EXHIBIT 4(p)
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE SECURITIES LAWS. THIS DEBENTURE MAY NOT BE OFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OF THE DEBENTURE UNDER SUCH
ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR UPON SATISFACTION BY THE
ISSUER HEREOF THAT SUCH REGISTRATION IS NOT REQUIRED AS TO SUCH SALE OR OFFER.
THIS DEBENTURE IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT (AS FROM
TIME TO TIME AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED), DATED AS OF
SEPTEMBER 12, 1997, BY AND BETWEEN HSBC BUSINESS LOANS, INC., HOLDER, AND THE
OTHER PARTIES NAMED THEREIN. THIS DEBENTURE IS ALSO SUBJECT TO THE TERMS OF A
SUBORDINATION AGREEMENT, DATED AS OF SEPTEMBER 12, 1997, BY AND BETWEEN THE
HOLDERS OF THE SUBORDINATED SECURED DEBENTURES DATED NOVEMBER 21, 1996, HOLDER,
AND THE OTHER PARTIES NAMED THEREIN.
JUNIOR SUBORDINATED SECURED DEBENTURE
$216,700 September 12, 1997
FOR VALUE RECEIVED, the undersigned, PICO PRODUCTS, INC., a New York
Corporation ("Parent"), PICO MACOM, INC., a Delaware corporation ("PMI") (the
Parent and PMI are hereinafter collectively referred to as "Borrowers"), jointly
and severally promise to pay ALLIED CAPITAL CORPORATION, a Maryland corporation
(the "Holder") or its registered assigns the principal sum of TWO HUNDRED
SIXTEEN THOUSAND AND SEVEN HUNDRED DOLLARS ($216,700), together with interest
thereon as set forth below, at its offices or such other place as the Holder may
designate in writing.
1. INVESTMENT AGREEMENT. This Junior Subordinated Secured Debenture
(the "Debenture") is one of three junior subordinated secured debentures to be
executed and delivered by the Borrowers in connection with an investment (the
"Investment") being made by the Holder and two affiliates of the Holder in the
Borrowers in the aggregate original principal amount of One Million Four
Hundred Eighty-Five Thousand Dollars ($1,485,000) pursuant to the terms and
conditions of an Investment Agreement between the Borrowers, the Holder and
certain other parties, dated of even date herewith (the "Investment Agreement").
This Junior Subordinated Secured Debenture and the other two junior subordinated
secured debentures evidencing the Investment (collectively, the "Other
Debentures") are each subject to the terms and conditions of the Investment
Agreement. A copy of the Investment Agreement may be examined during normal
business hours at the Parent's offices. Any capitalized term used herein and
not otherwise defined herein shall have the meaning given to it in the
Investment Agreement.
2. INTEREST RATE PROVISIONS.
2.1 INITIAL INTEREST RATE. Except as provided in Section 2.2,
from the date hereof and thereafter until repayment of this Debenture, interest
shall accrue hereunder at the rate of ten percent (10%) per annum (the "Initial
Interest Rate"). Interest shall be calculated on the basis of a 360-day year
and shall be computed for each payment period on the principal balance for the
actual number of days outstanding.
2.2 DEFAULT INTEREST RATE. Upon the occurrence of a Non-Payment
Event, as defined below, interest shall accrue and be payable hereunder at the
rate of fifteen percent (15%) per annum (the "Default Interest Rate") until the
earlier of repayment or the curing of such Non-Payment Event. A Non-Payment
Event shall be deemed to have occurred under this Debenture if any installment
payments due under the terms of this Debenture or any of the Other Debentures
are not received by the Holder on or before that date which is 10 days following
the due date thereof, or if any default interest or other sums payable to Holder
hereunder, under the terms of the Other Debentures, under the terms of the
Investment Agreement, or under the terms of any of the Security Documents are
not paid on or before that date which is 10 days following the due date thereof.
3. PAYMENT PROVISIONS.
3.1 INTEREST PAYMENTS. Commencing on October 1, 1997 and
continuing on the first day of each calendar month thereafter up to and
including September 1, 2000, the Borrowers shall pay to Holder monthly
installments of accrued interest, in arrears, at the Initial Interest Rate on
the principal balance of this Debenture then outstanding.
3.2 PRINCIPAL PAYMENTS; MATURITY DATE. The entire unpaid
principal balance of this Debenture, together with all accrued, but unpaid
interest, and all other sums owed hereunder shall be due and payable in full
without further notice or demand on September 30, 2000 (the "Maturity Date").
3.3 PREPAYMENTS; APPLICATION OF PAYMENTS. The Borrowers may
prepay this Debenture in whole or in part at any time without premium or
penalty. All prepayments shall be applied as follows: (a) first, to accrued,
but unpaid, interest; and (b) second, to principal installments, in inverse
order of maturity.
3.4 DUE ON SALE. The entire indebtedness hereunder shall become
due and payable upon the earlier of the Maturity Date or the "Transfer of the
Business", as defined in the Investment Agreement.
4. COLLATERAL. Pursuant to the terms and conditions of the
Investment Agreement and of the various Security Documents, this Debenture is
secured by perfected liens and security interests in favor of the Holder and the
holders of the Other Debentures in and to certain Collateral.
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5. SUBORDINATION. The indebtedness represented by this Debenture is
subordinate to the Senior Debt of the Borrowers in accordance with the terms of
the investment Agreement, the Senior Loan Subordination Agreement, and the
Senior Debentures Subordination Agreement.
6. ASSIGNMENT. This Debenture and the obligations hereunder may not
be assigned by any Borrower without the prior written consent of Holder. Holder
may freely assign all or any portion of its right, title and interest in and to
the Debenture.
7. JOINT AND SEVERAL LIABILITY. If more than one party signs this
instrument, then all signatories shall be jointly and severally liable
hereunder.
8. DEFAULT AND REMEDIES. The occurrence of an Event of Default under
the Investment Agreement shall constitute a default hereunder and shall entitle
the Holder to exercise the rights and remedies specified in the Investment
Agreement and the various Security Documents, as well as those available at law
or in equity. These rights and remedies include, but are not limited to, the
right of the Holder to accelerate the maturity of this Debenture and all other
Obligations (as defined in the Investment Agreement) and to sell or otherwise
dispose of any or all of the Collateral by public or private sale.
9. WAIVERS. Each Borrower hereby waives presentment, demand,
protest, or further notice of any kind (except such notices as may be
specifically required by the express terms of the Investment Agreement).
10. CONFESSION OF JUDGMENT. IN ADDITION TO ALL OTHER RIGHTS AND
REMEDIES AFFORDED HOLDER HEREUNDER AND UNDER THE INVESTMENT AGREEMENT AND
SECURITY DOCUMENTS, EACH BORROWER HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY,
OR THE CLERK OF ANY COURT IN THE STATE OF MARYLAND, TO APPEAR FOR SUCH BORROWER
AT ANY TIME FOLLOWING THE OCCURRENCE OF A DEFAULT UNDER THE INVESTMENT
AGREEMENT, IN ANY SUCH COURT IN AN APPROPRIATE ACTION THERE OR ELSEWHERE BROUGHT
OR TO BE BROUGHT AGAINST ANY BORROWER BY HOLDER ON THIS NOTE, WITH OR WITHOUT
DECLARATIONS FILED, AS OF ANY TERMS OR TIME OF COURT THERE OR ELSEWHERE TO BE
HELD AND THEREIN TO CONFESS OR ENTER JUDGMENT AGAINST SUCH BORROWER FOR ALL SUMS
DUE BY SUCH BORROWER TO HOLDER UNDER THIS NOTE AND THE INVESTMENT AGREEMENT,
TOGETHER WITH THE COSTS OF SUIT AND ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT
(15%) OF THE OUTSTANDING BALANCE, AND FOR SO DOING, THIS NOTE OR A COPY HEREOF
VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT. EACH BORROWER ACKNOWLEDGES
THAT IT HAS HAD THE ASSISTANCE OF COUNSEL IN THE REVIEW AND EXECUTION OF THE
INVESTMENT AGREEMENT AND THIS NOTE AND THE MEANING AND SIGNIFICANCE OF THE
CONFESSION OF JUDGMENT CONTAINED IN THIS PARAGRAPH HAS BEEN EXPLAINED TO SUCH
BORROWER BY SUCH COUNSEL.
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11. CONTROLLING LAW. This Debenture and all matters related hereto
shall be governed, construed and interpreted strictly in accordance with the
laws of the State of Maryland, without regard to its principles of conflicts of
law.
12. PURPOSE OF INVESTMENT. Each Borrower represents and warrants
that this Debenture evidences an investment made in the Borrowers for the
purpose of carrying on a business or commercial enterprise pursuant to Section
12-103(e) of the Commercial Law Article, Annotated Code of Maryland, as amended.
13. NO USURY. This Debenture is subject to the express condition
that at no time shall any Borrower be obligated or required to pay interest
hereunder at a rate which could subject the Holder to either civil or criminal
liability as a result of being in excess of the maximum rate which such Borrower
is permitted by law to contract or agree to pay. If, by the terms of this
Debenture, such Borrower is at any time required or obligated to pay interest at
a rate in excess of such maximum rate, the rate of interest under this Debenture
shall be deemed to be immediately reduced to such maximum rate, and interest
payable hereunder shall be computed at such maximum rate and the portion of all
prior interest payments in excess of such maximum rate shall be applied and
shall be deemed to have been payments in reduction of the principal balance of
this Debenture.
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IN WITNESS WHEREOF, the undersigned has caused this Debenture to be
executed and its seal affixed on the day and year first above written.
ATTEST: PICO PRODUCTS, INC.,
a New York corporation
By: By:
--------------------------- ----------------------- (SEAL)
Gary M. Atkinson Charles G. Emley, Jr.
Chairman and Chief Executive Officer
ATTEST: PICO MACOM, INC.,
a Delaware corporation
By: By:
--------------------------- ----------------------- (SEAL)
Gary M. Atkinson Charles G. Emley, Jr.
Chairman and Chief Executive Officer
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