EXHIBIT 10.51
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NOTE AND WARRANT PURCHASE AGREEMENT
BY AND AMONG
▇▇▇▇▇▇ INDUSTRIAL GROUP, INC.,
THE GUARANTORS FROM TIME TO TIME PARTY HERETO,
THE PURCHASERS
AND
BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇ CAPITAL (U.S.), INC.,
AS AGENT
DATED AS OF MARCH 26, 2004
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SECTION 1 PURCHASE AND SALE OF THE NOTES AND WARRANTS............................................... 1
Section 1.1 Notes and Warrants............................................................... 1
Section 1.2 The Closing...................................................................... 1
Section 1.3 Pro Rata Payment................................................................. 1
SECTION 2 INTEREST ................................................................................. 2
Section 2.1 Interest Rate.................................................................... 2
Section 2.2 Computation of Interest.......................................................... 2
Section 2.3 Default Rate..................................................................... 2
SECTION 3 FEES, PREPAYMENTS, TERMINATIONS, APPLICATIONS AND NOTATIONS............................... 2
Section 3.1 Fees............................................................................. 2
Section 3.2 Voluntary Prepayments of Notes................................................... 3
Section 3.3 Place of Payments................................................................ 4
Section 3.4 Application of Payments.......................................................... 4
SECTION 4 COLLATERAL................................................................................ 5
Section 4.1 Collateral....................................................................... 5
Section 4.2 Guaranties....................................................................... 5
Section 4.3 Further Assurances............................................................... 5
Section 4.4 Collections...................................................................... 5
SECTION 5 DEFINITIONS; INTERPRETATION............................................................... 6
Section 5.1 Definitions...................................................................... 6
Section 5.2 Interpretation................................................................... 17
Section 5.3 Change in Accounting Principles.................................................. 17
SECTION 6 REPRESENTATIONS AND WARRANTIES............................................................ 17
Section 6.1 Organization and Qualification................................................... 18
Section 6.2 Subsidiaries..................................................................... 18
Section 6.3 Authority and Validity of Obligations............................................ 18
Section 6.4 Use of Proceeds; Margin Stock.................................................... 19
Section 6.5 Financial Reports................................................................ 19
Section 6.6 Full Disclosure.................................................................. 19
Section 6.7 Good Title....................................................................... 20
Section 6.8 Litigation and Other Controversies............................................... 20
Section 6.9 Taxes............................................................................ 20
TABLE OF CONTENTS
(continued)
Section 6.10 Approvals........................................................................ 20
Section 6.11 Affiliate Transactions........................................................... 20
Section 6.12 Investment Company; Public Utility Holding Company............................... 21
Section 6.13 ERISA............................................................................ 21
Section 6.14 Compliance with Laws (Nonenvironmental).......................................... 21
Section 6.15 Environmental and Safety Matters................................................. 21
Section 6.16 Other Agreements................................................................. 22
Section 6.17 No Default....................................................................... 23
Section 6.18 Trademarks, Franchises, and Licenses............................................. 23
Section 6.19 Governmental Authority and Licensing............................................. 23
Section 6.20 Solvency......................................................................... 23
Section 6.21 Capital Structure................................................................ 23
Section 6.22 SEC Disclosure................................................................... 24
SECTION 7 CONDITIONS PRECEDENT...................................................................... 25
Section 7.1 Conditions....................................................................... 25
Section 7.2 Documents........................................................................ 26
SECTION 8 COVENANTS................................................................................. 29
Section 8.1 Maintenance of Business.......................................................... 29
Section 8.2 Maintenance of Property.......................................................... 29
Section 8.3 Taxes and Assessments............................................................ 29
Section 8.4 Insurance........................................................................ 29
Section 8.5 Financial Reports................................................................ 30
Section 8.6 Total Funded Debt/EBITDA Ratio................................................... 31
Section 8.7 Total Senior Funded Debt/EBITDA Ratio............................................ 32
Section 8.8 Minimum EBITDA................................................................... 32
Section 8.9 Fixed Charge Coverage Ratio...................................................... 33
Section 8.10 Capital Expenditures............................................................. 33
Section 8.11 Board Matters.................................................................... 33
Section 8.12 Investor Protection.............................................................. 34
Section 8.13 Equity Restriction............................................................... 34
Section 8.14 Indebtedness..................................................................... 34
Section 8.15 Liens............................................................................ 35
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TABLE OF CONTENTS
(continued)
Section 8.16 Investments, Loans, Advances and Guaranties...................................... 36
Section 8.17 Leases........................................................................... 37
Section 8.18 Dividends and Certain Other Restricted Payments.................................. 38
Section 8.19 Mergers, Consolidations and Sales................................................ 38
Section 8.20 Acquisitions..................................................................... 39
Section 8.21 Maintenance of Subsidiaries...................................................... 39
Section 8.22 Formation of Subsidiaries........................................................ 40
Section 8.23 ERISA............................................................................ 40
Section 8.24 Compliance with Laws............................................................. 40
Section 8.25 Burdensome Contracts with Affiliates............................................. 40
Section 8.26 Changes in Fiscal Year........................................................... 40
Section 8.27 Change in the Nature of Business................................................. 40
Section 8.28 Use of Loan Proceeds............................................................. 41
Section 8.29 No Restrictions.................................................................. 41
Section 8.30 Senior Debt...................................................................... 41
Section 8.31 Junior Subordinated Debt......................................................... 41
Section 8.32 [Reserved]....................................................................... 41
Section 8.33 Worthington Settlement Documents................................................. 41
Section 8.34 Mid-Central Debt................................................................. 42
Section 8.35 D & O Insurance.................................................................. 42
Section 8.36 Capital Stock.................................................................... 42
Section 8.37 Management Compensation.......................................................... 42
Section 8.38 Additional Life Insurance........................................................ 42
SECTION 9 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.......................................... 43
Section 9.1 Organization and Good Standing................................................... 43
Section 9.2 Authorization; Power............................................................. 43
Section 9.3 Validity......................................................................... 43
Section 9.4 Accredited Investor.............................................................. 43
Section 9.5 Purchase for Own Account; Acknowledgment of Risk................................. 43
SECTION 10 EVENTS OF DEFAULT AND REMEDIES............................................................ 44
Section 10.1 Events of Default................................................................ 44
Section 10.2 Consequences of Events of Default................................................ 46
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TABLE OF CONTENTS
(continued)
SECTION 11 THE AGENT................................................................................. 47
Section 11.1 Appointment and Authorization of Agent........................................... 47
Section 11.2 Agent and its Affiliates......................................................... 47
Section 11.3 Action by Agent.................................................................. 47
Section 11.4 Consultation with Experts........................................................ 48
Section 11.5 Liability of Agent; Credit Decision.............................................. 48
Section 11.6 Indemnity........................................................................ 48
Section 11.7 Resignation of Agent and Successor Agent......................................... 49
Section 11.8 Designation of Additional Agents................................................. 49
Section 11.9 Authorization to Release or Subordinate or Limit Liens........................... 49
Section 11.10 Authorization to Enter into, and Enforcement of, the Collateral Documents........ 50
Section 11.11 Subordination and Intercreditor Agreement........................................ 50
SECTION 12 The Guaranties............................................................................ 50
Section 12.1 The Guaranties................................................................... 50
Section 12.2 Guaranty Unconditional........................................................... 51
Section 12.3 Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances...... 51
Section 12.4 Waivers.......................................................................... 52
Section 12.5 Limit on Recovery................................................................ 52
Section 12.6 Stay of Acceleration............................................................. 52
Section 12.7 Benefit to Guarantors............................................................ 52
Section 12.8 Guarantor Covenants.............................................................. 53
SECTION 13 MISCELLANEOUS............................................................................. 53
Section 13.1 Holidays......................................................................... 53
Section 13.2 No Waiver, Cumulative Remedies................................................... 53
Section 13.3 Waivers, Modifications and Amendments............................................ 53
Section 13.4 Costs and Expenses............................................................... 53
Section 13.5 Documentary Taxes................................................................ 54
Section 13.6 Survival of Representations...................................................... 54
Section 13.7 Survival of Indemnities.......................................................... 54
Section 13.8 Notices.......................................................................... 54
Section 13.9 Headings......................................................................... 55
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TABLE OF CONTENTS
(continued)
Section 13.10 Severability of Provisions....................................................... 55
Section 13.11 Counterparts..................................................................... 55
Section 13.12 Binding Nature, Governing Law, Etc............................................... 55
Section 13.13 Entire Understanding............................................................. 55
Section 13.14 Confidentiality.................................................................. 55
Section 13.15 Sharing of Set-Off............................................................... 56
Section 13.16 Headings......................................................................... 56
Section 13.17 Set-off.......................................................................... 56
Section 13.18 Construction..................................................................... 56
Section 13.19 Submission to Jurisdiction; Waiver of Jury Trial................................. 57
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PURCHASER SCHEDULE
Exhibit A -- Form of Note
Exhibit B -- Form of Warrant
Exhibit C -- Compliance Certificate
Attachment to Compliance Certificate
Exhibit D -- Guaranty
Schedule 6.2 -- Subsidiaries
Schedule 6.7 -- Property
Schedule 6.15 -- Environmental and Safety Matters
Schedule 6.21 -- Capital Structure
Schedule 7.2(l) -- EBITDA Reconciliation
Schedule 8.15 -- Other Liens
▇▇▇▇▇▇ INDUSTRIAL GROUP, INC.
NOTE AND WARRANT
PURCHASE AGREEMENT
This Note and Warrant Purchase Agreement is entered into as of March
26, 2004, (the "AGREEMENT"), by and among ▇▇▇▇▇▇ Industrial Group, Inc., a
Georgia corporation (the "COMPANY"), each of the Subsidiaries from time to time
becoming a party hereto, as Guarantors, each of the purchasers set forth in the
Purchaser Schedule hereto (together with any other transferee or other Person
that becomes a holder of any Note, collectively, the "PURCHASERS" and
individually, a "PURCHASER"), and BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital (U.S.), Inc., in its
capacity as agent hereunder (hereinafter referred to as the "AGENT").
The parties hereto agree as follows:
SECTION 1
PURCHASE AND SALE OF THE NOTES AND WARRANTS
Section 1.1 Notes and Warrants.
(a) Sale and Issuance of Securities. Subject to the terms
and conditions hereof, at the Closing the Company shall sell to the Purchasers
and the Purchasers shall purchase from the Company (i) the Notes in the
aggregate principal amount of $10,000,000, in the amounts set forth opposite
each Purchaser's name as set forth in the Purchaser Schedule, and (ii) the
Warrants to purchase in the aggregate, nine percent (9%) of the Company's common
stock on a fully-diluted basis, in the amounts set forth opposite each
Purchaser's name as set forth in the Purchaser Schedule.
(b) Guaranties. The obligations of the Company under the
Notes, the Collateral Documents and, with respect to the payment to each
Purchaser of the Put Price (as defined in the Warrants), shall be guaranteed by
each Subsidiary of the Company pursuant to a guaranty in form and substance
acceptable to the Agent (the "GUARANTY").
Section 1.2 The Closing. The closing of the separate purchases
and sales of the Securities (the "CLOSING") shall take place at the offices of
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, P.C., at 10:00 a.m. on March 26, 2004 (the
"CLOSING DATE"), or at such other place or on such other date as may be mutually
agreeable to the Company, the Agent and the Purchasers. At the Closing, the
Company shall deliver to the Purchasers instruments evidencing the Notes and the
Warrants to be purchased by such Purchaser, payable to the order of such
Purchaser or its nominee or registered in such Purchaser's or its nominee's
name, respectively, upon payment by such Purchaser of the amount set forth
opposite such Purchaser's name in the Purchaser Schedule, by wire transfer of
immediately available funds to an account specified in writing by the Company to
the Agent at least two (2) Business Days prior to the Closing.
Section 1.3 Pro Rata Payment. All payments to the Purchasers or
any other holders of the Notes (whether for principal, interest or otherwise)
shall be made pro rata among such holders based upon the aggregate unpaid
principal amount of the Notes held by each such holder. If any holder of any of
the Notes obtains any payment (whether voluntary or involuntary) of
principal, interest or other amount with respect to any of the Notes in excess
of such holder's pro rata share of such payments obtained by all holders of the
Notes, such holder hereby agrees to purchase from the other holders of the Notes
a participation in the Notes held by them as is necessary to cause such holders
to share the excess payment ratably among each of them as provided in this
Section 1.3.
SECTION 2
INTEREST
Section 2.1 Interest Rate. The Notes shall bear interest on the
unpaid balance thereof at the aggregate rate of 16% per annum, and shall be
payable at the times specified in the Notes, which interest shall be segregated
into Current Interest and Deferred Interest, all as more fully specified in the
Notes.
Section 2.2 Computation of Interest. All interest shall be
computed on the basis of a year of 360 days for the actual number of days
elapsed.
Section 2.3 Default Rate. Notwithstanding anything to the
contrary contained herein, while any Event of Default exists or after
acceleration, the Company shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on the principal amount of all
Notes at a rate per annum equal to the rate specified in Section 10.2 of this
Agreement. Any interest above the aggregate rate of 16% per annum required to be
paid under this Section 2.3 shall be deemed to be Current Interest.
SECTION 3
FEES, PREPAYMENTS, TERMINATIONS,
APPLICATIONS AND NOTATIONS
Section 3.1 Fees.
(a) Commitment Fee. For the period from and including the
date hereof to but not including the Maturity Date, the Company shall pay to the
Agent for the ratable benefit of the Purchasers as hereinafter set forth, a
commitment fee of $200,000, $25,000 of which has been paid prior to the Closing
Date.
(b) Audit and Appraisal Fees. The Company shall pay to
the Agent for its own use and benefit reasonable charges for audits of the
Collateral by the Agent or its agents or representatives in such amounts as the
Agent may from time to time reasonably request (the Agent acknowledging and
agreeing that such charges shall be computed in the same manner as it at the
time customarily uses for the assessment of charges for similar collateral
audits actually performed by it). The Agent, on behalf of the Purchasers, shall
be entitled to conduct two (2) such audits (each a "SCHEDULED FIELD AUDIT")
during each calendar year (unless any Default or Event of Default has occurred,
in which case there shall be no limit on the number of such audits). In the
absence of any Default or Event of Default, the Company shall not be required to
reimburse the Agent for more than two (2) Scheduled Field Audits per calendar
year.
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Section 3.2 Voluntary Prepayments of Notes.
(a) Optional Prepayments of the Notes. At any time and
from time to time, the Company may, at its option, upon notice as provided in
Section 3.2(b), prepay all or any portion of the principal balance of the Notes,
on any quarterly payment date, in minimum increments of $500,000, plus a
prepayment premium equal to the product obtained by multiplying (i) the amount
being prepaid by (ii) the percentage set forth below opposite the time period in
which such prepayment shall occur (the "PREPAYMENT PREMIUM"):
TIME PERIOD PERCENTAGE
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Closing Date to March 31, 2005 3%
April 1, 2005 to March 31, 2006 2%
April 1, 2006 to March 31, 2007 1%
April 1, 2007 to maturity No Prepayment Premium
In addition, the Company may, at its option, upon notice as provided in Section
3.2(b), prepay all or any portion of the Deferred Interest on any quarterly
payment date without having to pay a prepayment premium. Except as provided in
Section 3.2(a) and 3.2(c) hereof, the Notes may not be voluntarily prepaid by
the Company.
(b) Notice of Optional Prepayments; Officer's
Certificate. The Company will give each holder of the Notes written notice of
such optional prepayment under Section 3.2(a) not less than two (2) Business
Days prior to the date fixed for such prepayment. Each such notice shall be
accompanied by an officer's certificate (i) stating the principal amount and
holder of each Note to be prepaid and the principal amount thereof to be
prepaid, (ii) stating the proposed date of prepayment and any conditions
relating thereto and (iii) stating the Prepayment Premium required under Section
3.2(a) (calculated as of the date of such prepayment).
(c) Contingent Prepayments of Notes on Change of Control;
Officer's Certificates.
(i) In the event of a Change of Control, the
Company will, at least thirty (30) days and not more than sixty (60)
days prior to such Change of Control, give written notice thereof to
each holder of the Securities, which shall contain a written
irrevocable notice that the Company will prepay (a "PREPAYMENT
NOTICE"), by a date (the "PREPAYMENT DATE") specified in such notice
(which date shall be on or prior to the effective date of the Change of
Control), all of the Obligations under the Notes held by such holder in
full (and not in part) in cash. Such notice may state that the
Company's prepayment is conditioned upon the consummation of such
Change of Control. The Company shall pay to such holder the outstanding
principal amount of all Notes then held by such holder, together with
all accrued and unpaid interest thereon. In the event of a prepayment
of the Notes in connection with a Change of Control, no Prepayment
Premium shall be due in connection therewith and neither the Company
nor any Guarantor shall be liable therefor.
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(ii) Any notice by the Company to prepay the
Notes, and any subsequent prepayment thereof pursuant to this Section
3.2(c), shall be accompanied by an officer's certificate (A) stating
the principal amount of each Note to be prepaid, (B) stating the
Prepayment Date, (C) stating the accrued interest on each such Note to
the Prepayment Date to be prepaid, (D) stating the Prepayment Premium
payable in connection with such proposed prepayment (calculated as of
the date of such notice or prepayment, as the case may be), (E)
certifying that the conditions of this Section 3.2(c) have been
fulfilled, and (F) specifying the nature of the Change of Control, the
transactions or proposed transactions resulting in such Change of
Control and the date or proposed date of the occurrence of such Change
of Control.
Section 3.3 Place of Payments. All payments of principal,
interest, fees and all other amounts payable hereunder shall be made to such
Purchaser's account as specified in the Purchaser Schedule on the date any such
payment is due and payable. All such payments shall be made in lawful money of
the United States of America, by wire transfer of immediately available funds at
the place of payment, without setoff or counterclaim and without reduction for,
and free from, any and all present or future taxes, levies, imposts, duties,
fees, charges, deductions, withholdings, restrictions or conditions of any
nature imposed by any government or any political subdivision or taxing
authority thereof (but excluding any taxes imposed on or measured by the net
income of such Purchaser). Payments received by such Purchaser after 1:00 p.m.
(Chicago time) or any date shall be deemed received as of the opening of
business on the next Business Day. Except as herein provided, all payments shall
be received by the Agent for the ratable account of the Purchasers and shall be
promptly distributed by the Agent ratably to the Purchasers. No amount paid or
prepaid on the Notes may be reborrowed.
Section 3.4 Application of Payments Anything contained herein to
the contrary notwithstanding, all payments and collections received in respect
of the Notes and other Obligations by the Agent or any of the Purchasers, after
acceleration or the final maturity of the Obligations as a result of an Event of
Default, shall be remitted to the Agent and distributed as follows:
(a) first, to the payment of any outstanding costs and
expenses incurred by the Agent in protecting, preserving or enforcing rights
under this Agreement and the other Operative Documents and in any event
including all costs and expenses of a character which the Company has agreed to
pay under Section 13.4 hereof (such funds to be retained by the Agent for its
own account unless it has previously been reimbursed for such costs and expenses
by the Purchasers, in which event such amounts shall be remitted to the
Purchasers to reimburse them for payments theretofore made to the Agent);
(b) second, to the payment of any outstanding interest or
other fees or indemnification amounts due under the Operative Documents other
than for principal of the Notes, ratably as among the Agent and the Purchasers
in accord with the amount of such interest and other fees or Obligations owing
each;
(c) third, to the payment of all other unpaid Obligations
and all other indebtedness, obligations, and liabilities of the Company and its
Subsidiaries secured by the Operative Documents (including, without limitation,
the Put Price and any Deferred Put
4
Obligation) to be allocated pro rata in accordance with the aggregate unpaid
amounts owing to each holder thereof; and
(d) fourth, to the Company or to whoever the Agent
reasonably determines to be lawfully entitled thereto.
SECTION 4
COLLATERAL
Section 4.1 Collateral. The payment and performance of the
Obligations shall at all times be secured by, among other things, (a) all of the
Company's and its Subsidiaries' accounts, chattel paper, documents, instruments,
general intangibles, inventory, equipment and certain other assets and property
of the Company and its Subsidiaries, in each case whether now owned or held or
hereafter acquired or arising, pursuant to that certain Security Agreement from
the Company and its Subsidiaries dated as of even date herewith, as the same may
be amended, modified or supplemented from time to time (the "SECURITY
AGREEMENT"), (b) all of the capital stock of the Subsidiaries and certain other
assets and property of the Company and its Subsidiaries, in each case whether
now owned or held or hereafter acquired or arising, pursuant to that certain
Pledge Agreement from the Company dated as of even date herewith, as the same
may be amended, modified or supplemented from time to time (the "PLEDGE
AGREEMENT"), and (c) the real estate and related assets and properties of the
Company and its Subsidiaries, in each case whether now owned or held or
hereafter acquired or arising, pursuant to mortgages and trust deeds reasonably
acceptable to the Agent as to form and substance (as supplemented or otherwise
modified from time to time, collectively the "MORTGAGES" and individually each a
"MORTGAGE").
Section 4.2 Guaranties. Payment of obligations evidenced by the
Notes and the other Obligations shall at all times be jointly and severally
guaranteed by each Subsidiary pursuant hereto or pursuant to a Guaranty issued
by such Subsidiary. In the event any Subsidiary is hereafter acquired or formed,
the Company shall also cause such Subsidiary to execute such Collateral
Documents (having terms and conditions substantially similar to those executed
by the Company and its Subsidiaries in connection with the purchase and sale of
the Securities under this Agreement) as the Agent may then require, granting in
favor of the Agent for the benefit of the holders of the Notes a security
interest in and lien on the assets of such Subsidiary as collateral security for
the Notes and the other Obligations, together with such other instruments,
documents, certificates and opinions required by the Agent in connection
therewith.
Section 4.3 Further Assurances. The Company covenants and agrees
that it shall, and shall cause each Subsidiary to, comply with all terms and
conditions of each of the Collateral Documents and that the Company shall, and
shall cause each Subsidiary to, at any time and from time to time as requested
by the Agent, execute and deliver such further instruments and do such other
acts as the Agent or the Majority Holders may deem necessary or desirable to
provide for or protect or perfect the Lien of the Agent in the Collateral.
Section 4.4 Collections. The Company shall establish and maintain
such arrangements as shall be necessary or appropriate to assure that all
proceeds of the Collateral of
5
the Company and its Subsidiaries are deposited (in the same form as received) in
accounts maintained with a financial institution reasonably satisfactory to, and
under the dominion and control of, the Agent (subject to the dominion and
control of the Senior Bank Agent), such accounts to constitute special
restricted accounts, the Company and Guarantors acknowledging that the Agent has
(and is hereby granted) a lien on such accounts and all funds contained therein
to secure the Obligations. It shall be a condition to the Company's or any
Subsidiary's right to establish and maintain such deposit accounts at any time
following the Closing Date, that the financial institutions maintaining such
accounts shall have delivered to the Agent blocked account agreements reasonably
satisfactory to the Agent in form and substance pursuant to which such financial
institutions acknowledge the Agent's Lien thereon, waive any right of offset or
bankers' liens thereon (other than (i) Liens of the Senior Bank Agent which are
subject to the Subordination Agreement and (ii) with respect to account
maintenance charges and returned items). Agent acknowledges that ▇▇▇▇▇▇ Trust
and Savings Bank is a satisfactory financial institution for purposes of this
Section 4.4.
SECTION 5
DEFINITIONS; INTERPRETATION.
Section 5.1 Definitions. The following terms when used herein
shall have the following meanings:
"ACQUISITION" means (i) the acquisition of all or any substantial part
of the assets, property or business of any other Person, firm or corporation,
(ii) any acquisition of a majority of the common stock or other equity
securities of any firm or corporation, or (iii) any other transaction pursuant
to which a Person is newly allocated a majority of the profits or losses of any
other Person.
"AFFILIATE" means any Person, directly or indirectly controlling,
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control another Person for the purposes of this
definition if such Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of the other
Person, whether through the ownership of voting securities, common directors,
trustees or officers, by contract or otherwise; provided that, in any event, any
Person that owns, directly or indirectly, 5% or more of the securities having
the ordinary voting power for the election of directors or governing body of a
corporation or 5% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person.
"AGENT" means BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital (U.S.), Inc. and any successor
thereto appointed pursuant to Section 11.1 hereof.
"AUTHORIZED REPRESENTATIVE" means those Persons shown on the list of
officers and employees of the Company pursuant to Section 7.2(h) hereof or on
any update of any such list provided by the Company to the Agent, or any further
or different officers and employees so named by any Authorized Representative in
a written notice to the Agent.
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"BOARD" shall mean the board of directors (or comparable managers) of a
Person.
"BORROWING BASE" shall have the meaning given such term in the Senior
Credit Agreement as in effect on the date hereof.
"BORROWING BASE CERTIFICATE" shall have the meaning given such term in
the Senior Credit Agreement as in effect on the date hereof.
"BUSINESS DAY" means any day (other than a Saturday or Sunday) on which
banks are not authorized or required to close in Chicago, Illinois.
"CAPITAL EXPENDITURES" means, for any period, capital expenditures of
the Company and its Subsidiaries during such period as defined and classified in
accordance with GAAP.
"CAPITAL LEASE" means any lease of Property which, in accordance with
GAAP, is required to be capitalized on the balance sheet of the lessee.
"CAPITAL STOCK" shall mean (i) in the case of a corporation, voting
capital stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of voting capital stock, (iii) in the case of a partnership, voting
partnership interests (whether general or limited), (iv) in the case of a
limited liability company, voting membership or similar interests and (v) any
other interest or participation that confers on a Person the right to vote and
to receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"CAPITALIZED LEASE OBLIGATION" means the amount of the liability shown
on the balance sheet of any Person in respect of a Capital Lease determined in
accordance with GAAP.
"CASH MATURITIES" means, with reference to any period, the aggregate
amount of payments required to be made by the Company and its Subsidiaries
during such period with respect to principal on all Indebtedness (whether at
maturity, as a result of mandatory sinking fund redemption, scheduled mandatory
prepayment or otherwise).
"CERCLA" is defined in Section 6.15(b).
"CHANGE OF CONTROL" means the occurrence, at any time after the date
hereof, of (i) any Person or two or more Persons acting in concert acquiring
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act), directly or indirectly,
of securities of the Company (or other securities convertible into such
securities) representing more than twenty-five percent (25%) of the combined
voting power of all securities of the Company entitled to vote in the election
of directors; or (ii) commencing after the date hereof, individuals who as of
the date hereof were directors of the Company ceasing for any reason to
constitute a majority of the Parent Board unless the Persons replacing such
individuals were nominated by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or the Parent Board; or (iii)
any Person or two or more Persons acting in concert acquiring by contract or
otherwise, or entering into a contract or arrangement which upon consummation
will result in its or their acquisition of, or control over, securities of the
Company (or other securities convertible into such securities) representing more
than twenty-five percent (25%) of the
7
combined voting power of all securities of the Company entitled to vote in the
election of directors; or (iv) except for Permitted Transfers, either ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ or ▇▇▇▇ ▇. ▇▇▇▇▇ ceases any time and for any reason own and to hold of
record at least ninety percent (90%) of the securities of the Company which he
owns and holds of record on the Closing Date; or (v) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall
fail to own or be a party to one or more contracts or arrangements giving him
voting control over at least fifty-one percent (51%) of the combined voting
power of all securities of the Company entitled to vote in the election of
directors.
"CLOSING DATE" means the date on which the Agent has received signed
counterpart signature pages of this Agreement from each of the signatories and
the conditions in Section 7.1 and 7.2 hereof have been fulfilled.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"COLLATERAL DOCUMENTS" means the Security Agreement, the Pledge
Agreement, the Mortgages and all other mortgages, deeds of trust, security
agreements, assignments, financing statements and other documents as shall from
time to time secure the Obligations.
"CONSOLIDATED ENTITY" means, collectively, the Company and each of its
Subsidiaries that are consolidated for financial reporting purposes.
"CONSOLIDATED NET INCOME" means, with reference to any period, the net
income (or net deficit) of the Company and its Subsidiaries for such period as
computed on a consolidated basis in accordance with GAAP.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company or any Subsidiary, are treated
as a single employer under Section 414 of the Code.
"CREDIT PARTIES" means the Company and the Domestic Subsidiaries, and
the term "CREDIT PARTY" shall mean any of the foregoing unless the context in
which such term is used shall otherwise require.
"CURRENT INTEREST" means the rate of twelve percent (12.00%) per annum
(computed on the basis of a 360-day year and the actual number of days elapsed
in any year) on the unpaid principal amount of the Notes outstanding from time
to time from and including the date of issuance thereof until the date paid, or
if less, at the highest rate then permitted under applicable law.
"DEFAULT" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.
"DEFERRED INTEREST" means the rate of four percent (4%) per annum
(computed on the basis of a 360-day year and the actual number of days elapsed
in any year) on the unpaid principal amount of the Notes outstanding from time
to time from and including the date of issuance thereof until the date paid, or
if less, at the highest rate then permitted under applicable law.
8
"DEFERRED PUT OBLIGATIONS" shall have the meaning given such term in
the Warrants.
"DOMESTIC SUBSIDIARY" means each Subsidiary of the Company which is
organized under the laws of the United States of America or any State thereof.
"EBIT" means, with reference to any period, Consolidated Net Income for
such period plus all amounts deducted in arriving at such Consolidated Net
Income for such period in respect of (i) Interest Expense for such period, plus
(ii) federal, state and local income taxes for such period, plus (iii) with
respect to any applicable accounting period of the Company, to the extent such
charges against Consolidated Net Income are reflected on the Company's annual
audited financial statements for the most recent fiscal year then ended, (x)
non-cash charges reflecting impairment charges arising from SFAS No. 142
(Goodwill and Other Intangible Assets), for such period, and (y) non-cash
charges for accretion of discount on, or interest on, preferred stock of the
Company for such period, plus or minus (iv) non-cash charges or gains resulting
from any valuation of the Warrants in accordance with the provisions of FAS 150.
"EBITDA" means, with reference to any period, EBIT for such period plus
all amounts properly deducted in arriving at such Consolidated Net Income for
such period in respect of depreciation of fixed assets and amortization of
intangible assets during such period on the books of the Company and its
Subsidiaries; provided, that EBITDA for the fiscal quarters of the Company
listed below shall be deemed by the parties hereto to be, notwithstanding the
other provisions of this definition, $3,401,000 for the fiscal quarter ended
June 30, 2003, $2,324,000 for the fiscal quarter ended September 30, 2003, and
$2,365,000 for the fiscal quarter ended December 31, 2003.
"ENVIRONMENTAL CLAIMS" means all claims, however asserted, by any
governmental authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"ENVIRONMENTAL LAWS" means any present or future federal, state or
local laws, statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative orders, licenses, authorizations and
permits of, and agreements with, any governmental authority, in each case
relating to Environmental Matters.
"ENVIRONMENTAL MATTERS" means any matter arising out of or relating to
health and safety, or pollution or protection of the environment or workplace,
including any of the foregoing relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution,
discharge, release, control or cleanup of any Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.
"EVENT OF DEFAULT" means any event or condition identified as such in
Section 10.1 hereof.
"FIXED CHARGE COVERAGE RATIO" means, as of the last day of each fiscal
quarter of the Company, the ratio of (i) EBITDA for the four fiscal quarters of
the Company ending on such date, less Capital Expenditures for such four fiscal
quarters, to (ii) the sum for such four fiscal
9
quarters of (a) Interest Expense (but excluding therefrom all payment-in-kind
interest and non-cash interest relating to the Warrants in accordance with the
provisions of FAS 150), (b) Cash Maturities, (c) federal, state and local income
taxes and (d) without duplication of the foregoing, stock redemption payments
required to be made pursuant to the terms of the Stock Redemption Agreement;
provided that, for all calculations of the Fixed Charge Coverage Ratio for
fiscal quarters ending through and including December 31, 2004, (1) Interest
Expense for the four fiscal quarters then ended shall be deemed by the parties
hereto to be equal to the product of (x) Interest Expense incurred during the
period (the "POST-CLOSING PERIOD") from and including the Effective Date through
and including the last day of such period and (y) a fraction, the numerator of
which is 365 and the denominator of which is the number of days in such
post-closing period, (2) Cash Maturities for the four fiscal quarters then ended
shall be deemed by the parties hereto to be equal to the product of (x) Cash
Maturities during the post-closing period and (y) a fraction, the numerator of
which is 365 and the denominator of which is the number of days in such
post-closing period, and (3) stock redemption payments required to be made
during the four fiscal quarters then ended shall be deemed by the parties hereto
to be $500,000.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied by the Company and its Subsidiaries on a basis consistent
with the preparation of the Company's audited financial statements referred to
in Section 6.5 hereof.
"GUARANTOR" means each Subsidiary that is a signatory hereto or that
executes and delivers to the Agent a Guaranty along with the accompanying
closing documents required by Section 4.2 hereof.
"GUARANTEED OBLIGATIONS" is defined in Section 12.1 hereof.
"GUARANTY" means this Agreement as to Guarantors party hereto and
otherwise, a letter to the Agent in the form of Exhibit E hereto executed by a
Subsidiary whereby it acknowledges it is party hereto as a Guarantor under
Section 12 hereof and also in the case of any Subsidiary not organized under the
laws of the United States of any State thereof, such other form of guaranty as
shall be reasonably acceptable to the Agent and the Majority Holders.
"HAZARDOUS MATERIAL" means all or any of the following: (i) substances
that are defined or listed in, or otherwise classified pursuant to, any
Environmental Laws or regulations as "hazardous substances," "hazardous
materials," "hazardous wastes," "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity, or
toxicity; (ii) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (iii) any flammable substances or
explosives or any radioactive materials; and (iv) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
polychlorinated biphenyls.
"HEDGING LIABILITY" means the liability of the Company to any of the
Senior Lenders or their Affiliates in respect of any interest rate swaps,
interest rate caps, interest rate collars, or other interest rate hedging
arrangements as the Company may from time to time enter into with any one or
more of the Senior Lenders or their Affiliates. Unless and until the amount of
the
10
Hedging Liability is fixed and determined, the Hedging Liability shall be deemed
to be the market value of the notional amount of the hedge from the date of
computation to the date the hedge expires.
"INDEBTEDNESS" means for any Person (without duplication) (i) all
indebtedness created, assumed or incurred in any manner by such Person
representing money borrowed (including by the issuance of debt securities), (ii)
all indebtedness for the deferred purchase price of property or services (but
specifically excluding (x) trade accounts payable arising in the ordinary course
of business which are not more than 180 days past due and (y) unsecured
indebtedness of the type and in the amount permitted pursuant to Section 8.14(f)
hereof), (iii) all indebtedness secured by any Lien upon Property of such
Person, whether or not such Person has assumed or become liable for the payment
of such indebtedness, (iv) all indebtedness secured by a purchase money mortgage
or other Lien to secure all or part of the purchase price of Property subject to
such mortgage or Lien, (v) all Capitalized Lease Obligations of such Person,
(vi) all obligations of such Person on or with respect to letters of credit,
bankers' acceptances and other extensions of credit whether or not representing
obligations for borrowed money, (vii) each "non-compete" and like payment owed
by such Person in connection with an Acquisition, to the extent such payment
would be classified as a liability under GAAP, and (viii) with respect to the
Company or any of its Subsidiaries, all obligations of such Persons to pay the
Purchase Price (and, to the extent all or any portion of such amount is
reinstated pursuant to the Stock Redemption Agreement, the Stated Redemption
Amount) for the Subject Stock under, and as such capitalized terms are defined
in, the Stock Redemption Agreement, it being understood that for the purpose of
calculating compliance with the terms and provisions of this Agreement, the
amount of "Indebtedness" at any time of the type described in this clause (viii)
shall be agreed by the parties to be the arithmetical sum of all such
obligations then due and unpaid or to become due at any time in the future under
such agreement as in effect at the time of determination, provided that there
shall be excluded from this definition of "Indebtedness" the obligations of the
Company under the Warrants, notwithstanding any contrary treatment thereof under
GAAP.
"INTEREST EXPENSE" means, with reference to any period (the
"MEASUREMENT PERIOD"), the sum of all interest expense with respect to
Indebtedness or Hedging Liabilities relating to indebtedness (including imputed
interest charges with respect to Capitalized Lease Obligations and all
amortization of debt discount and expense) of the Company and its Subsidiaries
for such measurement period determined in accordance with GAAP (and including,
for any measurement period in the overall calculation of Interest Expense for
such measurement period, the net amount of interest expense relating to Hedging
Liabilities during such measurement period, whether positive or negative).
"JUNIOR SUBORDINATED DEBT" means, collectively (x) the currently
outstanding Indebtedness of the Company evidenced by those two Non-Negotiable
Promissory Notes (subordinated) each dated as of April 8, 1998, one payable to
the order of ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. in the currently outstanding principal amount
of $1,262,781, and the second payable to the order of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in the
currently outstanding principal amount of $600,255, (y) Indebtedness to
Worthington under the Settlement Agreement and the Stock Redemption Agreement
and (z) any other indebtedness for borrowed money which shall be subordinated in
right of payment to the prior payment of the Obligations by written provisions
acceptable to the Agent and Majority Holders in form and substance and otherwise
pursuant to documentation, in an amount, and
11
containing interest rates, payment terms, maturities, amortization schedules,
covenants, defaults, remedies and other material terms in form and substance
satisfactory to the Agent and Majority Holders.
"LIEN" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor under any conditional sale, capital lease or other title
retention arrangement.
"MAJORITY HOLDERS" means, as of the date of determination thereof, the
holders of at least fifty-one percent (51%) of the outstanding principal amount
of the Notes and the holders of at least fifty-one percent (51%) of the
Underlying Capital Stock (on an as-converted basis).
"MATERIAL ADVERSE EFFECT" means (a) a material adverse change in, or
material adverse effect upon, the operations, business, Property, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries taken
as a whole, (b) a material impairment of the ability of the Company or any
Subsidiary to perform its material obligations under any Operative Document, or
(c) a material adverse effect upon (i) the legality, validity, binding effect or
enforceability against the Company or any Subsidiary of any Operative Document
or the rights and remedies of the Agent and the Purchasers thereunder or (ii)
the perfection or priority of any Lien granted under any Collateral Document.
"MATERIAL PLAN" is defined in Section 10.1(j) hereof.
"MATURITY DATE" means (x) March 26, 2009, or (y) if earlier, such
earlier date on which the Notes are accelerated in whole pursuant to Sections
10.1 or 10.2 hereof.
"MID-CENTRAL" means Mid-Central Plastics, Inc., an Iowa corporation.
"MID-CENTRAL NOTES" means those certain promissory notes received by
Mid-Central as partial consideration for the Mid-Central Sale, including without
limitation the Three Month Note, the Six Month Note and the Subordinated Note as
defined in the asset purchase agreement for the Mid-Central Sale, all of which
are subject to the terms of the ▇▇▇▇▇ Fargo Subordination Agreement.
"MID-CENTRAL SALE" means the sale by Mid-Central to Innovative
Injection Technologies, Inc. of substantially all of its assets, including
without limitation its right, title and interest in and to its real property and
associated improvements and certain personal property associated therewith
located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇.
"MORTGAGE" is defined in Section 4.1 hereof.
"▇▇▇▇▇▇ SOUTH CAROLINA" means ▇▇▇▇▇▇ Metalcraft Co. of South Carolina,
a South Carolina corporation.
"NOTES" means and includes those certain Senior Subordinated Promissory
Notes dated the date hereof in the aggregate principal amount of Ten Million
Dollars $10,000,000, issued to the Purchasers by the Company pursuant to this
Agreement, in substantially the form attached
12
hereto as Exhibit A, with the blanks appropriately filled in, as may be amended,
restated, replaced, substituted or otherwise modified from time to time.
"OBLIGATIONS" means all obligations of the Company to pay the principal
and interest on the Notes, all fees and charges payable hereunder, and all other
payment obligations of the Company arising under or in relation to any Operative
Document, including, without limitation, the Put Price and any Deferred Put
Obligations, in each case whether now existing or hereafter arising, due or to
become due, direct or indirect, absolute or contingent, and howsoever evidenced,
held or acquired.
"OFFICER'S CERTIFICATE" means a certificate signed on behalf of the
Company by the Company's president, CEO or chief financial officer, stating that
(a) the officers signing such certificate have made or have caused to be made
such investigations as are necessary in order to permit them to verify the
accuracy of the information set forth in such certificate and (b) such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the certificate not misleading.
"OPERATIVE DOCUMENTS" means this Agreement, the Notes, the Warrants,
the Investor Rights Agreement, the Guaranties, the Collateral Documents and all
other documents, instruments and agreements executed by or on behalf of the
Company and delivered concurrently herewith or at any time hereafter to or for
the Purchasers, Agent or any Affiliate of Purchasers or Agent, all as amended,
restated or supplemented from time to time.
"OPTION PLANS" means the Stock Option Plan and the Company Director
Plan, as each such term is defined in Section 6.21(a) hereof.
"PARENT BOARD" has the meaning given such term in Section 8.11 hereof.
"PAYMENT DEFAULT" means in Event of Default as described in Section
10.1(a) after the expiration of any applicable grace period.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, partnership, corporation, association,
trust, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof.
"PERMITTED TRANSFERS" means any sale, assignment, transfer, pledge,
hypothecation, mortgage, encumbrance or other disposition of all or any of the
Capital Stock of the Company held by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇, respectively,
as follows: (i) by way of gift to any member of his family or to any trust or
other estate planning entity for his benefit or the benefit of any such family
member, provided that any such transferee shall agree in writing with the
Company and the Purchasers, as a condition to such transfer, to be bound by all
of the provisions of this Agreement to the same extent as if such transferee
were such transferor; or (ii) by will or the laws of descent and distribution,
in which event each such transferee shall be bound by all of the provisions of
this Agreement to the same extent as if such transferee were such transferor. As
used herein, the word "family" shall include any spouse, lineal ancestor or
descendant.
13
"PLAN" means any employee pension benefit plan covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
that either (i) is maintained by a member of the Controlled Group for employees
of a member of the Controlled Group, (ii) is maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one employer
makes contributions and to which a member of the Controlled Group is then making
or accruing an obligation to make contributions or has within the preceding five
plan years made contributions, or (iii) under which a member of the Controlled
Group has any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
during the preceding five years or by reason of being deemed a contributing
sponsor under Section 4064 of ERISA.
"PLEDGE AGREEMENT" is defined in Section 4.1 hereof.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"SECURITIES" means, collectively, the Notes and the Warrants.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITY AGREEMENT" is defined in Section 4.1 hereof.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental body or
agency succeeding to the functions thereof.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.
"SENIOR BANK AGENT" means ▇▇▇▇▇▇ Trust and Savings Bank, in its
capacity as agent under the Senior Credit Agreement and any successor thereto
appointed pursuant to the Senior Credit Agreement.
"SENIOR CREDIT AGREEMENT" means that certain Second Amended and
Restated Credit Agreement, dated the date hereof, by and among the Company,
certain guarantor parties thereto, the Senior Lenders and the Senior Bank Agent,
as amended, supplemented or modified from time to time, including, without
limitation, any agreement refinancing in whole or in part the "Obligations" (as
defined therein) as permitted under the Subordination Agreement.
14
"SENIOR CREDIT DOCUMENTS" means the Senior Credit Agreement and the
related agreements, documents and instruments, as amended, modified or
supplemented in accordance with the Subordination Agreement.
"SENIOR DEBT" means the Indebtedness of the Company and extension of
credit by the Senior Lenders under the Senior Credit Agreement, together with
extensions of credit pursuant to any modifications of the Senior Credit
Agreement, to the extent permitted under the Subordination Agreement, as the
same may be amended, modified, supplemented or restated from time to time in
accordance with the provisions of this Agreement.
"SENIOR LENDERS" means the financial institutions from time to time
party to the Senior Credit Agreement.
"SETTLEMENT AGREEMENT" means that certain Settlement Agreement dated as
of November 20, 2003 by and between Worthington Industries, Inc., Worthington
and the Company.
"SHARES" shall mean certificated or uncertificated instruments or
denominations that represent the ownership of the Capital Stock of any Person.
"SMP" means SMP Steel Corporation, a South Carolina corporation.
"STOCK REDEMPTION AGREEMENT" means that certain Stock Redemption
Agreement dated as of December 23, 2003 between the Company and Worthington.
"SUBORDINATION AGREEMENT" means that certain Subordination and
Intercreditor Agreement dated as of March 26, 2004, by and between the Agent and
Senior Bank Agent, as the same may be amended, modified, supplemented or
restated from time to time in accordance with the terms hereof.
"SUBSIDIARY" means any corporation or other Person more than 50% of the
outstanding ordinary voting shares or other equity interests of which is at the
time directly or indirectly owned by the Company, by one or more of its
Subsidiaries, or by the Company and one or more of such Subsidiaries.
"SUBSIDIARY BOARD" has the meaning given such term in Section 8.11 of
this Agreement.
"TAX" or "TAXES" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
15
"TOTAL FUNDED DEBT" means, at any time the same is to be determined,
the aggregate of all Indebtedness of the Company and its Subsidiaries at such
time, plus all Indebtedness of any other Person which is directly or indirectly
guaranteed by the Company or any of its Subsidiaries or which the Company of any
of its Subsidiaries has agreed (contingently or otherwise) to purchase or
otherwise acquire or in respect of which the Company or any of its Subsidiaries
has otherwise assured a creditor against loss.
"TOTAL FUNDED DEBT/EBITDA RATIO" means, as of the last day of any
fiscal quarter of the Company, the ratio of (x) Total Funded Debt as of such
date to (y) EBITDA for the four fiscal quarters of the Company ending on such
date.
"TOTAL SENIOR FUNDED DEBT" means, at any time the same is to be
determined, Total Funded Debt at such time minus the sum of (i) the principal
balance of the Obligations, and (ii) the principal balance of Junior
Subordinated Debt then outstanding to Messrs. ▇▇▇▇▇ and ▇▇▇▇▇▇, and (iii)
amounts owing by the Company to Worthington pursuant to the Settlement Agreement
or the Stock Redemption Agreement.
"TOTAL SENIOR FUNDED DEBT/EBITDA RATIO" means, as of the last day of
any fiscal quarter of the Company, the ratio of (x) Total Senior Funded Debt as
of such date to (y) EBITDA for the four fiscal quarters of the Company ending on
such date.
"UNDERLYING CAPITAL STOCK" means (a) the Capital Stock issued or
issuable upon exercise of the Warrants and (b) any Capital Stock issued or
issuable with respect to the securities referred to in clause (a) above by way
of dividend or split or in connection with a combination of Shares,
recapitalization, merger, consolidation or other reorganization. For purposes of
this Agreement, any Person who exercises a Warrant shall be deemed to be the
holder of the Underlying Capital Stock obtainable upon exercise of such Warrant,
and such Person shall be entitled to exercise the rights of a holder of
Underlying Capital Stock hereunder. As to any particular Shares of Underlying
Capital Stock, such Shares shall cease to be Underlying Capital Stock when they
have been (i) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (ii) distributed to
the public through a broker, dealer or market maker pursuant to Rule 144 under
the Securities Act (or any similar provision then in force) or (iii) repurchased
by the Company or any of its Subsidiaries.
"UNFUNDED VESTED LIABILITIES" means, for any Plan at any time, the
amount (if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"UNUSED REVOLVING CREDIT COMMITMENTS" shall have the meaning given such
term in the Senior Credit Agreement.
"WARRANTS" means and includes those certain Stock Purchase Warrants
dated the date hereof, issued by the Company in favor of the Purchasers to
acquire an aggregate of nine percent (9%) of the Capital Stock of the Company,
on a fully-diluted basis, in substantially the form
16
attached hereto as Exhibit B, with the blanks appropriately filled in, as may be
amended, restated or supplemented from time to time, and "WARRANT" means each of
the Warrants issued hereunder, individually.
"WELFARE PLAN" means a "welfare plan" as defined in Section 3(1) of
ERISA.
"▇▇▇▇▇ FARGO SUBORDINATION AGREEMENT" means that certain Subordination
Agreement dated as of June 20, 2003 made by the Company for the benefit of ▇▇▇▇▇
Fargo Business Credit, Inc. and relating to the Mid-Central Notes, in the form
delivered to the Agent.
"WHOLLY OWNED SUBSIDIARY" means a Subsidiary of the Company all of the
issued and outstanding shares of capital stock (other than directors' qualifying
shares as required by law) or other equity interests are owned by the Company
and/or one or more Wholly Owned Subsidiaries within the meaning of this
definition.
"WORTHINGTON" means WI Products, Inc., f/k/a Worthington Custom
Plastics, Inc.
Section 5.2 Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. All
references to time of day herein are references to Chicago, Illinois time unless
otherwise specifically provided. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, it shall be done in accordance with GAAP except
where such principles are inconsistent with the specific provisions of this
Agreement.
Section 5.3 Change in Accounting Principles. If, after the date
of this Agreement, there shall occur any change in generally accepted accounting
principles from those used in the preparation of the financial statements
referred to in Section 6.5 hereof and such change shall result in a change in
the method of calculation of any financial covenant, standard or term found in
this Agreement, either the Company or the Majority Holders may by notice to the
holders of the Notes and the Company, respectively, require that the Agent (at
the direction of the Majority Holders) and the Company negotiate in good faith
to amend such covenant, standard and term so as equitably to reflect such change
in accounting principles, with the desired result being that the criteria for
evaluating the financial condition of the Company and its Subsidiaries shall be
the same as if such change had not been made. No delay by the Company or the
Majority Holders in requiring such negotiation shall limit their right to so
require such a negotiation at any time after such a change in accounting
principles. Without limiting the generality of the foregoing, the Company shall
neither be deemed to be in compliance with any financial covenant hereunder nor
out of compliance with any financial covenant hereunder if such state of
compliance or noncompliance, as the case may be, would not exist but for the
occurrence of a change in accounting principles after the date hereof.
SECTION 6
REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Agent and the Purchasers as
follows:
17
Section 6.1 Organization and Qualification. The Company is duly
organized, validly existing and in good standing as a corporation under the laws
of the State of Georgia, and has full and adequate corporate power to own its
Property and carry on its business as now conducted. The Company is duly
licensed or qualified and in good standing in each jurisdiction in which the
nature of the business conducted by it or the nature of the Property owned or
leased by it requires such licensing or qualification unless and to the extent
that the failure to be so licensed or qualified or to be in such good standing
would not have any material adverse effect on the financial condition,
Properties, business, or operations of the Company or in its ability to perform
or the Agent's ability to enforce performance of the Company's obligations under
the Operative Documents.
Section 6.2 Subsidiaries. Each Subsidiary is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated or organized, as the case may be, has full and adequate
power to own its Property and carry on its business as now conducted, and is
duly licensed or qualified and in good standing in each jurisdiction in which
the nature of the business conducted by it or the nature of the Property owned
or leased by it requires such licensing or qualification unless and to the
extent that the failure to be so licensed or qualified or to be in such good
standing would not have any material adverse effect on the financial condition,
Properties, business or operations of the Company and its Subsidiaries taken as
a whole or in its ability to perform or the Agent's ability to enforce
performance of the Company's obligations under the Operative Documents. Schedule
6.2 hereto identifies each Subsidiary, the jurisdiction of its incorporation or
organization, as the case may be, the percentage of issued and outstanding
shares of each class of its Capital Stock or other equity interests owned by the
Company and the Subsidiaries and, if such percentage is not 100% (excluding
directors' qualifying shares as required by law), a description of each class of
its authorized Capital Stock and other equity interests and the number of shares
of each class issued and outstanding. All of the outstanding shares of capital
stock and other equity interests of each Subsidiary are validly issued and
outstanding and fully paid and nonassessable and all such shares and other
equity interests indicated on Schedule 6.2 as owned by the Company or a
Subsidiary are owned, beneficially and of record, by the Company or such
Subsidiary free and clear of all Liens, other than Liens in favor of the Senior
Bank Agent that are subject to the Subordination Agreement. There are no
outstanding commitments or other obligations of any Subsidiary to issue, and no
options, warrants or other rights of any Person to acquire, any shares of any
class of capital stock or other equity interests of any Subsidiary.
Section 6.3 Authority and Validity of Obligations. The Company
has full right and authority to enter into this Agreement and the other
Operative Documents executed by it, to issue its Notes and Warrants, to grant to
the Agent the Liens described in the Collateral Documents executed by the
Company, and to perform all of its obligations hereunder and under the other
Operative Documents executed by it. Each Subsidiary has full right and authority
to enter into the Operative Documents executed by it, to grant to the Agent the
Liens described in the Collateral Documents executed by such Person, and to
perform all of its obligations under the Operative Documents executed by it. The
Operative Documents delivered by the Company and its Subsidiaries have been duly
authorized, executed, and delivered by such Persons and constitute valid and
binding obligations of the Company and its Subsidiaries enforceable against them
in accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors' rights generally and
18
general principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law); and this
Agreement and the other Operative Documents do not, nor does the performance or
observance by the Company or any Subsidiary of any of the matters and things
herein or therein provided for, (a) contravene or constitute a default under any
provision of law or any judgment, injunction, order or decree binding upon the
Company or any Subsidiary or any provision of the organizational documents
(e.g., charter, certificate or articles of incorporation and by-laws,
certificate or articles of association and operating agreement, partnership
agreement, or other similar organizational documents) of the Company or any
Subsidiary, (b) contravene or constitute a default under any covenant, indenture
or agreement of or affecting the Company or any Subsidiary or any of their
Property, in each case where such contravention or default, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect,
or (c) result in the creation or imposition of any Lien on any Property of the
Company or any Subsidiary other than the Liens (i) granted in favor of the Agent
pursuant to the Collateral Documents, and (ii) granted in favor of the Senior
Bank Agent that are subject to the Subordination Agreement.
Section 6.4 Use of Proceeds; Margin Stock. The Company shall use
the proceeds of the issuance of the Notes to refinance all or a part of its
existing senior credit facility, to pay fees and expenses associated with such
refinancing and general working capital purposes. Neither the Company nor any of
its Subsidiaries is engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any Note hereunder will be used to purchase or carry any such margin
stock or to extend credit to others for the purpose of purchasing or carrying
any such margin stock.
Section 6.5 Financial Reports. The consolidated balance sheet of
the Company and its Subsidiaries as at December 31, 2003 and the related
consolidated statements of income, retained earnings and cash flows of the
Company and its Subsidiaries for the fiscal year then ended, and accompanying
notes thereto, which financial statements are accompanied by the audit report of
KPMG LLP, independent public accountants, and the unaudited interim consolidated
balance sheet of the Company and its Subsidiaries as at February 29, 2004 and
the related consolidated statements of income, retained earnings and cash flows
of the Company and its Subsidiaries for the two (2) months then ended,
heretofore furnished to the Purchasers, fairly present the consolidated
financial condition of the Company and its Subsidiaries as at said dates and the
consolidated results of their operations and cash flows for the periods then
ended in conformity with GAAP applied on a consistent basis. Neither the Company
nor any of its respective Subsidiaries has contingent liabilities which are
material to it other than as indicated on such financial statements or, with
respect to future periods, on the financial statements furnished pursuant to
Section 8.5 hereof. Since December 31, 2003, no event or condition has occurred
which would have a Material Adverse Effect.
Section 6.6 Full Disclosure. The statements and information
furnished to the Agent and the Purchasers in connection with the negotiation of
this Agreement and the commitments by the Purchasers to provide all or part of
the financing contemplated hereby do not contain any untrue statements of a
material fact or omit a material fact necessary to make the material statements
contained therein or herein not misleading, the Purchasers acknowledging that as
to
19
any projections furnished to any Purchaser, the Company only represents that the
same were prepared on the basis of information and estimates the Company
believed to be reasonable.
Section 6.7 Good Title. The Company and its respective
Subsidiaries have good and defensible title to their respective Property as
reflected on the most recent consolidated balance sheet of the Company and its
Subsidiaries furnished to the Purchasers (except for sales of assets by the
Company and such Subsidiaries in the ordinary course of their respective
businesses), subject to no Liens other than such thereof as are specifically
identified on Schedule 6.7 or, with the exception of Liens on real Property,
permitted by Section 8.15 hereof.
Section 6.8 Litigation and Other Controversies. There is no
litigation or governmental proceeding or labor controversy pending, nor to the
knowledge of the Company threatened, against the Company or any of its
Subsidiaries which if adversely determined would result in any material adverse
change in the financial condition, Properties, business or operations of the
Company and its Subsidiaries taken as a whole.
Section 6.9 Taxes. All Tax Returns with respect to any material
Tax required to be filed by the Company or any Subsidiary in any jurisdiction
have, in fact, been filed, and all Taxes upon the Company or any Subsidiary or
upon any of their respective Properties, income or franchises, which are shown
to be due and payable in such returns, have been paid. The Company does not know
of any proposed additional Tax assessment against the Company or any Subsidiary
which if paid (taking into consideration any cash segregated for such purpose)
would have a Material Adverse Effect. Adequate provisions in accordance with
GAAP for Taxes on the books of the Company and each Subsidiary have been made,
or (to the extent such provisions have not been made) adequate cash reserves for
such Taxes have been segregated, in each case for all open years, and for its
current fiscal period. No Consolidated Entity has made an election under Section
341(f) of the Code. No Consolidated Entity is liable for the Taxes of another
Person that is not a Subsidiary in an amount under (i) Treasury Regulation
Section 1.1502-6 (or comparable provisions of state, local or foreign law), (ii)
as a transferee or successor, (iii) by contract or indemnity, or (iv) otherwise.
No Consolidated Entity is a party to any tax sharing agreement. Each
Consolidated Entity has disclosed on its federal income Tax Returns any position
taken for which substantial authority (within the meaning of Code Section
6662(d)(2)(B)(i)) did not exist at the time the Tax Return was filed. No
Consolidated Entity has made any payments, is obligated to make payments or is a
party to an agreement that could obligate it to make any payments that would not
be deductible under Code Section 280G.
Section 6.10 Approvals. No authorization, consent, license,
exemption, filing or registration with any court or governmental department,
agency or instrumentality, nor any approval or consent of the stockholders of
the Company or any other Person, is or will be necessary to the valid execution,
delivery or performance by the Company of this Agreement, the Operative
Documents, the Notes, the Warrants or the Investor Rights Agreement.
Section 6.11 Affiliate Transactions. Neither the Company nor any
of its Subsidiaries is a party to any contracts or agreements with any of its
Affiliates (other than with Wholly Owned Subsidiaries) on terms and conditions
which are less favorable to the Company or such Subsidiary than would be usual
and customary in similar contracts or agreements between Persons not affiliated
with each other.
20
Section 6.12 Investment Company; Public Utility Holding Company.
Neither the Company nor any of its Subsidiaries is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "public utility holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
Section 6.13 ERISA. The Company and each other member of its
Controlled Group has fulfilled its obligations under the minimum funding
standards of and is in compliance in all material respects with ERISA and the
Code to the extent applicable to it and has not incurred any liability to the
PBGC or a Plan under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA. Neither the Company nor any Subsidiary has
any contingent liabilities with respect to any post-retirement benefits under a
Welfare Plan, other than liability for continuation coverage described in
article 6 of Title I of ERISA.
Section 6.14 Compliance with Laws (Nonenvironmental). The Company
and its Subsidiaries are in compliance with the requirements of all federal,
state and local laws, rules and regulations (in each case, other than with
respect to Environmental Laws) applicable to or pertaining to the Properties or
business operations of the Company or any such Subsidiary (including, without
limitation, the Occupational Safety and Health Act of 1970, and the Americans
with Disabilities Act of 1990, non-compliance with which would reasonably be
expected to have a Material Adverse Effect as a whole. Neither the Company nor
any of its Subsidiaries has received notice to the effect that its operations
are not in compliance with any of the requirements of applicable federal, state
or local statutes and regulations (other than Environmental Laws), which
non-compliance would reasonably be expected to have a Material Adverse Effect.
Section 6.15 Environmental and Safety Matters
(a) Except as set forth on the Schedule 6.15, the Company
and its Subsidiaries have materially complied with and are currently in material
compliance with all Environmental Laws, and neither the Company nor any of its
respective Subsidiaries have received any oral or written notice, regarding any
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
or any corrective, investigatory or remedial obligations arising under
Environmental Laws which have not been corrected and which relate to the Company
or any of its Subsidiaries or any of their Properties or facilities. Without
limiting the generality of the foregoing, the Company and its Subsidiaries have
obtained and materially complied with, and are currently in material compliance
with, all permits, licenses and other authorizations that may be required
pursuant to any Environmental Law for the occupancy of their properties or
facilities or the operation of their businesses. Neither this Agreement nor the
consummation of the transactions contemplated by this Agreement shall impose any
obligations on the Company or any of its Subsidiaries or otherwise for site
investigation or cleanup, or notification to or consent of any government
agencies or third parties under any Environmental Laws (including, without
limitation, any so called "transaction-triggered" or "responsible property
transfer" laws and regulations). None of the following exists in violation of
Environmental Laws at any property or facility owned, occupied or operated by
the Company or any of its respective Subsidiaries:
(i) underground storage tanks or surface
impoundments;
21
(ii) asbestos-containing materials in any form or
condition; or
(iii) materials or equipment containing
polychlorinated biphenyls.
(b) Except as set forth on Schedule 6.15, neither the
Company nor any of its respective Subsidiaries has treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled or released any
substance (including, without limitation, any Hazardous Material) or owned,
occupied or operated any facility or property, so as to give rise to liabilities
of the Company or any of its Subsidiaries for response costs, natural resource
damages or attorneys fees pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended, or any other
Environmental Law, except where any such action would not, individually or in
the aggregate, have a Material Adverse Effect.
(c) Without limiting the generality of the foregoing,
except as set forth on Schedule 6.15, no facts, events or conditions relating to
the past or present Properties, facilities or operations of the Company or its
Subsidiaries shall materially prevent, hinder or limit continued compliance with
Environmental Laws, give rise to any corrective, investigatory or remedial
obligations pursuant to Environmental Laws or any other material liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental Laws (including, without limitation, those liabilities relating to
onsite or offsite releases or threatened releases of Hazardous Materials,
personal injury, property damage or natural resources damage).
(d) Except as set forth on Schedule 6.15, neither the
Company nor any of its Subsidiaries has, either expressly or by operation of
law, assumed or undertaken any liability or corrective, investigatory or
remedial obligation of any other Person relating to any Environmental Laws.
(e) Except as set forth on Schedule 6.15, neither the
Company nor any of its Subsidiaries has received or is subject to any
Environmental Claims. No Lien, whether recorded or unrecorded, in favor of any
international, federal, state or local governmental authority having
jurisdiction over the Company or any of its Subsidiaries, relating to any
liability of the Company or any of its Subsidiaries arising under any
Environmental Laws has attached to any property owned, leased or operated by the
Company or any of its Subsidiaries.
Section 6.16 Other Agreements. Neither the Company nor any of its
Subsidiaries is in default under the terms of any covenant, indenture or
agreement of or affecting the Company or any such Subsidiary or any of their
Properties, which default would have a Material Adverse Effect. All of the
Company's and its Subsidiaries' material contracts are valid, binding and
enforceable in accordance with their respective terms, except where any failure
or failures thereof would not, considered in the aggregate, have a Material
Adverse Effect. Each of the Company and each of its Subsidiaries has performed
all obligations required to be performed by it under such contracts and is not
in default under or in breach of nor in receipt of any claim of default or
breach under any such contract; no event has occurred which, with the passage of
time or the giving of notice or both, would result in a default, breach or event
of noncompliance by the Company or any of its Subsidiaries under any such
contract; and neither the Company nor any of its Subsidiaries has any present
expectation or intention of not fully performing all such
22
obligations; neither the Company nor any of its Subsidiaries has knowledge of
any breach or anticipated breach by the other parties to any such contract.
Neither the Company nor any of its Subsidiaries is a party to any contract or
commitment requiring it to purchase or sell goods or services or lease property
above or below (as the case may be) prevailing market prices and rates.
Section 6.17 No Default. No Default or Event of Default has
occurred and is continuing.
Section 6.18 Trademarks, Franchises, and Licenses. The Company and
its Subsidiaries own, possess, or have the right to use all necessary patents,
licenses, franchises, trademarks, trade names, trade styles, copyrights, trade
secrets, know how, and confidential commercial and proprietary information to
conduct their businesses as now conducted, without known conflict with any
patent, license, franchise, trademark, trade name, trade style, copyright or
other proprietary right of any other Person, except for any such failures to so
own, possess or have the right to use the same or any such conflicts which would
not, individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.
Section 6.19 Governmental Authority and Licensing. The Company and
its Subsidiaries have received all licenses, permits, and approvals of all
federal, state, and local governmental authorities, if any, necessary to conduct
their businesses, in each case where the failure to obtain or maintain the same
could reasonably be expected to have a Material Adverse Effect. No investigation
or proceeding which, if adversely determined, could reasonably be expected to
result in revocation or denial of any material license, permit or approval is
pending or, to the knowledge of the Company, threatened.
Section 6.20 Solvency. The Company and its Subsidiaries are
solvent, able to pay their debts as they become due, and have sufficient capital
to carry on their business and all businesses in which they are about to engage.
Section 6.21 Capital Structure.
(a) Generally. The authorized capital stock of the
Company consists of (i) 20,000,000 shares of Class A Common Stock, $.01 par
value, of which there are 4,560,547 shares issued and outstanding as of the
Closing Date and no shares held in the treasury of the Company; (ii) 200,000
shares of Class B Common Stock, $.01 par value, of which there are 100,000
shares issued and outstanding as of the Closing Date and no shares held in the
treasury of the Company; and (iii) 2,000,000 shares of Preferred Stock, no par
value, of which 10,000 shares are issued and outstanding as of the Closing Date
and no shares held in the treasury of the Company. All outstanding shares of the
Company's Class A and Class B Common Stock and Preferred Stock are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights created by statute, the Articles of Incorporation or Bylaws of
the Company or any agreement or document to which the Company is a party or by
which it is bound. Shares of the Company's Class B Common Stock are convertible,
on a one-to-one basis, into shares of the Company's Class A Common Stock, and
shares of the Company's Preferred Stock are not convertible into any Capital
Stock of the Company. As of the Closing Date the Company had remaining a reserve
of an aggregate of 1,166,711 shares and 25,000 shares,
23
respectively, of the Company's Class A Common Stock for issuance to employees
pursuant to the Company's 1997 Employee Stock Option Plan (the "STOCK OPTION
PLAN"), and the Company's ▇▇▇▇▇▇ Industrial Group, Inc. Nonemployee Directors'
Compensation Plan (the "COMPANY DIRECTOR PLAN"). Except for the Warrants,
Schedule 6.21 sets forth for each Person who held options to acquire shares of
the Company's Class A or Class B Common Stock, or any other capital stock of the
Company, in each case as of the Closing Date, the name of the holder of such
option, the number of shares subject to such option, the exercise price of such
option, the number of shares as to which such option was vested at such date and
the vesting schedule for such option. As of the Closing Date there are, in the
aggregate, 336,981 shares of Class A Common Stock available for issuance under
the Option Plans.
(b) Obligations With Respect to Capital Stock. Except as
set forth in Section 6.21(a), and except for the Warrants, as of the Closing
Date, there are no equity securities, partnership interests or similar ownership
interests of any class of the Company, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. As of the Closing Date, except as described in Section 6.21(a) and
except for the Warrants, there are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Company or any of its Subsidiaries is a party or by which it is bound obligating
the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition, of any shares of capital stock,
partnership interests or similar ownership interests of the Company or any of
its Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement.
Section 6.22 SEC Disclosure. The Class A Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the Company has
timely filed all proxy statements, reports, schedules, forms, statements and
other documents required to be filed by it under the Exchange Act. The Company
has filed (a) its Annual Report on Form 10-K for the fiscal year ended December
31, 2002 and (b) its Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 2003 (collectively, the "SEC REPORTS"). Each SEC Report was, at the
time of its filing, in substantial compliance with the requirements of its
respective form and none of the SEC Reports, nor the financial statements (and
the notes thereto) included in the SEC Reports, as of their respective filing
dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the United States
Securities and Exchange Commission or other applicable rules and regulations
with respect thereto. Such financial statements have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed) and fairly present in all material
respects the financial condition, the results of operations and the cash flows
of the
24
Company and its Subsidiaries, on a consolidated basis, as of, and for, the
periods presented in each such SEC Report.
SECTION 7
CONDITIONS PRECEDENT.
The obligation of the Purchasers to purchase and pay for the Securities
is subject to fulfillment on or prior to the Closing Date of the following
conditions precedent to the satisfaction of the Purchasers in their sole
discretion:
Section 7.1 Conditions. As of the time of the purchase of the
Securities by the Purchasers:
(a) each of the representations and warranties set forth
in Section 6 hereof and the other Operative Documents shall be true and correct
in all material respects as of such time, except to the extent the same relate
expressly to an earlier date;
(b) the Company shall be in compliance with all of the
terms and conditions hereof, and no Default or Event of Default shall have
occurred and be continuing hereunder;
(c) the Company shall have simultaneously sold to the
Purchasers the Securities to be purchased by the Purchasers hereunder at the
Closing;
(d) the Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with such
laws;
(e) the purchase and sale of the Securities shall not
violate any order, judgment or decree of any court or other authority or any
provision of law or regulation applicable to the Agent or any Purchaser
(including, without limitation, Regulation U of the Board of Governors of the
Federal Reserve System, the Securities Act and the Securities Exchange Act) as
then in effect;
(f) the Company, the Senior Bank Agent and the Senior
Lenders shall have entered into the Senior Credit Agreement and all conditions
to its effectiveness shall have been satisfied and no default or event of
default shall have occurred and be continuing thereunder;
(g) the Purchasers shall have received approval from each
of their respective investment committees to purchase the Securities and enter
into this Agreement;
(h) since December 31, 2003 there shall have been no
change in the financial condition, operating results, assets, operations,
business prospects, results, assets, operations, business prospects, employee
relations or customer or supplier relations of the Company or any of its
Subsidiaries which would have a Material Adverse Effect; and
(i) Agent and the other Purchasers shall have completed a
due diligence review of the Company and its Subsidiaries and their respective
records, financial condition and
25
operations, which due diligence review shall be satisfactory to Agent and the
other Purchasers in their sole discretion.
Section 7.2 Documents. At or prior to the purchase of the
Securities, the Agent shall have received the following for the account of the
Purchasers (each to be properly executed and completed) and the same shall have
been approved as to form and substance by the Purchasers:
(a) this Agreement, the Notes and the Warrants, duly
executed by the Company, the Guarantors and the Purchasers, as applicable;
(b) (i) the Collateral Documents and the UCC financing
statements requested by the Agent in connection therewith, (ii) copies of
original stock certificates representing all of the issued and outstanding
shares of stock of the Company's Subsidiaries, together with stock powers
therefor executed in blank and undated, (iii) patent, trademark, and copyright
collateral agreements to the extent requested by the Agent, (iv) deposit
account, securities account, and commodity account control agreements to the
extent requested by the Agent and (v) landlord waivers with respect to leased
properties of the Company and its Subsidiaries to the extent requested by the
Agent, which it is hereby agreed by the parties will be delivered on a
post-closing basis with respect to the leased properties in Apex, North Carolina
and on Detroit Street, Morton, Illinois.
(c) a Mortgage duly executed and recorded with respect to
each parcel of real property owned by the Company or any of its Subsidiaries;
(d) copies of title insurance policies and date-down
endorsements for each policy of title insurance and all endorsements thereunder
delivered to the Senior Bank Agent in form and substance acceptable to the Agent
(which will, among other things, insure over any survey exception) from the
issuer of such policy or another title insurance company acceptable to the
Agent, maintaining the existing level of coverage under each such policy,
provided that any title policies and endorsements which are not available at the
time of the purchase of the Securities hereunder will be delivered by the
Company to the Agent not later than 90 days after the date hereof, and Agent
shall be named as the named insured on each title policy delivered hereunder;
(e) certified copies of resolutions of the Parent Board
and each Subsidiary Board authorizing the execution and delivery of the
Operative Documents delivered by them and indicating the authorized signers of
such Operative Documents;
(f) copies of the articles of incorporation and by-laws
of the Company and each Guarantor certified as true and correct by the Secretary
or other appropriate officer of the Company or such Guarantor, as the case may
be;
(g) a good standing certificate for the Company and each
Guarantor, dated as of a date no earlier than thirty days prior to the date
hereof, from the appropriate governmental office in the jurisdiction of its
incorporation and in each jurisdiction in which such Person is required to
qualify to do business; and
26
(h) an incumbency certificate containing the name, title
and genuine signatures of the Company's Authorized Representatives;
(i) the Company, Agent and the Purchasers and certain
other Persons shall have entered into an Investor Rights Agreement, in form and
substance satisfactory to the Purchasers (the "INVESTOR RIGHTS AGREEMENT"), and
the Investor Rights Agreement shall be in full force and effect;
(j) the Agent shall have received for the account of and
addressed to the Purchasers the favorable written opinions of (i) Illinois
counsel for the Company and the Guarantors and (ii) Georgia counsel for the
Company, each in form and substance acceptable to the Agent and the Purchasers;
(k) the Agent shall have received copies of reliance
letters addressed to the Agent and the Purchasers in form and substance
satisfactory to Agent and the Purchasers relating to any prior environmental
assessments;
(l) the Agent shall have received evidence satisfactory
to it, including without limitation a certificate from the Company's chief
financial officer with supporting documentation satisfactory to the Agent, that
(i) EBITDA for the twelve months ending on February 29, 2004, was not less than
$11,600,000; (ii) the Total Funded Debt/EBITDA Ratio, measured based on Total
Funded Debt projected to be outstanding after giving effect to the Closing
hereunder and under the Senior Credit Agreement and EBITDA for the four fiscal
quarters ended on February 29, 2004, will be less than 4.10 to 1.0; and (iii)
the Total Senior Funded Debt/EBITDA Ratio, measured based on Total Senior Funded
Debt projected to be outstanding after giving effect to the Closing hereunder
and under the Senior Credit Agreement and EBITDA for the four fiscal quarters
ended on February 29, 2004, will be less than 2.90 to 1.0 (as used in this
clause (d), EBITDA shall be understood by the parties to incorporate such
adjustments thereto as are acceptable to the Company and the Agent and shall
specifically exclude the terms of the proviso set forth at the end of the
definition of EBITDA herein);
(m) the Agent shall have received such evaluations and
certifications as it may require (including (i) satisfactory results of a
collateral audit, and (ii) appraisal reports, real estate surveys, flood hazard
determinations and environmental assessments in form and substance satisfactory
to the Agent with respect to the real property of the Company and its
Subsidiaries in order to satisfy itself as to the value of the Collateral, the
financial condition of the Company and its Subsidiaries, and the lack of
material contingent liabilities of the Company and its Subsidiaries;
(n) the Liens granted to the Agent under the Collateral
Documents shall have been perfected in a manner satisfactory to each Lender and
its counsel;
(o) the Borrower and its Subsidiaries shall have entered
into the account arrangements described n Section 4.4 hereof.
(p) the Agent shall have received a fully executed copy
of the Subordination Agreement;
27
(q) [Reserved];
(r) the Agent shall have received evidence of insurance
required to be maintained under the Operative Documents, naming the Agent as
mortgagee and loss payee for the benefit of the Purchasers and as an additional
insured;
(s) the Agent shall have received financing statement,
tax, and judgment lien search results against the Property of the Company and
each Subsidiary evidencing the absence of Liens on its Property except as
permitted by Section 8.15 hereof;
(t) the Agent shall have received, for the benefit of the
Purchasers, a collateral assignment of life insurance in form and substance
satisfactory to the Agent on the life of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, which insurance shall
be in an aggregate amount of not less than $4,000,000;
(u) the Agent shall have received for the account of the
Purchasers such other agreements, instruments, documents, certificates and
opinions as the Agent or the Purchasers may reasonably request;
(v) the Agent shall have received from the Company the
initial fees called for by Section 3.1(a) hereof and reimbursement for any fees,
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, legal fees);
(w) the Liens granted to the Agent under the Collateral
Documents shall have been perfected in a manner satisfactory to each Purchaser
and its counsel;
(x) after giving effect to the initial loans under the
Senior Credit Agreement, there shall be at least $5,000,000 in Unused Revolving
Credit Commitment and in availability under the Borrowing Base, which shall be
evidenced by a Borrowing Base Certificate delivered at the Closing in the form
provided to the Senior Bank Agent;
(y) the obligations under the existing senior credit
agreement shall have been repaid in full and all commitments of the senior
lenders thereunder cancelled; and
(z) the capital and organizational structure of the
Company and its Subsidiaries shall be satisfactory to the Agent and the
Purchasers including, without limitation, the effectiveness of the Senior Credit
Agreement, which shall provide for loans thereunder of $40,000,000 which shall
include an $18,000,000 revolving facility and a $22,000,000 term facility, which
shall be satisfactory to the Agent and the Purchasers, and Agent shall have
received true, correct and complete copies of the Senior Credit Documents.
Anything to the contrary in the foregoing provisions of this Section
7.2 notwithstanding:
(aa) Provided that Agent receives reliance letters
acceptable to Agent and the Purchasers, Agent shall
accept environmental audits which are deemed
acceptable to Senior Agent;
28
(bb) Agent shall accept copies of the following real
estate surveys in lieu of new surveys:
(i) Survey of the Morton, Illinois real estate
dated January 8, 1998 by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
professional land surveyor;
(ii) Survey of the Welcome, North Carolina real
estate dated August 10, 1992 by J. ▇▇▇▇
▇▇▇▇▇▇▇▇, registered land surveyor; and
(iii) Survey of the ▇▇▇▇▇ Path, South Carolina
real estate dated May 15, 1998 by J. ▇▇▇
▇▇▇, registered land surveyor.
SECTION 8
COVENANTS.
The Company agrees that, so long as any portion of the Notes remains
outstanding, except to the extent compliance in any case or cases is waived in
writing by the Majority Holders:
Section 8.1 Maintenance of Business. The Company shall, and shall
cause each of its Subsidiaries to, preserve and keep in force and effect its
corporate existence (except to the extent such existence terminates in mergers
and consolidations permitted by Section 8.19 hereof) and all licenses, permits
and franchises necessary to the proper conduct of its business.
Section 8.2 Maintenance of Property. The Company will maintain,
preserve and keep those of its Properties material to its business in good
repair, working order and condition (ordinary wear and tear excepted) and will
from time to time make all needful and proper repairs, renewals, replacements,
additions and betterments thereto so that at all times the efficiency thereof
shall be fully preserved and maintained, and will cause each of their respective
Subsidiaries to do so in respect of Property owned or used by it.
Section 8.3 Taxes and Assessments. The Company will duly pay and
discharge, and will cause each of its Subsidiaries to duly pay and discharge,
all federal and other material taxes, rates, assessments, fees and governmental
charges upon or against it or its Properties, in each case before the same
become delinquent and before penalties accrue thereon, unless and to the extent
that the same are being contested in good faith and by appropriate proceedings
which prevent enforcement of the matter under contest and adequate reserves are
provided therefor.
Section 8.4 Insurance. The Company will insure and keep insured,
and will cause each of its Subsidiaries to insure and keep insured, with good
and responsible insurance companies, all insurable Property owned by it which is
of a character usually insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards and risks, and in such
amounts, as are insured by Persons similarly situated and operating like
Properties; and the Company will insure, and cause each of their respective
Subsidiaries to insure, such other hazards and risks (including employers' and
public liability risks) with other good and responsible insurance companies as
and to the extent usually insured by Persons similarly situated and conducting
similar businesses. The Company will upon request of the
29
Agent furnish a certificate setting forth in summary form the nature and extent
of the insurance maintained pursuant to this Section.
Section 8.5 Financial Reports. The Company will, and will cause
each of its Subsidiaries to, maintain a standard system of accounting in
accordance with GAAP, will permit the Agent, each holder of any Note and their
representatives to visit and inspect the properties and assets (including books
and records) of the Company and its Subsidiaries at all reasonable times and
will furnish to the Agent, each holder of the Securities and their duly
authorized representatives such information respecting the business and
financial condition of the Company and its Subsidiaries as the Agent or such
holder may reasonably request; and without any request, the Company will furnish
to the holders of the Notes:
(a) as soon as available, and in any event within 45 days
after the close of each monthly fiscal period of the Company which is also the
end of a fiscal quarter of the Company and within 30 days after the close of
each other monthly fiscal period of the Company, a copy of the balance sheet,
statements of income, retained earnings and cash flows of the Company and its
Subsidiaries for such period, all prepared on a consolidated basis and in
reasonable detail showing in comparative form the figures for the corresponding
date and period in the previous fiscal year and a comparison to budget, prepared
by the Company in accordance with GAAP (subject to normal year-end audit
adjustments and the absence of footnotes) and certified to by the chief
financial officer of the Company;
(b) as soon as available, and in any event within 90 days
after the close of each fiscal year of the Company, a copy of the consolidated
balance sheet of the Company and its Subsidiaries as of the close of such fiscal
year and the consolidated statements of income, retained earnings and cash flows
of the Company and its Subsidiaries for such period, and accompanying notes
thereto, all in reasonable detail showing in comparative form the figures for
the previous fiscal year and a comparison to budget, accompanied by an
unqualified opinion thereon of KPMG LLP or another firm of independent public
accountants of recognized national standing, selected by the Company and
satisfactory to the Agent, to the effect that the financial statements have been
prepared in accordance with GAAP and present fairly in accordance with GAAP the
consolidated financial condition of the Company and its Subsidiaries as of the
close of such fiscal year and the results of their operations and cash flows for
the fiscal year then ended and that an examination of such accounts in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and, accordingly, such examination
included such tests of the accounting records and such other auditing procedures
as were considered necessary in the circumstances;
(c) a copy of any management letters on internal
accounting controls of the Company or any Subsidiary prepared by its independent
public accountants;
(d) promptly after the sending or filing thereof, copies
of all proxy statements, financial statements and reports the Company sends to
its shareholders, and copies of all other regular, periodic and special reports
(other than SEC Form 3, Form 4, Form 5, Form S-8 or similar administrative
reports) and all registration statements the Company files with the Securities
and Exchange Commission or any successor thereto, or with any national
securities exchanges;
30
(e) promptly after knowledge thereof shall have come to
the attention of any responsible officer of the Company, written notice of (x)
any threatened or pending litigation or governmental proceeding or labor
controversy against the Company or any Subsidiary which, if adversely
determined, would have a material adverse effect on the financial condition,
Properties, business or operations of the Company and its Subsidiaries taken as
a whole or of (y) the occurrence of any Default or Event of Default hereunder;
(f) as soon as available, and in any event within 30 days
prior to the end of each fiscal year of the Company, a copy of the Company's
consolidated and consolidating business plan for the following fiscal year, such
budget and business plan to show the Company's projected consolidated and
consolidating revenues, expenses and balance sheet on a
quarter-by-quarter/month-by-month basis, such business plan to be in reasonable
detail prepared by the Company and in form satisfactory to the Agent and the
Majority Holders (which shall include a summary of all assumptions made in
preparing such budget and business plan);
(g) notice of any Change of Control; and
(h) within thirty (30) days after the close of each
month, a Borrowing Base Certificate prepared as of the last day of such month.
Each of the financial statements furnished to the holders of the Notes
pursuant to clauses (a) and (b) of this Section shall be accompanied by a
written certificate in the form attached hereto as Exhibit C signed by the chief
financial officer of the Company to the effect that to the best of the chief
financial officer's knowledge and belief no Default or Event of Default is
continuing as of the close of the period covered by such statements or, if any
such Default or Event of Default is continuing as of the close of such period,
setting forth a description of such Default or Event of Default and specifying
the action, if any, taken by the Company to remedy the same. Such certificate
shall also set forth the calculations supporting such statements in respect of
Sections 8.6, 8.7, 8.8, 8.9 and 8.10 of this Agreement.
The Company will, and will cause each Subsidiary to, permit the Agent,
the Purchasers and their duly authorized representatives to visit and inspect
any of the Properties of the Company and its Subsidiaries, to examine all of
their books of account, records, reports and other papers, to make copies and
extracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective officers, employees and independent public
accountants (and by this provision the Company authorizes such accountants to
discuss with the holders of the Notes (and such Persons as any holder of any
Note may designate) the finances and affairs of the Company and its
Subsidiaries) all at such reasonable times and as often as may be reasonably
requested.
Section 8.6 Total Funded Debt/EBITDA Ratio. The Company shall
not, as of the last day of each fiscal quarter of the Company ending on the
dates set forth below, permit the Total Funded Debt/EBITDA Ratio to be greater
than the corresponding ratio set forth opposite such dates:
31
TOTAL FUNDED
FISCAL QUARTER DEBT/EBITDA RATIO
ENDING DATES SHALL NOT BE GREATER THAN
------------------------- --------------------------
Closing Date through and
including 9/30/04 5.00 to 1.0
12/31/04 through 9/30/05 4.50 to 1.0
12/31/05 through 9/30/06 4.00 to 1.0
12/31/06 through 9/30/07 3.50 to 1.0
12/31/07 and thereafter 3.40 to 1.0
Section 8.7 Total Senior Funded Debt/EBITDA Ratio. The Company shall not, as of
the last day of each fiscal quarter of the Company ending on the dates set forth
below, permit the Total Senior Funded Debt/EBITDA Ratio to be greater than the
corresponding ratio set forth opposite such dates:
TOTAL SENIOR FUNDED
FISCAL QUARTER DEBT/EBITDA RATIO
ENDING DATES SHALL NOT BE GREATER THAN
------------------------- --------------------------
Closing Date through and
including 9/30/04 3.95 to 1.0
12/31/04 through 9/30/05 3.30 to 1.0
12/31/05 through 9/30/06 2.90 to 1.0
12/31/06 through 9/30/07 2.45 to 1.0
12/31/07 and thereafter 2.35 to 1.0
Section 8.8 Minimum EBITDA. The Company shall not, as of the last
day of each fiscal quarter of the Company ending on the dates set forth below,
permit EBITDA for the four fiscal quarters of the Company then most-recently
ended to be less than the corresponding amount set forth opposite such dates:
FISCAL QUARTER EBITDA FOR SUCH PERIOD SHALL
ENDING DATE NOT BE LESS THAN:
------------------------- ----------------------------
3/31/04 through 9/30/04 $10,000,000
12/31/04 through 9/30/06 $10,200,000
32
FISCAL QUARTER EBITDA FOR SUCH PERIOD SHALL
ENDING DATE NOT BE LESS THAN:
------------------------- ----------------------------
12/31/06 and thereafter $9,775,000
Section 8.9 Fixed Charge Coverage Ratio. The Company will not,
as of the last day of each fiscal quarter of the Company ending on the dates set
forth below, permit the Fixed Charge Coverage Ratio to be less than:
FISCAL QUARTER FIXED CHARGE COVERAGE
ENDING DATES RATIO SHALL NOT BE LESS THAN
----------------------------- -----------------------------
At all times 1.0 to 1.0
Section 8.10 Capital Expenditures. The Company will not, nor will
it permit any Subsidiary to, expend or (without duplication) become obligated to
expend, in each case for Capital Expenditures aggregating for the Company and
its Subsidiaries (taken together) an amount during any fiscal year of the
Company in excess of the corresponding amount set forth below opposite such
fiscal year:
CAPITAL EXPENDITURES
FISCAL YEAR SHALL NOT EXCEED
----------- --------------------
2004 $5,280,000
2005 $5,720,000
2006 $7,260,000
2007 $7,370,000
2008 $7,590,000
Section 8.11 Board Matters. The Company shall hold meetings of its
Board of Directors (the "PARENT BOARD") at least once every quarter. The Board
of Directors of any Subsidiary of the Company (each, a "SUBSIDIARY BOARD") shall
hold meetings at least once every quarter. The Parent Board shall have an audit
committee and a compensation committee. Members of the audit committee and the
compensation committee shall be members of the Parent Board that are not
employees of the Company or any of its Subsidiaries. Pursuant to the Investor
Rights Agreement, any Purchaser holding fifty percent (50%) of the Warrants or
fifty percent (50%) of the Underlying Capital Stock shall have the right to
designate one Person (each, a "DESIGNEE") who shall have observation rights with
respect to all meetings of the Parent Board and any Subsidiary Board. Each
Designee shall have observation rights with respect to all meetings of the
Parent Board and each Subsidiary Board. Each Designee shall have the right to
attend each meeting of the Parent Board and each Subsidiary Board and all
committees, respectively, thereof. The Parent Board and each Subsidiary Board
shall give each Designee and
33
each Purchaser notice of each meeting of its Board and each committee thereof at
the same time and in the same manner as notices given to the members of its
Board (which notice shall be promptly confirmed in writing). Each Designee and
each Purchaser shall be entitled to receive all written materials and other
information given to members of the Parent Board and the Subsidiary Boards and
each committee thereof in connection with such meetings at the same time such
materials and information are given to all other members of such Boards and such
committees. The Company and each Subsidiary shall reimburse each Designee for
reasonable out-of-pocket expenses in connection with attending such Board and
committee meetings. The Company and each Subsidiary agrees to take any and all
actions necessary to effectuate the intent of the foregoing provisions of this
Section 8.11.
Section 8.12 Investor Protection. In connection with any Change of
Control or similar transaction under circumstances where any Purchaser or any
holder thereof continues to hold a Warrant, the Company shall make, or cause to
be made, available to such Purchaser and/or such holder all economic benefits in
a manner that treats any Purchaser and/or such holder equitably with respect to
all other equity holders of the Company. In this regard, the Company agrees to
structure any Change of Control or similar transaction, under circumstances
where any Purchaser or any holder thereof continues to hold a Warrant, in order
to treat all equity holders, including such Purchaser and/or such holder, in a
fair and equitable manner and such transaction structure shall not include
disguised purchase price components in the form of payments allocated to
covenants not to compete, consulting payments and the like, except for
employment agreements or similar agreements providing for reasonable "arms
length" levels of compensation to such equity holder in return for future
services to be rendered to the acquirer subsequent to a Change of Control.
Section 8.13 Equity Restriction. The Company shall not:
(a) except as expressly permitted under Section 8.18 and
8.33 of this Agreement, directly or indirectly make, or permit any of its
Subsidiaries to make, any purchase of any Capital Stock, or directly or
indirectly redeem, purchase or make, or permit any of its Subsidiaries to
redeem, purchase or make, any payments with respect to any stock appreciation
rights, phantom stock plans or similar rights or plans; and
(b) authorize, issue or enter into any agreement
providing for the issuance (contingent or otherwise) of any notes or debt
securities containing equity features (including, without limitation, any notes
or debt securities convertible into or exchangeable for Capital Stock or other
equity securities issued in connection with the issuance of Capital Stock, or
other equity securities or containing profit participation features) at a price
at issuance which is lower than the then current market price of the Company's
Capital Stock except as otherwise expressly contemplated by this Agreement.
Section 8.14 Indebtedness. The Company will not, nor will it
permit any of its Subsidiaries to, issue, incur, assume, create or have
outstanding any Indebtedness; provided, however, that the foregoing provisions
shall neither restrict nor operate to prevent:
(a) obligations of the Company and its Subsidiaries owing
to the Agent and the Senior Lenders (and their Affiliates) under the Senior
Credit Agreement;
34
(b) purchase money indebtedness and Capitalized Lease
Obligations secured by Liens permitted by Section 8.15(d) hereof in an aggregate
amount which does not exceed $3,000,000 at any one time outstanding;
(c) obligations of the Company arising out of interest
rate, foreign currency and commodity hedging arrangements entered into with
financial institutions in the ordinary course of business and not for
speculative purposes;
(d) intercompany borrowings by and from the Company and
its Subsidiaries;
(e) indebtedness secured by Liens permitted by Section
8.15(e) hereof in an aggregate amount which does not exceed $1,000,000 at any
one time outstanding;
(f) unsecured indebtedness in an aggregate principal
amount not to exceed $1,500,000 at any one time outstanding in favor of vendors
or suppliers other than Deere or Caterpillar representing the extension, with
the consent of the creditor, beyond the normal due date (but not beyond 360 days
from invoice) of trade credit incurred in the ordinary course of business;
(g) the liability of ▇▇▇▇▇▇ Metalcraft Co. of South
Carolina for the currently outstanding indebtedness of SMP to Little River
Electric Cooperative, Inc. ("LITTLE RIVER") evidenced by that certain Mortgage
Note of SMP dated as of November 22, 1996 payable to the order of Little River
in the face principal amount of $400,000 provided such liability at no time
aggregates in excess of $400,000;
(h) all obligations of the Company to pay the Purchase
Price (and, to the extent all or any portion of such amount is reinstated
pursuant to the Stock Redemption Agreement, the Stated Redemption Amount) for
the Subject Stock under, and as such capitalized terms are defined in, the Stock
Redemption Agreement;
(i) to the extent not included in Section 8.14(h), the
Junior Subordinated Debt; and
(j) unsecured indebtedness not otherwise permitted by
this Section 8.14 provided the aggregate amount at any one time outstanding does
not exceed $100,000.
Section 8.15 Liens. The Company will not, and will not permit any
of its Subsidiaries to, create, incur or permit to exist any Lien of any kind on
any Property owned by the Company or any such Subsidiary; provided, however,
that this Section shall not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's
compensation, unemployment insurance, old age benefits, social security
obligations, taxes, assessments, statutory obligations or other similar charges,
good faith cash deposits in connection with tenders, contracts or leases to
which the Company or any of its Subsidiaries is a party or other cash deposits
required to be made in the ordinary course of business, provided in each case
that the obligation is not for borrowed money and that the obligation secured is
not overdue or, if
35
overdue, is being contested in good faith by appropriate proceedings which
prevent enforcement of the matter under contest and adequate reserves have been
established therefor;
(b) mechanics', workmen's, materialmen's, landlords',
carriers', or other similar Liens arising in the ordinary course of business
with respect to obligations which are not overdue or which are being contested
in good faith by appropriate proceedings which prevent enforcement of the matter
under contest;
(c) the pledge of assets for the purpose of securing an
appeal, stay or discharge in the course of any legal proceeding, provided that
the aggregate amount of liabilities of the Company and its Subsidiaries secured
by a pledge of assets permitted under this clause, including interest and
penalties thereon, if any, shall not be in excess of $250,000 at any one time
outstanding;
(d) Liens securing indebtedness permitted by Section
8.14(b) hereof in respect of Property now owned or hereafter acquired by the
Company or any of its Subsidiaries (not extending to any other Property), or
Liens on Property so acquired (not extending to any other Property) existing at
the time of acquisition thereof, or renewals, extensions and refundings of any
such Liens (not extending to any other Property);
(e) any Lien existing on any Property (other than (i)
shares of stock in any Subsidiary, (ii) receivables, inventory and similar
working capital assets and (iii) patents, trademarks and similar intangibles)
prior to the acquisition thereof by the Company or any Subsidiary, provided that
such Lien is not created in contemplation of or in connection with such
acquisition;
(f) Liens on the real estate of ▇▇▇▇▇▇ Metalcraft Co. of
South Carolina in ▇▇▇▇▇ Path, Abbeville County, South Carolina and the buildings
and other improvements situated on such real estate securing the indebtedness
permitted by Section 8.14(g) hereof provided such liens do not in any event
encumber any trade fixtures or similar equipment;
(g) Liens granted in favor of Senior Bank Agent on
certain assets of the Company and its Subsidiaries that are subject to the terms
of the Subordination Agreement;
(h) the Liens described on Schedule 8.15 hereof; and
(i) with respect to real property, easements, rights of
way, reservations and other minor defects or irregularities in title which do
not materially impair the use thereof for the purposes for which it is held by
the Company or any of its Subsidiaries.
Section 8.16 Investments, Loans, Advances and Guaranties. The
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly, make, retain or have outstanding any investments (whether through
purchase of stock or obligations or otherwise) in, or loans or advances (other
than for travel advances and other similar cash advances made to employees in
the ordinary course of business) to, any other Person, or be or become liable as
endorser, guarantor, surety or otherwise for any debt, obligation or undertaking
of any other Person, or otherwise agree to provide funds for payment of the
obligations of another, or supply funds thereto or invest therein or otherwise
assure a creditor of another against loss or apply for
36
or become liable to the issuer of a letter of credit which supports an
obligation of another, or subordinate any claim or demand it may have to the
claim or demand of any other Person; provided, however, that the foregoing
provisions shall not apply to nor operate to prevent:
(a) investments in direct obligations of the United
States of America or of any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of America,
provided that any such obligations shall mature within one year of the date of
issuance thereof;
(b) investments in commercial paper rated at least P-1 by
▇▇▇▇▇'▇ Investors Services, Inc. and at least A-1 by Standard & Poor's
Corporation maturing within 270 days of the date of issuance thereof;
(c) investments in certificates of deposit issued by any
United States commercial bank having capital and surplus of not less than
$100,000,000 which have a maturity of one year or less;
(d) endorsement of items for deposit or collection of
commercial paper received in the ordinary course of business;
(e) the Company's investments from time to time in its
Subsidiaries, and other intercompany loans and advances by and from the Company
and its Subsidiaries to one another;
(f) the Mid-Central Notes;
(g) the Guaranties; and
(h) guaranties by the Company of (i) trade accounts
payable of its Subsidiaries arising in the ordinary course of business which are
not more than ninety (90) days past due and (ii) indebtedness of its
Subsidiaries permitted pursuant to Sections 8.14(b), (c), (f), and (j) hereof.
In determining the amount of investments, loans, advances and
guarantees permitted under this Section, investments shall always be taken at
the original cost thereof (regardless of any subsequent appreciation or
depreciation therein); loans and advances shall be taken at the principal amount
thereof then remaining unpaid; and guarantees shall be taken at the amount of
obligations guaranteed thereby.
In addition to the foregoing, neither the Company nor any Subsidiary
will (i) create or be or become a party to the creation of any special-purpose
vehicle or entity, whether or not the Company or any Subsidiary owns an equity
interest therein, (ii) be or become a partner of any general or limited
partnership or a member of any limited liability Company or similar Person, or
(iii) enter into any agreement pursuant to which it will be allocated any
profits or losses of any Person, whether or not it holds an equity interest of
any type therein.
Section 8.17 Leases. (a) The Company will not, and will not permit
any of its Subsidiaries to, enter into any arrangement with any bank, insurance
company or any other lender or investor providing for the leasing by the Company
or any such Subsidiary of any
37
Property theretofore owned by it and which has been or is to be sold or
transferred by such owner to such lender or investor.
(a) Operating Leases. The Company shall not, nor shall it
permit any of its Subsidiaries to, acquire the use or possession of any Property
under a lease or similar arrangement, whether or not the Company or any of its
Subsidiaries have the express or implied right to acquire title to or purchase
such Property, at any time if, after giving effect thereto, the aggregate amount
of fixed rentals and other consideration payable by the Company and its
Subsidiaries under all such leases and similar arrangements would exceed
$7,500,000 for fiscal year 2004, $8,100,000 for fiscal year 2005, and $8,500,000
for fiscal year 2006 and thereafter.
Section 8.18 Dividends and Certain Other Restricted Payments. The
Company will not (a) declare or pay any dividends on or make any other
distributions in respect of any class or series of its capital stock or (b)
directly or indirectly purchase, redeem or otherwise acquire or retire any of
its capital stock, provided, however, that the foregoing shall neither apply to
nor operate to prevent:
(i) provided that no Default or Event of Default
exists before or after giving effect thereto or would be caused
thereby, the Company's expenditure of up to $20,000 in the aggregate to
redeem fractional shares of its common stock resulting from a previous
reverse stock split of the Company; or
(ii) the Company's redemption of up to 10,000
shares of its Series 1999A Preferred Stock at a redemption price not to
exceed $50,000 per 333 (or 334, as the case may be) shares redeemed and
payable at the times set forth in Section 3 of the Stock Redemption
Agreement as in effect on the Closing Date, provided that at the time
of such redemption (x) the Company was in compliance with the
requirements of each of Sections 8.6, 8.7, 8.8, 8.9 and 8.10 of this
Agreement as of the end of the most recent fiscal quarter for which it
was required to submit financial statements and a compliance
certificate pursuant to Section 8.5 hereof, (y) no Event of Default
exists under Section 10.1(a) or (b) hereof before or after giving
effect to such redemption and (z) no "Standstill Period" (as defined in
the Subordination Agreement) is in effect under the Subordination
Agreement at the time of such redemption.
Section 8.19 Mergers, Consolidations and Sales. The Company will
not, and will not permit any of its Subsidiaries to, be a party to any merger or
consolidation, or sell, transfer, lease or otherwise dispose of any operating
unit or division or any rights to any trade name or similar intangible or all or
any substantial part of its Property (except for sales of inventory in the
ordinary course of business), or in any event sell or discount (with or without
recourse) any of its notes or accounts receivable; provided, however, that:
(a) any Subsidiary of the Company may merge or
consolidate with or into the Company or any Wholly Owned Subsidiary of the
Company; provided that in any such merger or consolidation involving the
Company, the Company shall be the surviving or continuing corporation, or, in
the case of any other merger or consolidation of a Subsidiary and a Wholly Owned
Subsidiary of the Company, such Wholly Owned Subsidiary shall be the continuing
or surviving corporation; and provided, further, that, in the case of such a
merger or consolidation
38
involving a Guarantor, the net worth of the continuing or surviving corporation
shall not be less than the net worth of such Guarantor immediately prior to such
merger or consolidation;
(b) any Subsidiary may in the ordinary course of its
business sell, lease or otherwise dispose of all or any substantial part of its
equipment to the Company or any Wholly Owned Subsidiary of the Company; and
(c) the Company may merge with a Wholly Owned Subsidiary
incorporated in Delaware and directly owned by the Company solely for the
purpose of changing the Company's state of incorporation to Delaware, with such
Wholly Owned Subsidiary surviving such merger, provided that:
(i) at the time of such merger, no Default or
Event of Default shall occur or be continuing;
(ii) such Wholly Owned Subsidiary shall have
acknowledged in writing (in form and substance reasonably satisfactory
to the Agent and Majority Holders) its assumption of all the Company's
obligations under the Operative Documents to the same extent, with the
same force and effect, as if such Wholly Owned Subsidiary were
originally the Company identified and defined therein;
(iii) the Agent shall have received an opinion of
counsel of the Company, and such other assurances that the Agent or
Majority Holders shall reasonably require, to confirm that such merger
has been effected in accordance with all applicable laws and that the
foregoing conditions set forth in this subsection (c) have been
satisfied; and
(iv) such merger shall have no adverse effect on
the financial condition Properties, business or operations the Company
or any Subsidiary or on the ability of any Subsidiary to perform or the
Agent's ability to enforce performance of the obligations of any of
them under the Operative Documents.
The term "SUBSTANTIAL" as used herein shall mean the sale, transfer, lease or
other disposition in any fiscal year of five percent (5%) or more of the
Properties of the Company and its Subsidiaries taken as a whole.
Section 8.20 Acquisitions. The Company will not, and will not
permit any of its Subsidiaries to, make or commit to make any Acquisitions.
Section 8.21 Maintenance of Subsidiaries. The Company will not
assign, sell or transfer, or permit any of its Subsidiaries to issue, assign,
sell or transfer, any shares of capital stock of a Subsidiary, provided that the
foregoing shall not operate to prevent (a) the issuance, sale and transfer to
any person of any shares of Capital Stock of a Subsidiary solely for the purpose
of qualifying, and to the extent legally necessary to qualify, such person as a
director of such Subsidiary, (b) the issuance of such stock to the Company or a
Wholly-Owned Subsidiary, and (c) the Lien granted on equity interests in the
Company's Subsidiaries in favor of the Agent and, subject to the Subordination
Agreement, Liens granted therein to Senior Bank Agent.
39
Section 8.22 Formation of Subsidiaries. In the event any
Subsidiary is formed or acquired after the date hereof, the Company shall within
thirty (30) Business Days thereof (x) furnish an update to Schedule 6.2 hereof
to reflect such new Subsidiary and (y) cause such newly-formed or acquired
Subsidiary to execute a Guaranty and execute such Collateral Documents to the
extent required by Section 4 hereof (on terms substantially similar to those
executed in connection with this Agreement) as the Agent may then require
granting the Agent for the benefit of the holders of the Notes a security
interest in and lien on the personal property of such Subsidiary as collateral
security for the Notes and the other Obligations, together with documentation
(including a legal opinion) similar to that described in Section 7.2 hereof
relating to the authorization for, execution and delivery of, and validity of
such Subsidiary's obligations as a Guarantor hereunder and otherwise under the
Operative Documents in form and substance satisfactory to the Agent and such
other instruments, documents, certificates and opinions as are required by the
Agent in connection therewith.
Section 8.23 ERISA. The Company will, and will cause each of its
Subsidiaries to, promptly pay and discharge all obligations and liabilities
arising under ERISA of a character which if unpaid or unperformed might result
in the imposition of a Lien against any material portion of its Properties. The
Company will, and will cause each of its Subsidiaries to, promptly notify the
holders of the Notes of (i) the occurrence of any Reportable Event with respect
to a Plan, (ii) receipt of any notice from the PBGC of its intention to seek
termination of any Plan or appointment of a trustee therefor, (iii) its
intention to terminate or withdraw from any Plan, and (iv) the occurrence of any
event with respect to any Plan which would result in the incurrence by the
Company or any of its Subsidiaries of any material liability, fine or penalty,
or any material increase in the contingent liability of the Company or any such
Subsidiary with respect to any post-retirement Welfare Plan benefit.
Section 8.24 Compliance with Laws. The Company will, and will
cause each of its Subsidiaries to, comply in all respects with the requirements
of all federal, state and local laws, rules, regulations, ordinances and orders
applicable to or pertaining to the Properties or business operations of the
Company or any such Subsidiary, non-compliance with which could have a Material
Adverse Effect or would reasonably be expected to result in a Lien upon any of
their Property.
Section 8.25 Burdensome Contracts with Affiliates. The Company
will not, and will not permit any of its Subsidiaries to, enter into any
contract, agreement or business arrangement with any of its Affiliates (other
than with Wholly Owned Subsidiaries) on terms and conditions which are less
favorable to the Company or such Subsidiary than would be usual and customary in
similar contracts, agreements or business arrangements between Persons not
affiliated with each other.
Section 8.26 Changes in Fiscal Year. Except to change (with notice
to the Purchasers) its fiscal year to correspond with the calendar year, neither
the Company nor any of its Subsidiaries will change its fiscal year from its
present basis without the prior written consent of the Majority Holders.
Section 8.27 Change in the Nature of Business. The Company will
not, and will not permit any of its Subsidiaries to, engage in any business or
activity if as a result the general
40
nature of the business of the Company or any such Subsidiary would be changed in
any material respect from the general nature of the business engaged in by the
Company or such Subsidiary on the date of this Agreement.
Section 8.28 Use of Loan Proceeds. The Company will use the
proceeds of the Loans solely for the purposes described in, or otherwise
permitted by, Section 6.4 hereof.
Section 8.29 No Restrictions. Except as provided herein, the
Company shall not, nor shall it permit any Subsidiary to, directly or indirectly
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of the Company or any
Subsidiary to: (a) pay dividends or make any other distribution on any
Subsidiary's capital stock or other equity interests owned by the Company or any
other Subsidiary, (b) pay any indebtedness owed to the Company or any other
Subsidiary, (c) make loans or advances to the Company or any other Subsidiary,
(d) transfer any of its Property to the Company or any other Subsidiary, or (e)
guarantee the Obligations and/or grant Liens on its assets to the Agent as
required by the Operative Documents, except for such encumbrances or
restrictions relating to (i) customary non-assignment provisions of any lease
and restrictions therein restricting subletting, (ii) customary net worth
provisions contained in leases and other agreements entered into by the Company
or a Subsidiary in the ordinary course of business, (iii) customary
non-assignment provisions in licenses entered into by the Company or a
Subsidiary as lessee, in the ordinary course of business, and (iv) purchase
money obligations and Capitalized Lease Obligations that impose restrictions on
the property purchased or leased.
Section 8.30 Senior Debt. The Company shall not, nor shall it
permit any Subsidiary to, amend or modify the terms and conditions applicable to
the Senior Debt owing to Senior Lender in violation of the terms of the
Subordination Agreement.
Section 8.31 Junior Subordinated Debt. The Company shall not, nor
shall it permit any Subsidiary to (a) amend or modify the terms and conditions
applicable to the Subordinated Debt owing to Messrs. ▇▇▇▇ and ▇▇▇▇▇▇ or amend or
modify any terms applicable to any other Subordinated Debt in any respect
whatsoever, (b) make any voluntary prepayment of the Junior Subordinated Debt or
effect any voluntary redemption thereof, or (c) make any payment on account of
any Subordinated Debt which is prohibited under the terms of any instrument or
agreement Subordinating the same to the Obligations. Notwithstanding the
foregoing, the Company may agree to a decrease in the interest rate applicable
to the Junior Subordinated Debt or to a deferral of repayment of any of the
principal of or interest on the Junior Subordinated Debt beyond the current due
dates therefor.
Section 8.32 [Reserved].
Section 8.33 Worthington Settlement Documents. The Company will
not, nor will it permit any Subsidiary to, amend or modify any of the terms or
provisions of either of the Settlement Agreement or the Stock Redemption
Agreement without the prior written consent of the Majority Holders. The Company
will not, nor will it permit any Subsidiary to, (i) prepay or otherwise advance
the time for the payment of any amounts due, or pay more than the amounts
otherwise due, under the Settlement Agreement or the Stock Redemption Agreement,
or (ii) pay any amount due under the Stock Redemption Agreement unless such
payment is permitted
41
pursuant to the terms of Section 8.18 hereof (or represents interest on such a
permitted payment permitted to be paid pursuant to the immediately following
sentence), without (in each case described in the foregoing clauses (i) and
(ii)) the prior written consent of the Majority Holders. Without limiting the
foregoing, the Company will not pay, or permit any Subsidiary to pay, more than
$50,000 during any month as a payment of the Purchase Price (as defined in the
Stock Redemption Agreement) for the Subject Stock (as defined in the Stock
Redemption Agreement), unless such additional payment is a Deferred Payment (as
defined in the Stock Redemption Agreement) or interest on a Deferred Payment
which, pursuant to the terms of the Stock Redemption Agreement, may no longer be
deferred. If the making of any payment due under the Stock Redemption Agreement
would constitute a Payment Default or a Statutory Default (as those terms are
defined in the Stock Redemption Agreement), the Company will, and will cause any
Subsidiary to, take all necessary actions to defer such payment under the Stock
Redemption Agreement in accordance with the terms thereof.
Section 8.34 Mid-Central Debt. The Company will not, nor will it
permit Mid-Central or any other Subsidiary to, amend or modify any of the terms
or provisions of, or agree to defer or forgive any payments otherwise due under,
any of the Mid-Central Notes, except to the extent required by the ▇▇▇▇▇ Fargo
Subordination Agreement.
Section 8.35 D & O Insurance. The Company shall at all times
maintain directors' and officers' liability insurance policies.
Section 8.36 Capital Stock. The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Capital Stock,
solely for the purpose of issuance upon any conversion of the Warrants, such
number of shares of Capital Stock issuable upon the conversion of the Warrants.
All shares of Capital Stock which are so issuable shall, when issued, be duly
and validly issued, fully paid and nonassessable and free from all taxes, liens,
charges and encumbrances. The Company shall take all such actions as may be
necessary to assure that all such Shares of Capital Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which Shares of Capital
Stock may be listed.
Section 8.37 Management Compensation. The Company shall not,
without the Agent's prior written approval, increase the compensation paid to
any officer, key employee or consultant in excess of historical increases in
such compensation consistent with the past practices of the Company; provided,
however, that, upon the approval of the compensation committee of the Parent
Board, the Company shall be permitted to pay to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ a bonus of up to
$150,000 for the Company's 2003 fiscal year.
Section 8.38 Additional Life Insurance. No later than forty-five
(45) days following the Closing Date, the Agent shall have received, for the
benefit of the Purchasers, collateral assignments of life insurance in form and
substance satisfactory to the Agent on the lives of certain key employees of the
Company determined by the Agent, which insurance shall be in an aggregate amount
of not less than $1,000,000 for all such persons.
In addition to the foregoing, so long any portion of the Warrant, the
Underlying Capital Stock or the Deferred Put Obligations remains outstanding,
except to the extent compliance in
42
any case or cases is waived in writing by the Majority Holders, the Company
shall and shall cause its Subsidiaries to observe the covenants set forth in
Sections 8.1, 8.2, 8.5, 8.11, 8.12, 8.13, 8.36 and 8.37 hereof.
SECTION 9
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
As a material inducement to the Company entering into this Agreement
and selling the Securities hereunder, each Purchaser, severally but not jointly,
hereby represents and warrants to Holdings and the Company as follows:
Section 9.1 Organization and Good Standing. It is a limited
partnership, limited liability company or corporation, as the case may be, duly
organized, validly existing and in good standing under the laws of its state of
formation or organization and has all requisite power and authority to carry on
its business as now conducted.
Section 9.2 Authorization; Power. The execution and delivery by
it of, and the performance by it under, the Operative Documents to which it is a
party and the purchase of the Note and the Warrant issued in favor of it have
been duly authorized by all requisite action, and it has the full right, power
and authority to enter into, and perform its obligations under, this Agreement.
Section 9.3 Validity. This Agreement has been duly executed and
delivered by it and constitutes its valid and binding obligation, enforceable in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting creditors' rights generally or by general equitable principles,
regardless of whether such enforceability is considered in a proceeding in
equity or at law. The execution, delivery and performance of this Agreement and
the purchase of the Securities will not conflict with, or result in a material
breach of any of the terms of, or constitute a material default under, its
charter documents.
Section 9.4 Accredited Investor. It is an "accredited investor"
as such term is defined in Rule 501 of Regulation D under the Securities Act.
Section 9.5 Purchase for Own Account; Acknowledgment of Risk. It
is acquiring the Securities purchased hereunder by it or acquired pursuant
hereto by it for its own account without the present intention of resale or
distribution. It acknowledges that it may not resell or otherwise transfer such
Securities without an effective registration statement or exemption therefrom
under federal and applicable state securities laws, and that it may have to hold
its investment for an indefinite amount of time. It further acknowledges that
the purchase of the Securities is a risky investment and that it may lose its
entire investment hereby.
43
SECTION 10
EVENTS OF DEFAULT AND REMEDIES.
Section 10.1 Events of Default. Any one or more of the following
shall constitute an Event of Default hereunder:
(a) default in the payment when due of all or any part of
the principal of any Note (whether at the stated maturity thereof or at any
other time provided for in this Agreement); or
(b) default for five (5) days or more in the payment when
due of all or any part of interest on any Note (whether at the stated maturity
thereof or at any other time provided for in this Agreement) or of any fee or
other amount payable by the Company hereunder or under any other Operative
Document; or
(c) default in the observance or performance of any
covenant set forth in Section 8.1, 8.6, 8.7, 8.8, 8.9, 8.10, 8.13, 8.14, 8.15,
8.16, 8.17, 8.18, 8.19, 8.20, 8.21, 8.22, 8.28, 8.31, 8.33 or 8.34 hereof or of
any provision in any Operative Document dealing with the use, disposition or
remittance of the proceeds of Collateral or requiring the maintenance of
insurance thereon; or
(d) default in the observance or performance of any
covenant set forth in Section 8.5, 8.11 or 8.12 which is not remedied within ten
(10) days after written notice thereof to the Company by the Agent or any holder
of any Note; or
(e) default in the observance or performance of any other
provision hereof or of any other Operative Document which is not remedied within
thirty (30) days after written notice thereof to the Company by the Agent or any
holder of any Note; or
(f) any representation or warranty made by the Company
herein or in any other Operative Document, or in any statement or certificate
furnished by it pursuant hereto or thereto, or in connection with the purchase
and sale of the Securities, proves untrue in any material respect as of the date
of the issuance or making thereof; or
(g) any event occurs or condition exists (other than
those described in subsections (a) through (f) above) which is specified as an
event of default under any of the other Operative Documents, or any of the
Operative Documents shall for any reason not be or shall cease to be in full
force and effect or is declared to be null and void, or any Guarantor shall
purport to disavow, revoke, repudiate or terminate its obligations thereunder,
or any of the Collateral Documents shall for any reason fail to create a valid
and perfected first priority Lien in favor of the Agent in any Collateral
purported to be covered thereby except as expressly permitted by the terms
thereof, or any Subsidiary takes any action for the purpose of terminating,
repudiating or rescinding any Loan Document executed by it or any of its
obligations thereunder; or
(h) default shall occur under any evidence of
Indebtedness aggregating $1,000,000 or more issued, assumed or guaranteed by the
Company or any Subsidiary or under
44
any indenture, agreement or other instrument under which the same may be issued,
and such default shall continue for a period of time sufficient to permit the
acceleration of the maturity of any such Indebtedness (whether or not such
maturity is in fact accelerated) or any such Indebtedness shall not be paid when
due (whether by lapse of time, acceleration or otherwise); or
(i) any judgment or judgments, writ or writs, or warrant
or warrants of attachment, or any similar process or processes in an aggregate
amount in excess of $250,000 shall be entered or filed against the Company or
any of its Subsidiaries or against any of their Property and which remains
unvacated, unbonded, unstayed or unsatisfied for a period of thirty (30) days;
or
(j) the Company or any member of its Controlled Group
shall fail to pay when due an amount or amounts aggregating in excess $250,000
which it shall have become liable to pay to the PBGC or to a Plan under Title IV
of ERISA; or notice of intent to terminate a Plan or Plans having aggregate
Unfunded Vested Liabilities in excess of $250,000 (collectively, a "MATERIAL
PLAN") shall be filed under Title IV of ERISA by the Company or any other member
of its Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any Material Plan
or a proceeding shall be instituted by a fiduciary of any Material Plan against
the Company or any member of its Controlled Group to enforce Section 515 or
4219(c)(5) of ERISA and such proceeding shall not have been dismissed within
thirty (30) days thereafter; or a condition shall exist by reason of which the
PBGC would be entitled to obtain a decree adjudicating that any Material Plan
must be terminated; or
(k) a Change of Control shall occur; or
(l) the Company or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States Bankruptcy
Code, as amended, (ii) not pay, or admit in writing its inability to pay, its
debts generally as they become due, (iii) make an assignment for the benefit of
creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of
a receiver, custodian, trustee, examiner, liquidator or similar official for it
or any substantial part of its Property, (v) institute any proceeding seeking to
have entered against it an order for relief under the United States Bankruptcy
Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding
up, liquidation, reorganization, arrangement, adjustment or composition of it or
its debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, or (vi) fail to
contest in good faith any appointment or proceeding described in this Section
10.1(l); or
(m) a custodian, receiver, trustee, examiner, liquidator
or similar official shall be appointed for the Company or any of its
Subsidiaries or any substantial part of any of their Property, or a proceeding
described in Section 10.1(l) shall be instituted against the Company or any of
its Subsidiaries, and such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of sixty (60) days; or
(n) the Senior Lenders shall accelerate the Senior Debt;
or
45
(o) the Company shall breach or fail to perform any of
its covenants or obligations contained in the Investor Rights Agreement; or
(p) all or any portion of the outstanding principal of
the Notes (or any accrued and unpaid interest thereon) has not been paid in full
and any Purchaser exercises its put rights under the Warrant; or
(q) the Company shall have defaulted in any of its
obligations under any Warrant.
Section 10.2 Consequences of Events of Default.
(a) If any Event of Default has occurred, the total
interest rate on the Notes shall increase immediately by two (2) percentage
points and such two percent (2%) shall be deemed to be and treated as Current
Interest. Any increase of the Current Interest resulting from the operation of
this subsection shall terminate as of the close of business on the date on which
no Event of Default exists (subject to subsequent increases pursuant to this
subparagraph). Notwithstanding the foregoing, if a Payment Default occurs at any
time on or prior to December 31, 2004, the sum of the Current Interest and
Deferred Interest with respect to the Notes shall permanently increase by two
(2) percentage points (i.e., from sixteen percent (16%) to eighteen percent
(18%)); provided, however, that if such Payment Default is cured within one
hundred eighty (180) days of the occurrence thereof, the sum of the Current
Interest and Deferred Interest shall thereafter decrease to sixteen percent
(16%).
(b) If an Event of Default of the type described in
Section 10.1(l) has occurred, then the aggregate principal amount of the Notes
(together with all accrued interest thereon and all other amounts due and
payable with respect thereto) shall become immediately due and payable without
any action on the part of the holders of the Notes, and the Company shall
immediately pay to the holders of the Notes all amounts due and payable with
respect to the Notes.
(c) If any Event of Default has occurred and is
continuing, then each holder of the Notes may declare all or any portion of the
outstanding principal amount of its Note (together with all accrued interest
thereon and all other amounts due and payable with respect thereto) to be
immediately due and payable and may demand immediate payment of all or any
portion of the outstanding principal amount of such Note (together with all such
other amounts then due and payable) owned by such holder.
(d) Subject to Section 11 hereof the Agent (at the
direction of the Majority Holder), shall also have any other rights which such
holder may be afforded under any contract or agreement from time to time and any
other rights which such holder may have pursuant to applicable law.
(e) The Agent (at the direction of the Majority Holders)
may commence enforcement actions under the Collateral Documents and may exercise
the Put under and as defined in the Warrants.
46
SECTION 11
THE AGENT
Section 11.1 Appointment and Authorization of Agent. Each
Purchaser hereby appoints BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital (U.S.), Inc. as the Agent
under the Operative Documents and hereby authorizes the Agent to take such
action as Agent on its behalf and to exercise such powers under the Operative
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto. The Purchasers expressly agree that
the Agent is not acting as a fiduciary of the holders of the Notes in respect of
the Operative Documents, the Company or otherwise, and nothing herein or in any
of the other Operative Documents shall result in any duties or obligations on
the Agent or any of the Operative Documents except as expressly set forth
herein.
Section 11.2 Agent and its Affiliates. The Agent shall have the
same rights and powers under this Agreement and the other Operative Documents as
any other Purchaser and may exercise or refrain from exercising such rights and
power as though it were not the Agent, and the Agent and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Company or any Affiliate of the Company as if it were not the
Agent under the Operative Documents. The term "PURCHASER" or "HOLDER OF A NOTE"
as used herein and in all other Operative Documents, unless the context
otherwise clearly requires, includes the Agent in its individual capacity as a
holder of a Note. References herein to the Agent's Notes, or to the amount owing
to the Agent for which an interest rate is being determined, refer to the Agent
in its individual capacity as a holder of a Note.
Section 11.3 Action by Agent. If the Agent receives from the
Company a written notice of an Event of Default pursuant to Section 8.5 hereof,
the Agent shall promptly give each of the holders of the Notes written notice
thereof. The obligations of the Agent under the Operative Documents are only
those expressly set forth therein. Without limiting the generality of the
foregoing, the Agent shall not be required to take any action hereunder with
respect to any Default or Event of Default, except as expressly provided in
Section 11.2. Upon the occurrence of an Event of Default, the Agent shall take
such action to enforce its Lien on the Collateral and to preserve and protect
the Collateral as may be directed by the Majority Holders. Unless and until the
Majority Holders give such direction, the Agent may (but shall not be obligated
to) take or refrain from taking such actions as it deems appropriate and in the
best interest of all the holders of the Notes. In no event, however, shall the
Agent be required to take any action in violation of applicable law or of any
provision of any Operative Document, and the Agent shall in all cases be fully
justified in failing or refusing to act hereunder or under any other Operative
Document unless it first receives any further assurances of its indemnification
from the holders of the Notes that it may require, including prepayment of any
related expenses and any other protection it requires against any and all costs,
expense, and liability which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall be entitled to assume that
no Default or Event of Default exists unless notified in writing to the contrary
by a holder of a Note or the Company. In all cases in which the Operative
Documents do not require the Agent to take specific action, the Agent shall be
fully justified in using its discretion in failing to take or in taking any
action thereunder. Any instructions of the Majority Holders, or of any other
group
47
of holders of the Notes called for under the specific provisions of the
Operative Documents, shall be binding upon all the holders of the Notes and the
holders of the Obligations.
Section 11.4 Consultation with Experts. The Agent 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 by it in
good faith in accordance with the advice of such counsel, accountants or
experts.
Section 11.5 Liability of Agent; Credit Decision. Neither the
Agent nor any of its directors, officers, agents or employees shall be liable
for any action taken or not taken by it in connection with the Operative
Documents: (i) with the consent or at the request of the Majority Holders or
(ii) in the absence of its own gross negligence or willful misconduct. Neither
the Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify: (i) any
statement, warranty or representation made in connection with this Agreement,
any other Operative Document or any Note or Warrant; (ii) the performance or
observance of any of the covenants or agreements of the Company or any
Subsidiary contained herein or in any other Operative Document; (iii) the
satisfaction of any condition specified in Section 7 hereof, except receipt of
items required to be delivered to the Agent; or (iv) the validity,
effectiveness, genuineness, enforceability, perfection, value, worth or
collectibility hereof or of any other Operative Document or of any other
documents or writing furnished in connection with any Operative Document or of
any Collateral; and the Agent makes no representation of any kind or character
with respect to any such matter mentioned in this sentence. The Agent may
execute any of its duties under any of the Operative Documents by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
holders of the Notes, the Company, or any other Person for the default or
misconduct of any such agents or attorneys-in-fact selected with reasonable
care. The Agent shall not incur any liability by acting in reliance upon any
notice, consent, certificate, other document or statement (whether written or
oral) believed by it to be genuine or to be sent by the proper party or parties.
In particular and without limiting any of the foregoing, the Agent shall have no
responsibility for confirming the accuracy of any compliance certificate or
other document or instrument received by it under the Operative Documents. The
Agent may treat the payee of any Note as the holder thereof until written notice
of transfer shall have been filed with the Agent signed by such payee in form
satisfactory to the Agent. Each holder of a Note acknowledges that it has
independently and without reliance on the Agent or any other holder of any Note,
and based upon such information, investigations and inquiries as it deems
appropriate, made its own credit analysis and decision to purchase the
Securities in the manner set forth in the Operative Documents. It shall be the
responsibility of each holder of any Note to keep itself informed as to the
creditworthiness of the Company and its Subsidiaries, and the Agent shall have
no liability to any holder of any Note with respect thereto.
Section 11.6 Indemnity. The holders of the Notes shall ratably, in
accordance with their respective interests in the Notes and Warrants, indemnify
and hold the Agent, and its directors, officers, employees, agents, and
representatives harmless from and against any liabilities, losses, costs or
expenses suffered or incurred by it under any Operative Document or in
connection with the transactions contemplated thereby, regardless of when
asserted or arising, except to the extent they are promptly reimbursed for the
same by the Company and except to the extent that any event giving rise to a
claim was caused by the gross negligence or willful
48
misconduct of the party seeking to be indemnified. The obligations of the
holders of the Notes under this Section shall survive termination of this
Agreement. The Agent shall be entitled to offset amounts received for the
account of a holder of a Note under this Agreement against unpaid amounts due
from such holder to the Agent hereunder (whether as fundings of participations,
indemnities or otherwise), but shall not be entitled to offset against amounts
owed to the Agent by any holder of a Note arising outside of this Agreement and
the other Operative Documents.
Section 11.7 Resignation of Agent and Successor Agent. The Agent
may resign at any time by giving written notice thereof to the holders of the
Notes and the Company. Upon any such resignation of the Agent, the Majority
Holders shall have the right to appoint a successor Agent. If no successor Agent
shall have been so appointed by the Majority Holders, and shall have accepted
such appointment, within 30 days after the retiring Agent's giving of notice of
resignation then the retiring Agent may, on behalf of the holders of the Notes,
appoint a successor Agent, which may be any holder of a Note hereunder or any
commercial bank organized under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$200,000,000. Upon the acceptance of its appointment as the Agent hereunder,
such successor Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Agent under the Operative Documents, and the
retiring Agent shall be discharged from its duties and obligations thereunder.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 11 and all protective provisions of the other Operative Documents
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent, but no successor Agent shall in any event be liable or
responsible for any actions of its predecessor. If the Agent resigns and no
successor is appointed, the rights and obligations of such Agent shall be
automatically assumed by the Majority Holders and (i) the Company shall be
directed to make all payments due each holder of any Note hereunder directly to
such holder and (ii) the Agent's rights in the Collateral Documents shall be
assigned without representation, recourse or warranty to the holders of the
Notes as their interests may appear.
Section 11.8 Designation of Additional Agents. The Agent shall
have the continuing right, for purposes hereof, at any time and from time to
time to designate one or more of the holders of the Notes (and/or its or their
Affiliates) as "SYNDICATION AGENTS," "DOCUMENTATION AGENTS," "ARRANGERS," or
other designations for purposes hereto, but such designation shall have no
substantive effect, and such holder and their Affiliates shall have no
additional powers, duties or responsibilities as a result thereof.
Section 11.9 Authorization to Release or Subordinate or Limit
Liens. The Agent is hereby irrevocably authorized by each Purchaser and any of
the holders of the Notes to (a) release any Lien covering any Collateral that is
sold, transferred, or otherwise disposed of in accordance with the terms and
conditions of this Agreement and the relevant Collateral Documents (including a
sale, transfer, or disposition permitted by the terms of Section 8.19 hereof or
which has otherwise been consented to in accordance with Section 13.3 hereof),
(b) release or subordinate any Lien on Collateral consisting of goods financed
with purchase money indebtedness or under a Capital Lease to the extent such
purchase money indebtedness or Capitalized Lease Obligation, and the Lien
securing the same, are permitted by Sections 8.14(b) and 8.15(d) hereof, and (c)
reduce or limit the amount of the indebtedness secured by any
49
particular item of Collateral to an amount not less than the estimated value
thereof to the extent necessary to reduce mortgage registry, filing and similar
tax.
Section 11.10 Authorization to Enter into, and Enforcement of, the
Collateral Documents. The Agent is hereby irrevocably authorized by each of the
holders of the Notes to execute and deliver the Collateral Documents on behalf
of each of the holders of the Notes and their Affiliates and to take such action
and exercise such powers under the Collateral Documents as the Agent considers
appropriate, provided the Agent shall not amend the Collateral Documents unless
such amendment is agreed to in writing by the Majority Holders. Each holder of
the Notes acknowledges and agrees that it will be bound by the terms and
conditions of the Collateral Documents upon the execution and delivery thereof
by the Agent. Except as otherwise specifically provided for herein, no holder
(or its Affiliates) other than the Agent shall have the right to institute any
suit, action or proceeding in equity or at law for the foreclosure or other
realization upon any Collateral or for the execution of any trust or power in
respect of the Collateral or for the appointment of a receiver or for the
enforcement of any other remedy under the Collateral Documents; it being
understood and intended that no one or more of the holder of the Notes (or their
Affiliates) shall have any right in any manner whatsoever to affect, disturb or
prejudice the Lien of the Agent (or any security trustee therefor) under the
Collateral Documents by its or their action or to enforce any right thereunder,
and that all proceedings at law or in equity shall be instituted, had, and
maintained by the Agent (or its security trustee) in the manner provided for in
the relevant Collateral Documents for the benefit of the holder of the Notes and
their Affiliates.
Section 11.11 Subordination and Intercreditor Agreement. The Agent
is hereby irrevocably authorized by each of the Purchasers on their own behalf
to execute and deliver the Subordination Agreement on the Closing Date, and to
take such action and exercise such powers under the Subordination Agreement as
the Agent considers appropriate. Each Lender acknowledges that it has read, and
accepts, the Subordination Agreement and will be bound by the terms and
conditions thereof.
SECTION 12
THE GUARANTIES
Section 12.1 The Guaranties. To induce the Purchasers to purchase
the Securities described herein and in consideration of benefits expected to
accrue to each Guarantor by reason of the Commitments and for other good and
valuable consideration, receipt of which is hereby acknowledged, each Subsidiary
party hereto and each Subsidiary which executes and delivers a Guaranty (each
such Subsidiary being hereinafter referred to individually as a "GUARANTOR" and
collectively as the "GUARANTORS") hereby unconditionally and irrevocably
guarantees jointly and severally to the Agent, the Purchasers, their Affiliates
and each other holder of the Securities and any of the Obligations, the due and
punctual payment of all present and future Obligations, including, but not
limited to, the due and punctual payment of principal of and interest on the
Notes and obligations with respect to the Warrants and under the Deferred Put
Obligations, as and when the same shall become due and payable, whether at
stated maturity, by acceleration or otherwise, according to the terms hereof and
thereof as and when the same shall become due and payable, whether at its stated
maturity, by acceleration or otherwise, according to the terms
50
thereof (the Obligations so guaranteed being hereinafter referred to
collectively as the "GUARANTEED OBLIGATIONS"). In case of failure by the Company
punctually to pay any Guaranteed Obligations, each Guarantor hereby
unconditionally and jointly and severally agrees to make such payment or to
cause such payment to be made punctually as and when the same shall become due
and payable, whether at stated maturity, by acceleration or otherwise, and as if
such payment were made by the Company.
Section 12.2 Guaranty Unconditional. The obligations of each
Guarantor as a guarantor under this Section 12 and with respect to the Operative
Documents shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise,
waiver or release in respect of any obligation of the Company or of any other
Guarantor under this Agreement or any other Operative Document or by operation
of law or otherwise;
(b) any modification or amendment of or supplement to
this Agreement or any other Operative Document;
(c) any change in the corporate existence, structure or
ownership of, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting, the Company, any other Guarantor, or any of their
respective assets, or any resulting release or discharge of any obligation of
the Company or of any other Guarantor contained in any Operative Document;
(d) the existence of any claim, set-off or other rights
which the Guarantor may have at any time against the Agent, any holder of any
Note or any other Person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim
or demand or any exercise of, or failure to exercise, any rights or remedies
against the Company, any other Guarantor or any other Person or Property;
(f) any application of any sums by whomsoever paid or
howsoever realized to any obligation of the Company, regardless of what
obligations of the Company remain unpaid;
(g) any invalidity or unenforceability relating to or
against the Company or any other Guarantor for any reason of this Agreement or
of any other Operative Document or any provision of applicable law or regulation
purporting to prohibit the payment by the Company or any other Guarantor of the
principal of or interest on any Note or any other amount payable by them under
the Operative Documents; or
(h) any other act or omission to act or delay of any kind
by the Agent, any holder of any Note 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 obligations of the Guarantors
under the Operative Documents.
Section 12.3 Discharge Only upon Payment in Full; Reinstatement in
Certain Circumstances. Each Guarantor's obligations under this Section 12 shall
remain in full force and
51
effect until the principal of and interest on the Notes and all other Guaranteed
Obligations shall have been paid and satisfied in full. If at any time any
payment of the principal of or interest on any Note or any other amount payable
by the Company under any of the Operative Documents is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or reorganization
of the Company or of any Guarantor, or otherwise, each Guarantor's obligations
under this Section 12 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.
Section 12.4 Waivers.
(a) General. Each Guarantor 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 the Agent, any
holder of any Note or any other Person against the Company, another Guarantor or
any other Person.
(b) Subrogation and Contribution. Each Guarantor hereby
agrees not to exercise or enforce any right of exoneration, contribution,
reimbursement, recourse or subrogation available to such Guarantor against any
Person liable for payment of the Guaranteed Obligations, or as to any security
therefor, unless and until the full amount owing on the Guaranteed Obligations
has been paid; and the payment by such Guarantor of any amount pursuant to any
of the Operative Documents on account of credit extended to the Company shall
not in any way entitle such Guarantor to any right, title or interest (whether
by way of subrogation or otherwise) in and to any of the Guaranteed Obligations
or any proceeds thereof or any security therefor unless and until the full
amount owing on the Guaranteed Obligations has been paid.
Section 12.5 Limit on Recovery. Notwithstanding any other
provision hereof, the right of recovery against each Guarantor under this
Section 12 shall not (to the extent required by or as may be necessary or
desirable to ensure the enforceability against such Guarantor of its obligations
hereunder or thereunder in accordance with the laws of the jurisdiction of its
incorporation or where it carries on business) exceed (x) the amount which would
render such Guarantor's obligations under this Section 11 void or voidable under
applicable law, including without limitation fraudulent conveyance law minus (y)
$1.00.
Section 12.6 Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Company under this Agreement or any other
Operative Document is stayed upon the insolvency, bankruptcy or reorganization
of the Company, all such amounts otherwise subject to acceleration under the
terms of this Agreement or the other Operative Documents shall nonetheless be
payable jointly and severally by the Guarantors hereunder forthwith on demand by
the Agent made at the request of the Majority Holders.
Section 12.7 Benefit to Guarantors. All of the Guarantors are
engaged in related businesses and integrated to such an extent that the
financial strength and flexibility of each Guarantor has a direct impact on the
success of each other Guarantor. Each Guarantor will derive substantial direct
and indirect benefit from the extension of credit hereunder.
52
Section 12.8 Guarantor Covenants. Each Guarantor shall take such
action as the Company is required by this Agreement to cause such Guarantor to
take, and shall refrain from taking such action as the Company is required by
this Agreement to prohibit such Guarantor from taking.
SECTION 13
MISCELLANEOUS.
Section 13.1 Holidays. If any payment of principal or interest on
any Note or any fee hereunder shall fall due on a day which is not a Business
Day, principal together with interest at the rate the Note bears for the period
prior to maturity or any fee at the rate such fee accrues shall continue to
accrue from the stated due date thereof to and including the next succeeding
Business Day, on which the same is payable.
Section 13.2 No Waiver, Cumulative Remedies. No delay or failure
on the part of the Agent or on the part of any other holder of any Note in the
exercise of any power or right shall operate as a waiver thereof, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
of any other power or right, and the rights and remedies hereunder of the Agent,
each holder of any Note are cumulative to, and not exclusive of, any rights or
remedies which any of them would otherwise have.
Section 13.3 Waivers, Modifications and Amendments. Any provision
hereof or of the Notes or the Guaranties may be amended, modified, waived or
released and any Default or Event of Default and its consequences may be
rescinded and annulled upon the written consent of the Majority Holders;
provided, however, that without the consent of all holders of the Notes no such
amendment, modification or waiver shall increase the amount or extend the terms
of any Note or reduce the interest rate applicable to or extend the maturity
(including any scheduled installment) of its Notes or reduce the amount of the
principal or interest or fees to which such holder is entitled hereunder or
release any substantial (in value) part of the collateral security afforded by
the Collateral Documents (except in connection with a sale or other disposition
required to be effected by the provisions hereof or of the Collateral Documents)
or release any Guarantor or change this Section or change the definition of
"MAJORITY HOLDERS" or change the number of holders of Notes required to take any
action hereunder or under the Guaranties. No amendment, modification or waiver
of the Agent's protective provisions shall be effective without the prior
written consent of the Agent.
Section 13.4 Costs and Expenses. The Company agrees to pay on
demand the costs and expenses of the Agent in connection with the negotiation,
preparation, execution and delivery of the Operative Documents and the other
instruments and documents to be delivered hereunder or thereunder or in
connection with the transactions contemplated hereby or thereby or in connection
with any consents hereunder or waivers or amendments hereto or thereto,
including the fees and expenses of Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, P.C.,
counsel for the Agent, with respect to all of the foregoing (whether or not the
transactions contemplated hereby are consummated), and all costs and expenses
(including attorneys' fees), if any, incurred by the Agent, the holders of the
Notes or any other holders of a Note in connection with a default under
53
or the enforcement of the Operative Documents or any other instrument or
document to be delivered hereunder or thereunder. The Company agrees to
indemnify and save the holders of the Notes and the Agent harmless from any and
all liabilities, losses, costs and expenses (collectively, "INDEMNIFIED
LIABILITIES") incurred by the holders of the Notes or the Agent in connection
with any action, suit or proceeding brought against the Agent or any holder of
any Note by any Person (but excluding attorneys' fees for litigation solely
between the holders of the Notes to which the Company is not a party) which
arises out of the transactions contemplated or financed hereby or out of any
action or inaction by the Agent or any holder of any Note hereunder or
thereunder, except for such thereof as is caused by the gross negligence or
willful misconduct of the party seeking to be indemnified. The provisions of
this Section and the protective provisions of Section 2 hereof shall survive
payment of the Notes.
Section 13.5 Documentary Taxes. The Company agrees to pay on
demand any documentary, stamp or similar taxes payable in respect of this
Agreement, the Notes, the Warrant, any Collateral Document or any Guaranty
including interest and penalties, in the event any such taxes are assessed,
irrespective of when such assessment is made and whether or not any credit is
then in use or available hereunder.
Section 13.6 Survival of Representations. All representations and
warranties made herein or in any other Operative Documents or in certificates
given pursuant hereto or thereto shall survive the execution and delivery of
this Agreement and shall continue in full force and effect with respect to the
date as of which they were made as long as any credit is in use or available
hereunder.
Section 13.7 Survival of Indemnities. All indemnities and other
provisions relative to reimbursement to the holders of the Notes of amounts
sufficient to protect the yield of the holders of the Notes with respect to the
Notes, including, but not limited to, Sections 1.3, 2.7, 2.8 and 2.9 hereof,
shall survive the termination of this Agreement and the payment of the Notes.
Section 13.8 Notices. Except as otherwise specified herein, all
notices hereunder shall be in writing (including cable or telecopy) and shall be
given to the relevant party at its address or telecopier number set forth below,
in the case of the Company, or on the appropriate signature page hereof, in the
case of the holders of the Securities and the Agent, or such other address or
telecopier number as such party may hereafter specify by notice to the Agent and
the Company given by United States certified or registered mail or by telecopy.
Notices hereunder to the Company shall be addressed to the name of such Person
at:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Telecopy: (▇▇▇)▇▇▇-▇▇▇▇
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt
54
requested, addressed as aforesaid or (iii) if given by any other means, when
delivered at the addresses specified in this Section; provided that any notice
given pursuant to Section 1 or Section 2 hereof shall be effective only upon
receipt.
Section 13.9 Headings. Section headings used in this Agreement are
for convenience of reference only and are not a part of this Agreement for any
other purpose.
Section 13.10 Severability of Provisions. Any provision of this
Agreement which is unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. All rights, remedies
and powers provided in this Agreement and the Notes may be exercised only to the
extent that the exercise thereof does not violate any applicable mandatory
provisions of law, and all the provisions of this Agreement and the Notes are
intended to be subject to all applicable mandatory provisions of law which may
be controlling and to be limited to the extent necessary so that they will not
render this Agreement or the Notes invalid or unenforceable.
Section 13.11 Counterparts. This Agreement may be executed in any
number of counterparts, and by different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
Section 13.12 Binding Nature, Governing Law, Etc. This Agreement
shall be binding upon the Company and its successors and assigns, and shall
inure to the benefit of the Agent and the Purchasers and the benefit of their
successors and assigns, including any subsequent holder of an interest in the
Notes. This Agreement and the rights and duties of the parties hereto shall be
governed by, and construed in accordance with, the internal laws of the State of
Illinois without regard to principles of conflicts of laws. The Company may not
assign its rights hereunder without the written consent of the Agent and the
holders of the Notes.
Section 13.13 Entire Understanding. This Agreement, together with
other Operative Documents, constitutes the entire understanding of the parties
with respect to the subject matter hereof and any prior agreements, whether
written or oral, with respect thereto are superseded hereby except for prior
understandings related to fees payable to the Agent upon the initial closing of
the transactions contemplated hereby.
(a) Transfer Restrictions. The Securities acquired
pursuant hereto are subject to the applicable transfer restrictions contained in
the Notes, the Warrants and the Investor Rights Agreement, as the case may be.
Section 13.14 Confidentiality. The Agent and each holder of any
Note shall hold in confidence any material nonpublic information delivered or
made available to them by the Company or any Subsidiary. The foregoing to the
contrary notwithstanding, nothing herein shall prevent any holder of any Note
from disclosing any information delivered or made available to it by the Company
or any Subsidiary (i) to any other holder, (ii) to any other Person if
reasonably incidental to the administration of the credit contemplated hereby,
(iii) upon the order of any court or administrative agency, (iv) upon the
request or demand of any regulatory agency or authority, (v) which has been
publicly disclosed other than as a result of a disclosure by the
55
Agent or any holder of any Note which is not permitted by this Agreement, (vi)
in connection with any litigation to which the Agent, any holder, or any of
their respective Affiliates may be a party, along with the Company, any
Subsidiary or any of their respective Affiliates, (vii) to the extent reasonably
required in connection with the exercise of any right or remedy under this
Agreement or otherwise, (viii) to such holder's Affiliates and to its and its
Affiliates' legal counsel and financial consultants and independent auditors,
and (ix) to any actual or proposed participant or assignee of all or part of its
rights hereby.
Section 13.15 Sharing of Set-Off. Each holder of any Note agrees
with each other holder a party hereto that if such holder shall receive and
retain any payment, whether by set-off or application of deposit balances or
otherwise, on any of the Notes or Obligations in excess of its ratable share of
payments on all such Obligations then outstanding to the holder of the Notes,
then such holder shall purchase for cash at face value, but without recourse,
ratably from each of the other holders such amount of the Notes or Obligations,
or participations therein, held by each such other holder (or interest therein)
as shall be necessary to cause such holder to share such excess payment ratably
with all the other holders of the Notes; provided, however, that if any such
purchase is made by any holder, and if such excess payment or part thereof is
thereafter recovered from such purchasing holder, the related purchases from the
other holders of the Notes shall be rescinded ratably and the purchase price
restored as to the portion of such excess payment so recovered, but without
interest.
Section 13.16 Headings. Section headings used in this Agreement are
for reference only and shall not affect the construction of this Agreement.
Section 13.17 Set-off. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuation of any Event of Default, each
holder of any Note and each subsequent holder of any Obligation is hereby
authorized by the Company and each Guarantor at any time or from time to time,
without notice to the Company or such Guarantor or to any other Person, any such
notice being hereby expressly waived, to set-off and to appropriate and to apply
any and all deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured,
but not including trust accounts, and in whatever currency denominated) and any
other indebtedness at any time held or owing by that Purchaser or that
subsequent holder to or for the credit or the account of the Company or such
Guarantor, whether or not matured, against and on account of the Obligations of
the Company or such Guarantor to that Purchaser or that subsequent holder under
the Operative Documents, including, but not limited to, all claims of any nature
or description arising out of or connected with the Operative Documents,
irrespective of whether or not (a) that Purchaser or that subsequent holder
shall have made any demand hereunder or (b) the principal of or the interest on
the Loans or Notes and other amounts due hereunder shall have become due and
payable pursuant to Section 9 hereof and although said obligations and
liabilities, or any of them, may be contingent or unmatured.
Section 13.18 Construction. The provisions of this Agreement
relating to Subsidiaries shall only apply during such times as the Company has
one or more Subsidiaries. NOTHING CONTAINED HEREIN SHALL BE DEEMED OR CONSTRUED
TO PERMIT ANY ACT OR OMISSION WHICH IS PROHIBITED BY THE TERMS OF ANY COLLATERAL
DOCUMENT, THE COVENANTS AND AGREEMENTS
56
CONTAINED HEREIN BEING IN ADDITION TO AND NOT IN SUBSTITUTION FOR THE COVENANTS
AND AGREEMENTS CONTAINED IN THE COLLATERAL DOCUMENTS.
Section 13.19 Submission to Jurisdiction; Waiver of Jury Trial. The
Company and the Guarantors hereby submit to the nonexclusive jurisdiction of the
United States District Court for the Northern District of Illinois and of any
Illinois State court sitting in the City of Chicago for purposes of all legal
proceedings arising out of or relating to this Agreement, the other Operative
Documents or the transactions contemplated hereby or thereby. The Company and
the Guarantors irrevocably waive, to the fullest extent permitted by law, any
objection which they may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. THE COMPANY,
THE GUARANTORS, THE AGENT, AND THE PURCHASERS HEREBY IRREVOCABLY WAIVE ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.
[SIGNATURE PAGES TO FOLLOW]
57
Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.
Dated as of the date first above written.
▇▇▇▇▇▇ INDUSTRIAL GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Its: Chairman
----------------------------------
▇▇▇▇▇▇ METALCRAFT CO.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Its: President
----------------------------------
▇▇▇▇▇▇ METALCRAFT CO. OF NORTH CAROLINA
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Its: President
----------------------------------
▇▇▇▇▇▇ METALCRAFT CO. OF SOUTH CAROLINA
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Its: President
----------------------------------
MID CENTRAL PLASTICS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Its: President
----------------------------------
B&W METAL FABRICATORS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Its: President
----------------------------------
58
Accepted and Agreed to at Chicago, Illinois as of the day and year last
above written.
BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇ CAPITAL (U.S.), INC.,
as Agent and as a Purchaser
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
59
PURCHASER SCHEDULE
Purchaser Aggregate Principal Amount
(Notice and Payment of Notes to be
Information) Purchased Note Denominations Warrants
-------------------- -------------------------- ------------------ --------
BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital $10,000,000.00 $10,000,000.00 5 - 545,467 shares
(U.S.), Inc.
1
THIS WARRANT WAS ORIGINALLY ISSUED ON MARCH 26, 2004 AND NEITHER IT NOR
THE CLASS A STOCK ISSUABLE UPON EXERCISE HEREOF HAS BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE ILLINOIS
SECURITIES LAW OF 1953, AND NEITHER MAY BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
OFFERED UNDER THOSE LAWS, OR AN OPINION FROM COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
The security represented by this certificate is subject to a certain
Investor Rights Agreement dated as of March 26, 2004 (as amended,
restated or otherwise modified from time to time, the "Investor Rights
Agreement"), among the issuer hereof, BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital (U.S.),
Inc., the issuer hereof, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and certain other
parties named therein. A copy of the Investor Rights Agreement shall be
furnished without charge by the issuer hereof to the holder hereof upon
written request.
The security represented by this certificate is subject to the terms of
a Subordination and Intercreditor Agreement dated as of March 26, 2004
(as amended, restated or supplemented from time to time, the
"Subordination Agreement") between BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital (U.S.),
Inc., a Delaware corporation, as agent, and ▇▇▇▇▇▇ Trust and Savings
Bank, as agent.
▇▇▇▇▇▇ INDUSTRIAL GROUP, INC.
STOCK PURCHASE WARRANT
March 26, 2004 Certificate No. W-5
FOR VALUE RECEIVED, ▇▇▇▇▇▇ Industrial Group, Inc., a Georgia
corporation (the "Company"), hereby grants to BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇
Capital (U.S.), Inc., a Delaware corporation (the "Holder"), or its successors
and assigns (together with the Holder, the "Registered Holders" and,
individually, a "Registered Holder"), the right to purchase from the Company the
Applicable Number of shares of the Class A Common Stock, $.01 par value, of the
Company, at a price per share of $.02 (the "Exercise Price"). This warrant (this
"Warrant") is issued pursuant to the terms of that certain Note and Warrant
Purchase Agreement dated as of March 26, 2004 (as amended, restated or otherwise
modified from time to time, the "Purchase Agreement"), among the Company, the
Holder and certain other parties named therein. Certain capitalized terms used
herein are defined in Section 1 hereof. Capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Purchase Agreement.
The amount and kind of
securities obtainable pursuant to the rights granted hereunder and the purchase
price for such securities are subject to adjustment pursuant to the provisions
contained in this Warrant. All warrants, including, without limitation, this
Warrant, representing portions of the rights hereunder are referred to herein as
this "Warrant." This Warrant shall be numbered and shall be registered in a
Warrant Register by the Company at its principal place of business in the State
of Illinois. Unless all or a portion of this Warrant has been assigned as
permitted herein, the Company shall be entitled to treat the Holder as the owner
in fact of this Warrant for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in the Warrant on the part of any other
Person. For tax purposes, the value of this Warrant as of the date hereof is
$10,000.
This Warrant is subject to the following provisions:
1. Definitions. The terms set forth below have the following meanings:
"Applicable Number" on the Date of Issuance shall equal that
number of shares of Common Stock determined by multiplying nine percent (9%) by
the Common Stock Deemed Outstanding on the Date of Issuance (after giving effect
to the issuance of this Warrant) (i.e., 545,467 shares of Common Stock);
provided, however, that the Applicable Number may be reduced to a number that is
determined based upon the mutually exclusive methodologies set forth in
subsection (a) or subsection (b) below:
(a) If a Change of Control is consummated prior to the fifth (5th)
anniversary of the Date of Issuance and
(i) the Net Equity Value is equal to or greater than
$50,000,000, then the Applicable Number shall equal that number of
shares of Common Stock determined by multiplying five percent (5%) by
the Common Stock Deemed Outstanding on the Date of Issuance (after
giving effect to the issuance of this Warrant) (i.e., 290,278 shares of
Common Stock); or
(ii) the Net Equity Value is less than $50,000,000 but
equal to or greater than $48,000,000, then the Applicable Number shall
equal that number of shares of Common Stock determined by multiplying
six percent (6%) by the Common Stock Deemed Outstanding on the Date of
Issuance (after giving effect to the issuance of this Warrant) (i.e.,
352,039 shares of Common Stock); or
(iii) the Net Equity Value is less than $48,000,000 but
equal to or greater than $46,000,000, then the Applicable Number shall
equal that number of shares of Common Stock determined by multiplying
seven percent (7%) by the Common Stock Deemed Outstanding on the Date
of Issuance (after giving effect to the issuance of this Warrant)
(i.e., 415,128 shares of Common Stock); or
(iv) the Net Equity Value is less than $46,000,000 but
equal to or greater than $44,000,000, then the Applicable Number shall
equal that number of shares of Common Stock determined by multiplying
eight percent (8%) by the Common Stock Deemed Outstanding on the Date
of Issuance (after giving effect to the issuance of this Warrant)
(i.e., 479,589 shares of Common Stock); or
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(v) the Net Equity Value is less than $44,000,000, then
the Applicable Number shall equal that number of shares of Common Stock
determined by multiplying nine percent (9%) by the Common Stock Deemed
Outstanding on the Date of Issuance (after giving effect to the
issuance of this Warrant) (i.e., 545,467 shares of Common Stock).
(b) If a Change of Control has not been consummated prior to the
fifth (5th) anniversary of the Date of Issuance and/or
(i) EBITDA for the calendar year ended December 31, 2004
exceeds $14,506,000, then the Applicable Number as of the Date of
Issuance shall be reduced by an amount equal to one percent (1%)
multiplied by the Common Stock Deemed Outstanding on the Date of
Issuance (after giving effect to the issuance of this Warrant); and/or
(ii) EBITDA for the calendar year ended December 31, 2005
exceeds $16,706,000, then the Applicable Number as of the Date of
Issuance shall be reduced by an amount equal to one percent (1%)
multiplied by the Common Stock Deemed Outstanding on the Date of
Issuance (after giving effect to the issuance of this Warrant); and/or
(iii) EBITDA for the calendar year ended December 31, 2006
exceeds $18,591,000, then the Applicable Number as of the Date of
Issuance shall be reduced by an amount equal to one percent (1%)
multiplied by the Common Stock Deemed Outstanding on the Date of
Issuance (after giving effect to the issuance of this Warrant); and/or
(iv) EBITDA for the calendar year ended December 31, 2007
exceeds $14,217,000, then the Applicable Number as of the Date of
Issuance shall be reduced by an amount equal to one percent (1%)
multiplied by the Common Stock Deemed Outstanding on the Date of
Issuance (after giving effect to the issuance of this Warrant);
provided, however, that (A) the amount by which the Applicable Number
as of the Date of Issuance may be reduced in accordance with this subsection (b)
shall not exceed four percent (4%) multiplied by the Common Stock Deemed
Outstanding on the Date of Issuance (after giving effect to the issuance of this
Warrant) (i.e., 255,189 shares of Common Stock) and (B) if the Company does not
exceed the EBITDA projection set forth above for any such calendar year, then
the potential reduction of the Applicable Number for such calendar year shall
not apply and may not be recovered in any future years.
"Change of Control" shall have the meaning assigned to such
term in the Purchase Agreement.
"Class A Stock" means the Class A Common Stock of the Company,
par value $.01 per share.
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"Class B Stock" means the Class B Common Stock of the Company,
par value $.01 per share.
"Common Stock" means, at any given time, the issued and
outstanding common stock of the Company, determined on a fully-diluted basis,
including, without limitation, the Class A Stock and the Class B Stock.
"Common Stock Deemed Outstanding" means, at any given time,
the number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock issuable at such time upon exercise or
conversion of all outstanding Options and Convertible Securities regardless of
whether the Options or Convertible Securities are actually exercisable at such
time.
"Company Value" as of any Valuation Date shall equal the sum
of (a) EBITDA for the twelve (12) month period immediately preceding such
Valuation Date multiplied by five (5) plus (b) the Company's cash and cash
equivalents balance as of the last day of the month immediately preceding such
Valuation Date, minus (c) the outstanding amount of principal and interest on
the Company's Total Funded Debt (to the extent such debt is permitted
Indebtedness as of the last day of the month immediately preceding the Valuation
Date.
"Convertible Securities" means any stock or other securities
directly or indirectly convertible into or exchangeable for any shares of Common
Stock.
"Date of Issuance" means March 26, 2004.
"Deferred Put Obligation" is defined in Section 5(c) hereof.
"Diligent Efforts" is defined in Section 5(c) hereof.
"Exercise Period" is defined in Section 2(a) hereof.
"Exercise Price" is defined in the first paragraph of this
Warrant.
"Exercise Time" is defined in Section 2(b)(i) hereof.
"Holder" is defined in the first paragraph of this Warrant.
"EBITDA" means the consolidated EBITDA (as defined in the
Purchase Agreement) of the Company and its Subsidiaries.
"GAAP" means generally accepted accounting principles,
consistently applied.
"Liquidating Dividend" is defined in Section 4 hereof.
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"Majority Warrant Holders" means the Registered Holders of
this Warrant representing at least fifty-one percent (51%) of the shares of
Warrant Stock issuable upon exercise of this Warrant.
"Market Price" means as to any security (other than this
Warrant) the average of the closing prices of such security's sales on all
domestic securities exchanges on which such security may at the time be listed
or quoted, including for this purpose The Nasdaq Stock Market, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed or quoted, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of twenty (20)
days consisting of the day as of which "Market Price" is being determined and
the nineteen (19) consecutive business days prior to such day; provided that if
such security is listed on any domestic securities exchange the term "business
days" as used in this sentence means business days on which such exchange is
open for trading. If at any time such security is not listed on any domestic
securities exchange or quoted on The Nasdaq Stock Market or the domestic
over-the-counter market, the "Market Price" shall be the Market Value divided by
the Common Stock Deemed Outstanding on the Valuation Date (but, with respect to
Section 3 hereof, prior to giving effect to the event triggering the
determination of the Market Price).
"Market Value" means the fair market value of the Company's
entire equity determined on a going concern basis as between a willing buyer and
a willing seller and taking into account all relevant factors determinative of
value (but not taking into account any discounts for lack of liquidity, minority
position or other similar or related discounts), plus (to the extent not
otherwise taken into consideration in the determination of fair market value of
the Company's entire equity) the aggregate amount of cash or property payable or
to be surrendered to the Company upon exercise or conversion of all Options and
Convertible Securities and the principal amount of any debt constituting
Convertible Securities. Unless otherwise agreed by the Company and the
Registered Holders, Market Value shall be determined by an investment banking
firm reasonably acceptable to the Company and the Registered Holders, which firm
shall submit to the Company and the Registered Holders a written report setting
forth such determination. If the parties are unable to agree on an investment
banking firm within fifteen (15) days after the date of the event triggering the
determination of Market Value, a third firm will be selected by agreement of two
investment banking firms, one selected by the Company and one selected by the
Registered Holders. The expenses of such firm shall be borne by the Company, and
the determination of such firm shall be final and binding upon all parties,
except as otherwise provided in Section 6(d).
"Net Equity Value" means the net cash and non-cash
proceeds (valued at the Market Price thereof) payable to the holders of Common
Stock (without regard to the obligation to redeem this Warrant) upon or in
connection with the consummation of a Change of Control or Organic Change, after
payment of all debt obligations having priority over payments to equityholders
of the Company, including, without limitation,
-5-
Funded Debt, adjustments for cash and working capital and reasonable transaction
expenses and fees.
"Option Plans" shall have the meaning assigned to such term in
the Purchase Agreement.
"Options" means any rights or options to subscribe for or
purchase capital stock of the Company or Convertible Securities, including,
without limitation, under the Option Plans.
"Organic Change" is defined in Section 3(d) hereof.
"Preferred Stock" means the Preferred Stock of the Company, no
par value per share.
"Put" is defined in Section 6(a) hereof.
"Put Closing" is defined in Section 6(b) hereof.
"Put Event" means the occurrence of any of the following
events: (a) a Change of Control; (b) an Organic Change; (c) the fifth (5th)
anniversary of the Date of Issuance; or (d) the optional prepayment by the
Company or any other Person of seventy-five percent (75%) or more of the
original aggregate principal amount of the Notes.
"Put Notes" is defined in Section 6(c) hereof.
"Put Notice" is defined in Section 6(a) hereof.
"Put Price" of each Put Share that is Put by a Registered
Holder shall be equal to the greater of: (a) (i) Company Value multiplied by the
Warrant Fraction divided by (ii) the number of shares of Warrant Stock; and (b)
the per share Market Price of the Put Shares on the Valuation Date (assuming the
exercise for Put Shares of the portion of this Warrant being Put prior to such
determination, and subject to any adjustment pursuant to the last sentence of
Section 6(b) hereof). Notwithstanding anything to the contrary contained herein,
if the Put is exercised by the Registered Holder concurrently with the
consummation of a Change of Control or Organic Change, the Put Price shall be
equal to (A) Net Equity Value multiplied by the Warrant Fraction divided by (B)
the number of shares of Warrant Stock.
"Put Shares" is defined in Section 6(b) hereof.
"Registered Holder" or "Registered Holders" is defined in the
first paragraph of this Warrant.
"Restricted Applicable Number" on the Date of Issuance shall
equal that number of shares of Common Stock determined by multiplying five
percent (5%) by the Common Stock Deemed Outstanding on the Date of Issuance
(after giving effect to the issuance of this Warrant) (i.e., 290,278 shares of
Common Stock).
-6-
"Securities Act" means the Securities Act of 1933, as amended.
"Valuation Date" means the date of a Put Notice.
"Warrant" is defined in the first paragraph of this Warrant.
"Warrant Fraction" means a fraction, the numerator of which
shall be the number of shares of Warrant Stock issuable upon exercise of the
portion of this Warrant to be repurchased by the Company from the applicable
Registered Holder and the denominator of which shall be the total number of
shares of Common Stock Deemed Outstanding (assuming full exercise of this
Warrant).
"Warrant Stock" means the Class A Stock issuable upon exercise
of this Warrant; provided that if there is a change such that the securities
issuable upon exercise of this Warrant are issued by an entity other than the
Company or there is a change in the type or class of securities so issuable,
then the term "Warrant Stock" shall mean the securities issuable upon exercise
of this Warrant if such securities are issuable in shares, or shall mean the
smallest unit in which such securities are issuable if such securities are not
issuable in shares.
Other capitalized terms used in this Warrant but not defined
herein shall have the meanings set forth in the Purchase Agreement.
2. Exercise of Warrant.
(a) Exercise Period. Except as specifically provided in Section
2(d) below, the Registered Holders may exercise, in whole or in part, the
purchase rights represented by this Warrant at any time and from time to time
after the Date of Issuance, to and including the tenth (10th) anniversary of the
Date of Issuance (the "Exercise Period"). The Company shall give the Registered
Holders written notice of the expiration of the Exercise Period at least thirty
(30) days, but not more than ninety (90) days, prior to the end of the Exercise
Period.
(b) Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised
when the Company has received all of the following items (the "Exercise
Time"):
(A) a completed Exercise Agreement, as described
in Section 2(c) below, executed by the Registered Holder(s)
exercising all or part of the purchase rights represented by
this Warrant;
(B) this Warrant;
(C) if this Warrant is not registered in the
name of the Holder, an Assignment or Assignments in the form
set forth on Exhibit A hereto evidencing the assignment of
this Warrant to such Person, in which case the Registered
Holder(s) shall have complied with the provisions set forth
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in Section 8 hereof and shall have executed a joinder to the
Investor Rights Agreement pursuant to which the shares issued
pursuant to this Warrant shall be subject to the same terms as
the shares held by the Holder on the date hereof are subject;
(D) either (1) a check payable to the Company in
an amount equal to the product of the Exercise Price
multiplied by the number of shares of Warrant Stock being
purchased upon such exercise (the "Aggregate Exercise Price"),
(2) the surrender to the Company of debt or equity securities
of the Company or any of its Subsidiaries having a Market
Price equal to the Aggregate Exercise Price of the Warrant
Stock being purchased upon such exercise (provided that, for
purposes of this subsection, the Market Price of any note or
other debt security or any preferred stock shall be deemed to
be equal to the aggregate outstanding principal amount or
liquidation value thereof plus all accrued and unpaid interest
thereon or accrued or declared and unpaid dividends thereon),
or (3) a written notice to the Company that the Registered
Holder(s) is exercising this Warrant (or a portion thereof) by
authorizing the Company to withhold from issuance a number of
shares of Warrant Stock issuable upon such exercise of this
Warrant which, when multiplied by the Market Price of the
Warrant Stock, is equal to the Aggregate Exercise Price (and
such withheld shares shall no longer be issuable under this
Warrant); and
(E) if requested by the Company, the Registered
Holder shall confirm in writing, in a form satisfactory to the
Company, that the shares of Warrant Stock of the Company
issuable upon exercise of this Warrant are being acquired
solely for the Registered Holder's own account and not as a
nominee for any other party, for investment, and not with a
view toward distribution or resale in violation of the
Securities Act, and that the Registered Holder is an
Accredited Investor (as defined in Regulation D promulgated by
the Securities and Exchange Commission). If the Registered
Holder cannot make such representations because they would be
factually incorrect, it shall be a condition to the Registered
Holder's exercise of this Warrant that the Company receive
such other representations as the Company considers reasonably
necessary to assure the Company that the issuance of its
securities upon exercise of this Warrant shall not violate any
federal or state securities laws.
(ii) Certificates for shares of Warrant Stock purchased
upon exercise of this Warrant shall be delivered by the Company to each
Registered Holder exercising its rights under this Warrant within five
(5) Business Days after the date of the Exercise Time. If a Registered
Holder exercises less than all of the purchase rights represented by
the portion of this Warrant held by such Registered Holder, unless such
portion of this Warrant has expired, the Company shall prepare a new
Warrant, substantially identical hereto, representing the rights
formerly represented by this Warrant which have not expired or been
exercised
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and shall, within such five day period, deliver such new Warrant to the
Person designated for delivery in the Exercise Agreement.
(iii) The Warrant Stock issuable upon exercise of this
Warrant shall be deemed to have been issued to the exercising
Registered Holder(s) at the Exercise Time, and such Registered Holder
shall be deemed for all purposes to have become the record holder of
such Warrant Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Warrant
Stock shall be made without charge to the exercising Registered
Holder(s) for any issuance tax in respect thereof or other cost
incurred by the Company in connection with such exercise and the
related issuance of Warrant Stock. Each share of Warrant Stock shall,
upon payment of the Exercise Price therefor, be fully paid and
nonassessable and free from all taxes, liens, charges and encumbrances
with respect to the issuance thereof, but subject to restrictions on
transferability imposed on securities which are not registered under
the Securities Act or any state securities laws.
(v) The Company shall not close its books against the
transfer of this Warrant or of any share of Warrant Stock issued or
issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant.
(vi) The Company shall assist and cooperate with any
Registered Holder required to make any governmental filings or obtain
any governmental approvals prior to or in connection with any exercise
of this Warrant (including, without limitation, making any filings
required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in connection
with a registered public offering or the sale of the Company or any
Affiliate or Subsidiary thereof, or a transaction or a series of
transactions which, if consummated, would result in a Change of Control
of the Company or any Affiliate or Subsidiary thereof, the exercise of
any portion of this Warrant may, at the election of the Registered
Holder(s) hereof, be conditioned upon the consummation of the public
offering or the sale of the Company, in which case such exercise shall
not be deemed to be effective until the consummation of such
transaction.
(viii) The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Warrant Stock
solely for the purpose of issuance upon the exercise of this Warrant,
such number of shares of Warrant Stock issuable upon the exercise of
this Warrant. All shares of Warrant Stock shall, upon payment of the
Exercise Price therefor, when issued, be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens, charges and
encumbrances. The Company shall take all such actions as may be
necessary to assure that all such shares of Warrant Stock may be so
issued without violation of any applicable law or governmental
regulation or any requirements of any
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domestic securities exchange upon which shares of Warrant Stock may be
listed (except for official notice of issuance which shall be
immediately delivered by the Company upon each such issuance). The
Company shall from time to time take all such actions as may be
necessary to assure that the par value of the unissued shares of
Warrant Stock issuable upon exercise of this Warrant is at all times
equal to or less than the Exercise Price. The Company shall not take
any action which would cause the number of authorized but unissued
shares of Warrant Stock to be less than the number of such shares
required to be reserved hereunder for issuance upon exercise of this
Warrant.
(c) Exercise Agreement. Upon any exercise of this Warrant, the
Exercise Agreement shall be substantially in the form set forth in Exhibit B
hereto, except that if the shares of Warrant Stock are not to be issued in the
name of the Person in whose name this Warrant is registered, the Exercise
Agreement shall also state the name of the Person to whom the certificates for
the shares of Warrant Stock are to be issued, and if the number of shares of
Warrant Stock to be issued does not include all the shares of Warrant Stock
purchasable hereunder, it shall also state the name of the Person to whom a new
Warrant for the unexercised portion of the rights hereunder is to be delivered.
Such Exercise Agreement shall be dated the actual date of execution thereof.
(d) Exercise Restriction. In order to give effect to the possible
reduction in the Applicable Number pursuant to the adjustments set forth in
subsection (a) or subsection (b) of such definition, the Holder agrees that,
prior to the earlier to occur of (i) a Change of Control or Organic Change and
(b) the fifth (5th) anniversary of the Date of Issuance, the Holder shall only
have the right to exercise this Warrant for the Restricted Applicable Number.
3. Certain Adjustments. In order to prevent dilution of the rights granted
under this Warrant (except as otherwise set forth in the definition of
Applicable Number), the Exercise Price shall be subject to adjustment from time
to time as provided in this Section 3, and the number of shares of Warrant Stock
(including, for the avoidance of doubt, the Applicable Number and the Restricted
Applicable Number) issuable upon exercise of this Warrant shall be subject to
adjustment from time to time as provided in this Section 3.
(a) Adjustment of Exercise Price and Number of Shares.
(i) If and whenever on or after the Date of Issuance the
Company issues or sells, or in accordance with Section 3(b) hereof is
deemed to have issued or sold, any shares of Common Stock below the Put
Price per share of such Common Stock determined as of the date of such
issuance or sale, then the Exercise Price shall be adjusted to an
amount equal to (A) the Exercise Price in effect immediately prior to
such issuance or sale multiplied by (B) a fraction, the numerator of
which shall be the sum of (1) the number of shares of Common Stock
Deemed Outstanding immediately prior to such issuance or sale
multiplied by the Put Price of the Warrant Stock determined as of the
date of such issuance or sale without giving effect to such issuance or
sale, plus (2) the consideration, if
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any, received by the Company upon such issuance or sale, and the
denominator of which will be the product derived by multiplying the Put
Price of the Warrant Stock determined as of the date of such issuance
or sale without giving effect to such issuance or sale, by the number
of shares of Common Stock Deemed Outstanding immediately after such
issuance or sale.
(ii) Upon each such adjustment of the Exercise Price
hereunder, the number of shares of Warrant Stock issuable upon exercise
of this Warrant shall be adjusted to the number of shares determined by
multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Warrant Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
(iii) Notwithstanding the foregoing, there shall be no
adjustment to the Exercise Price or the number of shares of Warrant
Stock issuable upon exercise of this Warrant with respect to (a) the
issuance of Warrant Stock upon exercise of this Warrant, (b) the
issuance of any new warrants in connection with this Warrant, or (c)
the issuance of any other warrants pursuant to the Purchase Agreement
or the issuance of Common Stock upon the exercise of such warrants.
(iv) In addition, there shall be no adjustment to the
Exercise Price upon the issuance of Options under the Option Plans,
after the Date of Issuance, exercisable for up to 336,981 shares of
Class A Stock, at an exercise price per share equal to the Market Price
on the grant date, or the issuance of shares of Common Stock upon the
exercise of such Options; provided, however, that if such Options are
issued at an exercise price per share below such Market Price, the
Exercise Price shall adjust pursuant to Section 3(a)(i) hereof as if
such Options were issued below the Put Price as provided in Section
3(b)(i).
(v) If, at any time after the Date of Issuance, the
Company issues any Options under the Option Plans, such additional
Options shall be deemed to be included in "Common Stock Deemed
Outstanding on the Date of Issuance" for purposes of calculating the
Applicable Number (and the Restricted Applicable Number), and the
number of shares of Warrant Stock issuable upon exercise of this
Warrant shall be increased proportionally based upon the number of
Options so issued.
(b) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 3(a) hereof, the following
shall be applicable:
(i) Issuance of Rights or Options. If the Company in any
manner grants or sells any Options and the lowest price per share for
which any one share of Common Stock is issuable upon the exercise of
any such Option, or upon conversion or exchange of any Convertible
Securities issuable upon exercise of such Option, is less than the Put
Price per share determined as of such time, then such share of Common
Stock shall be deemed to have been issued and sold by the
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Company at such time for such price per share. For purposes of this
Section 3(b)(i) hereof, the "lowest price per share for which any one
share of Common Stock is issuable" shall be determined by dividing (1)
the sum of the lowest amounts of consideration (if any) received or
receivable by the Company upon (A) the granting or sale of the Option,
(B) exercise of the Option and (C) conversion or exchange of the Option
or such aforesaid Convertible Securities, by (2) the total maximum
number of shares of Common Stock issuable upon the conversion or
exchange of the Option and the aforesaid Convertible Securities. No
further adjustment of the Exercise Price shall be made upon the actual
issuance of such Common Stock or Convertible Securities, upon the
exercise of such Options or upon the actual issuance of Common Stock
upon conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in
any manner issues or sells any Convertible Securities and the lowest
price per share for which any one share of Common Stock is issuable
upon conversion or exchange thereof is less than the Put Price per
share determined as of such time, then the maximum number of shares of
Common Stock issuable upon conversion or exchange of such Convertible
Securities shall be deemed to be outstanding and to have been issued
and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of
this Section 3(b)(ii) hereof, the "lowest price per share for which any
one share of Common Stock is issuable" shall be determined by dividing
(1) the sum of (A) the amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities,
plus (B) the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof, by
(2) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities. No
further adjustment of the Exercise Price shall be made upon the actual
issuance of such Common Stock upon conversion or exchange of such
Convertible Securities, and if any such issuance or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustments of the Exercise Price had been or are to be made pursuant
to Section 3(b)(i) hereof, no further adjustment of the Exercise Price
shall be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issuance, conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock changes at any time, the Exercise Price in effect at the time of
such change shall be adjusted immediately to the Exercise Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold (but in no event
shall the Exercise Price after any such adjustments exceed the Exercise
Price on the Date of Issuance) and the number of shares of Warrant
Stock shall be correspondingly adjusted.
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(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Securities without the exercise of such Option or right, the Exercise
Price then in effect and the number of shares of Warrant Stock issuable
upon exercise of this Warrant shall be adjusted to the Exercise Price
and the number of shares which would have been in effect at the time of
such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
(v) Calculation of Consideration Received. If any Warrant
Stock, Options or Convertible Securities are issued or sold or deemed
to have been issued or sold for cash, the consideration received
therefor shall be deemed to be the net amount received by the Company
therefor. In case any Warrant Stock, Options or Convertible Securities
are issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Company shall be the
fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration
received by the Company shall be the Market Price thereof as of the
date of receipt. In case any Warrant Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving
entity, the amount of consideration therefor shall be deemed to be the
fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Warrant Stock, Options
or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities shall be determined by an
investment banking firm reasonably acceptable to the Company and the
Registered Holders, which firm shall submit to the Company and the
Registered Holders a written report setting forth such determination.
If the parties are unable to agree on an investment banking firm within
fifteen (15) days after delivery of the issuance of the applicable
securities, a third firm will be selected by agreement of two
investment banking firms, one selected by the Company and one selected
by the Registered Holders. The expenses of such firm shall be borne by
the Company, and the determination of such firm as to the fair value of
such consideration shall be final and binding upon all parties.
(vi) Integrated Transactions. In case any Option or
Convertible Security is issued in connection with the issue or sale of
other securities of the Company, together compromising one integrated
transaction in which no specific consideration is allocated to such
Option or Convertible Security by the parties thereto, the Option or
Convertible Security shall be deemed to have been issued for a
consideration of $.01.
(vii) Treasury Shares. The number of shares of Warrant
Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company or any Subsidiary, and the
disposition of any shares so owned or held shall be considered an
issuance or sale of Common Stock.
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(c) Subdivision or Combination of Common Stock. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be proportionately increased.
If the Company at any time combines (by reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased and the number of shares of Warrant Stock issuable
upon exercise of this Warrant shall be proportionately decreased.
(d) Consolidation, Merger or Sale. Any recapitalization,
reorganization, reclassification, consolidation, merger or sale of all or
substantially all of the Company's assets or other transaction, in each case
which is effected in such a way that the holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock, is referred to herein as
an "Organic Change." Prior to the consummation of any Organic Change, the
Company shall make appropriate provision to ensure that the Registered Holders
of this Warrant shall thereafter have the right to acquire and receive, in lieu
of or addition to (as the case may be) the shares of Warrant Stock immediately
theretofore acquirable and receivable upon the exercise of this Warrant, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for the number of shares of Warrant Stock immediately
theretofore acquirable and receivable upon exercise of this Warrant had such
Organic Change not taken place. In any such case, the Company shall make
appropriate provision (in form and substance reasonably satisfactory to the
Registered Holders) with respect to such holders' rights and interests under
this Warrant to insure that all of the provisions of this Warrant shall
thereafter continue to be applicable to such holders (including, in the case of
any such Organic Change in which the successor entity or purchasing entity is
other than the Company and in which the value for the Warrant Stock reflected by
the terms of such Organic Change is less than the Exercise Price in effect
immediately prior to such Organic Change, an immediate adjustment of the
Exercise Price to the value for the Warrant Stock reflected by the terms of such
Organic Change, and a corresponding immediate adjustment in the number of shares
of Warrant Stock acquirable and receivable upon exercise of this Warrant). The
Company shall not effect any Organic Change unless, prior to the consummation
thereof, the successor entity (if other than the Company) resulting from
consolidation or merger or the entity purchasing such assets assumes by written
instrument (in form and substance reasonably satisfactory to the Registered
Holders), the obligation to deliver to each such Registered Holder such shares
of stock, securities or assets as, in accordance with the foregoing provisions,
such Registered Holder may be entitled to acquire.
(e) Certain Events. If any event occurs of the type contemplated
by the provisions of this Section 3 hereof but not expressly provided for by
such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's board of directors shall make an appropriate adjustment to
the Exercise Price and the number of shares of Warrant Stock issuable upon
exercise of this Warrant so as to protect the rights of the
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Registered Holders of this Warrant; provided that no such adjustment shall
increase the Exercise Price or decrease the number of shares of Warrant Stock
issuable upon exercise of this Warrant as otherwise determined pursuant to this
Section 3 hereof.
(f) No Avoidance. In the event the Company shall enter into any
transaction for the purpose of avoiding the provisions of this Section 3 hereof,
the benefits provided by such provisions shall nevertheless apply and be
preserved.
(g) Notices.
(i) Promptly upon any adjustment of the Exercise Price
and/or the number of shares of Warrant Stock issuable upon exercise of
this Warrant, the Company shall give written notice thereof to the
Registered Holders, setting forth in reasonable detail and certifying
the calculation of such adjustment.
(ii) The Company shall give written notice to the
Registered Holder at least ten (10) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Warrant Stock, (B) with respect to
any pro rata subscription offer to holders of Warrant Stock or (C) for
determining rights to vote with respect to any Organic Change, Change
of Control, dissolution or liquidation.
(iii) The Company shall also give written notice to the
Registered Holder at least twenty (20) days prior to the date on which
any Organic Change, Change of Control, dissolution or liquidation shall
take place. Failure to give such notice or any defect therein or in the
mailing thereof shall not affect the validity of any action taken in
connection with such Organic Change, Change of Control, dissolution or
liquidation.
4. Dividends. If the Company declares or pays a dividend upon the Warrant
Stock payable (a) in cash out of earnings or earned surplus (determined in
accordance with GAAP) (a "Cash Dividend") or (b) other than in cash out of
earnings or earned surplus (determined in accordance with GAAP) except for a
stock dividend payable in shares of Warrant Stock (a "Liquidating Dividend"),
then the Company shall pay to the Registered Holder of this Warrant at the time
of payment thereof the Liquidating Dividend or Cash Dividend, as the case may
be, which would have been paid to such Registered Holder had this Warrant been
fully exercised immediately prior to the date on which a record is taken for
such Liquidating Dividend or Cash Dividend, as the case may be, or, if no record
is taken, the date as of which the record holders of Warrant Stock entitled to
such dividends are to be determined.
5. Purchase Rights. If at any time the Company grants, issues or sells to
any Person any Options, Convertible Securities or other rights to purchase
stock, warrants, securities or other property of the Company (the "Purchase
Rights"), then the Registered Holders of this Warrant (or any Person designated
by the Registered Holders) shall be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which the
Registered Holders could have acquired if they had held the number of
-15-
shares of Warrant Stock issuable upon complete exercise of this Warrant
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Warrant Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
6. Put Arrangements.
(a) Upon the occurrence of any Put Event and at any time
thereafter, any Registered Holder shall have the right to require the Company to
repurchase all or a portion of both this Warrant held by such Registered Holder
(the value of which shall be determined with respect to the value of the shares
of Warrant Stock issuable upon exercise of this Warrant, in accordance with this
Section 6) and the shares of Warrant Stock held by such Registered Holder at the
Put Price (the foregoing being referred to herein as the "Put"), by delivering a
written notice to the Company specifying the portion of this Warrant and the
number of shares of Warrant Stock to be purchased (the "Put Notice"). Upon the
delivery of the Put Notice, the Company and the Holder shall in good faith
promptly determine the Put Price as provided hereunder. Within five (5) days
after receipt of a Put Notice from any Registered Holder, the Company shall
notify in writing all other Registered Holders that the Put has been exercised,
and each other Registered Holder shall have the right, exercisable by written
notice delivered to the Company within ten (10) days after receipt of such
written notice from the Company, to request that all or a portion of this
Warrant held by such other Registered Holder's and/or shares of Warrant Stock
held by such other Registered Holders be included in the exercise of the Put
together with the portion of this Warrant and shares of Warrant Stock of the
Registered Holder(s) who delivered the Put Notice. The right to exercise the Put
shall also inure to the benefit of all transferees of the Registered Holders.
(b) Upon exercise of the Put, the Company will be obligated to
purchase all or such portion of this Warrant and/or shares of Warrant Stock
requested to be repurchased (collectively, the "Put Shares") at the Put Price in
cash at a mutually agreeable time and place which will in no event be later than
the ten (10) Business Days after the date as of which the Put Price has been
determined (the "Put Closing"). Promptly upon determination of the Put Price,
the Company will notify all Registered Holders of the portion of this Warrant
and/or shares of Warrant Stock thereof that are subject to the Put, as well as
the time and place of the Put Closing (the "Closing Notice"). Each Registered
Holder exercising its Put rights hereunder may deliver to the Company all or any
portion of this Warrant held by such Registered Holder in satisfaction of the
sale of such Registered Holder's shares of Warrant Stock hereunder, in which
event the Put Price will be reduced by the Exercise Price of the portion of this
Warrant so delivered.
(c) At the Put Closing, each exercising Registered Holder shall
deliver to the Company certificates representing the Put Shares held by such
Registered Holder or the portion of this Warrant held by such Registered Holder,
as applicable, and the Company shall deliver to such holder the Put Price
therefor in cash (subject to any adjustment pursuant to the last sentence of
Section 6(b) hereof) payable with respect thereto by wire transfer to each such
Registered Holder. The Company will, and will cause each of its Subsidiaries to,
undertake diligent efforts during the thirty (30) day period immediately
-16-
following the delivery date of the Put Notice to finance the payment of the Put
Price for all of the Put Shares in accordance with this Section 6 hereof so that
the Put Price for all of the Put Shares may be paid in full in cash at the Put
Closing. Such diligent efforts ("Diligent Efforts") shall include, but not be
limited to, pursuing private or public offerings of equity or debt securities,
restructuring of the Company's or any Subsidiary's debt and other
recapitalization. In the event that, notwithstanding such Diligent Efforts, the
Company is unable for any reason to purchase all of the Put Shares at the Put
Closing in cash, the Company shall at the Put Closing (i) pay in cash those
funds which are legally available to redeem the maximum possible number of Put
Shares ratably among the Registered Holders of such Put Shares based upon the
respective portion of the Put Price then owed to each such Registered Holder and
(ii) pay the portion of the Put Price which it is not able to pay in cash (the
"Deferred Put Obligation") by issuing to the holders of Put Shares promissory
notes in the form of Exhibit C attached hereto and made a part hereof (the "Put
Notes"). The Put Notes shall accrue interest at an annual rate equal to sixteen
percent (16%) per annum. Interest on the Put Notes shall be payable quarterly in
arrears based on a 360 day year and actual number of days elapsed in any year.
The Deferred Put Obligation, together with all accrued and unpaid interest
thereon, shall be payable in full on or before the second (2nd) anniversary of
the Put Closing. During the thirty (30) day period prior to the first (1st) and
second (2nd) anniversaries of the date of issuance of the Put Notes, the Company
will, and will cause each of its Subsidiaries to, undertake Diligent Efforts to
arrange debt and/or equity financing in order to retire the Put Notes for cash
and will provide to the Registered Holders any information regarding the
Company's efforts to obtain such financing as is reasonably requested by the
Registered Holders. Notwithstanding anything to the contrary contained herein,
the Company shall not be permitted to defer payment of the Put Price for all of
the Put Shares if the Put is exercised in connection with a Change of Control or
Organic Change and, accordingly, the Company shall, at the closing of such
Change of Control or Organic Change, pay the entire amount of the Put Price in
cash.
(d) If the Company fails to satisfy its obligations pursuant to
the Put, each Registered Holder may pursue the Company in connection with any
rights and remedies such Registered Holder may have at law or in equity. Each
Registered Holder may also, at its election, at any time rescind the Put and the
Put Notice if (i) the Company fails to satisfy its obligations pursuant to the
Put to pay the Put Price in cash, (ii) the Company fails for any reason to
consummate a Change of Control, or (iii) the Registered Holder determines that
the Put Price is unacceptable. In the event the Put and the Put Notice are
rescinded pursuant to clause (i) or (ii) of this Section 6(d), the Company shall
pay the expenses of any appraiser used in determining the Put Price. In the
event the Put and the Put Notice are rescinded pursuant to clause (iii) of this
Section 6(d), the rescinding Registered Holders (severally based on the number
of shares of Warrant Stock held or deemed to be held by such Registered Holders)
shall pay the expenses of any appraiser used in determining the Put Price.
7. Limitations of Liability. No provision hereof, in the absence of
affirmative action by the Registered Holders to purchase Warrant Stock, and no
enumeration herein of the rights and privileges of the Registered Holders, shall
give rise to any liability of such
-17-
holders for the payment of the Exercise Price of the Warrant Stock issuable
hereunder or as stockholders of the Company.
8. Warrant Transferable. Subject to the transfer conditions referred to in
the legend endorsed hereon, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the Registered Holders,
upon surrender of this Warrant with a properly executed Assignment (in the form
of Exhibit A attached hereto) at the principal office of the Company.
9. Holder's Acknowledgements. By accepting this Warrant, the Holder
agrees, acknowledges and understands that:
(i) Neither this Warrant nor the shares of Warrant Stock
purchasable hereunder (the "Securities") have been registered under the
Securities Act and, therefore, the Holder bears the economic risk of
the investment indefinitely because the Securities may not be sold
unless subsequently registered under the Act or an exemption from such
registration is available; except as otherwise provided in the Investor
Rights Agreement, the Company has not represented or covenanted to take
any action necessary to make available any registration or any
exemption for sale of the Securities without registration.
(ii) The Securities have not been registered under the
securities laws of any state and the offering of the Securities has not
been reviewed for accuracy or completeness by any state securities
commissioner or agency. The Holder agrees that a legend to the
foregoing effect may be placed upon any and all certificates and other
documents issued to the Holder representing such Securities.
(iii) The Company may place a stop-transfer order or
otherwise make appropriate notations in the records of the Company to
enforce the restrictions described above.
(iv) The Holder is acquiring the Securities for its own
account, solely for investment, and not with a view to resale or
distribution.
10. Warrant Exchangeable for Different Denominations. Any portion of this
Warrant is exchangeable, upon the surrender thereof properly endorsed by the
Registered Holder thereof at the principal office of the Company with
appropriate instructions in writing, for a new warrant of like tenor
representing in the aggregate the purchase rights hereunder, and each of such
new warrants shall represent such portion of such rights as is designated by
such Registered Holder at the time of such surrender. The Date of Issuance of
this Warrant shall be deemed to be the Date of Issuance of any new warrant
regardless of the number of times new certificates representing the unexpired
and unexercised rights formerly represented by this Warrant shall be issued.
11. Replacement. Upon receipt of evidence reasonably satisfactory to the
Company (an affidavit of the Registered Holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant or any portion thereof, and in the case of any such
loss, theft or destruction, upon receipt of indemnity or
-18-
bond reasonably satisfactory to the Company (provided that if such holder is a
financial institution or other institutional investor, its own agreement shall
be satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Company shall (at its expense) execute and deliver, in lieu of
such certificate, a new certificate of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
12. Notices. Except as otherwise expressly provided herein, all notices
referred to in this Warrant shall be in writing and shall be delivered
personally, sent by reputable overnight courier service (charges prepaid) or
sent by registered or certified mail, return receipt requested, postage prepaid
and shall be deemed to have been given when so delivered, sent or deposited in
the U.S. Mail (a) to the Company, at its principal executive offices and (b) to
a Registered Holder of this Warrant, at such Registered Holder's address as it
appears in the records of the Company (unless otherwise indicated by any such
holder).
13. Amendment and Waiver. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the prior written consent of the Majority
Warrant Holders.
14. Descriptive Headings. The descriptive headings of the several Sections
and subsections of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
15. Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by the internal
laws of the State of Illinois, after giving effect to any choice of law or
conflict of law provision or rule that would cause the application of the laws
of any jurisdictions other than the State of Illinois.
16. Affiliate or Subsidiary Transaction. The Company acknowledges and
agrees that, in the event that an Affiliate or Subsidiary of the Company shall
be the subject of (a) a Change of Control or (b) an Organic Change, then the
Registered Holders shall have the right to elect to receive, or be entitled to
receive, as a result of the consummation of such transaction, the cash or
securities to be received by equity holders of such entity, or to participate in
such transaction, as if this Warrant were exercisable by the Registered Holders
for their pro rata portion of the capital stock or other equity of such entity
immediately prior to the consummation of such transaction.
[SIGNATURE PAGE FOLLOWS]
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SIGNATURE PAGE TO STOCK PURCHASE WARRANT
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by a duly authorized officer and to be dated as of the date first above
written.
▇▇▇▇▇▇ INDUSTRIAL GROUP, INC.
By: ___________________________
Name: _________________________
Title: ________________________
EXHIBIT A
ASSIGNMENT
FOR VALUE RECEIVED, [______________________________] hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant
(Certificate No. W-[_____]) with respect to the number of shares of the Warrant
Stock covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
Dated: Signature ____________________________
____________________________
Witness ____________________________
EXHIBIT B
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. W-[______]), hereby agrees to subscribe for
the purchase of [_________] shares of the Warrant Stock covered by such Warrant
and makes payment herewith in full therefor at the price per share provided by
such Warrant.
Signature ______________________________
Address ______________________________
EXHIBIT C
Form of Put Note