agent for Service) ----------------------------- INSTRON CORPORATION (Exact name of obligor as specified in its charter) MASSACHUSETTS 04-2057203 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 ROYALL STREET CANTON, MA 02021 (Address of principal executive offices) (Zip code) ----------------------------- 13.25% SENIOR SUBORDINATED NOTES DUE 2009 (Title of the indenture securities) ================================================================================ 2 Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency Treasury Department Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. The Board of Governors of the Federal Reserve System Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None with respect to the trustee. No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under Item 13. Item 15. Foreign Trustee. Not applicable. Item 16. List of Exhibits. List below all exhibits filed as a part of this Statement of Eligibility. Norwest Bank incorporates by reference into this Form T-1 the exhibits attached hereto. Exhibit 1. a. A copy of the Articles of Association of the trustee now in effect.* Exhibit 2. a. A copy of the certificate of authority of the trustee to commence business issued June 28, 1872, by the Comptroller of the Currency to The Northwestern National Bank of Minneapolis.* b. A copy of the certificate of the Comptroller of the Currency dated January 2, 1934, approving the consolidation of The Northwestern National Bank of Minneapolis and The Minnesota Loan and Trust Company of Minneapolis, with the surviving entity being titled Northwestern National Bank and Trust Company of Minneapolis.* c. A copy of the certificate of the Acting Comptroller of the Currency dated January 12, 1943, as to change of corporate title of Northwestern National Bank and Trust Company of Minneapolis to Northwestern National Bank of Minneapolis.* d. A copy of the letter dated May 12, 1983 from the Regional Counsel, Comptroller of the Currency, acknowledging receipt of notice of name change effective May 1, 1983 from Northwestern National Bank of Minneapolis to Norwest Bank Minneapolis, National Association.* 3 e. A copy of the letter dated January 4, 1988 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation and merger effective January 1, 1988 of Norwest Bank Minneapolis, National Association with various other banks under the title of "Norwest Bank Minnesota, National Association."* Exhibit 3. A copy of the authorization of the trustee to exercise corporate trust powers issued January 2, 1934, by the Federal Reserve Board.* Exhibit 4. Copy of By-laws of the trustee as now in effect.* Exhibit 5. Not applicable. Exhibit 6. The consent of the trustee required by Section 321(b) of the Act. Exhibit 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.** Exhibit 8. Not applicable. Exhibit 9. Not applicable. * Incorporated by reference to exhibit number 25 filed with registration statement number 33-66026. ** Incorporated by reference to exhibit number 25.1 filed with registration statement number 333-93499. 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Norwest Bank Minnesota, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Minneapolis and State of Minnesota on the 28th day of December 1999. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION /s/ Timothy P. Mowdy ------------------------------------ Timothy P. Mowdy Corporate Trust Officer 5 EXHIBIT 6 December 28, 1999 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION /s/ Timothy P. Mowdy ------------------------------------ Timothy P. Mowdy Corporate Trust Officer EX-27 13 EXHIBIT 27
5 0000050716 INSTRON CORPORATION 1,000 U.S. DOLLARS 9-MOS DEC-31-1999 JAN-01-1999 OCT-02-1999 1 9,118 0 61,409 726 37,865 117,455 69,169 45,096 168,639 83,235 60,000 0 0 557 (14,388) 168,639 125,431 150,953 75,117 92,704 62,403 103 367 (4,547) (190) (4,357) 0 0 0 (4,357) (0.63) (0.63)
EX-99.1 14 EXHIBIT 99.1 1 EXHIBIT 99.1 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., CENTRAL TIME, ON JANUARY , 2000 UNLESS EXTENDED (THE "EXPIRATION DATE"). - -------------------------------------------------------------------------------- LETTER OF TRANSMITTAL OFFER TO EXCHANGE 13 1/4% SENIOR SUBORDINATED NOTES DUE 2009, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ANY AND ALL OUTSTANDING 13 1/4% SENIOR SUBORDINATED NOTES DUE 2009 OF INSTRON CORPORATION Deliver to: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION By Registered or Certified Mail: By Hand Delivery or Overnight Courier: In Person: Norwest Bank Minnesota, Norwest Bank Minnesota, Norwest Bank Minnesota, National Association National Association National Association Corporate Trust Operations Corporate Trust Operations Northstar East Bldg. P.O. Box 1517 Norwest Center 608 2nd Ave. S. Minneapolis, MN 55480-1517 Sixth and Marquette 12th Floor Minneapolis, MN 55479-0113 Corporate Trust Services Minneapolis, MN 55479-0113
By Facsimile: (612) 667-4927 Confirm By Telephone (612) 667-9764 Your delivery of this letter of transmittal will not be valid unless you deliver it to one of the addresses, or transmit it to the facsimile number, set forth above. Please carefully read this entire document, including the instructions, before completing this letter of transmittal. DO NOT DELIVER THIS LETTER OF TRANSMITTAL TO INSTRON. By completing this letter of transmittal, you acknowledge that you have received and reviewed Instron's prospectus dated January , 2000 and this letter of transmittal, which together constitute the "Exchange Offer." This letter of transmittal and the prospectus have been delivered to you in connection with Instron's offer to exchange its 13 1/4% Senior Subordinated Notes due 2009, which have been registered under the Securities Act (the "Exchange Notes") for its outstanding 13 1/4% Senior Subordinated Notes due 2009 (the "Outstanding Notes"). $60,000,000 in principal amount of the Outstanding Notes are currently issued and outstanding. This letter of transmittal is to be completed by Holder (this term is defined below) of Outstanding Notes if: (1) the Holder is delivering certificates for Outstanding Notes with this document, or (2) the tender of certificates for Outstanding Notes will be made by book-entry transfer to the account maintained by Norwest Bank Minnesota, National Association, the exchange agent for these notes, at the Depository Trust Company ("DTC") according to the procedures described in the prospectus under the heading "The Exchange Offer -- Procedures for Tendering." Please note that delivery of documents required by this letter of transmittal to DTC does not constitute delivery to the exchange agent. 2 You must tender your Outstanding Notes according to the guaranteed delivery procedures described in this document if: (1) your Outstanding Notes are not immediately available; (2) you cannot deliver your Outstanding Notes, this letter of transmittal and all required documents to the exchange agent before on or before the Expiration Date; or (3) you are unable to obtain confirmation of a book-entry tender of your Outstanding Notes into the exchange agent's account at DTC on or before the Expiration Date. More complete information about guaranteed delivery procedures is contained in the prospectus under the heading "The Exchange Offer -- Guaranteed Delivery Procedures." You should also read Instruction 1 to determine whether or not this section applies to you. As used in this letter of transmittal, the term "Holder" means (1) any person in whose name Outstanding Notes are registered on the books of Instron, (2) any other person who has obtained a properly executed bond power from the registered Holder or (3) any person whose Outstanding Notes are held of record by DTC who desires to deliver such notes by book-entry transfer at DTC. You should use this letter of transmittal to indicate whether or not you would like to participate in the Exchange Offer. If you decide to tender your Outstanding Notes, you must complete this entire letter of transmittal. YOU MUST FOLLOW THE INSTRUCTIONS IN THIS LETTER OF TRANSMITTAL -- PLEASE READ THIS ENTIRE DOCUMENT CAREFULLY. IF YOU HAVE QUESTIONS OR NEED HELP, OR IF YOU WOULD LIKE ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL, YOU SHOULD CONTACT THE EXCHANGE AGENT AT (612) 667-9764 OR AT ITS ADDRESS SET FORTH ABOVE. Please describe your Outstanding Notes below. - ----------------------------------------------------------------------------------------------------------- DESCRIPTION OF OUTSTANDING NOTES - ----------------------------------------------------------------------------------------------------------- AGGREGATE PRINCIPAL NAME(S) AND ADDRESS(ES) AMOUNT OF OF REGISTERED HOLDER(S) OUTSTANDING NOTES PRINCIPAL AMOUNT (PLEASE COMPLETE, IF REPRESENTED BY OF OUTSTANDING BLANK) CERTIFICATE NUMBER(S) CERTIFICATE(S) NOTES TENDERED* - ----------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TOTAL - -----------------------------------------------------------------------------------------------------------
* You will be deemed to have tendered the entire principal amount of Outstanding Notes represented in the column labeled "Aggregate Principal Amount of Outstanding Notes Represented by Certificate(s)" unless you indicate otherwise in the column labeled "Principal Amount of Outstanding Notes Tendered." If you need more space, list the certificate numbers and principal amount of Outstanding Notes on a separate schedule, sign the schedule and attach it to this letter of transmittal. [ ] CHECK HERE IF YOU HAVE ENCLOSED OUTSTANDING NOTES WITH THIS LETTER OF TRANSMITTAL. [ ] CHECK HERE IF YOU WILL BE TENDERING OUTSTANDING NOTES BY BOOK-ENTRY TRANSFER MADE TO THE EXCHANGE AGENT'S ACCOUNT AT DTC COMPLETE THE FOLLOWING ONLY IF YOU ARE AN ELIGIBLE INSTITUTION (THIS TERM IS DEFINED BELOW): 2 3 Name of Tendering Institution: - -------------------------------------------------------------------------------- Account Number: - -------------------------------------------------------------------------------- Transaction Code Number: - -------------------------------------------------------------------------------- [ ] CHECK HERE IF YOU ARE DELIVERING TENDERED OUTSTANDING NOTES THROUGH A NOTICE OF GUARANTEED DELIVERY AND HAVE ENCLOSED THAT NOTICE WITH THIS LETTER OF TRANSMITTAL COMPLETE THE FOLLOWING ONLY IF YOU ARE AN ELIGIBLE INSTITUTION: Name(s) of Registered Holder(s) of Outstanding Notes: - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Window Ticket Number (if available): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Name of Institution that Guaranteed Delivery: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Account Number (if delivered by book-entry transfer): - -------------------------------------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 4, 5 AND 6) Complete this section ONLY if: (1) certificates for untendered Outstanding Notes are to be issued in the name of someone other than you; (2) certificates for Exchange Notes issued in exchange for tendered and accepted Outstanding Notes are to be issued in the name of someone other than you; or (3) Outstanding Notes tendered by book-entry transfer that are not exchanged are to be returned by credit to an account maintained at DTC. Issue Certificate(s) to: Name - -------------------------------------------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) - -------------------------------------------------------------------------------- (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) (PLEASE ALSO COMPLETE SUBSTITUTE FORM W-9) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 4, 5 AND 6) Complete this section ONLY if certificates for untendered Outstanding Notes, or Exchange Notes issued in exchange for tendered and accepted Outstanding Notes are to be sent to someone other than you, or to you at an address other than the address shown above. Mail and deliver Certificate(s) to: Name - -------------------------------------------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) - -------------------------------------------------------------------------------- 3 4 Ladies and Gentlemen: According to the terms and conditions of the Exchange Offer, I hereby tender to Instron the principal amount of Outstanding Notes indicated above. At the time these notes are accepted by Instron, and exchanged for the same principal amount of Exchange Notes, I will sell, assign, and transfer to Instron all right, title and interest in and to the Outstanding Notes I have tendered. I am aware that the exchange agent also acts as the agent of Instron. By executing this document, I irrevocably appoint the exchange agent as my agent and attorney-in-fact for the tendered Outstanding Notes with full power of substitution to: 1. deliver certificates for the Outstanding Notes, or transfer ownership of the Outstanding Notes on the account books maintained by DTC, to Instron and deliver all accompanying evidences of transfer and authenticity to Instron, and 2. present the Outstanding Notes for transfer on the books of Instron, receive all benefits and exercise all rights of beneficial ownership of these Outstanding Notes, according to the terms of the Exchange Offer. The power of attorney granted in this paragraph is irrevocable and coupled with an interest. I represent and warrant that I have full power and authority to tender, sell, assign, and transfer the Outstanding Notes that I am tendering. I represent and warrant that Instron will acquire good and unencumbered title to the Outstanding Notes, free and clear of all liens, restrictions, charges and encumbrances and that the Outstanding Notes will not be subject to any adverse claim at the time Instron acquires them. I further represent that: 1. any Exchange Notes I will acquire in exchange for the Outstanding Notes I have tendered will be acquired in the ordinary course of business; 2. I have not engaged in, do not intend to engage in, and have no arrangement with any person to engage in, a distribution of any Exchange Notes issued to me; and 3. I am not an "affiliate" (as defined in Rule 405 under the Securities Act) of Instron. I understand that the Exchange Offer is being made in reliance on interpretations contained in letters issued to third parties by the staff of the Securities and Exchange Commission ("Commission"). These letters provide that the Exchange Notes issued in exchange for the Outstanding Notes in the Exchange Offer may be offered for resale, resold, and otherwise transferred by a Holder of Exchange Notes, unless that person is an "affiliate" of Instron within the meaning of Rule 405 under the Securities Act, without compliance with the registration and prospectus delivery provisions of the Securities Act. The Exchange Notes must be acquired in the ordinary course of the Holder's business and the Holder must not be engaging in, must not intend to engage in, and must not have any arrangement or understanding with any person to participate in, a distribution of the Exchange Notes. If I am a broker-dealer that will receive Exchange Notes for my own account in exchange for Outstanding Notes that were acquired as a result of market-making activities or other trading activities (a "Participating Broker-Dealer"), I acknowledge that I will deliver a prospectus in connection with any resale of the Exchange Notes. However, by this acknowledgment and by delivering a prospectus, I will not be deemed to admit that I am an "underwriter" within the meaning of the Securities Act. If I am a Participating Broker-Dealer, I will, on a weekly basis during the 90-day period following the Expiration Date, or any longer period required if use of the prospectus has been suspended by Instron, contact Instron's Investor Relations Department at (781) 828-2500 to confirm the availability of the prospectus for delivery in connection with resales. Upon request, I will execute and deliver any additional documents deemed by the exchange agent or Instron to be necessary or desirable to complete the assignment, transfer, and purchase of the Outstanding Notes I have tendered. I understand that Instron will be deemed to have accepted validly tendered Outstanding Notes when Instron gives oral or written notice of acceptance to the exchange agent. If, for any reason, any tendered Outstanding Notes are not accepted for exchange in the Exchange Offer, certificates for those unaccepted Outstanding Notes will be returned to me without charge at the address shown below or at a different address if one is listed under "Special Delivery Instructions." Any unaccepted 4 5 Outstanding Notes which had been tendered by book-entry transfer will be credited to an account at DTC, as soon as reasonably possible after the Expiration Date. All authority granted or agreed to be granted by this letter of transmittal will survive my death, incapacity or, if I am a corporation or institution, my dissolution and every obligation under this letter of transmittal is binding upon my heirs, personal representatives, successors, and assigns. I understand that tenders of Outstanding Notes according to the procedures described in the prospectus under the heading "The Exchange Offer -- Procedures for Tendering" and in the instructions included in this document constitute a binding agreement between myself and Instron subject to the terms and conditions of the Exchange Offer. Unless I have described other instructions in this letter of transmittal under the section "Special Issuance Instructions," please issue the certificates representing Exchange Notes issued and accepted in exchange for my tendered and accepted Outstanding Notes in my name, and issue any replacement certificates for Outstanding Notes not tendered or not exchanged in my name. Similarly, unless I have instructed otherwise under the section "Special Delivery Instructions," please send the certificates representing the Exchange Notes issued in exchange for tendered and accepted Outstanding Notes and any certificates for Outstanding Notes that were not tendered or not exchanged, as well as any accompanying documents, to me at the address shown below my signature. If both "Special Payment Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for my tendered and accepted Outstanding Notes in the name(s) of, and return any Outstanding Notes that were not tendered or exchanged and send such certificates to, the person(s) so indicated. I understand that if Instron does not accept any of the tendered Outstanding Notes for exchange, Instron has no obligation to transfer any Outstanding Notes from the name of the registered Holder(s) according to my instructions in the "Special Payment Instructions" and "Special Delivery Instructions" sections of this document. 5 6 PLEASE SIGN HERE WHETHER OR NOT OUTSTANDING NOTES ARE BEING PHYSICALLY TENDERED HEREBY - ------------------------------------------------ ------------------------------------------------ (Date) - ------------------------------------------------ ------------------------------------------------ Signature(s) of Registered Holder(s) (Date) or Authorized Signatory Area Code and Telephone Number(s): - -------------------------------------------------------------------------------------------------- Tax Identification or Social Security Number(s): - --------------------------------------------------------------------------------------------------
The above lines must be signed by the registered Holder(s) of Outstanding Notes as their name(s) appear(s) on the certificate for the Outstanding Notes or by person(s) authorized to become registered Holders(s) by a properly completed bond power from the registered Holder(s). A copy of the completed bond power must be delivered with this letter of transmittal. If any Outstanding Notes tendered through this letter of transmittal are held of record by two or more joint Holders, then all such Holders must sign this letter of transmittal. If the signature is by trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, then such person must (1) state his or her full title below and (2) unless waived by Instron, submit evidence satisfactory to Instron of such person's authority to act on behalf of the Holder. See Instruction 4 for more information about completing this letter of transmittal. Name(s): ------------------------------------------------------------ ------------------------------------------------------------ (Please Print) Capacity: ------------------------------------------------------------ Address: ------------------------------------------------------------ ------------------------------------------------------------ (Include Zip Code) Signature(s) Guaranteed by an Eligible Institution, if required by Instruction 4: ------------------------------------------------------------ (Authorized Signature) ------------------------------------------------------------ (Title) ------------------------------------------------------------ (Name of Firm)
Dated - ------------------------ , 2000 6 7 PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW. PAYOR'S NAME: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION - ------------------------------------------------------------------------------------------------------------------------ PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT ---------------------------- SUBSTITUTE AND CERTIFY BY SIGNING AND DATING BELOW. SOCIAL SECURITY NUMBER FORM W-9 OR ---------------------------- EMPLOYER IDENTIFICATION NUMBER ---------------------------------------------------------------------------------------- DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PART 3 -- PERJURY, I CERTIFY THAT: AWAITING TIN [ ] (1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TIN (OR I AM WAITING FOR A NUMBER TO BE ISSUED TO ME) AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE (A) I AM EXEMPT FROM BACKUP WITHHOLDING, OR (B) I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE ("IRS") THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (C) THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. ----------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- YOU MUST CROSS OUT ITEM (2) IN THE BOX ABOVE IF YOU PAYER'S REQUEST FOR HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING TAXPAYER IDENTIFICATION BECAUSE OF UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN. NUMBER ("TIN") CERTIFICATION SIGNATURE __________ DATE __________ , 1998 - -----------------------------------------------------------------------------------------------------------------------
NOTE: IF YOU DO NOT COMPLETE AND RETURN THIS FORM YOU MAY BE SUBJECT TO BACKUP WITHHOLDING OF 31% OF PAYMENTS MADE TO YOU UNDER THIS EXCHANGE OFFER. FOR MORE INFORMATION, PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9. - ----------------------------------------------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND EITHER (A) I HAVE MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE INTERNAL REVENUE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE OR (B) I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER WITHIN SIXTY (60) DAYS, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD UNTIL I PROVIDE A NUMBER.
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7 8 INSTRUCTIONS PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OUTSTANDING NOTES. The tendered Outstanding Notes or a confirmation of book-entry delivery, as well as a properly completed and executed copy or facsimile of this letter of transmittal and any other required documents must be received by the exchange agent at its address listed on the cover of this document before 5:00 p.m., central time, on the Expiration Date. YOU ARE RESPONSIBLE FOR THE DELIVERY OF THE OUTSTANDING NOTES, THIS LETTER OF TRANSMITTAL AND ALL REQUIRED DOCUMENTS TO THE EXCHANGE AGENT. EXCEPT UNDER THE LIMITED CIRCUMSTANCES DESCRIBED BELOW, THE DELIVERY OF THESE DOCUMENTS WILL BE CONSIDERED TO HAVE BEEN MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. WHILE THE METHOD OF DELIVERY IS AT YOUR RISK AND CHOICE, INSTRON RECOMMENDS THAT YOU USE AN OVERNIGHT OR HAND DELIVERY SERVICE RATHER THAN REGULAR MAIL. YOU SHOULD SEND YOUR DOCUMENTS WELL BEFORE THE EXPIRATION DATE TO ENSURE RECEIPT BY THE EXCHANGE AGENT. YOU MAY REQUEST THAT YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE DELIVER YOUR OUTSTANDING NOTES, THIS LETTER OF TRANSMITTAL AND ALL REQUIRED DOCUMENTS TO THE EXCHANGE AGENT. DO NOT SEND YOUR OUTSTANDING NOTES TO INSTRON. If you wish to tender your Outstanding Notes, but: (a) your Outstanding Notes are not immediately available; (b) you cannot deliver your Outstanding Notes, this letter of transmittal and all required documents to the exchange agent before the Expiration Date; or (c) you are unable to complete the book-entry tender procedure before the Expiration Date, you must tender your Outstanding Notes according to the guaranteed delivery procedure. A summary of this procedure follows, but you should read the section in the prospectus titled "The Exchange Offer -- Guaranteed Delivery Procedures" for more complete information. As used in this letter of transmittal, an "Eligible Institution" is any participant in a Recognized Signature Guarantee Medallion Program within the meaning of Rule 17Ad-15 of the Exchange Act. For a tender made through the guaranteed delivery procedure to be valid, the exchange agent must receive a properly completed and executed Notice of Guaranteed Delivery or a facsimile of that notice before 5:00 p.m., central time, on the Expiration Date. The Notice of Guaranteed Delivery must be delivered by an Eligible Institution and must: (a) state your name and address; (b) list the certificate numbers and principal amounts of the Outstanding Notes being tendered; (c) state that tender of your Outstanding Notes is being made through the Notice of Guaranteed Delivery; and (d) guarantee that this letter of transmittal, or a facsimile of it, the certificates representing the Outstanding Notes, or a confirmation of DTC book-entry transfer, and all other required documents will be deposited with the exchange agent by the Eligible Institution within three New York Stock Exchange trading days after the Expiration Date. The exchange agent must receive your Outstanding Notes certificates, or a confirmation of DTC book entry, in proper form for transfer, this letter of transmittal and all required documents within three New York Stock Exchange trading days after the Expiration Date or your tender will be invalid and may not be accepted for exchange. Instron has the sole right to decide any questions about the validity, form, eligibility, time of receipt, acceptance or withdrawal of tendered Outstanding Notes, and its decision will be final and binding. Instron's interpretation of the terms and conditions of the Exchange Offer, including the instructions contained in this letter of transmittal and in the prospectus under the heading "The Exchange Offer -- Conditions," will be final and binding on all parties. 8 9 Instron has the absolute right to reject any or all of the tendered Outstanding Notes if (1) the Outstanding Notes are not properly tendered or (2) in the opinion of counsel, the acceptance of those Outstanding Notes would be unlawful. Instron may also decide to waive any conditions, defects, or invalidity of tender of Outstanding Notes and accept such Outstanding Notes for exchange. Any defect or invalidity in the tender of Outstanding Notes that is not waived by Instron must be cured within the period of time set by Instron. It is your responsibility to identify and cure any defect or invalidity in the tender of your Outstanding Notes. Your Outstanding Notes will not be considered to have been made until any defect is cured or waived. Neither Instron, the exchange agent nor any other person is required to notify you that your tender was invalid or defective, and no one will be liable for any failure to notify you of such a defect or invalidity in your tender of Outstanding Notes. As soon as reasonably possible after the Expiration Date, the exchange agent will return to the Holder tendering any Outstanding Notes that were invalidly tendered if the defect of invalidity has not been cured or waived. 2. TENDER BY HOLDER. You must be a Holder of Outstanding Notes in order to participate in the Exchange Offer. If you are a beneficial holder of Outstanding Notes who wishes to tender, but is not the registered Holder, you must arrange with the registered Holder to execute and deliver this letter of transmittal on his, her or its behalf. Before completing and executing this letter of transmittal and delivering the registered Holder's Outstanding Notes, you must either make appropriate arrangements to register ownership of the Outstanding Notes in your name, or obtain a properly executed bond power from the registered Holder. The transfer of registered ownership of Outstanding Notes may take a long period of time. 3. PARTIAL TENDERS. If you are tendering less than the entire principal amount of Outstanding Notes represented by a certificate, you should fill in the principal amount you are tendering in the third column of the box entitled "Description of Outstanding Notes." The entire principal amount of Outstanding Notes listed on the certificate delivered to the exchange agent will be deemed to have been tendered unless you fill in the appropriate box. If the entire principal amount of all Outstanding Notes is not tendered, a certificate will be issued for the principal amount of those untendered Outstanding Notes not tendered. Unless a different address is provided in the appropriate box on this letter of transmittal, certificate(s) representing Exchange Notes issued in exchange for any tendered and accepted Outstanding Notes will be sent to the registered Holder at his or her registered address, promptly after the Outstanding Notes are accepted for exchange. In the case of Outstanding Notes tendered by book-entry transfer, any untendered Outstanding Notes and any Exchange Notes issued in exchange for tendered and accepted Outstanding Notes will be credited to accounts at DTC. 4. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. - If you are the registered Holder of the Outstanding Notes tendered with this document, and are signing this letter of transmittal, your signature must match exactly with the name(s) written on the face of the Outstanding Notes. There can be no alteration, enlargement, or change in your signature in any manner. If certificates representing the Exchange Notes, or certificates issued to replace any Outstanding Notes you have not tendered are to be issued to you as the registered Holder, do not endorse any tendered Outstanding Notes, and do not provide a separate bond power. - If you are not the registered Holder, or if Exchange Note or any replacement Outstanding Note certificates will be issued to someone other than you, you must either properly endorse the Outstanding Notes you have tendered or deliver with this letter of transmittal a properly completed separate bond power. Please note that the signatures on any endorsement or bond power must be guaranteed by an Eligible Institution. - If you are signing this letter of transmittal but are not the registered Holder(s) of any Outstanding Notes listed on this document under the "Description of Outstanding Notes," the Outstanding Notes tendered must be endorsed or accompanied by appropriate bond powers, in each case signed in the name of the 9 10 registered Holder(s) exactly as it appears on the Outstanding Notes. Please note that the signatures on any endorsement or bond power must be guaranteed by an Eligible Institution. - If this letter of transmittal, any Outstanding Notes tendered or any bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, that person must indicate their title or capacity when signing. Unless waived by Instron, evidence satisfactory to Instron of that person's authority to act must be submitted with this letter of transmittal. Please note that the signatures on any endorsement or bond power must be guaranteed by an Eligible Institution. - All signatures on this letter of transmittal must be guaranteed by an Eligible Institution unless one of the following situations apply: - If this letter of transmittal is signed by the registered Holder(s) of the Outstanding Notes tendered with this letter of transmittal and such Holder(s) has not completed the box titled "Special Payment Instructions" or the box titled "Special Delivery Instructions;" or - If the Outstanding Notes are tendered for the account of an Eligible Institution. 5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If different from the name and address of the person signing this letter of transmittal, you should indicate, in the applicable box or boxes, the name and address where Outstanding Notes issued in replacement for any untendered or tendered but unaccepted Outstanding Notes should be issued or sent. If replacement Original Notes are to be issued in a different name, you must indicate the taxpayer identification or social security number of the person named. 6. TRANSFER TAXES. Instron will pay all transfer taxes, if any, applicable to the exchange of Outstanding Notes in the Exchange Offer. However, transfer taxes will be payable by you (or by the tendering Holder if you are signing this letter on behalf of a tendering Holder) if: - certificates representing Exchange Notes or notes issued to replace any Outstanding Notes not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, a person other than the registered Holder; - tendered Outstanding Notes are registered in the name of any person other than the person signing this letter of transmittal; or - a transfer tax is imposed for any reason other than the exchange of Outstanding Notes according to the Exchange Offer. If satisfactory evidence of the payment of those taxes or an exemption from payment is not submitted with this letter of transmittal, the amount of those transfer taxes will be billed directly to the tendering Holder. Until those transfer taxes are paid, Instron will not be required to deliver any Exchange Notes required to be delivered to, or at the direction of, such tendering Holder. Except as provided in this Instruction 6, it is not necessary for transfer tax stamps to be attached to the Outstanding Notes listed in this letter of transmittal. 7. FORM W-9. You must provide the exchange agent with a correct Taxpayer Identification Number ("TIN") for the Holder on the enclosed Form W-9. If the Holder is an individual, the TIN is his or her social security number. If you do not provide the required information on the Form W-9, you may be subject to 31% Federal income tax withholding on certain payments made to the Holders of Exchange Notes. Certain Holders, such as corporations and certain foreign individuals, are not subject to these backup withholding and reporting requirements. For additional information, please read the enclosed Guidelines for Certification of TIN on Substitute Form W-9. To prove to the exchange agent that a foreign individual qualifies as an exempt Holder, the foreign individual must submit a Form W-8, signed under penalties of perjury, certifying as to that individual's exempt status. You can obtain a Form W-8 from the exchange agent. 8. WAIVER OF CONDITIONS. Instron may choose, at any time and for any reason, to amend, waive or modify certain of the conditions to the Exchange Offer. The conditions applicable to tenders of Outstanding Notes in the Exchange Offer are described in the prospectus under the heading "The Exchange Offer -- Conditions." 10 11 9. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES. If your Outstanding Notes have been mutilated, lost, stolen or destroyed, you should contact the exchange agent at the address listed on the cover page of this document for further instructions. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. If you have questions, need assistance, or would like to receive additional copies of the prospectus or this letter of transmittal, you should contact the exchange agent at the address listed in the prospectus. You may also contact your broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. 11 12 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GUIDE THE PAYER.-- Social Security Numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer Identification Numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
- ---------------------------------------------------------- GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ---------------------------------------------------------- 1. An individual's account. The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined funds, the first individual on the account(1) 3. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 4. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust account The actual owner(1) that is not a legal or valid trust under State law 5. Sole proprietorship account The owner(3) - ----------------------------------------------------------
- ---------------------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ---------------------------------------------------------- 6. A valid trust, estate, or The legal entity (Do pension trust not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(4) 7. Corporate account The corporation 8. Religious, charitable, or The organization educational organization account 9. Partnership The partnership 10. Association, club or other The organization tax-exempt organization 11. A broker or registered The broker or nominee nominee 12. Account with the Department The public entity of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - ----------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a Social Security Number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's Social Security Number. (3) Show the name of the owner. You may also enter your business name. You may use your Social Security Number or Employer Identification Number. (4) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 12 13 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you don't have a Taxpayer Identification Number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on broker transactions include the following: - A corporation. - A financial institution. - An organization exempt from tax under Section 501(a), an individual retirement plan, or a custodial account under Section 403(b)(7), if the account satisfies the requirements of Section 401(f)(2). - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency or instrumentality thereof. - A dealer in securities or commodities required to be registered in the United States, the District of Columbia, or a possession of the United States. - A real estate investment trust. - A futures commissions merchant registered with the Commodity Futures Trading Commission. - A common trust fund operated by a bank under Section 584(a). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. - A person registered under the Investment Advisors Act of 1940 who regularly acts as a broker. Payments of dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the United States and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments described in Section 404(k) made by an employee stock ownership plan. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct Taxpayer Identification Number to the payer. - Payments of tax-exempt interest (including tax-exempt interest dividends under Section 852). - Payments described in Section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451. - Payments made by certain foreign organizations. - Payments of mortgage interest to you. Exempt payees described above should file Substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend, interest, or other payments to give Taxpayer Identification Numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a Taxpayer Identification Number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your Taxpayer Identification Number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE IRS. 13 14 (DO NOT WRITE IN SPACE BELOW) CERTIFICATE OUTSTANDING NOTES OUTSTANDING NOTES SURRENDERED TENDERED ACCEPTED - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Delivery Prepared by: ---------------------------------------------------------------------------------- Checked by: -------------------------------------------------------------------------------------------- Date: -------------------------------------------------------------------------------------------------
14 EX-99.2 15 EXHIBIT 99.2 1 EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR 13- 1/4% SENIOR SUBORDINATED NOTES DUE 2009 OF INSTRON CORPORATION As set forth in the Prospectus dated January , 2000 (the "Prospectus"), of Instron Corporation and in the letter of transmittal, this form or one substantially similar must be used to accept Instron's offer to exchange all of its outstanding 13 1/4% Senior Subordinated Notes due 2009 (the "Outstanding Notes") for its 13 1/4% Senior Subordinated Notes due 2009, which have been registered under the Securities Act of 1933, if certificates for the Outstanding Notes are not immediately available or if the Outstanding Notes, the letter of transmittal or any other required documents cannot be delivered to the exchange agent, or the procedure for book-entry transfer cannot be completed, prior to 5:00 p.m., central time, on the Expiration Date (as defined in the Prospectus). This form may be delivered by an Eligible Institution by hand or transmitted by facsimile transmission, overnight courier or mail to the exchange agent as indicated below. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., CENTRAL TIME, ON , 2000, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OUTSTANDING NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE. Deliver to: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, EXCHANGE AGENT By Registered or Certified Mail: By Hand Delivery or Overnight Courier: In Person: Norwest Bank Minnesota, Norwest Bank Minnesota, Norwest Bank Minnesota, National Association National Association National Association Corporate Trust Operations Corporate Trust Operations Northstar East Bldg. P.O. Box 1517 Norwest Center 608 2nd Ave. S. Minneapolis, MN 55480-1517 Sixth and Marquette 12th Floor Minneapolis, MN 55479-0113 Corporate Trust Services Minneapolis, MN 55479-0113
By Facsimile: (612) 667-4927 Confirm By Telephone (612) 667-9764 Delivery of this notice to an address, or transmission of instructions via a facsimile, other than as set forth above, does not constitute a valid delivery. This form is not to be used to guarantee signatures. If a signature on the letter of transmittal to be used to tender Outstanding Notes is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the letter of transmittal. 2 Ladies and Gentlemen: The undersigned hereby tenders to Instron Corporation, a Massachusetts corporation (the "Company"), upon the terms and subject to the conditions set forth in the Prospectus and the letter of transmittal (which together constitute the "Exchange Offer"), receipt of which is hereby acknowledged, Outstanding Notes pursuant to guaranteed delivery procedures set forth in Instruction 1 of the letter of transmittal. The undersigned understands that tenders of Outstanding Notes will be accepted only in principal amounts equal to $1,000 or integral multiples thereof. The undersigned understands that tenders of Outstanding Notes pursuant to the Exchange Offer may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer -- Withdrawal of Tenders" section of the Prospectus. All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death, incapacity or dissolution of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW. Certificate No(s). for Outstanding Notes Principal Amount of Outstanding Notes (if available) - ----------------------------------------------------- ----------------------------------------------------- Principal Amount of Outstanding Notes Tendered Signature(s) - ----------------------------------------------------- ----------------------------------------------------- Dated: If Outstanding Notes will be delivered by book-entry transfer at the Depository Trust Company, Depository Account No.: - ----------------------------------------------------- -----------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered holder(s) of Outstanding Notes exactly as its (their) name(s) appear on certificates of Outstanding Notes or on a security position listing as the owner of Outstanding Notes, or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted with this 2 3 Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information: Please print name(s) and address(es) Name(s): ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ Capacity: ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------- Address(es): -------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- Area Code and Telephone No.: --------------------------------------------------------------------- ----------------------------------------------------------------------
3 4 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934 (the "Exchange Act"), hereby (a) represents that the above named person(s) "own(s)" the Outstanding Notes to be tendered within the meaning of Rule 14e-4 under the Exchange Act, (b) represents that such tender of Outstanding Notes complies with Rule 14e-4 under the Exchange Act and (c) guarantees that delivery to the exchange agent of certificates for the Outstanding Notes to be tendered, proper form for transfer (or confirmation of the book-entry transfer of such Outstanding Notes into the exchange agent's account at the Depository Trust company, pursuant to the procedures for book-entry transfer set forth in the prospectus), with delivery of a properly completed and duly executed (or manually signed facsimile) letter of transmittal with any required signatures and any other required documents, will be received by the exchange agent at one of its addresses set forth above within five business days after the Expiration Date. I HEREBY ACKNOWLEDGE THAT I MUST DELIVER THE LETTER OF TRANSMITTAL AND OUTSTANDING NOTES TO BE TENDERED TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD SET FORTH AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO ME. - -------------------------------------------- -------------------------------------------- Name of Firm Authorized Signature - -------------------------------------------- -------------------------------------------- Address Title - -------------------------------------------- Name: Zip Code -------------------------------------------- (Please Type or Print) Area Code and Telephone No._________________ Dated: --------------------------------------------
NOTE: DO NOT SEND OUTSTANDING NOTES WITH THIS FORM; OUTSTANDING NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE AGENT WITHIN THREE NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION DATE. 4 -----END PRIVACY-ENHANCED MESSAGE-----