EXHIBIT 10.39
NEITHER THIS NOTE NOR ANY SECURITIES WHICH MAY BE ISSUED UPON THE EXERCISE OF
THE WARRANTS HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR OTHERWISE QUALIFIED UNDER ANY STATE SECURITIES LAW.
NEITHER THIS NOTE NOR ANY SUCH SECURITIES MAY BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND REGISTRATION
OR OTHER QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR OTHER
QUALIFICATION IS NOT REQUIRED.
THIS NOTE IS SUBJECT TO THE TERMS OF THE SUBORDINATION AGREEMENT (AS DEFINED
HEREIN IN SECTION 8) IN FAVOR OF PNC BANK, NATIONAL ASSOCIATION, AS AGENT FOR
CERTAIN BANKS. NOTWITHSTANDING ANY CONTRARY STATEMENT CONTAINED IN THE WITHIN
INSTRUMENT, NO PAYMENT ON ACCOUNT OF ANY OBLIGATION ARISING FROM OR IN
CONNECTION WITH THE WITHIN INSTRUMENT OR ANY RELATED AGREEMENT (WHETHER OF
PRINCIPAL, INTEREST OR OTHERWISE) SHALL BE MADE, PAID, RECEIVED OR ACCEPTED
EXCEPT IN ACCORDANCE WITH THE TERMS OF THE SUBORDINATION AGREEMENT.
CECO Environmental Corp.
REPLACEMENT
PROMISSORY NOTE
$500,000 March 12, 2001
WHEREAS, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") has prior to this date advanced
$500,000 (the "Advance") to CECO Environmental Corp.
WHEREAS, the terms of the Advance are set forth in a Promissory Note
dated December 7, 1999, (the "Original Note"), which Original Note shall be
cancelled and replaced by this Replacement Promissory Note.
FOR VALUE RECEIVED, the undersigned, CECO Environmental Corp. (the
"Company"), a New York corporation, hereby promises to pay to the order of
Sandler or registered assigns ("Holder"), the principal sum of FIVE HUNDRED
THOUSAND DOLLARS ($500,000) on the Maturity Date, as defined in Section 1 below.
This Note is part of a series of Notes of like tenor and effect to this Note in
the aggregate principal amount of $5,000,000 issued in connection with a
financing by the Company (the "1999 Subordinated Notes").
1. Maturity. This Note shall be due and payable upon the earlier to
occur of the following events (the "Maturity Date"): (i) six and one-half (6
1/2) years from the December 7, 1999; (ii) six (6) months after repayment of the
Superior Debt (as defined in Section 8 below); or (iii) the closing (any such
closing referred to as the "Closing") of a Sale Transaction. For purposes of
this Note, a Sale Transaction shall mean (i) a merger, consolidation, corporate
reorganization, or sale of shares of stock of the Company as a result of which
there is a change in control and/or the shareholders of the Company on the date
hereof ("Current Shareholders") own 50% or less of the outstanding shares of the
Company on a fully-diluted basis immediately after the transaction and,
including as outstanding for purposes of such calculation, any warrants, options
or other instruments convertible or exchangeable into equity securities of the
Company issued to persons other than the Current Shareholders in connection with
the transaction or (ii) the sale of (A) fifty percent or more of the assets of
the Company or (B) any subsidiary, division or line of business of the Company
for total consideration in excess of $5 million.
2. Interest. Interest shall accrue on the unpaid principal balance
hereof and on any interest payment that is not made when due at the simple
compounded rate of twelve percent (12%) per annum from the date hereof. Accrued
Interest shall be due and payable on June 30 and December 31 of each year
commencing June 30, 2000 and on the Maturity Date. Notwithstanding the
foregoing, interest due under this Note on June 30, 2000 and December 31, 2000,
will be paid in accordance with the terms of the Subordination Agreement. It
shall not be a default hereunder and interest will not accrue on any portion of
such interest payments deferred pursuant to the Subordination Agreement
("Deferred Interest") so long as the Deferred Interest is paid at the time and
in the manner allowed by the Subordination Agreement. In the Event of Default
(as defined herein), interest shall accrue on all unpaid amounts due hereunder
including without limitation, interest, at the rate of fifteen percent (15%) per
annum. If a judgment is entered against the Company on this Note, the amount of
the judgment so entered shall bear interest at the highest rate authorized by
law as of the date of the entry of the judgment.
3. Payments. Payments of both principal and interest shall be made at
the principal executive office of the Company, or such other place as the holder
hereof shall designate to the Company in writing, in lawful money of the United
States of America.
So long as no Event of Default has occurred in this Note, all
payments hereunder shall first be applied to interest, then to principal. Upon
the occurrence of an Event of Default in this Note, all payments hereunder shall
first be applied to costs pursuant to Section 13.5, then to interest and the
remainder to principal.
4. Registration, Transfer and Exchange of Notes. The Company will keep
at its principal office a register in which it will provide for the registration
of and transfer of this Note, at its own expense (excluding transfer taxes). If
any Note is surrendered at said office or at the place of payment named in the
Note for registration of transfer or exchange (accompanied in the case of
registration of transfer or exchange by a written instrument of transfer in form
satisfactory to the Company duly executed by or on behalf of the holder), the
Company, at its expense, will deliver in exchange one or more new Notes in
denominations of $10,000 or larger multiples of $1,000, as requested by the
holder for the aggregate unpaid principal amount. Any Note or Notes issued in a
transfer or exchange shall carry the same rights to increase Notes surrendered.
The Holder agrees that prior to making any sale, transfer, pledge, assignment,
hypothecation, or other disposition (each, a "Transfer") of the Note, the Holder
shall give written notice to the Company describing the manner in which any such
proposed Transfer is to be made and providing such additional information and
documentation regarding the Transfer as the Company reasonably requests. If the
Company so requests, the Holder shall at his expense provide the Company with an
opinion of counsel (which counsel must be reasonably satisfactory to the
Company, to the holder, in form and substance satisfactory to the Company) that
the proposed Transfer complies with applicable federal and state securities
laws. The Company shall have no obligation to Transfer any Notes unless the
holder thereof has complied with the foregoing provisions, and any such
attempted Transfer shall be null and void.
5. Registered Owner. Prior to due presentation for registration of
transfer, the Company may treat the person in whose name any Note is registered
as the owner and holder of such Note for the purpose of receiving payment of
principal of, and interest on, such Note and for all other purposes.
6. Conversion.
a. Conversion Procedure.
(1) At any time and from time to time, the Company may elect
to convert all or any portion of the unpaid principal balance on any
1999 Subordinated Note into the number of shares of common stock of
the Company, $0.01 par value per share ("Common Stock") computed by
multiplying the unpaid principal balance to be converted times $1.00
per share and dividing the result by the 1999 Subordinated Note
Conversion Price determined pursuant to Section 6.b. The Company
shall pay to the holder of each 1999 Subordinated Note so converted,
all accrued and unpaid interest in cash or, at the Company's option,
in Common Stock valued at Fair Market Value, at the time of
conversion with respect to such 1999 Subordinated Note so converted
with no further interest accruing or payable on the converted
portion of the 1999 Subordinated Note.
(2) Each conversion of all or any portion of a 1999
Subordinated Note will be deemed to have been effected as of the
close of business on the date on which the Company gives written
notice to a holder of such 1999 Subordinated Note that the Company
shall convert all or part of such 1999 Subordinated Note. At such
time as such conversion has been effected, the rights of the holder
of such 1999 Subordinated Note as provided hereunder with respect to
the portion of the 1999 Subordinated Note to be converted will
cease, and the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock are to be
issued upon such conversion will be deemed to have become the holder
or holders of record of the shares of Common Stock represented
thereby.
(3) As soon as possible after a conversion has been effected
and in no event later than twenty (20) business days thereafter, the
Company will deliver to the converting holder:
(a) a certificate or certificates representing the number
of shares of Common Stock issuable by reason of such conversion in
such name or names and such denomination or denominations as the
holder of the converted 1999 Subordinated Note has specified;
(b) payment of all accrued and unpaid interest on such
converted portion of the 1999 Subordinated Note;
(c) the amount payable under Subsection 6.a.(6) below with
respect to such conversion; and
(d) if applicable, a replacement 1999 Subordinated Note
representing any portion of the 1999 Subordinated Note which was not
converted.
(4) The issuance of certificates for shares of Common Stock
upon conversion of a 1999 Subordinated Note will be made without
charge to the holders of such 1999 Subordinated Note for any
issuance tax in respect thereof or other cost incurred by the
Company in connection with such conversion and the related issuance
of shares of Common Stock. Upon conversion of all or any portion of
a 1999 Subordinated Note, the Company will take all such actions as
are necessary in order to insure that the Common Stock issued as a
result of such conversion is validly issued, fully paid and
nonassessable.
(5) The Company will not close its books against the transfer
of Common Stock issued or issuable upon conversion of the 1999
Subordinated Notes in any manner which interferes with the timely
conversion of the 1999 Subordinated Notes.
(6) If any fractional interest in a share of Common Stock
would, except for the provisions of this Subsection 6.a.(6), be
deliverable upon any conversion of any 1999 Subordinated Note, the
Company, in lieu of delivering the fractional share therefor, shall
pay an amount to the holder thereof equal to the Fair Market Value
of such fractional interest as of the date of conversion.
(7) Any 1999 Subordinated Notes which are converted shall be
canceled and will not be reissued or otherwise transferred.
(8) The Company will take such corporate action as may be
necessary from time to time so that at all times it will have
authorized, and reserved out of its authorized but unissued Common
Stock for the sole purpose of issuance upon conversion the 1999
Subordinated Notes, a sufficient number of shares of Common Stock to
permit the conversion in full of the sum of the aggregate unpaid
principal balances and accrued but unpaid interest due on all 1999
Subordinated Notes.
(9) For purposes of this Section 6, "Fair Market Value" means
the average of the last reported sales price of the Common Stock on
the Nasdaq Stock Market or on any national or regional securities
exchange on which the Common Stock is listed or admitted to unlisted
trading privileges and on which the Common Stock is principally
traded or quoted, as reported for each of the 10 consecutive trading
days ending on the 10th trading date prior to any dividend payment
date; or if there is no public market for the Common Stock of the
Company, the Fair Market Value shall be calculated based on the
price paid per share of Common Stock or the valuation of the Company
in the Company's most recent equity financing transaction with a
third party, or, if in the judgment of the Board of Directors of the
Company, the fair market value is materially different from that
reflected by such valuation, then the Fair Market Value shall be
determined by the Board of Directors in good faith.
b. Adjustments to 1999 Subordinated Notes Conversion Price.
(1) In order to prevent dilution of the interests of the
holders of the 1999 Subordinated Notes as a result of the conversion
right granted to the Company under this subsection 6, the 1999
Subordinated Note Conversion Price will be subject to adjustment
from time to time pursuant to this Section 6.b. The term "1999
Subordinated Note Conversion Price" initially means $2.00, as
subsequently adjusted as provided below.
(2) If the Company issues or sells, or in accordance with Section
6.c. is deemed to have issued or sold, any shares of its Common
Stock (except as set forth in Section 6.c.(9)) without consideration
or for a consideration per share less than the 1999 Subordinated
Note Conversion Price in effect immediately prior to the time of
such issuance or sale, then upon such issuance or sale the 1999
Subordinated Note Conversion Price will be reduced to the conversion
price determined by dividing (a) the sum of (1) the product derived
by multiplying the 1999 Subordinated Conversion Price in effect
immediately prior to such issuance or sale times the number of
fully-diluted shares of Common Stock outstanding immediately prior
to such issuance or sale, and (2) the consideration, if any,
received by the Company upon such issuance or sale, by (b) the
number of shares of fully-diluted Common Stock outstanding
immediately prior to such issuance or sale plus the number of shares
of Common Stock issued or deemed to have been issued in such sale
pursuant to this Section 6.
c. Effect on 1999 Subordinated Note Conversion Prices of Certain
Events.
(1) For purposes of determining the adjusted 1999 Subordinated
Note Conversion Prices under Section 6.b., the following will be
applicable:
(a) Issuance of Rights or Options. If the Company grants,
issues or sells Options to acquire Common Stock or Convertible
Securities and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or
exchange of any Convertible Securities issuable upon the exercise of
such Options is less than the 1999 Subordinated Note Conversion
Price in effect immediately prior to the time of the granting,
issuance or sale of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options
shall be deemed to be outstanding and to have been issued and sold
by the Company at the time of the granting of such Options for such
price per share. For purposes of this Section, the "price per share
for which Common Stock is issuable" shall be determined by dividing
(A) the sum of (i) the amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus (ii)
the minimum aggregate amount of additional consideration payable to
the Company upon exercise of all such Options, plus (iii) in the
case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (B) the total
maximum number of shares of Common Stock issuable upon the exercise
of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options.
No further adjustment of the 1999 Subordinated Note Conversion Price
shall be made when Convertible Securities are actually issued upon
the exercise of such Options or when Common Stock is actually issued
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.
(b) Issuance of Convertible Securities. If the Company in
any manner issues or sells any Convertible Securities and the price
per share for which Common Stock is issuable upon such conversion or
exchange thereof is less than the 1999 Subordinated Note Conversion
Price in effect immediately prior to the time of such issue or sale,
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, the "price per share for which Common Stock" shall be
determined by dividing (A) the sum of (i) the amount received or
receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus (ii) the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (B) 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 1999
Subordinated Note Conversion Price shall be made when Common Stock
is actually issued upon the conversion or exchange of such
Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for
which adjustments of the 1999 Subordinated Note Conversion Price had
been or are to be made pursuant to other provisions of this Section
6, no further adjustment of the 1999 Subordinated Note Conversion
Price shall be made by reason of such issue or sale.
(c) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for
Common Stock change at any time, the 1999 Subordinated Note
Conversion Price in effect at the time of such change shall be
readjusted to the 1999 Subordinated Note Conversion Price which
would have been in effect at such time had such Options or
Convertible Securities originally 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.
(2) For purposes of determining the adjusted 1999 Subordinated
Note Conversion Price under Subsection 6.b.(2) and (3), the
following will be applicable:
(a) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration
received therefor will be deemed to be the gross amount received by
the Company therefor after deducting any discounts or commissions
paid or incurred by the Company in connection with the issuance and
sale. In case any Common 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 will be
the Fair Market Value thereof as of the date of receipt. If any
Common Stock, Options or Convertible Securities are issued in
connection with any merger in which the Company is the surviving
Company, the amount of consideration therefor will be deemed to be
the Fair Market Value of such portion of the net assets and business
of the non-surviving Company as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be.
(b) Integrated Transactions. In case any Options are
issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which
no specific consideration is allocated to such Options by the
parties thereto, the Options will be deemed to have been issued for
a consideration of $0.01 each.
(c) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held
by or for the account of the Company, and the disposition of any
shares so owned or held will be considered an issue or sale of
Common Stock.
(d) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock,
Options or Convertible Securities or (ii) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date will be deemed to be the date of the issue or sale of
the shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(3) Subdivision or Combination of Common Stock. If the Company
at any time subdivides one or more classes of its outstanding shares
of Common Stock into a greater number of shares, the 1999
Subordinated Note Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced, and if the Company
at any time combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common
Stock into a smaller number of shares, the 1999 Subordinated Note
Conversion Price in effect immediately prior to such combination
will be proportionately increased.
(4) Stock Dividends. In the event of any stock dividend or
other distribution payable in shares of Common Stock, or other
securities or property of the Company, including securities of a
third party, then in each such event the 1999 Subordinated Note
Conversion Price
shall be adjusted by multiplying the 1999 Subordinated Note
Conversion Price then in effect by a fraction (i) the numerator of
which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance, and (ii)
the denominator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such
issuance plus the number of shares of Common Stock issuable in
payment of such dividend or the number of shares of Common Stock
which may be purchased at fair market value using the consideration
equal to the aggregate Fair Market Value of the securities or other
property of the Company to be distributed; provided, however, this
adjustment shall exclude any such distributions to the extent a
substantially similar distribution is made to the holders of the
1999 Subordinated Notes.
(5) Distributions of Property. In the event that the Company
makes a distribution of its property to the holders of Common Stock
as a dividend in liquidation or partial liquidation or by way of
return of capital or other than as a dividend payable out of funds
legally available for dividends under the laws of the State of
Delaware, the holders of 1999 Subordinated Notes Preferred Stock
shall, upon conversion thereof, be entitled to receive, in addition
to the number of shares of Common Stock receivable thereupon, and
without payment of any consideration therefor, a sum equal to the
amount of such property as would have been payable to them as owners
of that number of shares of Common Stock receivable upon such
conversion, had they been the holders of record of such Common Stock
on the record date for such distribution; and an appropriate
provision therefor shall be made a part of any such distribution;
provided, however, this adjustment shall exclude any such
distributions to the extent a substantially similar distribution is
made to the holders of the 1999 Subordinated Notes.
(6) Reorganization, Reclassification, Merger or Consolidation.
If at any time, as a result of:
(i) a capital reorganization or reclassification (other
than a subdivision, combination, dividend or distribution
provided for in Subsections (3), (4) or (5) above); or
(ii) a merger or consolidation of the Company with another
Company (whether or not the Company is the surviving Company),
the Common Stock issuable upon the conversion of the 1999
Subordinated Notes shall be changed into or exchanged for the
same or a different number of shares of any class or classes
of stock of the Company or any other Company, or other
securities convertible into such shares, then, as a part of
such reorganization, reclassification, merger or
consolidation, appropriate adjustments shall be made in the
terms of the 1999 Subordinated Notes (or of any instruments or
securities into which the 1999 Subordinated Notes are changed
or converted or for which the 1999 Subordinated Notes are
exchanged), so that:
(x) the holders of shares of the 1999 Subordinated Notes or of
such substitute securities shall thereafter be entitled to receive,
upon conversion of the such 1999 Subordinated Notes or of such
substitute securities, the substantially equivalent kind and amount
of shares of stock, other securities, money and property which such
holders would have received at the time of such capital
reorganization, reclassification, merger, or consolidation, if the
Company had elected to convert such 1999 Subordinated Notes into
Common Stock immediately prior to such capital reorganization,
reclassification, merger, or consolidation, and
(y) the 1999 Subordinated Notes or such substitute securities
shall thereafter be adjusted on terms as nearly equivalent as may be
practicable to the adjustments theretofore provided in this Section
6.c.
The provisions of this Subsection (6) shall similarly apply to
successive capital reorganizations, reclassifications, mergers, and
consolidations.
(7) Certain Events. If any event occurs of the type
contemplated by the provisions of Section 6.c. but not expressly
provided for by such provisions, then the Board of Directors will make
an appropriate adjustment in the 1999 Subordinated Note Conversion
Price so as to protect the rights of the holders of the 1999
Subordinated Notes; provided, however, that, no such adjustment will
increase the 1999 Subordinated Note Conversion Price as otherwise
determined pursuant to Section 6.c. or decrease the number of shares of
Common Stock issuable upon conversion of the 1999 Subordinated Notes.
(8) Notwithstanding the foregoing, no adjustment to the 1999
Subordinated Note Conversion Price shall be made for:
(a) issuances of Common Stock occurring prior to the date
of this replacement Note;
(b) the issuance of warrants to officers, directors,
shareholders or other investors in the Company, provided such issuance
is approved by the Board of Directors;
(c) the issuance of shares of Common Stock into which the
1999 Subordinated Notes are convertible;
(d) the issuance of shares of Common Stock upon exercise
of all options and warrants outstanding as of the date of this
replacement Note;
(e) the issuance of options to acquire shares of Common
Stock under the Company's incentive stock option or similar plans(or
the issuance of such Common Stock upon the exercise thereof), provided
each such plan has been approved by the Board of Directors;
(f) the issuance of shares of Common Stock under the
Company's stock purchase or similar plans, provided each such plan has
been approved by the Board of Directors;
(g) the issuance of Common Stock or Options, warrants or
rights to acquire Common Stock or the issuance of Common Stock upon the
exercise thereof, in connection with (i) strategic transactions
including acquisitions, joint ventures and similar arrangements, (ii)
to vendors or suppliers or other business associates, (iii), in
connection with debt financings or (iv) as compensation to service
providers including without limitation, as brokers, finders and
financial consultants, in connection with capital raising transactions.
d. Notices. As soon as practicable (and in any case not later
than fifteen (15) days) upon any adjustment of the 1999 Subordinated
Note Conversion Price, the Company will give written notice thereof to
all holders of 1999 Subordinate Notes.
e. Definitions.
"Convertible Securities" means securities convertible into or
exchangeable for Common Stock.
"Options" means any grant, issue or sale by the Corporation of
any right or option to subscribe for or to purchase Common Stock or any
Convertible Securities.
7. Warrant Coverage. Holder has received, on December 7, 1999, ten-year
warrants (the "Warrants) to purchase 800,000 shares of common stock of the
Company ("Common Stock"). The exercise price of the Warrants is $2.25 per share
of Common Stock of the Company. The Warrants are evidenced by Warrant
Certificates, issued in accordance with the terms of a Warrant Agreement.
8. Subordination. The indebtedness evidenced by this Note shall at all
times be wholly subordinate and junior in right of payment to all obligations of
the Company under or in connection with the Credit Agreement of even date
herewith ("Superior Debt") among the Company as guarantor, the borrowers CECO
Group Inc., CECO Filters, Inc., Air Purator Corporation, New ▇▇▇▇ Co., Inc.,
U.S. Facilities Management, Inc., The ▇▇▇▇ & ▇▇▇▇ Manufacturing Company, and
kbd/Technic, Inc., and the lenders PNC Bank, National Association and various
other financial institutions, upon the terms and conditions contained in the
Subordination Agreement between Green Diamond Oil Corp., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ICS
Trustee Services, Ltd., and PNC Bank, National Association and various other
financial institutions of even date herewith (the "Subordination Agreement").
9. Repayment of Notes. In the event the Company completes an equity
financing or offering or a series of equity financing or offerings for a total
consideration in excess of $10,000,000, then twenty-five percent (25%) of all
such consideration in excess of $10,000,000 shall be used immediately, upon
receipt by the Company, to pre-pay the 1999 Subordinated Notes, provided such
prepayment shall be made proportionately among the 1999 Subordinated Notes until
the 1999 Subordinated Notes are paid in full.
10. Covenants of the Company. The Company covenants and agrees that it
shall not, without the prior written approval of the Holders of a majority of
the aggregate principal amount outstanding of the 1999 Subordinated Notes
("Majority Holders"):
a. Obtain or incur any indebtedness or other monetary obligations
that are senior to or on parity with the Notes, other than the Superior
Debt.
b. Allow, suffer or cause to exist any lien, claim, security
interest or encumbrance on the Company's property or assets, other than
with respect to the Superior Debt and purchase money indebtedness
incurred in the ordinary course of business.
c. Enter into any arrangement or agreement involving the merger or
consolidation of the Company.
d. Use the proceeds from the sale of the 1999 Subordinated Notes
other than in the ordinary course of its business for general corporate
purposes including lending monies to any of its subsidiaries. The
Company also covenants and agrees that it shall operate its business in
the ordinary course.
11. Events of Default.
a. Occurrences of Events of Default. Each of the following events
shall constitute an "Event of Default" for purposes of this Note:
(1) if the Company fails to pay any amount payable, under this
Note when due;
(2) if the Company breaches any of its representations,
warranties or covenants set forth in this Note or the Warrant
Agreement;
(3) the commencement of an involuntary case against the Company
or its subsidiary or any of its subsidiaries under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, or the appointing of a receiver, liquidator, assignee,
custodian, trustee or similar official of the Company or for any
substantial part of the Company or one of its subsidiary's
property, or ordering the winding-up or liquidation of the Company
or one of its subsidiary's affairs;
(4) if the Company or any of its subsidiaries shall commence a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall consent to the
entry of an order for relief in an involuntary case under any such
law, or shall consent to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee, custodian or similar
official of the Company or its subsidiary or for any substantial
part of the Company or one of its subsidiary's property, or shall
make any general assignment for the benefit of creditors, or shall
take any corporate action in furtherance of any of the foregoing;
or
(5) if the Company's business shall fail, as determined in good
faith by the Majority Holders and evidenced by the Company's
inability to pay its ongoing debts as such debts become due.
b. Acceleration Upon Event of Default. If any Event of Default
shall have occurred and be continuing, for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about
or be effected by operation of law or otherwise), the unpaid principal
amount of, and the accrued interest on, the Notes shall automatically
become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby
expressly waived by the Company.
12. Investment Representations of the Holder. With respect to the
purchase of this Note, the Common Stock issuable upon the exercise of the
Warrants (collectively, the "Securities"), the Holder hereby represents and
warrants to the Company as follows:
a. Experience. The Holder has substantial experience in evaluating
and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating
the merits and risks of its investment in the Company and has the
capacity to protect its own interests.
b. Investment. The Holder is acquiring the Securities for
investment for its own account, not as a nominee or agent, and not with
the view to, or for resale in connection with, any distribution
thereof. The Holder understands that the Securities have not been, and
will not be, registered under the Securities Act of 1933, as amended
("Securities Act"), by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of
which depends upon, among other things, the bona fide nature of the
investment intent and the accuracy of the Holder's representations as
expressed herein. The holder is an "accredited investor" within the
meaning of Regulation D, Section 501(a), promulgated by the Securities
and Exchange Commission.
c. Rule 144. The Holder acknowledges that the Securities must be
held indefinitely unless subsequently registered under the Securities
Act, or unless an exemption from such registration is available. The
Holder understands that at this time the Company is not under any
obligation to register any of the Securities. The Holder is aware of
the provisions of Rule 144 promulgated under the Securities Act that
permit limited resale of securities purchased in a private placement
subject to satisfaction of certain conditions.
d. No Public Market. The Holder understands that no public market
now exists for any of the Securities issued by the Company and that the
Company has made no assurances that a public market will ever exist for
the Securities.
e. Access to Data. The Holder has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management and has also had an opportunity to ask questions of the
Company's officers, which questions were answered to its satisfaction.
13. Miscellaneous.
a. Invalidity of Any Provision. If any provision or part of any
provision of this Note shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Note and
this Note shall be construed as if such invalid, illegal or
unenforceable provisions or part hereof had never been contained
herein, but only to the extent of its invalidity, illegality or
unenforceability.
b. Governing Law. The Note shall be governed in all respects by the
laws of the State of New York, excluding its conflict of laws.
c. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly
given (i) on the date of delivery if delivered personally, (ii) one (1)
business day after transmission by facsimile transmission with a
written confirmation copy sent by first class mail, or (iii) five (5)
days after mailing if mailed by first class mail, to the following
addresses:
If to the Company: CECO Environmental Corp.
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
And if to the Holder, to the address or facsimile number of
Holder as set forth on the Company's records, or such other address as
the Holder has provided to the Company by notice duly given.
d. Notice of a Sale Transaction. The Company shall give all Holders
of Notes notice of the Closing of a Sale Transaction at least thirty
(30) days prior to such Closing.
e. Collection. If the indebtedness represented by the Note or any
part thereof is collected at law or in equity or in bankruptcy,
receivership or other judicial proceedings or if the Note is placed in
the hands of attorneys for collection after the occurrence of an Event
of Default, the Company agrees to pay, in addition to the outstanding
principal and accrued interest payable hereon, reasonable attorneys'
fees and costs incurred by the Holder, or on behalf of the Holder by a
representative of the Holder.
f. Successors and Assigns. The rights and obligations of the
Company and the Holder shall be binding upon and benefit the
successors, assigns, heirs, administrators and transferees of the
parties.
g. Waivers. The Company and any endorsers, sureties, guarantors,
and all others who are, or may become liable for the payment hereof
severally: (a) waive presentment for payment, demand, notice of demand,
notice of nonpayment or dishonor, protest and notice of protest of this
Note, and all other notices in connection with the delivery,
acceptance, performance, default, or enforcement of the payment of this
Note, (b) consent to all extensions of time, renewals, postponements of
time of payment of this Note or other modifications hereof from time to
time prior to or after the maturity date hereof, whether by
acceleration or in due course, without notice, consent or consideration
to any of the foregoing, (c) agree to any substitution, exchange,
addition, or release of any of the security for the indebtedness
evidenced by this Note or the addition or release of any party or
person primarily or secondarily liable hereon, (d) agree that Holder
shall not be required first to institute any suit, or to exhaust its
remedies against the Company or any other person or party to become
liable hereunder or against the security in order to enforce the
payment of this Note and (e) agree that, notwithstanding the occurrence
of any of the foregoing (except by the express written release by
Holder of any such person), the Company shall be and remain, directly
and primarily liable for all sums due under this Note.
h. Time. Time is of the essence in this Note.
i. Captions. The captions of sections of this Note are for
convenient reference only, and shall not affect the construction or
interpretation of any of the terms and provisions set forth in this
Note.
j. Number and Gender. Whenever used in this Note, the singular
number shall include the plural, and the masculine shall include the
feminine and the neuter, and vice versa.
k. Remedies. All remedies of the Holder shall be cumulative and
concurrent and may be pursued singly, successively, or together at the
sole discretion of the Holder and may be exercised as often as occasion
therefor shall arise. No act of omission or commission of the Holder,
including specifically any failure to exercise any right, remedy or
recourse shall be effective unless it is set forth in a written
document executed by the Holder and then only to the extent
specifically recited therein. A waiver or release with reference to one
event shall not be construed as continuing as a bar to or as a waiver
or release of any subsequent right, remedy, or recourse as to any
subsequent event.
l. No Waiver by Holder. The acceptance by Holder of any payment
under this Note which is less than the amount then due or the
acceptance of any amount after the due date thereof, shall not be
deemed a waiver of any right or remedy available to Holder nor nullify
the prior exercise of any such right or remedy by Holder. None of the
terms or provisions of this Promissory Note may be waived, altered,
modified or amended except by a written document executed by Holder and
then only to the extent specifically recited therein. No course of
dealing or conduct shall be effective waive, alter, modify or amend any
of the terms or provisions hereof. The failure or delay to exercise any
right or remedy available to Holder shall not constitute a waiver of
the right of the Holder to exercise the same or any other right or
remedy available to Holder at that time or at any subsequent time.
m. Submission to Jurisdiction. BORROWER, AND ANY ENDORSERS,
SURETIES, GUARANTORS AND ALL OTHERS WHO ARE, OR WHO MAY BECOME, LIABLE
FOR THE PAYMENT HEREOF SEVERALLY, IRREVOCABLY AND UNCONDITIONALLY (A)
AGREE THAT ANY SUIT, ACTION, OR OTHER LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS NOTE OR ANY OTHER AGREEMENT, DOCUMENT OR INSTRUMENT
DELIVERED PURSUANT TO, OR IN CONNECTION WITH THIS NOTE SHALL BE BROUGHT
AND MAINTAINED IN THE COURTS IN AND FOR NEW YORK COUNTY, NEW YORK, OR
IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK; (B) CONSENT TO THE JURISDICTION OF EACH SUCH COURT IN ANY SUCH
SUIT, ACTION OR PROCEEDING; AND (C) WAIVE ANY OBJECTION WHICH IT OR
THEY MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION, OR
PROCEEDING IN ANY OF SUCH COURTS.
n. Waiver of Trial by Jury. HOLDER AND BORROWER HEREBY KNOWINGLY,
IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR
COUNTERCLAIM BASED ON THIS NOTE, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION
THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR HOLDER TO MAKE THE LOAN
EVIDENCED BY THIS NOTE.
CECO ENVIRONMENTAL CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President