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EXHIBIT 10.64
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DENALI INCORPORATED
12% Senior Subordinated Notes due 2006
and Warrants
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NOTE AND WARRANT PURCHASE AGREEMENT
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Dated as of June 30, 1999
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Table of Contents
Page
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1. Authorization of Notes and Warrants; Guarantees; the Acquisition
1.1 The Notes
1.2 The Warrants
1.3 The Subsidiary Guarantees
1.4 The Acquisition
2. Sale and Purchase of Notes and Warrants
3. Closing
4. Conditions to Closing
4.1 Representations and Warranties
4.2 Performance; No Default
4.3 Compliance Certificates
4.4 Opinion of Counsel
4.5 Proceedings and Documents
4.6 Subsidiary Guarantees
4.7 Purchase Permitted by Applicable Law, Etc.
4.8 Payment of Special Counsel Fees
4.9 Private Placement Number
4.10 Contemporaneous Transactions
4.11 Changes in Corporate Structure
4.12 Closing Fee
4.13 Sale of Notes to Other Purchasers
4.14 Stock Pledge
5. Representations and Warranties of the Company
5.1 Financial Condition
5.2 No Change
5.3 Existence; Compliance with Law
5.4 Power; Authorization; Enforceable Obligations
5.5 No Legal Bar
5.6 No Material Litigation
5.7 No Default
5.8 Ownership of Property; Liens
5.9 Warrants and Equity of the Company
5.10 No Burdensome Restrictions
5.11 Taxes
5.12 Use of Proceeds; Margin Regulations
5.13 ERISA
5.14 Investment Company Act; Other Regulations
5.15 Subsidiaries
5.16 Environmental Matters
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5.17 Licenses, Permits, Y2K, etc.
5.18 Disclosure
5.19 Foreign Assets Control Regulations, etc.
5.20 Private Offering by the Company
5.21 Pledge Agreement
6. Representations of the Purchaser
6.1 Purchase of Notes and Warrants
6.2 Source of Funds
7. Information as to Company
7.1 Financial and Business Information
7.2 Officer's Certificate
7.3 Inspection
8. Prepayment of the Notes
8.1 Optional Prepayments
8.2 Notice of Prepayment
8.3 Prepayment in Connection with Change of Control
8.4 Allocation of Partial Prepayments
8.5 Maturity; Surrender, etc.
8.6 Purchase of Notes
9. Affirmative Covenants
9.1 Compliance with Law
9.2 Insurance
9.3 Maintenance of Properties
9.4 Payment of Taxes and Claims
9.5 Corporate Existence, Etc.
9.6 Additional Subsidiary Guarantees
9.7 Board Observation Rights
9.8 Pledge of Shares
10. Negative Covenants
10.1 Financial Condition Covenants
10.2 Limitation on Indebtedness; Subordination of Indebtedness
10.3 Limitation on Liens
10.4 Limitation on Guarantee Obligations
10.5 Limitation on Fundamental Changes
10.6 Limitation on Sale of Assets
10.7 Limitation on Dividends
10.8 Limitation on Capital Expenditures
10.9 Limitation on Investments, Loans and Advances
10.10 Limitation on Optional Payments and Modifications of Debt Instruments
10.11 Limitation on Transactions with Affiliates
10.12 Limitation on Sales and Leasebacks
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10.13 Limitation on Changes in Fiscal Year
10.14 Limitation on Negative Pledge Clauses
10.15 Limitation on Lines of Business
10.16 Governing Documents
10.17 Limitation on Subsidiary Formation
10.18 Limitation on Management Fees
10.19 Negative Pledge
11. Events of Default
12. Remedies on Default, Etc.
12.1 Acceleration
12.2 Other Remedies
12.3 Rescission
12.4 No Waivers or Election of Remedies, Expenses, Etc.
13. Subordination of Notes
13.1 Subordination to Superior Indebtedness
13.2 Effects of Defaults in Respect of Superior Indebtedness
13.3 Insolvency, etc.
13.4 Turnover of Certain Payments
13.5 No Impairment
13.6 Payment of Superior Indebtedness, Subrogation, Etc.
13.7 Rescission, Amendment, Etc.
14. Registration; Exchange; Substitution of Securities
14.1 Registration of Notes and Warrants
14.2 Transfer and Exchange of Notes or Warrants
14.3 Replacement of Notes and Warrants
15. Payments on Notes
15.1 Place of Payment
15.2 Home Office Payment
16. Expenses, Etc.
16.1 Transaction Expenses
16.2 Survival
17. Survival of Representations and Warranties; Entire Agreement
18. Amendment and Waiver
18.1 Requirements
18.2 Solicitation of Holders of Notes
18.3 Binding Effect, etc
18.4 Notes Held by Company, Etc.
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19. Notices
20. Reproduction of Documents
21. Confidential Information
22. Miscellaneous
22.1 Successors and Assigns
22.2 Construction
22.3 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial
22.4 Payments Due on Non-Business Days
22.5 Severability
22.6 Accounting Terms
22.7 Indemnification
22.8 Counterparts
22.9 Governing Law
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Exhibit 1.1 -- Form of 12% Senior Subordinated Note due 2006
Exhibit 1.2 -- Form of Warrant
Exhibit 1.3 -- Form of Subsidiary Guarantee
Exhibit 4.4(a) -- Form of Opinion of Special Counsel for the Company
Exhibit 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers
Exhibit 4.14 -- Form of Pledge of Shares Agreement
Exhibit A -- Form of Acquisition Abstract
Schedule A -- Names and Addresses of Purchasers
Schedule B -- Defined Terms
Schedule 5.1 -- Financial Condition
Schedule 5.3 -- Corporate Existence
Schedule 5.15 -- Subsidiaries
Schedule 5.16 -- Environmental Matters
Schedule 5.17 -- Licenses, Permits
Schedule 9.6 -- Denali ▇▇▇▇▇ Subsidiaries
Schedule 10.2 -- Permitted Indebtedness
Schedule 10.3 -- Permitted Encumbrances
Schedule 10.4 -- Guarantee Obligations
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DENALI INCORPORATED
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
12% Senior Subordinated Notes due 2006
and Warrants
As of June 30, 1999
TO EACH OF THE SEVERAL PURCHASERS WHOSE
NAMES APPEAR IN THE ACCEPTANCE FORMS AT THE
END HEREOF
Ladies and Gentlemen:
DENALI INCORPORATED, a Delaware corporation (sometimes
"DENALI" or the "COMPANY"), agrees with you as follows:
1. AUTHORIZATION OF NOTES AND WARRANTS; GUARANTEES; THE ACQUISITION.
1.1 THE NOTES.
The Company has duly authorized the issue and sale of its 12%
Senior Subordinated Notes due 2006 (the "NOTES") in an aggregate original
principal amount of $15,000,000, such notes to be substantially in the form set
out in Exhibit 1.1. As used herein, the term "NOTES" shall mean all notes
originally delivered pursuant to this Agreement and all notes delivered in
substitution or exchange for any such note and, where applicable, shall include
the singular number as well as the plural. The term "NOTE" means one of the
Notes. Certain capitalized and other terms used in this Agreement are defined in
Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.
1.2 THE WARRANTS.
The Company has duly authorized the issue and sale of
detachable warrants to purchase an aggregate of initially 534,873 shares of the
Company's Common Stock (the "WARRANTS"), such Warrants to be substantially in
the form set out in Exhibit 1.2. As used herein, the term "WARRANTS" shall mean
all warrants originally delivered pursuant to this Agreement and all warrants
delivered in substitution or exchange for any such warrant and, where
applicable, shall include the singular number as well as the plural. The term
"WARRANT" means one of the Warrants.
1.3 THE SUBSIDIARY GUARANTEES.
The Notes will be unconditionally guaranteed by each of the
Company's existing Subsidiaries (except for Denali ▇▇▇▇▇ and the Subsidiaries of
Denali ▇▇▇▇▇ set forth in Schedule 9.6), pursuant to subordinated subsidiary
guarantees substantially in the form of Exhibit 1.3 (individually a "SUBSIDIARY
Guarantee" and collectively the "SUBSIDIARY GUARANTEES", which terms shall
include after the date of the Closing all additional Subsidiary Guarantees from
time to time executed and
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delivered pursuant to Section 9.6). The Notes will also have the benefit of a
Pledge Agreement substantially in the form of Exhibit 4.14.
1.4 THE ACQUISITION.
Within the time provided in Section 11(l), the acquisition
contemplated by the ▇▇▇▇▇ Acquisition Documents (the "▇▇▇▇▇ ACQUISITION") shall
have become fully unconditional, pursuant to which the Company (directly or
through a Wholly-Owned Subsidiary) shall have purchased from stockholders of
▇▇▇▇▇ over 95% of the outstanding stock of ▇▇▇▇▇, N.V., a Netherlands
corporation ("▇▇▇▇▇").
2. SALE AND PURCHASE OF NOTES AND WARRANTS.
Subject to the terms and conditions of this Agreement, the
Company will issue and sell to you and you will purchase from the Company, at
the Closing provided for in Section 3, (i) Notes in the original principal
amount set opposite your name in Schedule A and (ii) Warrants to purchase such
number of shares of Common Stock set opposite your name in Schedule A, at the
purchase price of 100% of the principal amount of the Notes.
3. CLOSING.
The sale and purchase of the Notes and the Warrants to be purchased by
you shall occur at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ at 10:00 a.m., New York time, at a closing (the
"Closing") on June 30, 1999 or on such other Business Day thereafter on or prior
to July 2, 1999 as may be agreed upon by the Company and you. At the Closing the
Company will deliver to you the Notes and the Warrants to be purchased by you in
the form of a single Note and a single Warrant (or, in the case of the Notes,
such greater number of Notes in denominations of at least $500,000 as you may
request prior to the Closing) dated the date of the Closing and registered in
your name (or in the name of your nominee), against delivery by you to the
Company or its order of immediately available funds in the amount of the
purchase price therefor by wire transfer of immediately available funds to
account number ▇▇▇-▇▇▇▇-▇▇▇ at Canadian Imperial Bank of Commerce, ABA number
▇▇▇-▇▇▇-▇▇▇.
If at the Closing the Company shall fail to tender such Notes and
Warrants to you as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to your satisfaction, you
shall, at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights you may have by reason of such
failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes and Warrants
to be sold to you at the Closing is subject to the fulfillment to your
satisfaction, prior to or at the Closing, of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this
Agreement shall be correct when made and at the time of the Closing except to
the extent that such representations and warranties are expressly limited or
refer to an earlier date.
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4.2 PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed
or complied with by it prior to or at the Closing and after giving effect to the
issue and sale of the Notes (and the application of the proceeds thereof as
contemplated by Section 5.12) no Default or Event of Default shall have occurred
and be continuing.
4.3 COMPLIANCE CERTIFICATES.
(a) Officer's Certificates. The Company shall have delivered to you an
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2, 4.11, 4.12 and 4.13 have been
fulfilled.
(b) Secretary's Certificates. The Company shall have delivered to you a
certificate of the Secretary or an Assistant Secretary of the Company certifying
as to the resolutions attached thereto and other corporate proceedings relating
to the authorization, execution and delivery of the Notes, the Warrants and this
Agreement.
4.4 OPINIONS OF COUNSEL.
You shall have received opinions in form and substance
satisfactory to you, dated the date of the Closing (a) from Gardere ▇▇▇▇▇ ▇▇▇▇▇▇
& ▇▇▇▇▇, LLP, special counsel for the Company, the Company's in-house counsel,
and the Company's Dutch counsel, substantially in the form set forth in Exhibit
4.4(a) and covering such other matters incident to the transactions contemplated
hereby as you or your counsel may reasonably request (and the Company hereby
instructs its counsel to deliver such opinion to you) and (b) if you are an
Institutional Investor, from ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, your special counsel in
connection with such transactions, substantially in the form set forth in
Exhibit 4.4(b) and covering such other matters incident to such transactions as
you may reasonably request.
4.5 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to the Purchasers and their
special counsel, and each Purchaser and its special counsel shall have received
all such counterpart originals or certified or other copies of such documents as
it or they may reasonably request.
4.6 SUBSIDIARY GUARANTEES.
A Subsidiary Guarantee, dated as of a date on or before the
date of the Closing, shall have been executed and delivered by each Subsidiary
(except for Denali ▇▇▇▇▇ and the Subsidiaries of Denali ▇▇▇▇▇ set forth in
Schedule 9.6) (sometimes individually called a "SUBSIDIARY GUARANTOR" and
collectively the "SUBSIDIARY GUARANTORS", such term to include any Subsidiary
that executes and delivers a Subsidiary Guarantee pursuant to Section 9.6) in
the form hereinabove recited and shall be in full force and effect.
4.7 PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes and Warrants
shall (a) be permitted by the laws and regulations of each jurisdiction to which
you are subject, without recourse to provisions (such as Section 1405(a)(8) of
the New York Insurance Law) permitting limited investments by insurance
companies without restriction as to the character of the particular investment,
(b) not violate any applicable law or regulation (including without limitation
Regulation T, U or X of the Board of
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Governors of the Federal Reserve System) and (c) not subject you to any tax,
penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect on the date hereof. If requested by
you, you shall have received an Officer's Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine whether
such purchase is so permitted.
4.8 PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 16.1, the Company
shall have paid on or before the Closing the reasonable fees, charges and
disbursements of your special counsel referred to in Section 4.4 to the extent
reflected in a statement of such counsel rendered to the Company at least one
Business Day prior to the Closing.
4.9 PRIVATE PLACEMENT NUMBER.
A Private Placement Number issued by Standard & Poor's CUSIP
Service Bureau (in cooperation with the Securities Valuation Office of the
National Association of Insurance Commissioners) shall have been obtained for
the Notes.
4.10 CONTEMPORANEOUS TRANSACTIONS.
(a) The Acquisition shall have become fully unconditional in accordance
with the terms of the Acquisition Documents; and on the date of the Closing each
of the conditions of performance contained in the Acquisition Documents shall
have been satisfied in all material respects and not waived and the Acquisition
shall have been consummated (except only for the settlement of the consideration
payable by the Company to the shareholders of ▇▇▇▇▇) in accordance with all
applicable laws.
(b) The Permanent Equity Financing shall have been consummated.
(c) The Company (or a Wholly-Owned Subsidiary) shall have entered into
the Dutch Facility dated on or before the date of the Closing, which Dutch
Facility shall be in form and substance reasonably satisfactory to you; and the
Company (or such Wholly-Owned Subsidiary) shall have made the first borrowing
under the Dutch Facility upon satisfaction of the conditions precedent thereto.
(d) The Senior Credit Agreement shall have been amended and be in form
and substance reasonably satisfactory to you.
4.11 CHANGES IN CORPORATE STRUCTURE.
The Company shall not have changed its jurisdiction of
incorporation or, except in connection with the Acquisition, been a party to any
merger or consolidation or succeeded to all or any substantial part of the
liabilities of any other entity at any time following the date of the most
recent Financial Statements.
4.12 CLOSING FEE.
The Company shall have paid to you in full and in cash a
Closing fee equal to 1% of the aggregate original principal amount of Notes
purchased by you hereunder.
4.13 SALE OF NOTES TO OTHER PURCHASERS.
The Company shall sell to the Purchasers designated in
Schedule A who shall purchase the Notes to be purchased by them at the Closing
as specified in Schedule A.
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4.14 STOCK PLEDGE.
A pledge agreement, dated as of a date on or before the date of
Closing (the "Pledge Agreement"), shall have been executed and delivered by the
Company in substantially the form attached hereto as Exhibit 4.14, such pledge
to create a first priority perfected security interest in 65% of the capital
stock of Denali ▇▇▇▇▇ to the Purchasers.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you (as of the date of
the Closing and, unless the context otherwise clearly requires, after giving
effect to the Acquisition) as follows:
5.1 FINANCIAL CONDITION.
(a) The consolidated balance sheet of the Company and its consolidated
Subsidiaries as at June 27, 1998 and the related consolidated statements of
income and of cash flows for the fiscal year ended on such date, reported on by
Ernst & Young LLP, copies of which have heretofore been furnished to you, are
complete and correct and present fairly the consolidated financial condition of
the Company and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows for
the fiscal year then ended. The unaudited consolidated balance sheet of the
Company and its consolidated Subsidiaries as at March 27, 1999 and the related
unaudited consolidated statements of income and of cash flows for the nine-month
period ended on such date, certified by a Responsible Officer, copies of which
have heretofore been furnished to you, are in all material respects complete and
correct and present fairly the consolidated financial condition of the Company
and its consolidated Subsidiaries as at such date, and the consolidated results
of their operations and their consolidated cash flows for the nine-month period
then ended (subject to normal year-end audit adjustments). All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or Responsible Officer, as the
case may be, and as disclosed therein). Neither the Company nor any of its
consolidated Subsidiaries had, at the date of the most recent balance sheet
referred to above, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction or other financial derivative, which is not
reflected in the foregoing statements or in the notes thereto. During the period
from March 27, 1999 to and including the date hereof, except as disclosed by the
Company on Schedule 5.1 hereto, there has been no sale, transfer or other
disposition by the Company or any of its consolidated Subsidiaries of any
material part of its business or property and no purchase or other acquisition
of any business or property (including any Capital Stock of any other Person)
material in relation to the consolidated financial condition of the Company and
its consolidated Subsidiaries at March 27, 1999.
(b) The operating forecast and cash flow projections of the Company and
its consolidated Subsidiaries, copies of which have heretofore been furnished to
the Lenders, have been prepared in good faith under the direction of a
Responsible Officer of the Company, and in accordance with GAAP. The Company has
no reason to believe that as of the date of delivery thereof such operating
forecast and cash flow projections are materially incorrect or misleading in any
material respect, or omit to state any material fact which would render them
misleading in any material respect.
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5.2 NO CHANGE.
Since June 27, 1998 there has been no development or event
which has had or could have a Material Adverse Effect; and during the period
from June 27, 1998 to and including the date hereof no dividends or other
distributions have been declared, paid or made upon the Capital Stock of the
Company nor has any of the Capital Stock of the Company been redeemed, retired,
purchased or otherwise acquired for value by the Company or any of its
Subsidiaries.
5.3 EXISTENCE; COMPLIANCE WITH LAW.
Each of the Company and its Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) except as disclosed
on Schedule 5.3 hereto, is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not, in the aggregate, have a Material
Adverse Effect.
5.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
The Company has the corporate power and authority, and the
legal right, to make, deliver and perform the Note Documents to which it is a
party and to issue the Notes and Warrants hereunder and has taken all necessary
corporate action to authorize the issuance of the Notes and Warrants on the
terms and conditions of this Agreement and to authorize the execution, delivery
and performance of the Note Documents to which it is a party. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of the Note Documents to which the Company is a party, except for
the consents required under the Senior Credit Agreement and the Dutch Facility
(which consents have been obtained by the Company). This Agreement has been, and
each other Note Document to which it is a party will be, duly executed and
delivered on behalf of the Company. This Agreement constitutes, and each other
Note Document to which it is a party when executed and delivered will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
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5.5 NO LEGAL BAR.
The execution, delivery and performance of the Note Documents
to which the Company is a party, the issuance and the sale of the Notes and the
Warrants hereunder and the use of the proceeds thereof will not violate any
Requirement of Law, the Governing Documents or Contractual Obligation of the
Company or of any of its Subsidiaries which has not been waived, and will not
result in, or require, the creation or imposition of any Lien on any of its or
their respective properties or revenues pursuant to any such Requirement of Law,
Governing Document or Contractual Obligation (other than Liens created under the
Senior Credit Agreement).
5.6 NO MATERIAL LITIGATION.
No litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the
Company, threatened by or against the Company or any of its Subsidiaries or
against any of its or their respective properties or revenues (a) with respect
to any of the Note Documents or any of the transactions contemplated hereby or
thereby, or (b) which could have a Material Adverse Effect.
5.7 NO DEFAULT.
Neither the Company nor any of its Subsidiaries is in default
under or with respect to any of its Contractual Obligations in any respect which
could have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
5.8 OWNERSHIP OF PROPERTY; LIENS.
Each of the Company and its Subsidiaries has good record and
marketable or indefeasible title in fee simple to, or a valid leasehold interest
in, all its real property, and good title to, or a valid leasehold interest in,
all its other property, subject only to Permitted Encumbrances.
5.9 WARRANTS AND EQUITY OF THE COMPANY.
As of the Closing, the Warrants represent 8.5% of the Fully
Diluted Outstanding Shares of the Common Stock. There are authorized and
available for issuance such number of shares of the Company's authorized but
unissued Common Stock as will be sufficient to permit the exercise in full of
all outstanding Warrants.
5.10 NO BURDENSOME RESTRICTIONS.
No Requirement of Law, Governing Document or Contractual
Obligation of the Company or any of its Subsidiaries could reasonably be
expected to have a Material Adverse Effect.
5.11 TAXES.
Each of the Company and its Subsidiaries has filed or caused
to be filed all tax returns which, to the knowledge of the Company, are required
to be filed and has paid all taxes shown to be due and payable on said returns
or on any assessments made against it or any of its property and all other
taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Company or its Subsidiaries, as the case may be); no tax Lien has
been filed, and, to the knowledge of the Company, no claim is being asserted,
with respect to any such tax, fee or other charge.
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5.12 USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the net proceeds of the sale of the
Notes and Warrants to fund the Acquisition and related expenses. No part of the
proceeds from the sale of the Notes and Warrants hereunder will be used,
directly or indirectly, for the purpose of buying or carrying any margin stock
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading
in any securities under such circumstances as to involve the Company in a
violation of Regulation X of said Board (12 CFR 224) or to involve any broker or
dealer in a violation of Regulation T of said Board (12 CFR 220). As used in
this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall
have the meanings assigned to them in said Regulation U.
5.13 ERISA.
(a) Neither a Reportable Event nor an "accumulated funding deficiency"
(within the meaning of Section 412 of the Code or Section 302 of ERISA) has
occurred during the five-year period prior to the date hereof with respect to
any Plan, and each Plan has complied in all material respects with the
applicable provisions of ERISA and the Code. No termination of a Single Employer
Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during
such five-year period. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date hereof, exceed the
value of the assets of such Plan allocable to such accrued benefits. Neither the
Company nor any ERISA Affiliate has had a complete or partial withdrawal from
any Multiemployer Plan, and neither the Company nor any ERISA Affiliate would
become subject to any liability under ERISA if the Company or any such ERISA
Affiliate were to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. No such Multiemployer Plan is in Reorganization or
Insolvent.
(b) With respect to each employee benefit plan, if any, disclosed by
you in writing to the Company in accordance with Section 6.2(c), neither the
Company nor any "affiliate" of the Company (as defined in Section V(c) of the
QPAM Exemption) has at this time, nor has exercised at any time during the
immediately preceding year, the authority to appoint or terminate the "QPAM" (as
defined in Part V of the QPAM Exemption) disclosed by you to the Company
pursuant to Section 6.2(c) as manager of any of the assets of any such plan or
to negotiate the terms of any management agreement with such QPAM on behalf of
any such plan, and the Company is not an "affiliate" (as so defined) of such
QPAM. The Company is not a party in interest with respect to any employee
benefit plan disclosed by you in accordance with Section 6.2(b) or 6.2(e). The
execution and delivery of this Agreement and the issuance and sale of the Notes
and Warrants at the Closing hereunder will not involve any prohibited
transaction (as such term is defined in section 406(a) of ERISA and section
4975(c)(1)(A)-(D) of the Code), that could subject the Company or any holder of
a Note or a Warrant to any tax or penalty on prohibited transactions imposed
under said section 4975 of the Code or by section 502(i) of ERISA. The
representation by the Company in the preceding sentence of this Section 5.13(b)
is made in reliance upon and subject to the accuracy of your representation in
Section 6.2 as to the source of the funds used to pay the purchase price of the
Notes and the Warrants to be purchased by you.
15
5.14 INVESTMENT COMPANY ACT; OTHER REGULATIONS.
Neither the Company nor any Subsidiary is an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended. Neither the Company
nor any Subsidiary is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," or a "public utility" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
5.15 SUBSIDIARIES.
Schedule 5.15 sets forth the name of each direct or indirect
Subsidiary of the Company, its form of organization, its jurisdiction of
organization, the total number of issued and outstanding shares or other
interests of Capital Stock thereof, the classes and number of issued and
outstanding shares or other interests of Capital Stock of each such class, the
name of each holder of Capital Stock thereof and the number of shares or other
interests of such Capital Stock held by each such holder and the percentage of
all outstanding shares or other interests of such class of Capital Stock held by
such holders.
5.16 ENVIRONMENTAL MATTERS.
(a) The facilities and properties owned, leased or operated by the
Company or any of its Subsidiaries (the "PROPERTIES") do not contain, and have
not previously contained, any Materials of Environmental Concern in amounts or
concentrations which (i) constitute or constituted a violation of, or (ii) could
give rise to liability under, any Environmental Law except in either case
insofar as such violation or liability, or any aggregation thereof, is not
reasonably likely to result in the payment of a Material Environmental Amount.
(b) (i) Except for violations set forth on Schedule 5.16 with respect
to the Belco, Belton, Texas facility, the Properties and all operations at the
Properties are in compliance, and have in the last five years been in
compliance, in all material respects with all applicable Environmental Laws; and
(ii) there is no contamination at, under or about the Properties or violation of
any Environmental Law with respect to the Properties or the business operated by
the Company or any of its Subsidiaries (the "BUSINESS") which could interfere
with the continued operation of the Properties or impair the fair saleable value
thereof.
(c) Except as set forth on Schedule 5.16, neither the Company nor any
of its Subsidiaries has received any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental matters
or compliance with Environmental Laws with regard to any of the Properties or
the Business, nor does the Company have knowledge or reason to believe that any
such notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a location
which could give rise to liability under, any Environmental Law which could have
a Material Adverse Effect, nor have any Materials of Environmental Concern been
generated, treated, stored or disposed of at, on or under any of the Properties
in violation of, or in a manner that could give rise to liability under, any
applicable Environmental Law in any material respect and which could have a
Material Adverse Effect.
(e) Except as set forth on Schedule 5.16, no judicial proceeding or
governmental or administrative action is pending or, to the knowledge of the
Company, threatened, under any Environmental Law to which the Company or any
Subsidiary is or will be named as a party with respect to the Properties or the
Business, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to the
Properties or the Business which has not been disclosed in Schedule 5.16.
16
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations of the Company or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in violation of or in
amounts or in a manner that could give rise to liability under Environmental
Laws in any material respect and which could have a Material Adverse Effect.
(g) Nothing set forth on Schedule 5.16 individually or in the aggregate
would be expected to result in the payment of a Material Environmental Amount or
result in a Material Adverse Effect.
5.17 LICENSES, PERMITS, Y2K, ETC.
Except as disclosed in Schedule 5.17,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, proprietary software,
service marks, trademarks and trade names, or rights thereto, that individually
or in the aggregate are Material, without known infringement on or with respect
to the rights of others, except for such infringement as would not reasonably be
expected to have a Material Adverse Effect;
(b) to the best knowledge of the Company, no product of the Company
infringes on any license, permit, franchise, authorization, patent, copyright,
proprietary software, service ▇▇▇▇, trademark, trade name or other right owned
by any other Person, except for such infringement as would not reasonably be
expected to have a Material Adverse Effect; and
(c) to the best knowledge of the Company, there is no infringement by
any Person of any right of the Company or any of its Subsidiaries with respect
to any patent, copyright, proprietary software, service ▇▇▇▇, trademark, trade
name or other right owned or used by the Company or any of its Subsidiaries,
except for such infringement as would not reasonably be expected to have a
Material Adverse Effect.
The Company and its Subsidiaries have (a) initiated a review
and assessment of all areas within their respective businesses and operations
(including those affected by information received from suppliers and vendors)
that would reasonably be expected to be adversely affected by the Year 2000
Problem, (b) developed a plan and timetable for addressing the Year 2000 Problem
on a timely basis, and (c) to date, implemented that plan substantially in
accordance with that timetable. The Company reasonably believes that all
computer applications (including those affected by information received from its
suppliers and vendors) that are material to the businesses and operations of the
Company and its Subsidiaries, taken as a whole, will be Year 2000 Compliant,
except to the extent that a failure to be so would not reasonably be expected to
have a Material Adverse Effect. The Company does not believe that the costs to
be incurred after the date of this Agreement for the purpose of implementing its
Year 2000 plan will be Material. As used in this Agreement, the term "YEAR 2000
COMPLIANT" means all computer applications (including those affected by
information received from suppliers and vendors) that are material to the
businesses and operations of the Company and its Subsidiaries will on a timely
basis be able to perform properly date-sensitive functions involving all dates
on and after January 1, 2000; and the term "YEAR 2000 PROBLEM" means the risk
that computer applications used by the Company or any of its Subsidiaries
(including those affected by information received from suppliers and vendors)
may be unable to recognize and perform properly date-sensitive functions
involving certain dates on and after January 1, 2000.
5.18 DISCLOSURE.
The Company, through its agent, CIBC World Markets Corp., has
delivered to you a copy of a Confidential Information Memorandum, dated May 1999
(the "MEMORANDUM"), relating to the transactions contemplated hereby. The
Memorandum fairly describes, in all material respects, the general nature of the
business and principal properties of the Company and its Subsidiaries. This
17
Agreement, the Memorandum, the management presentation to investors document
dated May 1999 (together with the Memorandum, the "DISCLOSURE DOCUMENTS"), and
the Financial Statements, taken as a whole, do not contain any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made.
5.19 FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes and the Warrants by the Company
hereunder nor its use of the proceeds thereof will violate the Trading with the
Enemy Act, as amended, or any of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or
any enabling legislation or executive order relating thereto.
5.20 PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has
offered the Notes, the Warrants or any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, any person other than you and not more than
70 other Institutional Investors, each of which has been offered the Notes and
the Warrants at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Notes or the Warrants to the registration requirements
of Section 5 of the Securities Act.
5.21 PLEDGE AGREEMENT.
The provisions of the Pledge Agreement are effective to create
in favor of the Purchasers and the holders a legal, valid and enforceable
security interest in all right, title and interest of the Company in the
"Shares" described therein and such Pledge Agreement constitutes a first
priority perfected security interest on, and security interest in, all right,
title and interest of the Company in the "Shares" described therein.
6.0 REPRESENTATIONS OF THE PURCHASER.
6.1 PURCHASE OF NOTES AND WARRANTS.
You represent that you are purchasing the Notes and the
Warrants for your own account or for one or more separate accounts maintained by
you or for the account of one or more pension or trust funds and not with a view
to the distribution thereof, provided that the disposition of your or their
property shall at all times be within your or their control. You understand that
neither the Notes, the Warrants nor the shares of Common Stock issuable upon
exercise of the Warrants have been registered under the Securities Act and may
be resold only if registered pursuant to the provisions of the Securities Act or
if an exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes or the Warrants but is required to
register the shares of Common Stock issuable upon exercise of the Warrants (as
set forth in the Warrants).
You represent that you are an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act of 1933. In addition, if you are
not an Institutional Investor, you represent that you have provided such
separate assurances to the Company and your counsel as may be required to
establish that your purchase of Notes and Warrants will not require registration
of the Notes or the Warrants under the Securities Act.
18
6.2 SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes and the Warrants to be purchased by
you hereunder:
(a) the Source is an "insurance company general account", as such term
is defined in Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12,
1995), and there is no plan with respect to which the aggregate amount of such
general account's reserves and liabilities for the contracts held by or on
behalf of such plan and all other plans maintained by the same employer (and
affiliates thereof as defined in section V(a)(1) of PTE 95-60) or by the same
employee organization (in each case determined in accordance with PTE 95-60)
exceeds or will exceed 10% of the total of all reserves and liabilities of such
general account (determined in accordance with PTE 95-60, exclusive of separate
account liabilities, plus any applicable surplus) as of the date of the Closing;
or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a
bank collective investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991) and, except as you have disclosed to the Company in writing
pursuant to this paragraph (b), no employee benefit plan or group of plans
maintained by the same employer or employee organization beneficially owns more
than 10% of all assets allocated to such pooled separate account or collective
investment fund; or
(c) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified professional
asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption),
no employee benefit plan's assets that are included in such investment fund,
when combined with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity of
such QPAM and (ii) the names of all employee benefit plans whose assets are
included in such investment fund have been disclosed to the Company in writing
pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each of
which has been identified to the Company in writing pursuant to this paragraph
(e); or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such
terms in section 3 of ERISA.
19
7. INFORMATION AS TO COMPANY.
7.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes and Warrants
that is an Institutional Investor:
(a) Quarterly Statements -- within 45 days after the end of each fiscal
quarter in each Fiscal Year of the Company (other than the last fiscal quarter
of each such Fiscal Year), duplicate copies of
(i) a consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such fiscal quarter,
(ii) consolidated statements of income, cash flows and changes
in shareholders' equity of the Company and its consolidated Subsidiaries, for
such fiscal quarter and (in the case of the second and third quarters) for the
portion of the Fiscal Year ending with such fiscal quarter, and
(iii) unaudited summary consolidating balance sheets and
income statements as at the end of such fiscal quarter and for the portion of
the Fiscal Year ending with such fiscal quarter,
all in reasonable detail, prepared in accordance with GAAP applicable
to quarterly financial statements generally, and certified by a Senior
Financial Officer as fairly presenting, in all material respects, the
financial position of the companies being reported on and their results
of operations and cash flows (subject to changes resulting from
year-end adjustments) and setting forth in each case in comparative
form the consolidated figures for the corresponding periods in the
previous Fiscal Year;
(b) Annual Statements -- within 90 days after the end of each Fiscal
Year of the Company, commencing with the Fiscal Year ending on July 3, 1999,
duplicate copies of
(i) a consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such Fiscal Year,
(ii) consolidated statements of income, cash flows and changes
in shareholders' equity of the Company and its consolidated Subsidiaries for
such Fiscal Year, and
(iii) unaudited summary consolidating balance sheets and
income statements as at the end of and for such Fiscal Year,
all in reasonable detail, prepared in accordance with GAAP and setting
forth in each case, commencing in July 3, 1999, in comparative form the
consolidated figures for the previous Fiscal Year, and accompanied by
(a) an opinion thereon of independent public accountants of
recognized national standing, which opinion shall state that such
consolidated financial statements present fairly, in all material
respects, the financial position of the companies being reported upon
and their results of operations and cash flows and have been prepared
in conformity with GAAP (except for such changes in such principles
with which such public accountants shall have concurred), and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards, and that such audit provides a reasonable basis for such
opinion in the circumstances, and
(b) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their
audit, they have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if they are aware
that any such condition or event then exists, specifying the nature and
period of THE EXISTENCE THEREOF (IT BEING
20
understood that such accountants shall not be liable, directly or
indirectly, for any failure to obtain knowledge of any Default or Event
of Default);
(c) SEC and Other Reports -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or
proxy statement sent by the Company or any Subsidiary generally to its
shareholders or to its bank creditors, and (ii) each regular or
periodic report, each registration statement, and each prospectus and
all amendments thereto filed by the Company or any Subsidiary with the
Securities and Exchange Commission;
(d) Notice of Default or Event of Default -- promptly, and in
any event within five Business Days after a Responsible Officer
becoming aware (i) of the existence of any Default or Event of Default,
or (ii) that any Person has given any notice or taken any action with
respect to a claimed default hereunder or (iii) that any Person has
given any notice or taken any action with respect to a claimed default
of the type referred to in Section 11(f), a written notice specifying
the nature and period of existence thereof and what action the Company
is taking or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five
Business Days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:
(i) with respect to any Plan, any reportable event,
as defined in section 4043(b) of ERISA and the regulations thereunder,
for which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that would
reasonably be expected to result in the incurrence of any liability by
the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or the penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on any of the
rights, properties or assets of the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any other
such liabilities or Liens then existing, would reasonably be expected
to have a Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in
any event within 30 days of receipt thereof, copies of any notice to
the Company or any Subsidiary from any Federal or state Governmental
Authority relating to any order, ruling, statute or other law or
regulation that would reasonably be expected to have a Material Adverse
Effect; and
21
(g) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of its Subsidiaries or relating to the ability of the Company to
perform its obligations hereunder and under the Notes or Warrants as
from time to time may be reasonably requested by any such holder of
Notes or Warrants.
7.2 OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of
Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Sections 10.1, 10.2, 10.6 and 10.8, during
the quarter or annual fiscal period covered by the statements then being
furnished (including with respect to each such Section, where applicable, the
calculations of the maximum or minimum amount, ratio or percentage, as the case
may be, permissible under the terms of such Sections, and the calculation of the
amount, ratio or percentage then in existence); and
(b) Default -- a statement that such Senior Financial Officer
has reviewed the relevant terms hereof and has made, or caused to be made, under
his or her supervision, a review of the transactions and conditions of the
Company and its Subsidiaries from the beginning of the quarterly or annual
period covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the existence during
such period of any condition or event that constitutes a Default or an Event of
Default or, if any such condition or event existed or exists (including without
limitation any such event or condition resulting from the failure of the Company
or any Subsidiary to comply with any Environmental Law), specifying the nature
and period of existence thereof and what action the Company shall have taken or
proposes to take with respect thereto.
7.3 INSPECTION.
The Company shall permit the representatives of each holder of
Notes that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice (not to
be given more than two times in any Fiscal Year) to the Company (and in event,
at least 48 hours), to visit the principal executive office of the Company
during regular business hours, to discuss the affairs, finances and accounts of
the Company and its Subsidiaries with the Company's officers, and (with the
consent of the Company, which consent will not be unreasonably withheld) its
independent public accountants, and (with the consent of the Company, which
consent will not be unreasonably withheld) to visit the other offices and
properties of the Company and each Subsidiary during regular business hours; and
(b) Default -- if a Default or Event of Default then exists,
at the expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their respective
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
22
the Company authorizes said accountants to discuss the affairs, finances and
accounts of the Company and its Subsidiaries), all at such times and as often as
may be requested.
8.0 PREPAYMENT OF THE NOTES.
In addition to the payment of the entire unpaid principal
amount of the Notes at the final maturity thereof, the Company may make optional
prepayments in respect of the Notes, and under certain circumstances may be
required to prepay Notes, all as hereinafter provided.
8.1 OPTIONAL PREPAYMENTS.
Upon notice given as provided in Section 8.2, the Company may
at any time prepay the Notes as a whole, or from time to time in part (in a
minimum amount of $1,000,000 and otherwise in integral multiples of $100,000),
in each case at the principal amount to be prepaid, together with interest
accrued thereon to the date fixed for such prepayment, plus the applicable
prepayment premium (expressed as a percentage of the principal amount so to be
prepaid) indicated below:
Prepayment Date Prepayment Premium
--------------- ------------------
June 30, 1999 to June 29, 2000 8.0%
June 30, 2000 to June 29, 2001 6.0%
June 30, 2001 to June 29, 2002 4.8%
June 30, 2002 to June 29, 2003 3.6%
June 30, 2003 to June 29, 2004 2.4%
June 30, 2004 to June 29, 2005 1.2%
after June 29, 2005 None
8.2 NOTICE OF PREPAYMENT.
The Company will give each holder of Notes written notice of
each prepayment under Section 8.1 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify
the date fixed for such prepayment (which shall be a Business Day), the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of Notes held by such holder to be prepaid (determined in
accordance with Section 8.4) and the interest and prepayment premium, if any, to
be paid on the prepayment date with respect to such principal amount being
prepaid.
8.3 PREPAYMENT IN CONNECTION WITH CHANGE OF CONTROL.
Promptly and in any event within 20 days after the occurrence
of a Change of Control, the Company will give written notice thereof to the
holders of all outstanding Notes, which notice shall (a) refer specifically to
this Section 8.3, (b) describe the Change of Control in reasonable detail and
specify the Change of Control Prepayment Date and the Response Date (as
respectively defined below) in respect thereof and (c) offer to prepay all Notes
at the price specified below on the date therein specified (the "CHANGE OF
CONTROL PREPAYMENT DATE"), which shall be a Business Day not less than 30 nor
more than 60 days after the date of such notice. Each holder of a Note will
notify the Company of such holder's acceptance or rejection of such offer by
giving written notice of such acceptance or rejection to the Company at least
five Business Days prior to the Change of Control Prepayment Date (the "RESPONSE
DATE"). The failure by any such holder to respond in writing to such offer on or
before the Response Date shall be deemed to be an acceptance of such offer by
such holder in respect of such Change of Control.
On the Change of Control Prepayment Date the Company will
prepay all of the Notes held by the holders as to which such offer has been
accepted, at the principal amount of each such Note, together with interest
accrued thereon to the Change of Control Prepayment Date, plus a prepayment
23
premium determined in respect of such principal amount as if such Note were
being prepaid on such date pursuant to Section 8.1.
This Section 8.3 is acknowledged as being subject to the terms
of Section 13.
8.4 ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of a partial prepayment of the Notes pursuant to
Section 8.1, the principal amount of the Notes to be prepaid shall be allocated
among all the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof.
8.5 MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this
Section 8, the principal amount of each Note to be prepaid shall mature and
become due and payable on the date fixed for such prepayment, together with
interest on such principal amount accrued to such date and the applicable
Prepayment premium, if any. From and after such date, unless the Company shall
fail to pay such principal amount when so due and payable, together with the
interest and Prepayment premium, if any, as aforesaid, interest on such
principal amount shall cease to accrue. Any Note paid or prepaid in full shall
be surrendered to the Company and canceled and shall not be reissued, and no
Note shall be issued in lieu of any prepaid principal amount of any Note.
8.6 PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes.
9.0 AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1 COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to
comply with all laws, ordinances or governmental rules or regulations to which
each of them is subject, including without limitation Environmental Laws, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations would not reasonably be expected to have a Material
Adverse Effect.
9.2 INSURANCE.
The Company will and will cause each of its Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
24
9.3 MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Subsidiaries to
operate its Properties or cause such Properties to be operated in accordance
with practices of the industry and in material compliance with all applicable
contracts, agreements and Requirements of Law other than those being contested
in good faith by appropriate proceedings, except to the extent that such
compliance would not have a Material Adverse Effect.
9.4 PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to
file all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary in good faith and in appropriate proceedings, and
the Company or a Subsidiary has established adequate reserves therefor in
accordance with GAAP on the books of the Company or such Subsidiary or (ii) the
nonpayment of all such taxes and assessments in the aggregate would not
reasonably be expected to have a Material Adverse Effect.
9.5 CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force
and effect its corporate existence. Subject to Section 10.6, the Company will at
all times preserve and keep in full force and effect the corporate existence of
each of its Subsidiaries (unless merged into the Company or a Subsidiary) and
all rights and franchises of the Company and its Subsidiaries unless, in the
good faith judgment of the Company, the termination of or failure to preserve
and keep in full force and effect such corporate existence, right or franchise
would not have a Material Adverse Effect.
9.6 ADDITIONAL SUBSIDIARY GUARANTEES.
Forthwith after any Person becomes a Subsidiary after the date
of the Closing (except for Denali ▇▇▇▇▇ and the Subsidiaries of Denali ▇▇▇▇▇ set
forth in Schedule 9.6 or any parent of Denali ▇▇▇▇▇ formed after the date hereof
(so long as such parent complies with Section 10.5(c)), the Company will cause
such Person to execute and deliver a Subsidiary Guarantee and promptly and in
any event within ten Business Days thereafter the Company will furnish each
holder of the Notes with a counterpart of such executed Subsidiary Guarantee,
together with an opinion of Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ or other counsel
reasonably satisfactory to the Majority Holders (which opinion shall be
reasonably satisfactory to the Majority Holders and may be subject to customary
exceptions, qualifications and limitations under the circumstances) to the
effect that such Subsidiary Guarantee has been duly authorized, executed and
delivered by such Subsidiary and is legal, valid, binding and enforceable in
accordance with its terms. The Company will cause each Subsidiary Guarantee to
remain in full force and effect at all times after the execution and delivery
thereof.
9.7 BOARD OBSERVATION RIGHTS.
If a Default or an Event of Default then exists, the Majority
Holders shall have the right to designate one person (the "BOARD OBSERVER") who
will participate in all meetings of the board of directors of the Company and
any committees thereof. The Board Observer shall receive the same information as
any other member of the board of directors of the Company and shall participate
in the meetings to the same extent as any other member of the board of the
directors of the Company, but shall
25
not have the right to vote. The Company shall pay the reasonable out-of-pocket
expenses incurred by the Board Observer in connection with attending the
meetings of the board of directors of the Company and any committees thereof.
9.8 PLEDGE OF SHARES.
The Company hereby expressly agrees to enter into the Pledge
Agreement and to keep such Pledge Agreement effective at all time, with such
Pledge Agreement creating a first priority perfected security interest in all
right, title and interest of the Company in the "Shares" described therein.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding the Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly:
10.1 FINANCIAL CONDITION COVENANTS.
(a) Maximum Leverage Ratio. Permit the Leverage Ratio of the
Company and its Subsidiaries as of the last day of any fiscal quarter of the
Company ending closest to any test date set forth on the table below to be
greater than the ratio set forth opposite such test date below:
Test Date Ratio
--------- -----
6/30/99 4.75x
9/30/99 4.75x
12/31/99 4.75x
3/31/00 4.50x
6/30/00 4.50x
9/30/00 4.25x
12/31/00 4.25x
3/31/01 4.25x
6/30/01 4.25x
9/30/01 4.00x
12/31/01 4.00x
3/31/02 4.00x
6/30/02 4.00x
Thereafter 3.75x
26
(b) Maximum Senior Leverage Ratio. Permit the Senior Leverage
Ratio of the Company and its Subsidiaries as of the last day of any fiscal
quarter of the Company ending closest to any test date set forth on the table
below to be greater than the ratio set forth opposite such test date below:
Test Date Ratio
--------- -----
6/30/99 4.00x
9/30/99 4.00x
12/31/99 4.00x
3/31/00 4.00x
6/30/00 4.00x
9/30/00 3.75x
12/31/00 3.75x
3/31/01 3.75x
6/30/01 3.75x
9/30/01 3.50x
12/31/01 3.50x
3/31/02 3.50x
6/30/02 3.50x
Thereafter 3.25x
27
(c) Minimum Interest Coverage. Permit the ratio of
Consolidated EBITDA (or Adjusted EBITDA, in the case of any period during which
the Company or any Subsidiary has consummated a Permitted Acquisition) to
Consolidated Interest Expense for any period of four consecutive fiscal quarters
(or if less than four fiscal quarters have occurred after the Reference Date,
such full fiscal quarters as have been elapsed since the Reference Date) of the
Company ending closest to any test date set forth on the table below to be less
than the ratio set forth opposite such test date below:
Test Date Ratio
--------- -----
6/30/99 2.50x
9/30/99 2.50x
12/31/99 2.50x
3/31/00 2.50x
6/30/00 2.50x
9/30/00 2.75x
12/31/00 2.75x
3/31/01 2.75x
6/30/01 2.75x
9/30/01 2.75x
12/31/01 2.75x
3/31/02 2.75x
6/30/02 2.75x
Thereafter 3.00x
28
(d) Minimum Fixed Charge Coverage. Permit the ratio of
Consolidated EBITDA (or Adjusted EBITDA, in the case of any period during which
the Company or any Subsidiary has consummated a Permitted Acquisition) less
consolidated capital expenditures of the Company and its Subsidiaries to
Consolidated Fixed Charges for any period of four consecutive fiscal quarters
(or if less than four fiscal quarters have occurred after the Reference Date,
such full fiscal quarters as have been elapsed since the Reference Date) of the
Company ending closest to any test date set forth on the table below to be less
than the ratio set forth opposite such test date below:
Test Date Ratio
--------- -----
6/30/99 1.00x
9/30/99 1.00x
12/31/99 1.00x
3/31/00 1.00x
6/30/00 1.00x
9/30/00 1.00x
12/31/00 1.00x
3/31/01 1.00x
6/30/01 1.00x
Thereafter 1.10x
(e) Maximum Domestic Leverage Ratio. Permit the Domestic
Leverage Ratio of the Company and its Domestic Subsidiaries as of the last day
of any fiscal quarter of the Company ending closest to any test date set forth
on the table below to be greater than the ratio set forth opposite such test
date below:
Test Date Ratio
--------- -----
6/30/99 4.75x
9/30/99 4.75x
12/31/99 4.75x
3/31/00 4.50x
6/30/00 4.50x
9/30/00 4.25x
12/31/00 4.25x
3/31/01 4.25x
6/30/01 4.25x
9/30/01 4.00x
12/31/01 4.00x
3/31/02 4.00x
6/30/02 4.00x
Thereafter 3.75x
29
(f) Maximum Senior Domestic Leverage Ratio. Permit the Senior
Domestic Leverage Ratio of the Company and its Domestic Subsidiaries as of the
last day of any fiscal quarter of the Company ending closest to any test date
set forth on the table below to be greater than the ratio set forth opposite
such test date below:
Test Date Ratio
--------- -----
6/30/99 4.00x
9/30/99 4.00x
12/31/99 4.00x
3/31/00 4.00x
6/30/00 4.00x
9/30/00 3.75x
12/31/00 3.75x
3/31/01 3.75x
6/30/01 3.75x
9/30/01 3.50x
12/31/01 3.50x
3/31/02 3.50x
6/30/02 3.50x
Thereafter 3.25x
30
(g) Minimum Domestic Interest Coverage. Permit the ratio of
Consolidated Domestic EBITDA (or Adjusted Domestic EBITDA, in the case of any
period during which the Company or any Domestic Subsidiary has consummated a
Permitted Acquisition) to Consolidated Domestic Interest Expense for any period
of four consecutive fiscal quarters (or if less than four fiscal quarters have
occurred after the Closing Date, such full fiscal quarters as have been elapsed
since the Closing Date) of the Company ending closest to any test date set forth
on the table below to be less than the ratio set forth opposite such test date
below:
Test Date Ratio
--------- -----
6/30/99 2.50
9/30/99 2.50
12/31/99 2.50
3/31/00 2.50
6/30/00 2.50
9/30/00 2.75
12/31/00 2.75
3/31/01 2.75
6/30/01 2.75
9/30/01 2.75
12/31/01 2.75
3/31/02 2.75
6/30/02 2.75
Thereafter 3.00x
31
(h) Minimum Domestic Fixed Charge Coverage. Permit the ratio
of Consolidated Domestic EBITDA (or Adjusted Domestic EBITDA, in the case of any
period during which the Company or any Domestic Subsidiary has consummated a
Permitted Acquisition) less consolidated capital expenditures of the Company and
its Domestic Subsidiaries to Consolidated Domestic Fixed Charges for any period
of four consecutive fiscal quarters (or if less than four fiscal quarters have
occurred after the Closing Date, such full fiscal quarters as have been elapsed
since the Closing Date) of the Company ending closest to any test date set forth
on the table below to be less than the ratio set forth opposite such test date
below:
Test Date Ratio
--------- -----
6/30/99 1.00x
9/30/99 1.00x
12/31/99 1.00x
3/31/00 1.00x
6/30/00 1.00x
9/30/00 1.00x
12/31/00 1.00x
3/31/01 1.00x
6/30/01 1.00x
Thereafter 1.10x
(i) Maximum Foreign Leverage Ratio. Permit the Foreign
Leverage Ratio of the Foreign Subsidiaries as of the last day of any fiscal
quarter of the Company ending closest to any test date set forth on the table
below to be greater than the ratio set forth opposite such test date below:
Test Date Ratio
--------- -----
6/30/99 4.75x
9/30/99 4.75x
12/31/99 4.75x
3/31/00 4.50x
6/30/00 4.50x
9/30/00 4.25x
12/31/00 4.25x
3/31/01 4.25x
6/30/01 4.25x
9/30/01 4.00x
12/31/01 4.00x
3/31/02 4.00x
6/30/02 4.00x
Thereafter 3.75x
32
(j) Minimum Foreign Interest Coverage. Permit the ratio of
Consolidated Foreign EBITDA (or Adjusted Foreign EBITDA, in the case of any
period during which the Foreign Subsidiary has consummated a Permitted
Acquisition) to Consolidated Foreign Interest Expense for any period of four
consecutive fiscal quarters (or if less than four fiscal quarters have occurred
after the Closing Date, such full fiscal quarters as have been elapsed since the
Closing Date) of the Company ending closest to any test date set forth on the
table below to be less than the ratio set forth opposite such test date below:
Test Date Ratio
--------- -----
6/30/99 2.50
9/30/99 2.50
12/31/99 2.50
3/31/00 2.50
6/30/00 2.50
9/30/00 2.75
12/31/00 2.75
3/31/01 2.75
6/30/01 2.75
9/30/01 2.75
12/31/01 2.75
3/31/02 2.75
6/30/02 2.75
Thereafter 3.00x
33
(k) Minimum Foreign Fixed Charge Coverage. Permit the ratio of
Consolidated Foreign EBITDA (or Adjusted Foreign EBITDA, in the case of any
period during which the Company or any Foreign Subsidiary has consummated a
Permitted Acquisition) less consolidated capital expenditures of the Company and
its Foreign Subsidiaries to Consolidated Foreign Fixed Charges for any period of
four consecutive fiscal quarters (or if less than four fiscal quarters have
occurred after the Closing Date, such full fiscal quarters as have been elapsed
since the Closing Date) of the Company ending closest to any test date set forth
on the table below to be less than the ratio set forth opposite such test date
below:
Test Date Ratio
--------- -----
6/30/99 1.00x
9/30/99 1.00x
12/31/99 1.00x
3/31/00 1.00x
6/30/00 1.00x
9/30/00 1.00x
12/31/00 1.00x
3/31/01 1.00x
6/30/01 1.00x
Thereafter 1.10x
10.2 LIMITATION ON INDEBTEDNESS; SUBORDINATION OF INDEBTEDNESS.
(a) Create, incur, assume or suffer to exist any Indebtedness, except
for Permitted Indebtedness.
(b) The Company will not create, assume, incur, guarantee or otherwise
become liable in respect of any Indebtedness which by its terms is or purports
to be subordinate or junior in right of payment to Superior Debt unless such
Indebtedness by its terms ranks pari passu with, or is subordinate and junior in
right of payment to, the Notes at least to the extent that the Notes are
subordinated to Superior Debt under Section 14.
(c) The Company will not permit any Subsidiary Guarantor to create,
assume, incur, guarantee or otherwise become liable in respect of any
Indebtedness which by its terms is or purports to be subordinate or junior in
right of payment to any other Indebtedness of such Subsidiary Guarantor unless
such Indebtedness by its terms ranks pari passu with, or is subordinate and
junior in right of payment to, such Subsidiary Guarantor's Subsidiary Guarantee
at least to the extent that such Subsidiary Guarantee is subordinated to
Superior Debt of such Subsidiary Guarantor.
For purposes of this Section 10.2, a Subsidiary shall be
deemed to have incurred Indebtedness in respect of any obligation previously
owed to the Company or to a Wholly-Owned Subsidiary on the date the obligee
ceases for any reason to be the Company or a Wholly-Owned Subsidiary and a
Person that hereafter becomes a Subsidiary or is consolidated or merged with or
into the Company or a Subsidiary shall be deemed at that time to have incurred
all of its outstanding Indebtedness.
34
10.3 LIMITATION ON LIENS.
Create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired,
except for Permitted Encumbrances.
10.4 LIMITATION ON GUARANTEE OBLIGATIONS.
Create, incur, assume or suffer to exist any Guarantee
Obligation except:
(a) Guarantee Obligations listed on Schedule 10.4;
(b) the Subsidiary Guarantees;
(c) any guaranty executed in connection with the Bank of Oklahoma Swing
Facility; and
(d) any guaranty executed in connection with the Southwest Bank of
Texas Swing Facility.
10.5 LIMITATION ON FUNDAMENTAL CHANGES.
Enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets, or make any
material change in its present method of conducting business, except:
(a) any Subsidiary of the Company may be merged or consolidated with or
into the Company (provided, that the Company shall be the continuing or
surviving corporation) or with or into any one or more Wholly-Owned Subsidiaries
of the Company (provided, that the Wholly-Owned Subsidiary or Subsidiaries shall
be the continuing or surviving corporation);
(b) any Wholly-Owned Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or otherwise) to
the Company or any other Wholly-Owned Subsidiary of the Company; and
(c) the shares of Denali ▇▇▇▇▇ may be sold to a Wholly-Owned
Subsidiary, provided that (i) the shares of Denali ▇▇▇▇▇ pledged pursuant to the
Pledge Agreement shall continue to be subject to the Lien provided for therein
and (ii) the Company shall create and grant to the holders a first priority
security interest in 65% of the shares of capital stock of such Wholly-Owned
Subsidiary in the same manner as the shares of Denali ▇▇▇▇▇ have been pledged
under the Pledge Agreement.
35
10.6 LIMITATION ON SALE OF ASSETS.
Convey, sell, lease, assign, transfer or otherwise dispose of
any of its property, business or assets (including, without limitation,
receivables and leasehold interests), whether now owned or hereafter acquired,
or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's
Capital Stock to any Person other than the Company or any Wholly-Owned
Subsidiary, except:
(a) the sale or other disposition of (i) obsolete or worn out property
in the ordinary course of business or (ii) other property with a fair market
value not in excess of $2,500,000 in any year;
(b) the sale of inventory in the ordinary course of business;
(c) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the compromise or
collection thereof; and
(d) as permitted by Section 10.5(b).
10.7 LIMITATION ON DIVIDENDS.
Declare or pay any dividend (other than dividends payable
solely in common stock of the Company) on, or make any payment on account of, or
set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of any
class of Capital Stock of the Company or any warrants or options to purchase any
such Capital Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Company or any Subsidiary; provided, that
the Company shall be permitted to make dividends in connection with a Permitted
Acquisition in accordance with the terms disclosed to the holders on the related
Acquisition Abstract so long as no Event of Default has occurred and is
continuing prior to such dividend and after giving effect thereto.
10.8 LIMITATION ON CAPITAL EXPENDITURES.
Make or commit to make (by way of the acquisition of
securities of a Person or otherwise) any expenditure in respect of the purchase
or other acquisition of fixed or capital assets (excluding any such asset
acquired in connection with normal replacement and maintenance programs properly
charged to current operations) and excluding any expenditures in respect of any
Foreign Subsidiaries except for expenditures in the ordinary course of business
not exceeding, in the aggregate for the Company and its Domestic Subsidiaries
during any particular fiscal years of the Company, $5,000,000.
10.9 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES.
Make any advance, loan, extension of credit or capital
contribution to, or purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting a business unit of, or make any other
investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Permitted Acquisitions; and
36
(d) investments by the Company in Subsidiary Guarantors and investments
by such Subsidiary Guarantors in the Company and in other Subsidiary Guarantors.
10.10 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT INSTRUMENTS.
(a) Make any optional payment, voluntary prepayment on or optional
redemption or purchase of any Indebtedness (other than the Loans or the Notes),
or (b) amend, modify or change, or consent or agree to any amendment,
modification or change to any of the terms of any such Indebtedness (other than
the Senior Credit Agreement) or any Acquisition Documents (other than any such
amendment, modification or change which would extend the maturity or reduce the
amount of any payment of principal thereof or which would reduce the rate or
extend the date for payment of interest thereon); provided, however that nothing
contained in this Agreement shall prohibit payments made pursuant to the terms
of the Bank of Oklahoma Swing Facility and the Southwest Bank of Texas Swing
Facility.
10.11 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
Enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of property or the rendering of any service,
with any Affiliate unless such transaction is (a) otherwise permitted under this
Agreement, (b) in the ordinary course of the Company's or such Subsidiary's
business and (c) upon fair and reasonable terms no less favorable to the Company
or such Subsidiary, as the case may be, than it would obtain in a comparable
arm's length transaction with a Person which is not an Affiliate.
10.12 LIMITATION ON SALES AND LEASEBACKS.
Enter into any arrangement with any Person providing for the
leasing by the Company or any Subsidiary of real or personal property which has
been or is to be sold or transferred by the Company or such Subsidiary to such
Person or to any other Person to whom funds have been or are to be advanced by
such Person on the security of such property or rental obligations of the
Company or such Subsidiary.
10.13 LIMITATION ON CHANGES IN FISCAL YEAR.
Permit the fiscal year of the Company to end on a day other
than the Saturday closest to June 30 in any year (each such year, a "FISCAL
YEAR").
10.14 LIMITATION ON NEGATIVE PLEDGE CLAUSES.
Enter into with any Person any agreement, other than (a) the
Senior Credit Agreement, (b) the Dutch Facility, (c) the Bank of Oklahoma Swing
Facility, (d) the Southwest Bank of Texas Swing Facility, and (e) any industrial
revenue bonds, purchase money mortgages or Financing Leases from time to time
permitted under the Senior Credit Agreement and this Agreement (in which cases,
any prohibition or limitation shall only be effective against the assets
financed thereby), which prohibits or limits the ability of the Company or any
of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon
any of its property, assets or revenues, whether now owned or hereafter
acquired.
10.15 LIMITATION ON LINES OF BUSINESS.
Enter into any business, either directly or through any
Subsidiary, except for those businesses in which the Company and its
Subsidiaries are primarily engaged on the date of this Agreement or which are
directly related thereto or a natural and logical extension thereof.
37
10.16 GOVERNING DOCUMENTS.
Amend its certificate of incorporation (except to increase the
number of authorized shares of common stock), partnership agreement or other
Governing Documents, without the prior written consent of the Majority Holders,
which shall not be unreasonably withheld or delayed.
10.17 LIMITATION ON SUBSIDIARY FORMATION.
Form any Subsidiary unless, immediately upon the formation of
such Subsidiary, all requirements of Section 9.6 shall have been satisfied.
10.18 LIMITATION ON MANAGEMENT FEES.
The Company shall not pay to any Affiliate any management fee
or similar fee.
10.19 NEGATIVE PLEDGE.
Create or suffer to exist, or permit any of its Subsidiaries
to create or suffer to exist, any Lien (other than the Lien created by the
Pledge Agreement or as otherwise permitted by Section 10.5(c)) on any share of
capital stock (or any other evidence of ownership) of Denali ▇▇▇▇▇ or its parent
(if such parent is not the Company).
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following
conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or prepayment
premium, if any, on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note for
more than ten days after the same becomes due and payable; or
(c) the Company defaults in the performance of or compliance with any
term contained in Section 7.1(d) or 8.3; or
(d) the Company defaults in the performance of or compliance with any
term contained in Section 10.1 and such default is not remedied within ten days
after a Responsible Officer obtains knowledge of such default; or
(e) the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a), (b), (c)
and (d) of this Section 11) and such default is not remedied within 30 days
after a Responsible Officer obtains knowledge of such default; or
(f) any representation or warranty made in writing by or on behalf of
the Company or any Affiliate of the Company or by any officer of the Company or
any such Affiliate in this Agreement or in any writing furnished in connection
with the transactions contemplated hereby proves to have been false or incorrect
in any material respect on the date as of which made; or
38
(g) (i) the Company or any Subsidiary is in default (as principal or as
guarantor or other surety) in the payment of any principal of or premium or
prepayment premium or interest on any Indebtedness (other than the Notes), and
as a consequence of such default such Indebtedness has become, or has been
declared, due and payable before its stated maturity or before its regularly
scheduled dates of payment, or (ii) the Company or any Subsidiary is in default
in the performance of or compliance with any term of any evidence of any
Indebtedness outstanding in an aggregate principal amount of at least $500,000
or of any mortgage, indenture or other agreement relating thereto or any other
condition exists, and as a consequence of such default or condition such
Indebtedness has become, or has been declared, due and payable before its stated
maturity or before its regularly scheduled dates of payment, or (iii) as a
consequence of the occurrence or continuation of any event or condition (other
than the passage of time or the right of the holder of Indebtedness outstanding
in an aggregate principal amount of at least $500,000 to convert such
Indebtedness into equity interests or a sale of assets or other transaction that
is permitted if made in connection with a repayment of Indebtedness), the
Company or any Subsidiary has become obligated to purchase or repay such
Indebtedness before its regular maturity or before its regularly scheduled dates
of payment; or
(h) the Company or any Subsidiary (i) is generally not paying, or
admits in writing its inability to pay, its Indebtedness as it becomes due, (ii)
files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or
(i) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the Company or any Subsidiary, a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, or constituting
an order for relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company or any such Subsidiary, or any such
petition shall be filed against the Company or any such Subsidiary and such
petition shall not be dismissed within 60 days; or
(j) a final judgment or judgments not covered by insurance (as to which
the insurer has admitted liability in writing) for the payment of money
aggregating in excess of $500,000 are rendered against one or more of the
Company and its Subsidiaries which judgments are not, within 60 days after entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within 90 days after the expiration of such stay; or
(k) except in connection with a transaction permitted by Section 10.5,
any Subsidiary Guarantee shall cease to be in full force and effect as an
enforceable obligation of the respective Subsidiary Guarantor or any of the
Subsidiary Guarantors shall assert that its Subsidiary Guarantee is
unenforceable in any material respect; or
39
(l) The Company or one of its Wholly-Owned Subsidiaries fails to
acquire 95% or more of the outstanding shares of ▇▇▇▇▇ within five days of the
Closing; or
(m) the Pledge shall cease to be, or shall be asserted by the Company
or any Subsidiary not to be, a valid, perfected, first security interest in the
securities covered thereby.
12. REMEDIES ON DEFAULT, ETC.
12.1 ACCELERATION.
(a) If an Event of Default with respect to the Company described in
paragraph (h) or (i) of Section 11 has occurred, all the Notes then outstanding
shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the
Majority Holders may at any time at its or their option, by notice or notices to
the Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by written notice or notices to the Company, declare all the Notes
held by it or them to be immediately due and payable.
Upon any Note becoming due and payable under this Section
12.1, whether automatically or by declaration, such Note will forthwith mature
and the entire unpaid principal amount of such Note, plus (x) all accrued and
unpaid interest thereon and (y) the prepayment premium (to the full extent
permitted by applicable law) determined in respect of such principal amount as
if such Note were being prepaid on such date pursuant to Section 8.1, shall all
be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived.
12.2 OTHER REMEDIES.
If any Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
12.3 RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to paragraph (b) or (c) of Section 12.1, subject to Section 13, the
Majority Holders, by written notice to the Company, may rescind and annul any
such declaration and its consequences if (a) the Company has paid all overdue
interest on the Notes, all principal of and prepayment premium, if any, on any
Notes that are due and payable and are unpaid other than by reason of such
declaration, and all interest on such overdue principal and prepayment premium,
if any, and (to the extent permitted by applicable law) any overdue interest in
respect of the Notes, at the Default Rate, (b) all Events of Default and
Defaults, other than the non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Notes. No rescission and annulment
under this Section 12.3 will extend to or affect any subsequent Event of Default
or Default or impair any right consequent thereon.
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12.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of
any Note in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers or remedies. No
right, power or remedy conferred by this Agreement or by any Note upon any
holder thereof shall be exclusive of any other right, power or remedy referred
to herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all reasonable costs and expenses of such holder
incurred in any enforcement or collection under this Section 12, including
without limitation reasonable attorneys' fees, expenses and disbursements.
13. SUBORDINATION OF NOTES.
13.1 SUBORDINATION TO SUPERIOR INDEBTEDNESS.
Notwithstanding any provision of this Agreement or the Notes
to the contrary, payments of the principal of and premium, if any, and interest
on the Notes shall be subordinate and junior in right of payment to the prior
payment in full of all Superior Indebtedness of the Company, whether now owed or
hereafter incurred, to the extent and in the manner provided in this Section.
"SUPERIOR INDEBTEDNESS" means any and all Indebtedness,
liabilities and obligations of the Company to Senior Creditors which are not
expressed to be junior or subordinate in right of payment to any other
Indebtedness of the Company, whether owed individually or jointly, absolute or
contingent, direct or indirect, joint, several or independent, including all
principal, interest, fees, reimbursement expenses, indemnification liabilities,
interest rate hedging obligations, or any other form of liability, and shall
include any such interest, fees, reimbursement expenses, indemnification
liabilities or other form of liability arising after the commencement of a
bankruptcy or insolvency proceeding involving the Company, whether or not
allowed as a claim in such proceeding, and shall also include any extensions,
renewals, refinancings or refundings thereof and any increases thereof, with
respect to each such Indebtedness, in an aggregate amount not to exceed
$3,500,000; provided, however, that to the extent that any such extension,
renewal, refinancing or refunding (other than the $3,500,000 aggregate increase
referred to in this definition) causes or constitutes any breach of Section
10.1, such amount of Indebtedness shall not be deemed to be Superior
Indebtedness.
13.2 EFFECTS OF DEFAULTS IN RESPECT OF SUPERIOR INDEBTEDNESS.
If (a) any principal, interest or other amounts owing under
the Superior Indebtedness is not paid when due or is not paid on or before the
maturity thereof, (b) a bankruptcy filing is made by or against the Company, or
(c) there occurs any actual acceleration of any Superior Indebtedness by any
Senior Creditor (any of (a), (b) or (c) being referred to as a "BLOCKAGE EVENT")
then, unless and until such Blockage Event shall have been cured or waived to
the satisfaction of the Senior Creditors holding the affected Superior
Indebtedness, in their sole discretion, or unless and until the affected
Superior Indebtedness shall be paid in full, no payments of any principal,
interest, premium or any other kind (other than payments in kind permitted by
the Notes in respect of a portion of accrued interest thereon), shall be made on
the Notes.
Following any event of default caused by the default in the
observance or performance of any agreement contained in Section 10 of the Senior
Credit Agreement (Negative Covenants) in respect of Superior Indebtedness (a
"SENIOR DEFAULT") other than a Blockage Event (a "TRIGGERING EVENT"), and notice
thereof by or on behalf of the Senior Creditors to the holders of the Notes, no
payments of any kind, principal, interest, premium or any other kind, may be
made on the Notes for a period of 180 days or, if earlier, the date on which
such Senior Default is cured to the satisfaction of the affected Senior
Creditors or waived by the affected Senior Creditors.
41
In addition, following any Blockage Event or Triggering Event
and notice thereof by or on behalf the Senior Creditors to the holders of the
Notes, the holders of the Notes will not ask for, ▇▇▇ for, take, demand, set-off
or in any other manner, direct or indirect, attempt to enforce any right or
collect any payment or distribution on account of the Notes, nor present any
Note for payment for a 120 day period following such notice (the "STANDSTILL
PERIOD"). The Standstill Period shall end on the earlier of (i) 120 days after
the receipt of such notice and (ii) the cure of such Blockage Event to the
satisfaction of the affected Senior Creditors or the waiver thereof by such
Senior Creditors or the cure of such Triggering Event to the satisfaction of the
Senior Creditors or the waiver thereof by the Senior Creditors. Upon the ending
of the Standstill Period, the holders of the Notes may exercise the remedies
available to them under this Agreement and the Notes, provided that any money,
property, collateral or any proceeds thereof received by any holder of a Note,
directly or indirectly, during such Standstill Period or while any Blockage
Event remains uncured or unwaived (before or after the giving of notice thereof)
shall be paid over to the Senior Creditors.
After the expiration of a Triggering Event or the termination
of a Blockage Event, any regularly scheduled interest or principal payment on
account of the Notes not made when due as a result thereof may be made, together
with any accrued and unpaid interest with respect to such overdue payment,
provided that such payment shall not result in a separate Triggering Event or
Blockage Event.
Not more than one notice with regard to a Triggering Event may
be given by the Senior Creditors to the holders of the Notes in any one calendar
year, and no subsequent notice with regard to a Triggering Event may be sent on
the basis of the same Senior Default that is specified in any prior notice.
During any Standstill Period, no holder of a Note may commence
any action or proceeding against the Company to recover all or any part of the
Notes or join with any other creditor, unless the Senior Creditors shall also,
in their sole and absolute discretion, agree to join in bringing any proceedings
against the Company under any bankruptcy, reorganization, readjustment of debt,
arrangement of debt, receivership, liquidation or insolvency law or statute of
the federal or any state government unless and until all Superior Indebtedness
shall be finally paid in full in cash; provided, however, that, if the Senior
Creditors shall, during the Standstill Period, accelerate their Superior
Indebtedness or exercise or begin to exercise their rights with respect to any
collateral therefor, the Majority Holders shall immediately have the right to
accelerate the Notes and otherwise exercise their remedies under this Agreement
and the Notes, to the extent permitted hereunder, notwithstanding such
Standstill Period.
13.3 INSOLVENCY, ETC.
(a) In the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or to its creditors, as such, or
to the property of the Company, and in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy, then the holders of the Superior
Indebtedness shall be entitled to receive payment in full of any obligations
with respect to the Superior Indebtedness. To that end any payment or
distribution of any kind or character, whether in cash or property or
securities, which may be payable or deliverable in any such proceedings in
respect of the obligations evidenced by the Notes (except (i) a distribution of
securities which are subordinate and junior (to at least the same extent as the
Notes) in right of payment to the payment of all obligations with respect to the
Superior Indebtedness then outstanding or (ii) any payment or distribution to
the holders of the Notes which is authorized by an order or decree (from which
no appeal may be taken), which order or decree gives effect to these
subordination provisions) shall be paid or delivered by the Company (or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution), or by any holder of a Note, if received by
it, first, to the holders of the Superior Indebtedness, pro rata, for
application in
42
payment of the obligations with respect thereto, to the extent necessary to pay
all obligations with respect to the Superior Indebtedness in full, after giving
effect to any concurrent payment or distribution to the holders of the Superior
Indebtedness, before any such payment or distribution shall be made to or
retained by any holder of a Note.
(b) Following the occurrence and during the continuation of any event
or circumstance described in Section 13.3(a), if within ten (10) days of the
applicable bar date, one or more of the holder(s) of the Notes shall fail to
file a proof of claim, the Senior Creditors shall have the right, but not the
obligation (but without creating any duty or liability, except in the case of
gross negligence or willful misconduct by the Senior Creditors, to the holders
of Notes), to file a proof of claim for or collect the claim of such holder of
Notes (to be applied as set forth in Section 13.3(a)) directly from the
receiver, trustee, custodian, liquidator or representative of the Company's
estate in such proceedings. In the event that the Senior Creditors acquire the
right to file a proof of claim pursuant to this Section 13.3(b), the Company and
the applicable holders of Notes shall promptly furnish all assignments, powers
or other documents reasonably requested by the Senior Creditors to facilitate
the filing of such proof(s) of claim by the Senior Creditors.
13.4 TURNOVER OF CERTAIN PAYMENTS.
To the extent that the holder of any Note receives any payment in
violation of the subordination provisions contained in this Section 13, such
holder (by the acceptance of such Note) agrees to hold such payments in trust
and promptly to pay such amounts to the holders of the Superior Indebtedness. As
used herein, the term "payment" shall include any distribution of assets or any
lien, deposit, set-off, or recoupment of any kind for the benefit of the holder
of the Notes made from the assets of the Company.
13.5 NO IMPAIRMENT.
Nothing contained herein shall impair, as between the Company and the
holder of any Note, the obligation of the Company to pay to the holder thereof
the principal thereof and prepayment premium, if any, and interest thereon as
and when the same shall become due and payable in accordance with the terms of
such Note and this Agreement, or, except as provided herein, prevent the holder
of any Note from exercising all rights, powers and remedies otherwise permitted
by applicable law or thereunder upon the happening of an Event of Default, all
subject to the rights of the holders of Superior Indebtedness as provided in
this Section 13 to receive cash, securities or other property otherwise payable
or deliverable to the holders of the Notes directly or indirectly by the Company
from any source whatsoever.
13.6 PAYMENT OF SUPERIOR INDEBTEDNESS, SUBROGATION, ETC.
Upon the payment in full of all Superior Indebtedness of the Company,
the holders of the Notes shall be subrogated to all rights of the holders of
such Superior Indebtedness to receive any further payments or distributions
applicable to such Superior Indebtedness until the Notes shall have been paid in
full, and, for the purposes of such subrogation, no payment or distribution
received by the holders of such Superior Indebtedness of cash, securities, or
other property to which the holders of the Notes would have been entitled except
for this Section 13 shall, as between the Company and its creditors other than
the holders of Superior Indebtedness, on the one hand, and the holders of the
Notes, on the other hand, be deemed to be a payment or distribution by the
Company on account of Superior Indebtedness.
13.7 RESCISSION, AMENDMENT, ETC.
Each holder of a Note consents that, without the necessity of
any reservation of rights against any holder of a Note, and without notice to or
further assent by any holder of a Note:
43
(a) any demand for payment of any Superior Indebtedness made by any
Senior Creditor may be rescinded in whole or in part by such Senior Creditor,
and any obligations under the Superior Indebtedness may be continued, and the
Superior Indebtedness, or the liability of the Company or any guarantor or any
other party upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, or any obligation or
liability of the Company or any other party under the Superior Indebtedness or
any other agreement, may, from time to time, in whole or in part, be renewed,
extended, modified, accelerated, compromised, waived, surrendered, or released
by any Senior Creditor; and
(b) any Superior Indebtedness may be amended, modified, supplemented or
terminated, in whole or in part, as any Senior Creditor may deem advisable from
time to time, and any collateral security at any time held by any of the Senior
Creditors for the payment of any of the Superior Indebtedness may be sold,
exchanged, waived, surrendered or released;
in each case all without notice to or further assent by any holder of a Note,
which will remain bound under this Agreement, and all without impairing,
abridging, releasing or affecting the subordination provided for herein, subject
always to the proviso contained in the definition of Superior Indebtedness.
14. REGISTRATION; EXCHANGE; SUBSTITUTION OF SECURITIES.
14.1 REGISTRATION OF NOTES AND WARRANTS.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of the Notes and the Warrants.
The name and address of each holder of one or more Notes or Warrants, each
transfer thereof and the name and address of each transferee of one or more
Notes or Warrants shall be registered in such register. Prior to due presentment
for registration of transfer, the Person in whose name any Note or Warrant, as
applicable, shall be registered shall be deemed and treated as the owner and
holder thereof for all purposes hereof, and the Company shall not be affected by
any notice or knowledge to the contrary. The Company shall give to any holder of
a Note or Warrant that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes and Warrants.
14.2 TRANSFER AND EXCHANGE OF NOTES OR WARRANTS.
Upon surrender of any Note or Warrant at the principal executive office
of the Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or Warrant or his attorney duly authorized in writing and accompanied by
the address for notices of each transferee of such Note, Warrant or part
thereof), within five Business Days thereafter the Company shall execute and
deliver, at the Company's expense (except as provided below), one or more new
Notes or Warrant, as applicable,(as requested by the holder thereof) in exchange
therefor, in an aggregate principal amount equal to the unpaid principal amount
of the surrendered Note or Warrant. Each such new Note or Warrant shall be
payable to such Person as such holder may request. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Notes or Warrants. Notes shall not be transferred in
denominations of less than $500,000, provided that if necessary to enable the
registration of transfer by a holder of its entire holding of Notes, one Note
may be in a denomination of less than $500,000. Any transferee, by its
acceptance of a Note registered in its name (or the name of its nominee), shall
be deemed to have made the representation set forth in Section 6.2.
44
14.3 REPLACEMENT OF NOTES AND WARRANTS.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
or Warrant (which evidence shall be, in the case of an Institutional Investor,
notice from such Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note or Warrant is, or
is a nominee for, an original Purchaser or another holder of a Note or Warrant
with a minimum net worth of at least $5,000,000, such Person's own unsecured
agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation thereof,
within five Business Days thereafter the Company at its own expense shall
execute and deliver, in lieu thereof, a new Note or Warrant, as applicable, in
the case of a new Note dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated Note
or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.
15. PAYMENTS ON NOTES.
15.1 PLACE OF PAYMENT.
Subject to Section 15.2, payments of principal, premium, if any, and
interest becoming due and payable on the Notes shall be made at the principal
office of The Chase Manhattan Bank in New York City. The Company may at any
time, by notice to each holder of a Note, change the place of payment of the
Notes so long as such place of payment shall be either the principal office of
the Company in New York City or the principal office of a bank or trust company
in New York City.
15.2 HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 15.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
prepayment premium, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 15.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of interest added to the principal thereof, principal
paid thereon and the last date to which interest has been paid thereon or
surrender such Note to the Company in exchange for a new Note or Notes pursuant
to Section 14.2. The Company will afford the benefits of this Section 15.2 to
any Institutional Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 15.2.
16. EXPENSES, ETC.
16.1 TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all reasonable costs and expenses (including reasonable
attorneys' fees of your special counsel and, if reasonably required, local or
other counsel) incurred by you and each holder of a Note or Warrant in
45
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes or the Warrants
(whether or not such amendment, waiver or consent becomes effective), including
without limitation: (a) the costs and expenses incurred in enforcing or
defending (or determining whether or how to enforce or defend) any rights under
this Agreement or the Notes or the Warrants or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the Notes or Warrants, or by reason of being a holder of any
Note or any Warrant, and (b) the costs and expenses, including financial
advisors' fees, incurred in connection with the insolvency or bankruptcy of the
Company or any Subsidiary or in connection with any work-out or restructuring of
the transactions contemplated hereby and by the Notes or the Warrants. The
Company will pay, and will save you and each other holder of a Note or a Warrant
harmless from, all claims in respect of any fees, costs or expenses if any, of
brokers and finders (other than those retained by you).
In furtherance of the foregoing, on the date of the Closing the Company
will pay or cause to be paid the reasonable fees and disbursements and other
charges (including estimated unposted disbursements and other charges as of the
date of the Closing) of your special counsel which are reflected in the
statement of such special counsel submitted to the Company on or prior to the
date of the Closing. The Company will also pay, promptly upon receipt of
supplemental statements therefor, reasonable additional fees, if any, and
disbursements and charges of such special counsel in connection with the
transactions hereby contemplated (including disbursements and other charges
unposted as of the date of the Closing to the extent such disbursements exceed
estimated amounts paid as aforesaid).
16.2 SURVIVAL.
The obligations of the Company under this Section 16 will survive the
payment or transfer of any Note or any Warrant, the enforcement, amendment or
waiver of any provision of this Agreement or the Notes or the Warrants, and the
termination of this Agreement. Nothing in this Section 16 shall limit the
obligations of the Company in the Warrant with respect to expenses.
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes and the Warrants, the
purchase or transfer by you of any Note or any Warrant or portion thereof or
interest therein and the payment of any Note or exercise or expiry of any
Warrant, and may be relied upon by any subsequent holder of a Note or Warrant,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note or Warrant. All statements contained in any certificate
or other instrument delivered by or on behalf of the Company pursuant to this
Agreement shall be deemed representations and warranties of the Company under
this Agreement. Subject to the preceding sentence, this Agreement and the Notes
and the Warrants embody the entire agreement and understanding between you and
the Company and supersede all prior agreements and understandings relating to
the subject matter hereof.
18. AMENDMENT AND WAIVER.
18.1 REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Majority Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 22, or any defined term (as it is used
therein), will be effective as to you unless consented to by you in writing, and
(b) no such amendment or waiver may, without the written consent of the holder
of each Note at the time outstanding affected thereby, (i) subject to the
provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or change the rate
or the time of payment or method of computation of interest or
46
of the prepayment premium on, the Notes, (ii) change the percentage of the
principal amount of the Notes the holders of which are required to consent to
any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12
or 18.
18.2 SOLICITATION OF HOLDERS OF NOTES.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
18.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 18
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
18.4 NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
19. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
47
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or it
shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such address
as such other holder shall have specified to the Company in writing, or
(iii) if to the Company, to the Company at its address set forth at the
beginning hereof to the attention of R. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Fax: ▇▇▇-▇▇▇-▇▇▇▇,
Telephone: ▇▇▇-▇▇▇-▇▇▇▇, or at such other address as the Company shall have
specified to the holder of each Note and each Warrant in writing.
Notices under this Section 19 will be deemed given only when actually received.
20. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes, the
Subsidiary Guarantees and Warrants themselves), and (c) financial statements,
certificates and other information previously or hereafter furnished to you, may
be reproduced by you by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and you may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the
Company or any other holder of Notes, Subsidiary Guarantees or Warrants from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
21. CONFIDENTIAL INFORMATION.
For the purposes of this Section 21, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement, provided that such term does not include information that (a) was
publicly known or otherwise known to you prior to the time of such disclosure,
(b) subsequently becomes publicly known through no act or omission by you or any
person acting on your behalf, (c) otherwise becomes known to you other than
through disclosure by the Company or any Subsidiary or (d) constitutes financial
statements delivered to you under Section 7.1 that are otherwise publicly
available. You will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by you in good faith to
protect confidential information of third parties delivered to you, provided
that you may deliver or disclose Confidential Information to (i) your directors,
officers, trustees, employees, agents, attorneys and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by your Notes and Warrants), (ii) your financial advisors and other
professional advisors whose duties require them to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 21, (iii) any other holder of any Note or Warrant, (iv) any
Institutional Investor to which you sell or offer to sell such Note or Warrant
or any part thereof or any participation therein (if such Person has agreed in
writing prior to its receipt of such Confidential Information to be bound by the
provisions of this Section 21), (v) any Person from which you offer to purchase
any security of the Company (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions of this
Section 21), (vi) any federal or state regulatory authority having jurisdiction
over you, (vii) the National Association of Insurance Commissioners or any
similar organization, or any nationally recognized rating agency that requires
48
access to information about your investment portfolio or (viii) any other Person
to which such delivery or disclosure may be necessary or appropriate (w) to
effect compliance with any law, rule, regulation or order applicable to you, (x)
in response to any subpoena or other legal process, (y) in connection with any
litigation to which you are a party or (z) if an Event of Default has occurred
and is continuing, to the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under your Notes, Warrants and this
Agreement. Each holder of a Note or Warrant, by its acceptance of a Note or a
Warrant, will be deemed to have agreed to be bound by and to be entitled to the
benefits of this Section 21 as though it were a party to this Agreement. On
reasonable request by the Company in connection with the delivery to any holder
of a Note or Warrant of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 21.
22. MISCELLANEOUS.
22.1 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including without limitation any subsequent
holder of a Note or Warrant) whether so expressed or not.
22.2 CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.3 CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL.
(a) The Company irrevocably submits to the non-exclusive in personam
jurisdiction of any New York State or federal court sitting in the Borough of
Manhattan, The City of New York, over any suit, action or proceeding arising out
of or relating to this Agreement or the Notes or the Warrants. To the fullest
extent it may effectively do so under applicable law, the Company irrevocably
waives and agrees not to assert, by way of motion, as a defense or otherwise,
any claim that it is not subject to the in personam jurisdiction of any such
court, any objection that it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
(b) The Company consents to process being served in any suit, action or
proceeding of the nature referred to in paragraph (a) of this Section 22.3 by
mailing a copy thereof by registered or certified mail, postage prepaid, return
receipt requested, to the address of such party specified in Section 18 or at
such other address of which you shall then have been notified pursuant to said
Section. The Company agrees that such service upon receipt (i) shall be deemed
in every respect effective service of process upon it in any such suit, action
or proceeding and (ii) shall, to the full extent permitted by law, be taken and
held to be valid personal service upon and personal delivery to such party.
Notices hereunder shall be conclusively presumed received as evidenced by a
delivery receipt furnished by the United States Postal Service or any reputable
commercial delivery service.
49
(c) Nothing in this Section 22.3 shall affect the right of any holder
of Notes or Warrants to serve process in any manner permitted by law, or limit
any right that the holders of any of the Notes or Warrants may have to bring
proceedings against the Company in the courts of any appropriate jurisdiction or
to enforce in any lawful manner a judgment obtained in one jurisdiction in any
other jurisdiction.
(d) EACH OF THE PARTIES HERETO WAIVES TRIAL BY JURY IN ANY ACTION
BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTES, THE WARRANTS OR ANY
OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH.
22.4 PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes or the Warrants to the contrary
notwithstanding (but without limiting the requirement in Section 8.1 that notice
of any prepayment specify a Business Day as the date fixed for such prepayment),
any payment of principal of or Prepayment premium (if any) or interest on any
Note that is due on a date other than a Business Day shall be made on the next
succeeding Business Day without including the additional days elapsed in the
computation of the interest payable on such next succeeding Business Day.
22.5 SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the fullest extent permitted by applicable law) not
invalidate or render unenforceable such provision in any other jurisdiction.
22.6 ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined in this
Agreement have the meanings respectively given to them in accordance with GAAP.
Except as otherwise specifically provided herein, all computations made pursuant
to this Agreement shall be made in accordance with GAAP and all balance sheets
and other financial statements with respect thereto shall be prepared in
accordance with GAAP. Except as otherwise specifically provided herein, any
consolidated financial statement or financial computation shall be done in
accordance with GAAP, applied on a basis consistent with the audited Financial
Statements (except for changes concurred with by the Company's independent
public accountants).
22.7 INDEMNIFICATION.
The Company agrees to indemnify, exonerate and hold you and each of
your officers, directors, employees and agents (collectively the "INDEMNITIES"
and individually an "INDEMNITEE") free and harmless from and against any and all
actions, causes of action, suits, losses, liabilities and damages, and expenses
in connection therewith, including without limitation reasonable counsel fees
and disbursements (collectively the "INDEMNIFIED LIABILITIES"), incurred by the
Indemnitees or any of them as a result of, or arising out of, or relating to any
transaction financed or to be financed in whole or in part directly or
indirectly with proceeds from the sale of any of the Notes, or the execution,
delivery, performance or enforcement of this Agreement, the Warrant or any
instrument contemplated hereby by any of the Indemnitees, except as to any
Indemnitee for any such Indemnified Liabilities arising on account of such
Indemnitee's gross negligence or willful misconduct; and if and to the extent
the foregoing undertaking may be unenforceable for any reason, the Company
agrees to make the maximum contribution to the
50
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The obligations of the Company under this
Section shall survive the payment of the Notes and the exercise or expiry of the
Warrants.
22.8 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.9 GOVERNING LAW.
This Agreement and the Notes and the Warrants shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by
the laws of the State of New York, excluding choice-of-law principles of the law
of such State that would require the application of the laws of a jurisdiction
other than such State.
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
DENALI INCORPORATED
By /s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Title: Vice President/CFO
51
The foregoing is hereby agreed to as of the date thereof.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Title: Vice President & Investment Officer
A.G. INVESTMENT ADVISORY SERVICES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Title: Vice President & Investment Officer
EMC EQUITY FUND, L.P.
By: /s/ ▇▇▇▇▇▇ ▇. ST. ▇▇▇▇▇▇▇
--------------------------------
Title: Managing Director/Treasurer
▇▇▇▇▇▇▇▇ INVESTMENT PARTNERS, L.P.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Title: President of Texas Production Company, General Partner
▇▇▇▇▇▇▇ FAMILY TRUST
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------------------
Title: Co-Trustee
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. MARITAL TRUST
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------------------
Title: Trustee
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------------------
Title: Self
▇▇▇▇ ▇. STAFF
By: /s/ ▇▇▇▇ ▇. STAFF
--------------------------------
Title: Self
▇▇▇▇▇▇▇ TRUST CO., LTD.
By: /s/ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Title: President
52
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ REVOCABLE TRUST
By: /s/ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Title: Trustee
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
--------------------------------
Title: Self
C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
By: /s/ C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Title: Self
H. ▇▇▇▇ ▇▇▇▇▇▇
By: /s/ H. ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Title: Self
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, CUSTODIAN
F/B/O ▇▇▇ ▇. ▇▇▇▇▇▇▇ PROFIT SHARING
PLAN DATED 12/11/89
By: /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
--------------------------------
Title: Assistant Vice President
53
THE SENIOR SUBORDINATED NOTE REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE ACT AND SUCH LAWS OR IN A TRANSACTION WHICH QUALIFIES AS
AN EXEMPT TRANSACTION UNDER THE ACT AND SUCH LAWS AND THE RESPECTIVE RULES AND
REGULATIONS PROMULGATED THEREUNDER.
EXHIBIT 1.1
[FORM OF NOTE]
DENALI INCORPORATED
12% SENIOR SUBORDINATED NOTE DUE 2006
No. R-[_____] New York, New York
$[_______] [Date]
PPN: 248221A*4
FOR VALUE RECEIVED, the undersigned, DENALI INCORPORATED (the
"COMPANY"), a Delaware corporation, hereby promises to pay to [ ], or
registered assigns, the principal sum of [ ] DOLLARS on [ ], 2006,
with interest (computed on the basis of a 360-day year of twelve 30-day months)
(a) from the date hereof on the unpaid balance thereof at the rate of 12% per
annum, payable quarterly on [ ______________ ] in each year, until the principal
hereof shall have become due and payable and (b) on any overdue payment of
principal, any overdue payment of interest and any overdue payment of any
premium, payable quarterly as aforesaid (or, at the option of the holder hereof,
on demand) at a rate per annum from time to time equal to the greater of (i) 14%
and (ii) 2% above the rate of interest publicly announced by The Chase Manhattan
Bank from time to time at its principal office in New York City as its prime or
base rate.
Payments of principal of, interest on and any prepayment
premium with respect to this Note are to be made in lawful money of the United
States of America at said principal office of The Chase Manhattan Bank or at
such other place as the Company shall have designated by written notice to the
holder of this Note as provided in the Note Agreement referred to below.
This Note is one of a series of 12% Senior Subordinated Notes
due 2006 issued pursuant to the Note and Warrant Purchase Agreement dated as of
June 30, 1999 (as from time to time amended, the "NOTE Agreement") by the
Company and the respective Purchasers named on Schedule A therein and is
entitled to the benefits thereof. This Note is also entitled to the benefits of
Subsidiary Guarantees heretofore and from time to time hereafter executed and
delivered pursuant to the Note Agreement. Each holder of this Note will be
deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 21 of the Note Agreement and (ii) to have made
the representation set forth in Section 6.2 of the Note Agreement.
Payments of principal of, interest on and any premium with
respect to this Note are subordinated, to the extent specified in the Note
Agreement, to all Superior Indebtedness of the Company, as such term is defined
in the Note and Warrant Purchase Agreement.
This Note is a registered Note and, as provided in the Note
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
54
- 2 -
The Company may make optional prepayments of principal, in
whole or from time to time in part, and under circumstances involving a change
of control may be required to prepay this Note in full, at the times and on the
terms specified in the Note Agreement, but not otherwise.
If an Event of Default, as defined in the Note Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable premium) and with the effect provided in the Note Agreement.
This Note shall be construed and enforced in accordance with,
and the rights of the Company and the holder hereof shall be governed by, the
laws of the State of New York, excluding choice-of-law principles of the law of
such State that would require the application of the laws of a jurisdiction
other than such State.
DENALI INCORPORATED
By
------------------------
Title:
55
EXHIBIT 1.2
[FORM OF WARRANT]
NUMBER OF SHARES: _____ WARRANT No. _____
WARRANT TO PURCHASE
COMMON STOCK OF DENALI INCORPORATED
DENALI INCORPORATED, a Delaware corporation (the "COMPANY"),
HEREBY CERTIFIES THAT, for value received, [__________], or registered assigns,
is entitled to purchase fully paid and non-assessable shares of Common Stock,
par value $0.01 per share, of the Company (adjusted as below provided) at any
time from the Closing Date (as defined below) until 5:00 p.m., New York City
time, on the Warrant Expiration Date (as defined below) or the next succeeding
Business Day if such Warrant Expiration Date is not a Business Day (as defined
below). As used herein, the term "COMMON STOCK" means the Company's common
stock, par value $0.01 per share, as constituted on the date of original issue
of this Warrant, and (unless the context otherwise requires) irrespective of the
classes into which such common stock may be divided, and any shares of capital
stock into which such common stock may thereafter be changed or that may be
issued in respect of, in exchange for, or in substitution of such common stock
by reason of any transaction described in Section 8. As used herein, the term
"WARRANTS" means all warrants originally issued pursuant to the Agreements (as
defined below) and all warrants delivered in substitution or exchange for such
warrants. The term "WARRANT" means one of the Warrants.
This Warrant is one of an issue of Warrants to Purchase Common
Stock of the Company issued on June 30, 1999, the date of original issue of this
Warrant (the "CLOSING DATE"), pursuant to the several Note and Warrant Purchase
Agreements dated as of June 30, 1999 (the "AGREEMENTS"), entered into by the
Company with certain investors named in Schedule A to the Agreements (the
"PURCHASERS"). The holder of this Warrant is entitled to certain benefits of the
Agreements. In addition to payment of the Warrant Price (as defined herein) the
Company has granted this Warrant and agreed to issue the shares of Common Stock
issuable upon exercise hereof as consideration and in exchange for the agreement
of the Purchasers to enter into the Agreements and to purchase the Company's 12%
Senior Subordinated Notes due 2006 issued in an aggregate principal amount of
$15,000,000 pursuant to the Agreements. The term "NOTES" means all such notes
originally delivered pursuant to the Agreements and all notes delivered in
substitution or exchange for any such note.
Section 1. Term of Warrants; Exercise of Warrants. Subject to the terms
hereof, the holder of this Warrant shall have the right, at any time during the
period commencing on the Closing Date and ending at 5:00 p.m., New York time, on
the seventh anniversary of the Closing Date (the "Warrant Expiration Date"), to
purchase from the Company up to the number of shares of
56
Common Stock which such holder may at the time be entitled to purchase pursuant
to this Warrant, upon at least three Business Days' prior written notice to the
Company of such holder's election to exercise this Warrant and upon surrender of
this Warrant to the Company, at its office maintained for such purpose pursuant
to Section 14 of the Agreements, together with the purchase form at the end
hereof duly completed and signed, accompanied by payment to the Company of the
Warrant Price (as defined in and determined in accordance with the provisions of
Sections 7 and 8) for the number of shares with respect to which this Warrant is
then exercisable. Payment of the aggregate Warrant Price shall be made by (i)
certified or official bank check or wire transfer, and/or (ii) the delivery and
surrender to the Company of Notes issued pursuant to the Agreements in an
aggregate amount equal to the Warrant Price and/or (iii) the delivery and
surrender to the Company of Warrants (valued at the product of (a) the
difference between the Trigger Price and the Warrant Price and (b) the number of
shares of Common Stock purchasable upon the exercise of the Warrants being
surrendered). In the event that the holder hereof chooses to exercise the
Warrant, in whole or in part, by delivery and surrender to the Company of any
other securities of the Company held by the holder hereof and redeemable at such
time, the holder shall be entitled to receive, upon such delivery and surrender,
cash in an aggregate amount equal to any and all interest accrued but unpaid on
such securities to the date of delivery and surrender. As used herein, the term
"Business Day" means any day other than a Saturday or Sunday or a day on which
commercial banks in New York City or the State of Texas are required or
authorized to be closed.
Upon such surrender of this Warrant and payment of such
Warrant Price as aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the holder of this
Warrant and in such name or names as such holder may designate, a certificate or
certificates for the number of full shares of Common Stock so purchased,
together with cash, as provided in Section 9, with respect to any fractional
shares of Common Stock otherwise issuable upon such surrender. Such certificate
or certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of such shares of
Common Stock as of the close of business on the date of the surrender of this
Warrant and payment of the Warrant Price as aforesaid, notwithstanding that the
certificates representing such shares shall not actually have been delivered or
that the stock transfer books of the Company shall then be closed.
This Warrant shall be exercisable, at the election of the
holder of this Warrant, either in full or from time to time in part. In the
event that this Warrant is exercised with respect to less than the aggregate
number of shares of Common Stock this Warrant then entitles such holder to
purchase, the Company shall deliver to or upon the order of such holder hereof a
new Warrant evidencing the rights of such holder to purchase the unpurchased
shares of Common Stock then called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant. In the alternative, at the
request of the holder upon any partial exercise of this Warrant, appropriate
notation may be made
If the Warrant Expiration Date occurs prior to the exercise of
the Warrant in full at a time when the Trigger Price exceeds the Warrant Price,
the exercise of the Warrant in full shall be automatic and shall require no
notice to the Company. In such event, the Company shall give written notice to
the holder of this Warrant and require within 30 days of such notice the
surrender of the Warrant and payment of the Warrant Price thereon by the holder
in accordance
57
with the terms set forth herein. If such payment and surrender are not made by
the holder within such time period, the right of the holder to exercise the
Warrant shall expire.
Section 2. Payment of Taxes. The Company shall pay all documentary
stamp taxes, if any, attributable to the initial issuance of the shares of
Common Stock upon exercise of this Warrant, provided that the Company shall not
be required to pay any tax or taxes which may be payable with respect to any
secondary transfer of a Warrant or the shares of Common Stock issued upon
exercise of any Warrant, and in such case the Company shall not be required to
issue or deliver any certificates for shares of Common Stock, until the person
requesting the same has paid to the Company the amount of such tax or has
established to the Company's reasonable satisfaction that such tax has been paid
or that no such tax is due.
Section 3. Transferability.
Section 3.1. Registration. The Warrants shall be numbered and shall be
registered on the books of the Company maintained for such purpose pursuant to
Section 14 of the Agreements (the "Security Register").
Section 3.2. Transfer. Subject to compliance with Section 3.3, this
Warrant, the Warrant Shares (as defined below) and all rights hereunder are
transferable upon delivery hereof together with the assignment form at the end
hereof duly completed and signed by the holder hereof or such holder's duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer, provided that any transferee of
this Warrant or such Warrant Shares shall expressly agree to be bound by the
terms and conditions hereof. Upon any registration of transfer of this Warrant,
the Company shall execute and deliver a new Warrant or Warrants as may be
requested by such holder for the same aggregate number of shares of Common Stock
as this Warrant. As used herein, the term "Warrant Shares" shall mean,
collectively, the shares of Common Stock acquired pursuant to the exercise of
this Warrant and any securities issued or issuable with respect to such Common
Stock by way of stock dividend or other distribution or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise.
Section 3.3. Limitations on Transfer of the Warrants and the Warrant
Shares. If, at the time of any transfer of this Warrant or any Warrant Shares,
this Warrant or such Warrant Shares, as the case may be, are not registered
under the Securities Act of 1933, as amended (the "Securities Act"), the Company
may require as a condition of allowing such transfer or exchange that the holder
or transferee of this Warrant or such Warrant Shares furnish to the Company such
information as, in the reasonable opinion of counsel to the Company, is
necessary in order to establish that such transfer or exchange may be made
without registration under the Securities Act, including a written statement
that such holder or transferee will not sell or otherwise dispose of this
Warrant or such Warrant Shares purchased or acquired by him in any transaction
which would violate the Securities Act or any other securities laws, provided
that the disposition thereof shall at all times be within the control of such
holder or transferee.
Section 3.4. Legend on Warrant Shares. Each certificate for shares of
Common Stock initially issued upon exercise of this Warrant shall bear the
following legend, unless at the time
58
of exercise such shares are registered under the Securities Act or in the
opinion of Counsel to the Company such shares are no longer subject to the
restriction contemplated by the legend:
"The securities represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, or the Blue
Sky laws of any State and may not be sold, exchanged, hypothecated or
transferred in any manner except in compliance with said Act and with
such Blue Sky laws."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution in the United States pursuant to a registration
statement under the Securities Act of the securities represented thereby) shall
also bear the above legend unless in the opinion of counsel to the Company the
securities represented thereby need no longer be subject to such restriction.
Section 4. Exchange of Warrant Certificate. Any Warrant certificate may
be exchanged for another certificate or certificates entitling the holder
thereof to purchase a like aggregate number of shares of Common Stock as this
certificate then entitles such holder to purchase. Any holder of a Warrant
desiring to exchange such Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver one or more new Warrant certificates as so requested.
Section 5. Mutilated or Missing Warrant. In case any Warrant
certificate shall be mutilated, lost, stolen or destroyed, the Company shall, at
the request of the holder thereof, issue and deliver in exchange and
substitution for and upon cancellation of the mutilated certificate or
certificates, or in lieu of and substitution for the certificate or certificates
lost, stolen or destroyed, a new Warrant certificate or certificates of like
tenor and representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such
Warrant and indemnity, if requested, satisfactory to the Company. In the case of
any Purchaser or any other institutional investor holder of a Warrant, such
holder's unsecured agreement of indemnity shall be deemed satisfactory to the
Company.
Section 6. Requirement of Availability of Shares of Common Stock. There
are authorized and available for issuance, and so long as any Warrant remains
outstanding the Company shall at all times keep authorized and available for
issuance, such number of shares of the Company's authorized but unissued Common
Stock as will be sufficient to permit the exercise in full of all outstanding
Warrants. Every transfer agent for the Common Stock and other securities of the
Company issuable upon the exercise of the Warrants shall be irrevocably
authorized and directed at all times to keep available such number of authorized
shares and other securities as will be sufficient for such purpose. The Company
shall keep a copy of the Warrants on file with every such transfer agent for the
Common Stock and other securities of the Company issuable upon the exercise of
the Warrants. The Company shall supply any such transfer agent with duly
executed stock and other certificates for such purpose and shall provide or
otherwise make available any cash which may be payable as provided in Section 9.
59
Section 7. Warrant Price. The price per share of Common Stock (the
"Warrant Price") at which shares of Common Stock shall be purchasable upon the
exercise of the Warrants shall be $7.5375, subject to adjustment pursuant to
Section 8.
Section 8. Adjustment of Warrant Price and Number of Shares. The number
and kind of securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
Section 8.1. Adjustments. The number of shares purchasable upon the
exercise of this Warrant and the Warrant Price shall be subject to adjustment as
follows:
(a) In case the Company shall (i) pay a dividend in Common Stock or
make a distribution in Common Stock, (ii) pay a liquidating cash dividend as so
denominated in accordance with generally accepted accounting principles, (iii)
subdivide its outstanding Common Stock, (iv) combine its outstanding Common
Stock into a smaller number of shares of Common Stock, or (v) issue by
reclassification of its Common Stock, spin-off, split-up, recapitalization,
merger, consolidation or any similar corporate event or arrangement of other
securities of the Company, the number of shares of Common Stock purchasable upon
exercise of this Warrant immediately prior thereto shall be adjusted so that the
holder of this Warrant shall be entitled to receive the kind and number of
shares or other securities of the Company which it would have owned or would
have been entitled to receive after the happening of any of the events described
above had this Warrant been exercised immediately prior to the happening of such
event or any record date with respect thereto. Any adjustment made pursuant to
this subsection (a) shall become effective immediately after the effective date
of such event retroactive to the record date, if any, for such event.
(b) Except in respect of transactions described in subsection (a)
above, in case the Company shall sell or issue Common Stock or rights, options,
warrants, convertible securities or options or other rights to purchase
convertible securities or any similar instrument containing the right to
subscribe for, purchase or otherwise acquire shares of Common Stock
(collectively, "Derivative Securities") at a price per share which is lower at
the date of such sale or issuance of such Common Stock or lower at the record
date for determination of shareholders entitled to receive (or purchase) such
Derivative Securities than the Trigger Price (as defined below), then the number
of shares of Common Stock purchasable upon exercise of this Warrant shall be the
number determined by multiplying the number of shares of Common Stock issuable
upon exercise of this Warrant immediately prior to the first public announcement
(or consummation of such transaction if the Common Stock is not then publicly
traded) of such transaction (or the record date for determination of
shareholders entitled to receive (or purchase) such Derivative Securities in the
case of a distribution or issuance thereof in respect of the Common Stock) by a
fraction (not to be less than one) with (A) a numerator equal to the product of
(1) the number of shares of Common Stock outstanding after giving effect to such
sale or issuance (and assuming in the case of Derivative Securities that such
Derivative Securities had been fully exercised or converted, as the case may be)
and (2) the Trigger Price, and (B) a denominator equal to the sum of (i) the
product of (x) the number of shares of Common Stock outstanding immediately
before such public announcement date, consummation date or record date, as the
case may be, and (y)
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the Trigger Price, and (ii) the aggregate consideration received by the Company
for the shares of Common Stock to be so issued or sold or to be purchased or
subscribed for upon exercise of such Derivative Securities.
For the purposes of such adjustments, the Common Stock which
the holders of any such Derivative Securities shall be entitled to subscribe for
or purchase shall be deemed to be issued and outstanding as of the date of such
public announcement date, consummation date or record date, as the case may be,
and the consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such Derivative Securities, plus any
underwriting discounts or selling commissions paid by the Company, plus the
consideration or premiums stated in such Derivative Securities to be paid for
the Common Stock covered thereby. In case the Company shall sell or issue Common
Stock or Derivative Securities containing the right to subscribe for or purchase
Common Stock for a consideration consisting, in whole or in part, of property
other than cash or its equivalent, then in determining the "consideration
received by the Company" for purposes of this subsection (b), the fair market
value of said property shall be determined in the manner set forth below.
For purposes of this Section, the term "Trigger Price" means
in respect of any sale or issuance of Common Stock or Derivative Securities the
higher of (i) the then applicable Warrant Price and (ii) (x) so long as the
Common Stock is listed or admitted to trading on a national securities exchange
or, if not so listed, is quoted on the NASDAQ or any comparable system (a
"Listed Company"), the Current Market Price (as defined below), or (y) at any
time while the Company is not a Listed Company, the then current fair market
value per share of Common Stock immediately prior to such sale or issuance,
determined in the manner set forth below.
In the case of each such sale or issuance of Common Stock or
Derivative Securities by the Company, the Company will give written notice to
the holder of this Warrant not less than 20 nor more than 60 days prior to the
date upon which such sale or issue is proposed to be consummated. Such notice
shall (i) refer specifically to this Section 8.1(b), (ii) specify the date of
such sale or issue and the Response Date (as defined below) and (iii) contain
the terms of such sale or issue and the Company's estimates, determined in good
faith by the Board of Directors of the Company, of (A) the then current fair
market value per share of Common Stock or, if the Company is a Listed Company,
the Current Market Price and (B) if applicable, the fair market value of any
property, other than cash or its equivalent, taken into account in determining
the consideration to be received by the Company for purposes of this subsection
(b). The holder of this Warrant shall notify the Company of such holder's
acceptance or rejection of such estimates by giving written notice of such
acceptance or rejection to the Company at least five days prior to such sale or
issue (the "Response Date"). If either or both of such estimates is rejected by
any original holder of Warrants (or any Affiliate (as defined in the Agreements)
of such original holder) or by the holder or holders of then unexercised
Warrants to purchase at least 25% of shares of Common Stock covered by all
outstanding Warrants, the Company shall appoint an Independent Financial Expert
acceptable to the rejecting holder or holders of Warrants to make such
determinations. Such Independent Financial Expert shall be instructed to use its
best efforts to complete its appraisals within 30 days. In no event shall such
issue or sale be consummated prior to (x) five days after the completion of such
appraisals and delivery of the Value Report (hereafter referred to) by such
Independent Financial Expert or (y)
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the waiver by all such rejecting holders of such requirement so to complete the
appraisals and provide such Value Report.
The Independent Financial Expert shall deliver to the Company
and each holder of Warrants or Warrant Shares, a value report (the "Value
Report") stating the methods of valuation considered or used and the respective
values of the Common Stock and/or property, if applicable, as of the date of
such issue or sale of Common Stock or Derivative Securities, and containing a
statement as to the nature and scope of the examination or investigation upon
which the determination of value was made. The values set forth in such Value
Report shall be binding upon the Company and the holders of the Warrants. The
Company will pay all fees and expenses of such Independent Financial Expert.
For purposes of this Section, the term "Current Market Price"
means the Closing Price of shares of Common Stock immediately prior to the
public announcement date of the sale or issue (or, if no public announcement is
made, the date immediately prior to such sale or issue). "Closing Price" means
(1) the per share average of the last reported sale price on each of the five
(5) trading days prior to the date of determination or, if no such reported sale
occurs on any such day, the average of the closing bid and asked prices on any
such day, in each case on the principal national securities exchange in which
the Common Stock is listed or admitted to trading or (2) if the Common Stock is
not listed or admitted to trading on any national securities exchange, the per
share average of the closing bid and asked prices in the over-the-counter market
on each of the five (5) trading days prior to the date of determination as
reported by NASDAQ or any comparable system.
As used herein, the term "Independent Financial Expert" means
a qualified appraisal or investment banking firm that (i) has experience in the
valuation of companies similar to the Company, (ii) does not (and whose
directors, officers, employees and affiliates do not) have a direct or indirect
financial interest in the Company or any of its affiliates or the holder of this
Warrant or any of its affiliates, (iii) has not been, and, at the time it is
called upon to give independent financial advice, is not (and none of whose
directors, officers, employees or affiliates is) a promoter, director or officer
of the Company or any of its affiliates or such holder or any of its affiliates,
and (iv) does not provide any advice or opinions to, and is not otherwise
compensated by, the Company or any of its affiliates or such holder or any of
its affiliates, except as an Independent Financial Expert.
(c) In case the Company shall distribute in any calendar year to all or
substantially all holders of its Common Stock evidences of its indebtedness
(including Derivative Securities) or assets (including cash or other dividends
or distributions out of earnings), then, and in each case, the Company shall pay
to the holder of this Warrant an amount in cash equal to such holder's pro rata
share (assuming for such purpose the exercise of this Warrant in full) of such
distributions; and for such purpose any assets (other than cash) or evidences of
indebtedness so distributed shall be valued at the fair market value thereof
determined in good faith by the Board of Directors of the Company acting upon
the advice of any Independent Financial Expert acceptable to the Majority
Warrantholders.
As used herein, the term "Majority Warrantholders" means the holder or
holders of then unexercised Warrants to purchase at least a majority of the
shares of Common Stock covered by
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all outstanding Warrants. For purposes of determining whether the holders of
outstanding Warrants at any time have taken any action authorized by this
Section or otherwise by this Warrant, any Warrants owned by the Company, any
Subsidiary or any Affiliate (as such terms are defined in the Agreements) of the
Company shall not be deemed outstanding.
(d) Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant is increased or decreased as provided in this Section
8, the Warrant Price payable upon exercise of this Warrant shall be adjusted by
multiplying the Warrant Price in effect immediately prior to such adjustment by
a fraction, the numerator of which shall be the number of shares of Common Stock
purchasable upon exercise of this Warrant immediately prior to such adjustment,
and the denominator of which shall be the number of shares so purchasable
immediately after such adjustment.
(e) Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant or the Warrant Price is adjusted as herein provided,
the Company shall cause to be promptly mailed to the holder by first-class mail,
postage prepaid, notice of such adjustment or adjustments and a certificate of
an executive officer of the Company setting forth the number of shares of Common
Stock purchasable upon the exercise of this Warrant and the Warrant Price after
such adjustment, a brief statement of the facts requiring such adjustment and
the computation by which such adjustment was made.
(f) If, as a result of an adjustment made pursuant to this Section 8,
the holder of this Warrant shall become entitled to purchase any shares of the
Company other than Common Stock, thereafter the number of such other shares so
purchasable upon exercise of this Warrant and the Warrant Price of such shares
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions of this Section 8 with
respect to the shares of Common Stock.
Section 8.2. No Adjustment in Certain Cases. No adjustments to the
number of shares of Common Stock issuable upon the exercise of this Warrant or
the Warrant Price shall be made pursuant to this Section 8 in connection with
the issuance of (a) Common Stock upon exercise of any of the Warrants, or (b)
Common Stock in any underwritten public offering registered under the Securities
Act, or (c) up to an additional 314,631 shares of Common Stock pursuant to any
stock option, stock purchase or similar plan or arrangement for the benefit of
employees, consultants or directors of the Company or its Subsidiaries (such
number and amount to be appropriately adjusted in the event the Common Stock is
subdivided into a greater or combined into a lesser number).
Section 8.3. Preservation of Purchase Rights Upon Reorganization,
Consolidation, Merger, etc. In case of any reorganization, consolidation or
merger of the Company with or into another entity as a result of which the
holders of the Company's Common Stock become holders of other shares or
securities of the Company or of another entity or person, or such holders
receive cash or other assets, or in case of any sale or conveyance to another
person of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing entity
or person, as the case may be, shall execute with the holder of this Warrant an
agreement that such holder shall have the right thereafter upon payment of the
aggregate Warrant Price in effect immediately prior to such action to purchase
upon exercise of this Warrant the kind and amount of shares and other securities
and property which such holder would have owned or have been entitled to receive
after the happening of such reorganization, consolidation, merger, sale or
conveyance had this Warrant been exercised immediately prior to such action.
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The agreements referred to in this Section 8.3 shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 8. The provisions of this Section 8.3
shall similarly apply to successive reorganizations, consolidations, mergers,
sales or conveyances.
Section 8.4. Statement on Warrants. This Warrant shall entitle the holder
hereof to purchase such number of shares of Common Stock at such Warrant Price
as may be determined in accordance with the terms hereof after giving effect to
any adjustments in the number or kind of shares purchasable upon the exercise
hereof or the Warrant Price, as the case may be, notwithstanding that this
Warrant certificate may continue to express the same price and number and kind
of shares as are initially stated herein.
Section 8.5. Adjustment by Board of Directors. If any event occurs as to
which, in the reasonable good faith opinion of the Board of Directors of the
Company, the provisions of this Section 8 are not strictly applicable or if
strictly applicable would not fairly protect the rights of the holder of this
Warrant in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such rights as aforesaid, but in no event shall any
adjustment have the effect of increasing the Warrant Price as otherwise
determined pursuant to any of the provisions of this Section 8, except in the
case of a combination of shares of a type contemplated in Section 8.1(a) and
then in no event to an amount larger than the Warrant Price as adjusted pursuant
to Section 8.1(d).
Section 8.6. No Dilution or Impairment. The Company will not, by
amendment of its charter or through any reorganization, transfer or sale of
assets, consolidation, merger, dissolution or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in carrying out all of such
terms and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the holder hereof against dilution or other
impairment. Without limiting the generality of the foregoing, the Company will
not increase the par value of any shares of stock receivable upon the exercise
of this Warrant above the amount payable therefor upon such exercise, and at all
times will take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and non-assessable stock
upon the exercise of this Warrant.
Section 9. Fractional Interests. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of any Warrant. If any
fraction of a share would, except for the provisions of this Section 9, be
issuable on the exercise of this Warrant (or specified portions thereof), the
Company shall in lieu thereof pay to the person entitled thereto an amount in
cash equal to the current value of such fraction, calculated to the nearest
one-hundredth (1/100) of a share, to be computed (i) if the Common Stock is
listed on any national securities exchange on the basis of the last sales price
of the Common Stock on such exchange (or the quoted closing bid price if there
shall have been no sales) on the date of conversion, or (ii) if the Common Stock
shall not be listed, on the basis of the mean between the closing bid and asked
prices for the Common Stock on the date of conversion as reported by
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NASDAQ, or its successor, and if there are not such closing bid and asked
prices, on the basis of the fair market value per share as determined by the
Board of Directors of the Company.
Section 10. No Rights as Shareholder; Notices. Nothing contained in
this Warrant shall be construed as conferring upon the holder or its transferees
any rights as a shareholder of the Company, including the right to vote, consent
or receive notices as a shareholder with respect to any meeting of shareholders
for the election of directors of the Company or any other matter. If, however,
at any time prior to the Warrant Expiration Date and prior to the exercise of
this Warrant, any of the following events shall occur:
(a) any action which would require an adjustment pursuant to Section
8.1 or 8.5; or
(b) a dissolution, liquidation or winding up of the Company (other than
in connection with a consolidation, merger or sale of its property, assets and
business as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to each holder of Warrants at least 20 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to any relevant dividend,
distribution, subscription rights or other rights or for the determination of
shareholders entitled to vote on such proposed dissolution, liquidation or
winding up but failure to mail or receive such notice or any defect therein or
in the mailing thereof shall not affect the validity of any such action taken.
Such notice shall specify such record date or the date of closing the transfer
books, as the case may be.
Section 11. Registration Rights.
Section 11.1. Requested Registration. (a) At any time after the earlier
of (1) 90 days after the effective date of a registration statement filed by the
Company for the registration of securities under the Securities Act of the same
class as any Registrable Securities (as defined below) and (2) fifteen months
from the Closing Date, the holder or holders of any of the Registrable
Securities then outstanding and entitled to registration rights under this
Section 11 (the "Initiating Holders") may, upon written request to the Company,
require that the Company effect a registration, qualification or compliance with
respect to all or a part of such Registrable Securities. The Company will,
within ten days of the receipt of such request, give written notice of such
request to all other holders of Registrable Securities and shall file a
registration statement with the Commission on a form deemed appropriate by the
Company's counsel as expeditiously as possible, but in no event later than 60
days after receipt of such written request. Such registration statement shall
cover all the Registrable Securities requested to be included therein by the
Initiating Holders and by such other holders as specified in writing given
within 20 days of receipt of the notice given by the Company pursuant to this
subsection (a). After the filing of such registration statement, the Company
shall use its best efforts to cause such registration statement to become
effective as expeditiously as possible. The Company shall pay the expenses (as
defined in Section 11.7) of such registration.
The Company shall also use its best efforts to effect promptly all such
other registration, qualification and compliance (including, without limitation,
the execution of an undertaking to
65
file post-effective amendments, appropriate qualification under the applicable
Blue Sky, or other state securities laws, and appropriate compliance with
exemptive regulations issued under the Securities Act) as may be so requested by
a holder of Registrable Securities covered by a registration statement filed
pursuant to this Section 11.1 and as would permit or facilitate the sale and
distribution of all or any portion of such Registrable Securities.
The Company shall not be obligated to effect such registration,
qualification or compliance (1) after the Company has already effected two such
registrations pursuant to this subsection (a), (2) if the Initiating Holders
hold less than 25% of the Registrable Securities then outstanding, or (3) within
nine months after the effective date of the registration statement most recently
filed by the Company under the Securities Act with respect to any class of
Registrable Securities if the holders of the Registrable Securities shall have
had the opportunity pursuant to Section 11.2 to participate in the offering
effected pursuant to such registration statement without any reduction of the
number of Registrable Securities included in such offering pursuant to Section
11.3.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by such request by means of an underwriting, they shall so
advise the Company as a part of such request made pursuant to Section 11.1(a).
The Company shall enter into an agreement in customary form for a secondary
distribution with the underwriter or underwriters selected by the Company for
such underwriting, provided such underwriters are reasonably acceptable to the
Initiating Holders.
(c) As used herein, the term "Registrable Securities" means,
collectively, the Warrants, or any portion thereof, and all Warrant Shares
(including all such Warrant Shares issued upon exercise of any other Warrant),
or any portion thereof. Registrable Securities will cease to be such when (i) a
registration statement covering such Registrable Securities has become or been
declared or ordered effective and they have been disposed of pursuant to such
effective Registration Statement, (ii) they are sold, transferred or distributed
pursuant to and in compliance with Rule 144 (or any similar provision then in
force, but not including Rule 144A) under the Securities Act, or (iii) they have
been otherwise transferred and the Company has delivered new certificates or
other evidences of ownership for them not subject to any stop transfer order or
other restriction on transfer and not bearing a legend restricting transfer in
the absence of an effective registration or an exemption from the registration
requirements of the Securities Act.
Section 11.2 Incidental Registration. (a) If at any time or times after
the date hereof, the Company intends to file a registration statement for the
registration of securities under the Securities Act of the same class as any
Registrable Securities in connection with a public offering (other than any
offering pursuant to any stock option plan or stock purchase, savings or similar
plan, any offering in connection with any merger or acquisition of or by the
Company, any exchange of outstanding Common Stock or any registration of any
security convertible into Common Stock), the Company shall notify in writing
each of the holders of record of Registrable Securities at least 30 days prior
to each such filing of the Company's intention to file such a registration
statement. Such notice shall state the date on which the Company proposes to
file such registration statement and the number and class of securities proposed
to be registered thereby and shall advise the holders of such Registrable
Securities of their rights to have such
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securities included in such registration. If any holder of Registrable
Securities notifies the Company within 20 days after receipt of such notice from
the Company of its desire to have included in such registration statement any of
its Registrable Securities, then the Company shall include such shares in such
registration statement for sale in the same manner and upon the same terms and
conditions as for the securities originally to be subject to such registration
statement; provided that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason either not to register, to discontinue
registration or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a determination not to
register or to discontinue registration, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay the registration expenses in connection
therewith) and (ii) in the case of a determination to delay registering, shall
be permitted to delay registering any Registrable Securities for the same period
as the delay in registering such other securities. The Company shall pay the
expenses (as defined in Section 11.7) of such registration.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the holders of Registrable Securities as a part of the written notice
given pursuant to subsection (a) above. In such event the right of such holders
to registration pursuant to this Section 11.2 shall be conditioned upon such
holders' participation in such underwriting and the inclusion of such holders'
Registrable Securities in the underwriting to the extent provided herein. The
holders of Registrable Securities shall (together with the Company and any other
shareholders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or underwriters
selected for underwriting by the Company and shall use their best efforts to
arrange for all documents and opinions required to be delivered thereunder in
respect of their participation as selling shareholders to be delivered. If any
of the holders of Registrable Securities or any officer, director or other
shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
(c) The holders of Registrable Securities shall be entitled to have
their shares included in an unlimited number of registrations pursuant to this
Section 11.2.
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Section 11.3. Underwriter Cutbacks. Notwithstanding any other provision
of this Section 11, if any registration provided for in Section 11.1 or 11.2
involves an underwriting and if the managing underwriter determines that
marketing factors require a limitation on the number of shares to be
underwritten, then the Company shall include in the underwriting only that
number of such securities, including Registrable Securities, which the managing
underwriter believes will not jeopardize the success of the offering. The
securities to be so included will be apportioned pro rata among the
securityholders (including the selling holders of Registrable Securities)
seeking to include their respective securities in the offering according to the
total amount of securities entitled to be included therein owned by each such
selling securityholder or in such other apportions as shall be mutually agreed
to by such selling securityholders.
Section 11.4. Right to Review the Registration Statement. In connection
with the preparation and prior to the filing of each registration statement
under the Securities Act pursuant to Sections 11.1 and 11.2, the Company will
give the holders of Registrable Securities registered under such registration
statement the right to review and comment upon such registration statement and
to request the insertion therein of material furnished to the Company in writing
which in the reasonable judgment of such holder (a "Requesting Holder") of
Registrable Securities should be included; provided, however, that such
information shall not be required to be included if in the reasonable opinion of
counsel of the Company, the inclusion of such material furnished by such holder
would be misleading or otherwise in violation of the rules and regulations of
the Securities Act. Furthermore, a Requesting Holder has the right to require
the deletion of any reference to such Requesting Holder by name or otherwise if
such reference is not required by the Securities Act or the rules promulgated
thereunder.
The Company will not file any registration statement or amendment
thereto or any prospectus or any supplement thereto (including such documents
incorporated by reference and proposed to be filed after the initial filing of
the registration statement) to which the holders of at least a majority of the
securities (including Registrable Securities) covered by such registration
statement or the underwriter or underwriters, if any, shall reasonably object,
provided that the Company may file such document in a form required by law or
upon the advice of its counsel.
Section 11.5. Registration Procedures. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Section 11, the Company shall:
(a) notify each holder of Registrable Securities as to the filing of
the Registration Statement and of all amendments or supplements thereto filed
prior to the effective date of said Registration Statement;
(b) notify each holder of Registrable Securities, promptly after it
shall receive notice thereof, of the time when said Registration Statement
becomes effective or when any amendment or supplement to any prospectus forming
a part of said Registration Statement has been filed;
(c) notify each holder of Registrable Securities promptly of any
request by the Commission for the amending or supplementing of such Registration
Statement or prospectus or for additional information;
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(d) prepare and promptly file with the Commission and promptly notify
each holder of Registrable Securities of the filing of any amendments or
supplements to such Registration Statement or prospectus as may be necessary to
correct any statements or omissions if, at any time when a prospectus relating
to the Registrable Securities is required to be delivered under the Securities
Act, any event with respect to the Company shall have occurred as a result of
which any such prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading; and, in addition,
prepare and file with the Commission, promptly upon the written request of any
holder of Registrable Securities, any amendments or supplements to such
Registration Statement or prospectus which may be reasonably necessary or
advisable in connection with the distribution of the Registrable Securities;
(e) advise each holder of Registrable Securities promptly after the
Company shall receive notice or obtain knowledge of the issuance of any stop
order by the Commission suspending the effectiveness of any such Registration
Statement or amendment thereto or of the initiation or threatening of any
proceeding for that purpose, and promptly use its best efforts to prevent the
issuance of any stop order or obtain its withdrawal promptly if such stop order
should be issued;
(f) use its best efforts to qualify as soon as reasonably practicable
the Registrable Securities included in the Registration Statement for sale under
the securities or blue-sky laws of such states and jurisdictions within the
United States as shall be reasonably requested by any holder of Registrable
Securities; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business, to become subject
to taxation or to file a consent to service of process generally in any of the
aforesaid states or jurisdictions; and
(g) furnish each holder of Registrable Securities, as soon as
available, copies of any Registration Statement and each preliminary or final
prospectus, or supplement or amendment required to be prepared pursuant hereto,
all in such quantities as any holder of Registrable Securities may from time to
time reasonably request.
At its expense, the Company shall keep such registration statement
effective until 180 days after such registration statement becomes effective.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subsection (d) above, such
holder will forthwith discontinue such holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by subsection (d) above and, if so directed by
the Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such notice, the
period mentioned in the immediately preceding paragraph of this Section 11.5
shall be extended by the length of the period from and including the date when
each seller of any Registrable Securities covered by such registration statement
shall have received such notice to the date on
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which each such seller has received the copies of the supplemented or amended
prospectus contemplated by subsection (d) above.
Section 11.6. Indemnity. (a) In connection with a Registration Statement
filed with the Commission pursuant to this Section 11 or any other registration
statement filed by the Company, the Company will indemnify and hold harmless any
seller of Registrable Securities and each person, if any, who controls any
holder of Registrable Securities within the meaning of the Securities Act, any
underwriter who participates in the distribution of Registrable Securities and
any Requesting Holder and each person, if any, who controls any Requesting
Holder against any loss, claim, damage or liability, joint or several, to which
such holder or such controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any Registration
Statement (including any preliminary prospectus and the prospectus as a part
thereof (the "Prospectus") or any amendment or supplement thereof, or (B) in any
blue sky application or other document executed by the Company specifically for
that purpose or based upon written information furnished by the Company filed in
any state or other jurisdiction in order to qualify any or all of the
Registrable Securities under the securities laws thereof (any such application,
document or information being hereinafter called a "Blue Sky Application"), or
(ii) the omission or alleged omission to state in any Registration Statement
(including any preliminary prospectus and the Prospectus as a part thereof) or
any amendment or supplement thereof or in any Blue Sky Application 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; and
will reimburse each holder of Registrable Securities, Requesting Holder and each
such controlling person for any legal or other expenses reasonably incurred by
such holder of Registrable Securities, Requesting Holder or such controlling
person in connection with investigating or defending against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action; provided that the Company will not be liable to any holder of
Registrable Securities in any such case to the extent, but only to the extent,
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by such holder of Registrable Securities specifically stating that
it is for use in the preparation of any Registration Statement or any such
amendment or supplement thereof or any such Blue Sky Application or any such
preliminary prospectus or the Prospectus or any such amendment thereof or
supplement thereto. This indemnity agreement is in addition to any liability
which the Company may otherwise have.
(b) Each holder of Registrable Securities included in the securities
covered by the Registration Statement severally, but not jointly, will indemnify
and hold harmless the Company, each of the Company's directors, each of the
Company's officers, and each person, if any, who controls the Company within the
meaning of the Securities Act, as well as any underwriter who participates in
the distribution of securities covered by such Registration Statement against
any loss, claim, damage or liability to which the Company, or any such director
or officer or controlling person or any underwriter may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage or
liability (or action in respect thereof) arises out of or is based upon (i) any
untrue statement or alleged untrue statement of a material fact contained (A) in
any Registration Statement (including any preliminary prospectus and the
70
Prospectus as a part thereof) or any amendment or supplement thereof, or (B) in
any Blue Sky Application, or (ii) the omission or alleged omission to state in
the Registration Statement (including any preliminary prospectus and the
Prospectus as a part thereof) or any amendment or supplement thereto or in any
Blue Sky Application 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, but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such holder of Registrable Securities specifically stating that it
is for use in the preparation of the Registration Statement or any such
amendment or supplement thereof or any such Blue Sky Application or any such
preliminary prospectus or the Prospectus or any such amendment thereof or
supplement thereto; and will reimburse any legal or other expenses reasonably
incurred by the Company or any such director or officer or controlling person in
connection with investigating or defending against any such loss, claim, damage,
liability or action. No holder of Registrable Securities shall be required by
this subsection (b) to pay an amount in excess of the amount of proceeds (net of
underwriting discounts or commissions) received by such holder upon the sale of
Registrable Securities included in such Registration Statement. This indemnity
agreement is in addition to any liability which such holder of Registrable
Securities may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
11.6 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against any indemnifying party under
this Section 11.6, notify in writing the indemnifying party of the commencement
thereof within a reasonable time thereafter, provided that the failure so to
notify the indemnifying party shall not relieve the indemnifying party from any
liability which it may have under this Section 11.6, except to the extent it has
been prejudiced by such failure, or from any liability which it may have to an
indemnified party otherwise than under this Section 11.6. In case any such
action, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel who shall be reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 11.6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, provided that if it is necessary to prevent a conflict
of interest for the holders of Registrable Securities, Requesting Holders or
their respective controlling persons to be represented by separate counsel, the
holders of Registrable Securities shall have the right to employ a single
counsel to represent the holders of Registrable Securities and such controlling
persons, in which event the reasonable fees and expenses of such separate
counsel shall be borne by the Company.
Section 11.7. Expenses. The Company shall bear all registration expenses
in connection with a registration of Registrable Securities pursuant to this
Section 11. As used in this Section 11, "registration expenses" of a
registration shall mean, without limitation, all registration, filing and
National Association of Securities Dealers' fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger
71
and delivery expenses, the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of any special
audits or "cold comfort" letters required by or incident to such performance and
compliance and the fees and disbursements of underwriters customarily paid by
issuers or sellers of securities (including fees paid to a qualified independent
underwriter) and the reasonable fees and expenses of one firm (which firm shall
be reasonably satisfactory to the selling holders of Registrable Securities) to
act as special counsel for all selling securityholders (including such selling
holders of Registrable Securities) and such other local counsel as to matters of
local laws as such special counsel and such selling securityholders may
reasonably request. All underwriting discounts and commissions relating to
securities registered on behalf of the holders of Registrable Securities and
transfer taxes shall be borne by such holders pro rata on the basis of the
number of Registrable Securities so registered.
Section 11.8. Lock-Ups. To the extent requested by the managing
underwriter in respect of an offering of securities of the Company described in
this Section 11, each holder of Registrable Securities and the Company shall
agree to refrain from selling or offering to sell, making any short sale of,
loaning, granting any option for the purchase of, effecting any public sale or
distribution of or otherwise disposing of (other than pursuant to such
Registration Statement) any securities of the Company during the seven days
prior to and the 90 days after the effective date of any Registration Statement
described herein, whether or not such holder participates in such registration.
Nothing in this Section 11.8 shall preclude the Company from issuing shares of
Registrable Securities upon exercise of outstanding options or conversion of
outstanding convertible securities. Each holder of Registrable Securities agrees
that the Company may instruct its transfer agent to place stop transfer
notations in its records to enforce this Section 11.8.
Section 11.9. Other Obligations of the Company. In connection with the
Company's obligations to the holders of Registrable Securities with respect to
the sale of Registrable Securities pursuant to a public offering thereof as
provided in this Section 11, the Company shall use its best efforts to register
Registrable Securities as required, or permitted if any holder of Registrable
Securities so requests, by Section 12 of the Securities Exchange Act of 1934, as
amended, and, if the Registrable Securities to be sold meet the criteria for
listing on any exchange on which the Common Stock is then listed, apply for
listing of such Registrable Securities on such exchange.
Section 11.10. Transferability. The registration rights granted in this
Section 11 shall not be assignable in any manner to any transferee of any of the
Warrants or Registrable Securities except in connection with the sale by the
holder of this Warrant or the Registrable Securities issued upon exercise hereof
of all of this Warrant or such securities, as the case may be, in a transaction
not involving a public offering for the purposes of the Securities Act.
Section 12. Put Right.
Section 12.1. Put at the Option of the Holder. At any time on or after
the fifth anniversary of the Closing Date, the holder of this Warrant or any
Warrant Shares may elect to cause the Company to repurchase all the Warrants and
all Warrant Shares (including all such Warrant Shares issued upon exercise of
any other Warrant) for cash at
(a) if the Company is a Listed Company, the Current Market Price, or
72
(b) if the Company is not a Listed Company, the applicable price
determined in accordance with Section 12.2. The Company shall identify the
Independent Financial Expert selected by the Company to determine the Appraised
Market Value (as defined below) of the Company. The holder of this Warrant and
any Warrant Shares shall appoint a second Independent Financial Expert and both
such Independent Financial Experts shall be instructed to use their best efforts
to complete their appraisals pursuant to Section 12.2 within 30 days. If the
holders of Warrants and Warrant Shares are unable to agree on the identity of a
second Independent Financial Expert, such second Independent Financial Expert
shall be appointed by the holder or holders participating in such appointment
having Warrants representing the highest aggregate number of shares of Common
Stock (including Warrant Shares).
(c) The holder of this Warrant or any Warrant Shares may exercise its
right to cause the Company to repurchase up to one-third of the Warrants and all
Warrant Shares on the Repurchase Date (as defined below) pursuant to subsection
(b) above by written notice to the Company, which notice shall be given no later
than 15 days after the Appraised Market Value of the Company is determined
pursuant to Section 12.2.
Section 12.2. Repurchase Price. (a) The aggregate price of the portion
of this Warrant and any Warrant Shares to be repurchased pursuant to Section
12.1(b) shall be equal to the product of (1) the Appraised Market Value of the
Company as of the date on which the repurchase of the Warrant is to be
consummated (the "Repurchase Date") and (2) a fraction, the numerator of which
is equal to the sum of (x) the total number of shares of Common Stock subject to
purchase upon exercise of that portion of this Warrant being repurchased by the
Company (after giving effect to any adjustments resulting from the occurrence of
any event described in Section 8) and (y) the aggregate number of Warrant Shares
being repurchased, as the case may be, and the denominator of which is the total
number of shares of Common Stock then outstanding (assuming that all outstanding
Derivative Securities had been fully exercised or converted, as the case may
be), provided that the price per Warrant Share (assuming for such purpose the
exercise of any remaining portion of this Warrant) so repurchased shall not be
less than the Warrant Price paid for such Warrant Share at the time of exercise.
(b) The term "Appraised Market Value" of the Company means the cash
purchase price (determined as of the Repurchase Date) that a Person who is not
an affiliate of the Company would pay for the Company, on a going concern basis
in an all cash transaction in which such Person is under no compulsion to buy
and the Company is under no compulsion to sell. Such cash purchase price shall
be independently determined by the Independent Financial Experts using such
valuation methods as they may determine to be most appropriate for establishing
a value for the Company in light of relevant market and economic factors at the
time and in conformity with standard appraisal techniques in use at the time for
valuing businesses similar to the Company, but without either any discount for
any lack of liquidity of the Common Stock or any discount for the fact that the
Common Stock is not publicly traded or that the Company does not have any other
publicly traded class of equity securities.
(c) Each Independent Financial Expert shall deliver to the Company and
the holder of the Warrant, a value report (the "Value Report") stating the
methods of valuation considered or
73
used and the value of the Common Stock as of the Repurchase Date, and containing
a statement as to the nature and scope of the examination or investigation upon
which the determination of value was made. The Appraised Market Value of the
Company will be the average of the two values arrived at by the Independent
Financial Experts as set forth in such Value Reports if the higher of such
values does not exceed 110% of the lower. If the higher of such values exceeds
110% of the lower, said Independent Financial Experts shall select a third
Independent Financial Expert who shall conduct a third appraisal in accordance
with this Section and the Appraised Market Value shall be the value of the
Company determined by the Independent Financial Expert whose valuation is
between the other two.
(d) The Company will, and will cause each of its Subsidiaries to, make
available to each of the Independent Financial Experts all of the books and
records of the Company and its Subsidiaries and such other information as any of
the Independent Financial Experts may request in order to ascertain the value of
the Company. The Company will pay all costs of the appraisals undertaken in
accordance with this Section 12, including the reasonable fees and expenses of
the Independent Financial Experts.
Section 12.3. Exercise and Expiration of the Put Right. (a) The right
of the holder of this Warrant or any Warrant Shares to cause the Company to
repurchase the Warrant and/or Warrant Shares pursuant to Section 12.1 may only
be exercised by such holder, in each 365-day period commencing on the fifth,
sixth, seventh, eighth and ninth anniversaries of the Closing Date, in respect
of such number of Warrant and Warrant Shares representing in the aggregate no
more than one-third of such holder's Initial Holding. For the purposes of this
Section 12.3, the holder's "Initial Holding" shall be the number of Warrant
Shares purchasable upon the exercise of the Warrant on the Closing Date, as
increased from time to time pursuant to Section 8.
(b) The right of the holders of the Warrant and Warrant Shares
described in this Section 12 shall automatically terminate on the tenth
anniversary of the Closing Date.
Section 13. Preemptive Rights. (a) Except in the case of Excluded
Securities (as defined below), the Company shall not issue, sell or exchange,
agree to issue, sell or exchange, or reserve or set aside for issuance, sale or
exchange, any (i) shares of Common Stock, (ii) any other equity security of the
Company, (iii) any debt security of the Company which by its terms is
convertible into or exchangeable for any equity security of the Company or has
an equity kicker or other participation rights, (iv) any security of the Company
that is a combination of debt and equity or (v) any option, warrant or other
right to subscribe for, purchase or otherwise acquire any equity security or any
such debt security of the Company, unless in each case the Company shall have
first offered to sell to the holder of the Warrant or any Warrant Shares such
holder's Common Stock percentage of such securities (the "Offered Securities")
(and to sell to the purchasing holders such Offered Securities not subscribed
for by the other holders as hereinafter provided), at a price and on such other
terms as shall have been specified by the Company in writing delivered to such
holder (the "Offer"), which Offer by its terms shall remain open and irrevocable
for a period of 30 days from the date it is delivered by the Company. The term
"Common Stock Percentage" means, with respect to a holder of Warrant or of any
Warrant Share the fraction, expressed as a percentage, the numerator of which is
the total number of shares of Common Stock (including Warrant Shares and
assuming in the case of Derivative Securities
74
(including the Warrants) that such Derivative Securities have been fully
exercised or converted) held by such holder and the denominator of which is the
total number of shares of Common Stock outstanding.
(b) Notice of the intention of the holder of Warrants or Warrant Shares
to accept, in whole or in part, an Offer shall be evidenced by a writing signed
by such holder and delivered to the Company prior to the end of the 30-day
period of such Offer, setting forth such portion of the Offered Securities as
such holder elects to purchase (the "Notice of Acceptance"). If any holder of
Warrants or Warrant Shares shall subscribe for less than its Common Stock
Percentage of the Offered Securities to be sold, the other subscribing holders
shall be entitled to purchase the balance of that holder's Common Stock
Percentage in the same proportion in which they were entitled to purchase the
Offered Securities in the first place (excluding for such purposes such holder
of Warrants or Warrant Shares). The Company shall notify the holder of the
Warrant or Warrant Shares five days following the expiration of the 30-day
period described above of the amount of Offered Securities which each holder may
purchase pursuant to the foregoing sentence, and each holder shall then have
five days from the delivery of such notice to indicate such additional amount,
if any, that such holder wishes to purchase.
(c) In the event that Notices of Acceptance are not given by the
holders of Warrant or Warrant Shares in respect of all the Offered Securities,
the Company shall have 90 days from the expiration of the foregoing 30-day or
40-day period, whichever is applicable, to sell all or any part of such Offered
Securities as to which Notices of Acceptance have not been given by such holders
(the "Refused Securities") to any other Person(s), but only upon terms and
conditions in all respects, including, without limitation, unit price and
interest rates, which are no more favorable, in the aggregate, to such other
Person(s) or less favorable to the Company than those set forth in the Offer.
Upon the closing, which shall include full payment to the Company, of the sale
to such other Person(s) of all the Refused Securities, the holders of Warrants
or Warrant Shares shall purchase from the Company, and the Company shall sell to
such holders, the Offered Securities in respect of which Notices of Acceptance
were delivered to the Company by the holders, at the terms specified in the
Offer.
(d) In each case, any Offered Securities not purchased by the holders
of Warrants or Warrant Shares or any other Person(s) in accordance with Section
13(c) may not be sold or otherwise disposed of until they are again offered to
the holders of Warrants or Warrant Shares under the procedures specified in
Sections 13(a), (b) and (c).
(e) The rights of the holders of any Warrant or of any Warrant Shares
under this Section 13 shall not apply to the following securities (the "Excluded
Securities"):
(1) the Warrants; and
(2) shares of Common Stock issued as a stock dividend or upon
any stock split or other subdivision or combination of the Common Stock.
Section 14. Notices. Any notice by the Company, the holder of this
Warrant or the holders of Warrant Shares or Registrable Securities shall be in
writing and shall be deemed to have been duly given if delivered or mailed by
certified mail five days after mailing, return
75
receipt requested (a) if to the Company, Denali Incorporated, ▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: R. ▇▇▇▇▇ ▇▇▇▇▇▇▇,
Fax: ▇▇▇-▇▇▇-▇▇▇▇, Tel: ▇▇▇-▇▇▇-▇▇▇▇, or at such other address as the Company
may designate by notice to each holder of Warrants, Warrant Shares or
Registrable Securities at the time outstanding, (b) if to any Purchaser that
holds Warrants, Warrant Shares or Registrable Securities, at such Purchaser's
address set forth in Schedule A to the Agreements, or at such other address as
such Purchaser may designate by notice to the Company and (c) if to any other
holder of Warrants, Warrant Shares or Registrable Securities, at the address of
such holder as it appears on the Security Register.
Section 15. Successors. Except as expressly provided in Section 11.10,
this Warrant shall bind and inure to the benefit of the Company and its
permitted successors and assigns hereunder, the Purchasers and their respective
successors and assigns hereunder and, in addition, shall inure to the benefit of
and be enforceable by all holders from time to time of the Warrants, the Warrant
Shares and the Registrable Securities. Without limiting the generality of the
foregoing, the rights of the Purchasers and their respective successors and
assigns as holders of Warrants and Registrable Securities (including without
limitation rights as to registrations and other matters covered by Section 11)
shall survive any reorganization, consolidation or merger of the Company with or
into another entity or the sale or conveyance to another person of the property,
assets or business of the Company as an entirety or substantially as an entirety
and such successor or purchasing entity or person, as the case may be, shall
execute such agreements or other instruments as may be reasonably requested by
the holder of this Warrant to give effect to the foregoing, provided that no
assignee of this Warrant may claim rights under Section 11 without at the time
of such claim agreeing to be bound by the provisions thereof.
Section 16. Applicable Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York.
Section 17. Remedies. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that the same may be specifically enforced.
Section 18. Benefits of this Agreement. Nothing in this Warrant shall
be construed to give to any person or corporation other than the Company, the
holder of this Warrant and the holders of the Warrant Shares or Registrable
Securities any legal or equitable right, remedy or claim under this Warrant and
this Warrant shall be for the sole and exclusive benefit of the Company, the
holder hereof and the holders of the Warrant Shares and the Registrable
Securities.
Section 19. Headings, Etc. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect the meaning
hereof.
Section 20. Change, Waiver, Etc. Neither this Warrant nor any term
hereof may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
76
Section 21. Survival. All covenants and agreements of the Company that
relate to the Warrant Shares or the Registrable Securities and all rights and
duties of the holders from time to time of the Warrant Shares or the Registrable
Securities in this Warrant shall be deemed to survive any surrender hereof to
the Company upon exercise hereof as contemplated by Section 1. References herein
to the Agreements and terms defined therein shall be deemed to survive the
termination of the Agreements.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its duly authorized officer.
Dated June 30, 1999
DENALI INCORPORATED
By
--------------------------------------
Name:
Title:
77
ELECTION TO PURCHASE
Att:
--------------------
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the Warrant to which this Election to Purchase is
attached for, and to purchase thereunder, _______________ shares of Common Stock
(or other securities) of the Company provided for therein, and requests that
certificates for said shares (or other securities) be issued in the name of:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(Please Print Name and Address)
and, if said number of shares shall not be all the shares of Common Stock
purchasable hereunder, that a new Warrant certificate for the balance of said
shares purchasable under the said Warrant be registered in the name of the
undersigned holder or its nominee as below indicated and delivered to the
address stated below:
Dated: ____________, ____
Name of holder or
Nominee (Please Print):
-------------------------------------
Address:
---------------------------------------------------------------
Signature:
--------------------------------------
Signature Guaranteed:
78
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Name and Address of Assignee must be Printed or Typewritten)
the within warrant, hereby irrevocably constituting and appointing
_____________________ Attorney to transfer said warrant on the books of Denali
Incorporated with full power of substitution in the premises.
Dated: ____________, ____
-----------------------------------------------
Signature of Registered Holder
Signature Guaranteed:
79
EXHIBIT 1.3
GUARANTEE AGREEMENT
(Subordinated)
GUARANTEE AGREEMENT dated as of _____________, ___ made by
________________________, a _________________ corporation (the "GUARANTOR"), in
favor of the holders from time to time of the Notes referred to below
(collectively the "OBLIGEES").
WHEREAS, Denali Incorporated ("DENALI" or "COMPANY" ), a
Delaware corporation, has entered into a Note and Warrant Purchase Agreement
dated as of June 30, 1999 (as amended or otherwise modified from time to time,
the "NOTE AND WARRANT PURCHASE AGREEMENT" and terms defined therein and not
otherwise defined herein are being used herein as so defined) with the
purchasers named therein, pursuant to which the Company proposes to issue and
sell to such purchasers its 12% Senior Subordinated Notes due 2006 (collectively
the "NOTES")in an aggregate original principal amount of $15,000,000;
WHEREAS, it is a [condition precedent to the purchase of the
Notes by such purchasers under/requirement of] the Note and Warrant Purchase
Agreement that the Guarantor shall execute and deliver this Guarantee Agreement;
NOW, THEREFORE, in consideration of the premises the Guarantor
hereby agrees as follows:
SECTION 1. Guarantee. The Guarantor unconditionally and
irrevocably guarantees, as primary obligor and not merely as surety,
A. the punctual payment when due, whether at stated maturity,
by acceleration or otherwise, of all obligations of the Company arising
under the Notes and the Note Agreement, including all extensions,
modifications, substitutions, amendments and renewals thereof, whether
for principal, interest (including without limitation interest on any
overdue principal, premium and interest at the rate specified in the
Notes and interest accruing or becoming owing both prior to and
subsequent to the commencement of any proceeding against or with
respect to the Company under any chapter of the Bankruptcy Code of
1978, 11 U.S.C. Section 101 et seq.), prepayment premium, fees,
expenses, indemnification or otherwise, and
B. the due and punctual performance and observance by the
Company of all covenants, agreements and conditions on its part to be
performed and observed under the Notes and the Note and Warrant
Purchase Agreement;
C. (all such obligations are called the "GUARANTEED
OBLIGATIONS"); provided that the aggregate liability of the Guarantor
hereunder in respect of the Guaranteed Obligations shall not exceed at
any time the lesser of (1) the amount of the Guaranteed Obligations and
(2) the maximum amount for which the Guarantor is liable under this
Guarantee Agreement without such liability being deemed a fraudulent
transfer under applicable Debtor Relief Laws (as hereinafter defined),
as determined by a court of competent jurisdiction. As used herein, the
term "DEBTOR RELIEF LAWS" means any applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization or similar debtor relief laws affecting the rights of
creditors generally from time to time in effect.
80
The Guarantor also agrees to pay, in addition to the amount
stated above, any and all reasonable expenses (including reasonable counsel fees
and expenses) incurred by any Obligee in enforcing any rights under this
Guarantee Agreement or in connection with any amendment of this Guarantee
Agreement.
Without limiting the generality of the foregoing, this
Guarantee Agreement guarantees, to the extent provided herein, the payment of
all amounts which constitute part of the Guaranteed Obligations and would be
owed by any other Person to any Obligee but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Person.
SECTION 2. Guarantee Absolute. The obligations of the
Guarantor under Section 1 of this Guarantee Agreement constitute a present and
continuing guaranty of payment and not of collectability and the Guarantor
guarantees that the Guaranteed Obligations will be paid strictly in accordance
with the terms of the Notes and the Note and Warrant Purchase Agreement,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of any Obligee with
respect thereto. The obligations of the Guarantor under this Guarantee Agreement
are independent of the Guaranteed Obligations, and a separate action or actions
may be brought and prosecuted against the Guarantor to enforce this Guarantee
Agreement, irrespective of whether any action is brought against the Company or
any other Person liable for the Guaranteed Obligations or whether the Company or
any other such Person is joined in any such action or actions. The liability of
the Guarantor under this Guarantee Agreement shall be primary, absolute,
irrevocable, and unconditional irrespective of:
A. any lack of validity or enforceability of any Guaranteed
Obligation, any Note, the Note and Warrant Purchase Agreement or any
agreement or instrument relating thereto;
B. any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations, or any
other amendment or waiver of or any consent to departure from any Note,
the Note and Warrant Purchase Agreement or this Guarantee Agreement;
C. any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent
to departure by the Guarantor or other Person liable, or any other
guarantee, for all or any of the Guaranteed Obligations;
D. any manner of application of collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any collateral or any other assets of the
Company or any other Subsidiary;
E. any change, restructuring or termination of the corporate,
limited liability company or partnership structure or existence of the
Company or any other Subsidiary; or
F. any other circumstance (including without limitation any
statute of limitations) that might otherwise constitute a defense,
offset or counterclaim available to, or a discharge of, the Company or
the Guarantor.
This Guarantee Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Guaranteed Obligations is rescinded or must otherwise be returned by any
Obligee, or any other Person upon the insolvency, bankruptcy or reorganization
of the Company or otherwise, all as though such payment had not been made.
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SECTION 3. Waivers. The Guarantor hereby irrevocably waives,
to the extent permitted by applicable law:
A. promptness, diligence, presentment, notice of acceptance
and any other notice with respect to any of the Guaranteed Obligations
and this Guarantee Agreement;
B. any requirement that any Obligee or any other Person
protect, secure, perfect or insure any Lien or any property subject
thereto or exhaust any right or take any action against the Company or
any other Person or any collateral;
C. any defense, offset or counterclaim arising by reason of
any claim or defense based upon any action by any Obligee;
D. any duty on the part of any Obligee to disclose to the
Guarantor any matter, fact or thing relating to the business, operation
or condition of any Person and its assets now known or hereafter known
by such Obligee; and
E. any rights by which it might be entitled to require suit on
an accrued right of action in respect of any of the Guaranteed
Obligations or require suit against the Company or the Guarantor or any
other Person.
SECTION 4. Waiver of Subrogation and Contribution. The
Guarantor shall not assert, enforce, or otherwise exercise (A) any right of
subrogation to any of the rights, remedies, powers, privileges or liens of any
Obligee or any other beneficiary against the Company or any other obligor on the
Guaranteed Obligations or any collateral or other security, or (B) any right of
recourse, reimbursement, contribution, indemnification, or similar right against
the Company, and the Guarantor hereby waives any and all of the foregoing
rights, remedies, powers, privileges and the benefit of, and any right to
participate in, any collateral or other security given to any Obligee or any
other beneficiary to secure payment of the Guaranteed Obligations, until such
time as the Guaranteed Obligations have been paid in full.
SECTION 5. Representations and Warranties. The Guarantor
hereby represents and warrants as follows:
A. The Guarantor is a corporation, limited liability company
or partnership, as the case may be, duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation or organization, as the case may be. The execution,
delivery and performance of this Guarantee Agreement have been duly
authorized by all necessary action on the part of the Guarantor.
B. Except as has been specifically waived, the execution,
delivery and performance by the Guarantor of this Guarantee Agreement
will not (i) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any
property of the Guarantor or any Subsidiary of the Guarantor under, any
indenture, mortgage, deed of trust, loan, purchase or credit agreement,
lease, corporate charter or by-laws or other governing documents, or
any other material agreement or instrument to which the Guarantor or
any Subsidiary of the Guarantor is bound or by which the Guarantor or
any Subsidiary of the Guarantor or any of their respective properties
may be bound or affected, (ii) conflict with or result in a breach of
any of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental Authority
applicable to the Guarantor or any Subsidiary of the
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Guarantor or (iii) violate any provision of any statute or other rule
or regulation of any Governmental Authority applicable to the Guarantor
or any Subsidiary of the Guarantor.
C. The Guarantor and the Company are members of the same
consolidated group of companies and are engaged in related businesses
and the Guarantor will derive substantial direct and indirect benefit
from the execution and delivery of this Guarantee Agreement.
SECTION 6. Amendments, Etc. No amendment or waiver of any
provision of this Guarantee Agreement and no consent to any departure by the
Guarantor therefrom shall in any event be effective unless the same shall be in
writing and signed by the Majority Holders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided that no amendment, waiver or consent shall, unless in
writing and signed by all Obligees, (i) limit the liability of or release the
Guarantor hereunder, (ii) postpone any date fixed for, or change the amount of,
any payment hereunder or (iii) change the percentage of Notes the holders of
which are, or the number of Obligees, required to take any action hereunder.
SECTION 7. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and (A) by telecopy if
the sender on the same day sends a confirming copy of such notice by a
recognized overnight delivery service (charges prepaid), or (B) by registered or
certified mail with return receipt requested (postage prepaid), or (C) by a
recognized overnight delivery service (with charges prepaid). Such notice if
sent to the Guarantor shall be addressed to it at the address of the Guarantor
provided below its name on the signature page of this Guarantee Agreement or at
such other address as the Guarantor may hereafter designate by notice to each
holder of Notes, or if sent to any holder of Notes, shall be addressed to it as
set forth in the Note and Warrant Purchase Agreement. Any notice or other
communication herein provided to be given to the holders of all outstanding
Notes shall be deemed to have been duly given if sent as aforesaid to each of
the registered holders of the Notes at the time outstanding at the address for
such purpose of such holder as it appears on the Note register maintained by the
Company in accordance with the provisions of Section 13.1 of the Note and
Warrant Purchase Agreement. Notices under this Section 7 will be deemed given
only when actually received.
SECTION 8. No Waiver; Remedies. No failure on the part of any
Obligee to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 9. Subordination.
9.1. Subordination to Superior Indebtedness. Notwithstanding
any provision of this Guarantee Agreement or the Guaranteed Obligations to the
contrary, payments of the principal of and premium, if any, and interest on the
Guaranteed Obligations shall be subordinate and junior in right of payment to
the prior payment in full of all Superior Indebtedness of the Guarantor, whether
now owed or hereafter incurred, to the extent and in the manner provided in this
Section.
"SUPERIOR INDEBTEDNESS" means any and all Indebtedness,
liabilities and obligations of the Guarantor which are not expressed to be
junior or subordinate in right of payment to any other Indebtedness of the
Guarantor, whether owed individually or jointly, absolute or contingent, direct
or indirect, joint, several or independent, to the Senior Creditors, including
all principal, interest, fees, reimbursement expenses, indemnification
liabilities, interest rate hedging obligations, or any other form of liability,
and shall include any such interest, fees, reimbursement expenses,
indemnification liabilities or other form of liability arising after the
commencement of a bankruptcy or insolvency proceeding involving the Guarantor,
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whether or not allowed as a claim in such proceeding, and shall also include any
extensions, renewals, refinancings or refundings thereof and any increases
thereof, with respect to each such Indebtedness, in an aggregate amount not to
exceed $3,500,000; provided, however, that to the extent that any such
extension, renewal, refinancing, or refunding (other than the $3,500,000
aggregate increase referred to in the definition) causes or constitutes any
breach of Section 10.1, such amount of Indebtedness shall not be deemed to be
Superior Indebtedness.
9.2. Effects of Defaults in Respect of Superior Indebtedness.
If (a) any principal, interest or other amount owing under the Superior
Indebtedness is not paid when due or is not paid on or before the maturity
thereof, (b) a bankruptcy filing is made by or against the Guarantor, or (c)
there occurs any actual acceleration of any Superior Indebtedness by any Senior
Creditor (any of (a), (b) or (c) being referred to as a "BLOCKAGE EVENT") then,
unless and until such Blockage Event shall have been cured or waived to the
satisfaction of the Senior Creditors holding the affected Superior Indebtedness,
in their sole discretion, or unless and until the affected Superior Indebtedness
shall be paid in full, no payments of any principal, interest, premium or any
other kind (other than payments in kind permitted by the Notes in respect of a
portion of accrued interest thereon), shall be made on the Guaranteed
Obligations.
Following any event of default caused by the default in the
observance or performance of any agreement contained in Section 10 of the Senior
Credit Agreement (Negative Covenants) in respect of Superior Indebtedness (a
"SENIOR DEFAULT") other than a Blockage Event (a "TRIGGERING EVENT"), and notice
thereof by or on behalf of the Senior Creditors to the holders of the Guaranteed
Obligations, no payments of any kind, principal, interest, premium or any other
kind, may be made on the Guaranteed Obligations for a period of 180 days or, if
earlier, the date on which such Senior Default is cured to the satisfaction of
the affected Senior Creditors or waived by the affected Senior Creditors.
In addition, following any Blockage Event or Triggering Event
and notice thereof by or on behalf the Senior Creditors to the holders of the
Guaranteed Obligations, the holders of the Guaranteed Obligations will not ask
for, ▇▇▇ for, take, demand, set-off or in any other manner, direct or indirect,
attempt to enforce any right or collect any payment or distribution on account
of the Guaranteed Obligations, nor present any Note for payment for a 120 day
period following such notice (the "STANDSTILL PERIOD"). The Standstill Period
shall end on the earlier of (i) 120 days after the receipt of such notice and
(ii) the cure of such Blockage Event to the satisfaction of the affected Senior
Creditors or the waiver thereof by such Senior Creditors or the cure of such
Triggering Event to the satisfaction of the Senior Creditors or the waiver
thereof by the Senior Creditors. Upon the ending of the Standstill Period, the
holders of the Guaranteed Obligations may exercise the remedies available to
them under this Guarantee Agreement and the Guaranteed Obligations, provided
that any money, property, collateral or any proceeds thereof received by any
holder of a Note, directly or indirectly, during such Standstill Period or while
any Blockage Event remains uncured or unwaived (before or after the giving of
notice thereof) shall be paid over to the Senior Creditors.
After the expiration of a Triggering Event or the termination
of a Blockage Event, any regularly scheduled interest or principal payment on
account of the Guaranteed Obligations not made when due as a result thereof may
be made, together with any accrued and unpaid interest with respect to such
overdue payment, provided that such payment shall not result in a separate
Triggering Event or Blockage Event.
Not more than one notice with regard to a Triggering Event may
be given by the Senior Creditors to the holders of the Guaranteed Obligations in
any one calendar year, and no subsequent notice with regard to a Triggering
Event may be sent on the basis of the same Senior Default that is specified in
any prior notice.
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During any Standstill Period, no holder of a Note may commence
any action or proceeding against the Guarantor to recover all or any part of the
Guaranteed Obligations or join with any other creditor, unless the Senior
Creditors shall also, in their sole and absolute discretion, agree to join in
bringing any proceedings against the Guarantor under any bankruptcy,
reorganization, readjustment of debt, arrangement of debt, receivership,
liquidation or insolvency law or statute of the federal or any state government
unless and until all Superior Debt shall be finally paid in full in cash;
provided, however, that, if the Senior Creditors shall, during the Standstill
Period, accelerate their Superior Indebtedness or exercise or begin to exercise
their rights with respect to any collateral therefor, the Majority Holders shall
immediately have the right to accelerate the Guaranteed Obligations and
otherwise exercise their remedies under this Guarantee Agreement and the
Guaranteed Obligations, to the extent permitted hereunder, notwithstanding such
Standstill Period.
9.3. Insolvency, etc. (a) In the event of any insolvency or
bankruptcy proceedings, or any receivership, liquidation, reorganization or
other similar proceedings in connection therewith, relative to the Guarantor or
to its creditors, as such, or to the property of the Guarantor, and in the event
of any proceedings for voluntary liquidation, dissolution or other winding up of
the Guarantor, whether or not involving insolvency or bankruptcy, then the
holders of the Superior Indebtedness shall be entitled to receive payment in
full of any obligations with respect to the Superior Indebtedness. To that end
any payment or distribution of any kind or character, whether in cash or
property or securities, which may be payable or deliverable in any such
proceedings in respect of the obligations evidenced by the Guaranteed
Obligations (except (i) a distribution of securities which are subordinate and
junior (to at least the same extent as the Guaranteed Obligations) in right of
payment to the payment of all obligations with respect to the Superior
Indebtedness then outstanding or (ii) any payment or distribution to the holders
of the Guaranteed Obligations which is authorized by an order or decree (from
which no appeal may be taken), which order or decree gives effect to these
subordination provisions) shall be paid or delivered by the Guarantor (or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution), or by any holder of a Note, if received by
it, first, to the holders of the Superior Indebtedness, pro rata, for
application in payment of the obligations with respect thereto, to the extent
necessary to pay all obligations with respect to the Superior Indebtedness in
full, after giving effect to any concurrent payment or distribution to the
holders of the Superior Indebtedness, before any such payment or distribution
shall be made to or retained by any holder of a Note.
(b) Following the occurrence and during the continuation of any event
or circumstance described in Section 9.3(a), if within ten (10) days of the
applicable bar date, one or more of the holder(s) of Notes shall fail to file a
proof of claim, the Senior Creditors shall have the right, but not the
obligation (but without creating any duty or liability, except in the case of
gross negligence or willful misconduct by the Senior Creditors, to the holders
of Notes), to file a proof of claim for or collect the claim of such holder of
Notes (to be applied as set forth in Section 9.3(a)) directly from the receiver,
trustee, custodian, liquidator or representative of the Company's estate in such
proceedings. In the event that the Senior Creditors acquire the right to file a
proof of claim pursuant to this Section 9.3(b), the Company and the holders of
the Note shall promptly furnish all assignments, powers or other documents
reasonably requested by the Senior Creditors to facilitate the filing of such
proof(s) of claim by the Senior Creditors.
9.4. Turnover of Certain Payments. To the extent that the
holder of any Note receives any payment in violation of the subordination
provisions contained in this Section 9, such holder (by the acceptance of such
Note) agrees to hold such payments in trust and promptly to pay such amounts to
the holders of the Superior Indebtedness. As used herein, the term "payment"
shall include any distribution of assets or any lien, deposit, set-off, or
recoupment of any kind for the benefit of the holder of the Guaranteed
Obligations made from the assets of the Guarantor.
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9.5. No Impairment. Nothing contained herein shall impair, as
between the Guarantor and the holder of any Note, the obligation of the
Guarantor to pay to the holder thereof the principal thereof and prepayment
premium, if any, and interest thereon as and when the same shall become due and
payable in accordance with the terms of such Note and this Guarantee Agreement,
or, except as provided herein, prevent the holder of any Note from exercising
all rights, powers and remedies otherwise permitted by applicable law or
thereunder upon the happening of a Senior Default under the Note And Warrant
Purchase Agreement, all subject to the rights of the holders of Superior
Indebtedness as provided in this Section 9 to receive cash, securities or other
property otherwise payable or deliverable to the holders of the Guaranteed
Obligations directly or indirectly by the Guarantor from any source whatsoever.
9.6. Payment of Superior Indebtedness, Subrogation, etc. Upon
the payment in full of all Superior Indebtedness of the Guarantor, the holders
of the Guaranteed Obligations shall be subrogated to all rights of the holders
of such Superior Indebtedness to receive any further payments or distributions
applicable to such Superior Indebtedness until the Guaranteed Obligations shall
have been paid in full, and, for the purposes of such subrogation, no payment or
distribution received by the holders of such Superior Indebtedness of cash,
securities, or other property to which the holders of the Guaranteed Obligations
would have been entitled except for this Section 9 shall, as between the
Guarantor and its creditors other than the holders of Superior Indebtedness, on
the one hand, and the holders of the Guaranteed Obligations, on the other hand,
be deemed to be a payment or distribution by the Guarantor on account of
Superior Indebtedness.
9.7 Rescission, Amendment, etc. Each holder of a Note consents
that, without the necessity of any reservation of rights against any holder of a
Note, and without notice to or further assent by any holder of a Note:
(i) any demand for payment of any Superior Indebtedness made
by any Senior Creditor may be rescinded in whole or in part by such
Senior Creditor, and any obligations under the Superior Indebtedness
may be continued, and the Superior Indebtedness, or the liability of
the Company or any guarantor or any other party upon or for any part
thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, or any obligation or liability of the
Company or any other party under the Superior Indebtedness or any other
agreement, may, from time to time, in whole or in part, be renewed,
extended, modified, accelerated, compromised, waived, surrendered, or
released by any Senior Creditor; and
(ii) any Superior Indebtedness may be amended, modified,
supplemented or terminated, in whole or in part, as any Senior Creditor
may deem advisable from time to time, and any collateral security at
any time held by any of the Senior Creditors for the payment of any of
the Superior Indebtedness may be sold, exchanged, waived, surrendered
or released;
in each case all without notice to or further assent by any holder of a Note,
which will remain bound under this Agreement, and all without impairing,
abridging, releasing or affecting the subordination provided for herein, subject
always to the proviso contained in the definition of Superior Indebtedness.
SECTION 10. Continuing Guarantee. This Guarantee Agreement is
a continuing guarantee of payment and performance and shall (A) remain in full
force and effect until payment in full of the Guaranteed Obligations and all
other amounts payable under this Guarantee Agreement, (B) be binding upon the
Guarantor, its successors and assigns and (C) inure to the benefit of and be
enforceable by the Obligees and their successors, transferees and assigns.
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SECTION 11. Jurisdiction and Process; Waiver of Jury Trial.
The Guarantor irrevocably submits to the non-exclusive in personam jurisdiction
of any New York State or federal court sitting in the Borough of Manhattan, The
City of New York, over any suit, action or proceeding arising out of or relating
to this Guarantee Agreement. To the fullest extent permitted by applicable law,
the Guarantor irrevocably waives and agrees not to assert, by way of motion, as
a defense or otherwise, any claim that it is not subject to the in personam
jurisdiction of any such court, any objection that it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding brought in any
such court and any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.
The Guarantor consents to process being served in any suit,
action or proceeding of the nature referred to in this Section by mailing a copy
thereof by registered or certified mail, postage prepaid, return receipt
requested, to the Guarantor at its address specified in Section 7 or at such
other address of which you shall then have been notified pursuant to said
Section. The Guarantor agrees that such service upon receipt (i) shall be deemed
in every respect effective service of process upon it in any such suit, action
or proceeding and (ii) shall, to the fullest extent permitted by applicable law,
be taken and held to be valid personal service upon and personal delivery to the
Guarantor. Notices hereunder shall be conclusively presumed received as
evidenced by a delivery receipt furnished by the United States Postal Service or
any recognized courier or overnight delivery service.
Nothing in this Section 11 shall affect the right of any
holder of a Note to serve process in any manner permitted by law, or limit any
right that the holders of any of the Notes may have to bring proceedings against
the Guarantor in the courts of any appropriate jurisdiction or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
THE GUARANTOR WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR
WITH RESPECT TO THIS GUARANTEE AGREEMENT OR ANY OTHER DOCUMENT EXECUTED IN
CONNECTION HEREWITH.
SECTION 12. Governing Law. This Guarantee Agreement shall be
construed and enforced in accordance with, and the rights of the Guarantor and
the Obligees shall be governed by, the laws of the State of New York excluding
choice-of-law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee
Agreement to be duly executed and delivered as of the date first above written.
[GUARANTOR]
By
-------------------------
Title:
Address:
Attention:
Telephone:
Telecopy:
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EXHIBIT 4.4A
GARDERE ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P.
June 30, 1999
To each of the Purchasers whose name appears
in the Acceptance Forms to the within-mentioned
Note and Warrant Purchase Agreement
Re: Denali Incorporated 12% Senior Subordinated Notes and Warrants
Ladies and Gentlemen:
We have acted as special counsel to Denali Incorporated, a Delaware
corporation ("Denali"), Ershigs, Inc., a Washington corporation ("Ershigs"),
SEFCO, Inc., an Oklahoma corporation ("SEFCO"), Specialty Solutions, Inc., a
Delaware corporation ("SSI"), Containment Solutions, Inc., a Delaware
corporation ("CSI"), Containment Solutions Services, Inc., a Delaware
corporation ("CSSI"), Denali Holdings Management, L.L.C., a Nevada limited
liability company ("DHM"), Fibercast Company, an Oklahoma corporation ("FC"),
Denali Management, Inc., a Delaware corporation ("DMI"), Denali Operating
Management, Ltd., a Texas limited partnership ("DOM"), Plasti-Fab, Inc., a
Delaware corporation ("Plasti-Fab"), Belco Manufacturing Company, Inc.
("Belco"), and Instrumentation Solutions, Inc., a Delaware corporation ("ISI")
(Ershigs, SEFCO, SSI, CSI, CSSI, DHM, FC, DMI, DOM, Plasti-Fab, Belco, and ISI
are sometimes collectively referred to herein as the "Domestic Subsidiaries",
and Denali and Domestic Subsidiaries are sometimes collectively referred to
herein as the "Denali Parties"). We are furnishing the opinion set forth below
to you at the request of the Denali Parties in compliance with Section 4.4 of
the Note and Warrant Purchase Agreement (the "Purchase Agreement") dated as of
June 30, 1999, between Denali and the several Purchasers named therein. Terms
not otherwise defined herein shall have the respective meanings assigned to such
terms in the Purchase Agreement.
In rendering the opinions set forth below, we have examined copies of
the documents listed in Schedule I attached hereto (the "Transaction
Documents"). We have also examined the originals or copies, certified or
otherwise identified to our satisfaction, of such documents and records of the
Denali Parties as we have deemed necessary in order to deliver this opinion. We
have also reviewed such other documents as we have deemed relevant to this
opinion and have discussed such matters as we have deemed relevant to this
opinion with the officers of the Denali Parties and, with respect to certain
factual matters involving the Denali Parties, we have relied on (a) the
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truthfulness, accuracy and completeness of all representations and warranties
of the Denali Parties contained in the Transaction Documents to which each is a
party, (b) the statements made in the opinion of ▇▇▇▇▇ ▇. ▇▇▇▇▇, General
Counsel of Denali, addressed to each of you, dated of even date herewith, and
(c) an Officer's Certificate from R. ▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), Chief Financial
Officer of Denali (the "Officer's Certificate"), of even date herewith which is
attached hereto as Exhibit A as to the matters addressed therein. We have not
conducted independent investigations or inquiries to determine the existence of
matters, actions, proceedings, items, documents, facts, judgments, decrees,
franchises, certificates, permits or the like, and we have made no independent
search of the records of any court, arbitrator or governmental authority
affecting any of the Denali Parties and no inference as to our knowledge
thereof shall be drawn from the fact of our representation of any party or
otherwise. Further, with respect to the legal opinion described in clause (b)
above, we have relied upon and assumed the accuracy of the opinions stated
therein.
In rendering this opinion, we have assumed:
(i) the legal capacity of all individuals to execute all
documents in their individual capacities;
(ii) the genuineness of the signatures appearing on all
documents other than the Denali Parties;
(iii) the authenticity of all documents submitted to us as
originals;
(iv) the conformity to authentic original documents of all
documents submitted to us as certified, conformed or
photostatic copies;
(v) the correctness and accuracy of all facts set forth
in all certificates, reports and discussions
identified in this opinion;
(vi) the due authorization, execution, and delivery of all
of the Transaction Documents by the parties thereto
other than the Denali Parties;
(vii) the Transaction Documents are legal, valid, and
binding obligations of all parties thereto other than
the Denali Parties;
(viii) no party to the transactions contemplated by the
Transaction Documents has fraudulently induced any
other party to become a party to such transactions
and no facts exist which would make available
defenses of mutual mistake, concealment, undue
influence, duress, or criminal activity; and
(ix) there are no other documents or instruments or oral
or written agreements between the parties to the
transactions contemplated by the Transaction
Documents, or any two or more of such parties, that
pertain to the subject matter of this opinion that
are not in the Transaction Documents and the various
other closing documents and certificates executed
and/or delivered in connection with the Transaction
Documents.
In basing the opinions set forth herein on matters "to our knowledge" or words
of similar import, such words signify that, in the course of our employment by
Denali and Domestic Subsidiaries, no information has come to our attention that
would give us actual knowledge that any such opinions are not accurate.
89
Except as otherwise stated herein, no attorney in our firm which has worked on
the transaction described in the Purchase Agreement has undertaken any
independent investigation or verification of such matters.
Based on the foregoing and subject to the other limitations, assumptions, and
qualifications set forth below, and having due regard for such legal
considerations as we deem relevant, we are of the opinion that:
1. Each of Denali and Domestic Subsidiaries has duly executed and
delivered the Transaction Documents to which it is a party.
2. The Transaction Documents to which Denali or any Domestic Subsidiary
is a party, constitute legal, valid and binding obligations of Denali and each
Domestic Subsidiary, enforceable in accordance with their respective terms.
3. No consent, approval or authorization of, or declaration,
registration or filing with, any Governmental Authority is required to be
obtained or made for validity of the execution, delivery or performance by
Denali or any Domestic Subsidiary of any of the Transaction Documents to which
they are a party.
4. There is no material agreement to which Denali or any Domestic
Subsidiary is a party, which would be contravened by the execution, delivery, or
performance of the Transaction Documents, except as has been waived or consented
to.
5. It is not necessary in connection with the offering, sale and
delivery of any of the Transaction Documents, under the circumstances
contemplated under the Purchase Agreement, to register any Transaction Document
under the Securities Act or to qualify an indenture in respect of the Notes
under the Trust Indenture Act of 1939, as amended.
6. None of the Denali Parties is (a) an "investment company," or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended, or (b) a "holding company" as
defined in, or otherwise subject to regulation under, the Public Utility Holding
Company Act of 1935. None of the Denali Parties is subject to regulation under
any Federal or state statute or regulation which limits its ability to incur
Indebtedness.
7. None of the transactions contemplated by the Purchase Agreement
(including without limitation the use of the proceeds from the sale of the
Notes) will violate or result in a violation of Section 7 of the Exchange Act,
or any regulations issued pursuant thereto, including without limitation
Regulations T, U and X of the Board of Governors of the Federal Reserve System
(12 C.F.R., Part 220, Part 221 and Part 224, respectively).
All opinions expressed herein are qualified in their entirety by the following:
a. The opinions expressed herein are qualified to the extent the
validity, binding nature, and enforceability of the Transaction Documents are
limited or otherwise affected by:
(i) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law), including, without limitation, the availability of
specific performance, the appointment of
90
a receiver, concepts of materiality, reasonableness, good
faith and fair dealing or any other equitable remedy;
(ii) bankruptcy, insolvency, reorganization, rearrangement,
moratorium, fraudulent or other conveyance laws, and similar
laws generally affecting creditors' and secured parties'
rights at the time in effect;
(iii) the rights of the United States under the Federal Tax Lien Act
of 1966, as amended;
(iv) other applicable statutory or case law which may impair the
enforceability of certain of the remedial, waiver, and other
provisions of the Transaction Documents, including without
limitation, the waiver of certain subrogation rights, but
which do not make the remedies and procedures set forth in the
Transaction Documents, as a whole, inadequate for the
realization of the substantive benefits intended to be
available to each of you under the Transaction Documents,
except to the extent of any economic consequences of any delay
which may result therefrom or as otherwise provided in this
letter; and
(v) to the extent to which the enforceability of any indemnity
provisions contained in the Transaction Documents may be
limited or rendered unenforceable by applicable public policy
as it relates to the attempt therein to exculpate a party for
any losses attributable to that party's own negligence or
intentional misconduct.
b. We express no opinion as to the due execution and enforceability of
any of the Transaction Documents delivered from time to time by any Subsidiary
of Denali, other than the Domestic Subsidiaries (all such other Subsidiaries of
Denali shall be referred to herein as "Foreign Subsidiaries") or of the
enforceability of any provisions in any Transaction Documents against or in
connection with any Foreign Subsidiary. We express no opinion whatsoever,
regarding any Foreign Subsidiary, including whether any such Foreign Subsidiary
may be a Domestic Subsidiary under the Transaction Documents. We express no
opinion as to the priority or perfection of the liens and security interests
granted in the Pledge Agreement, and we express no opinion concerning the
enforceability of any provision in the Pledge Agreement not governed by the laws
of Texas or the corporate laws of Delaware.
c. We have assumed that the holders of the Notes (whether the
Purchasers or any subsequent holder thereof) will act in good faith and will
seek to enforce their rights and remedies under the Transaction Documents in a
lawful and reasonable manner.
d. We express no opinion concerning the enforceability of any
provisions contained in any of the Transaction Documents which (i) purport to
restrict access to legal or equitable remedies; (ii) purport to establish
evidentiary standards for suit or proceedings to enforce the Transaction
Documents or evidentiary standards relating to the powers granted to the holders
of the Notes thereunder; and (iii) relate to subrogation rights, delay or
omissions of enforcement of remedies, election of remedies, waiver of defenses,
waiver of notices, indemnity, severance, marshaling of assets or sales in the
inverse order of alienation.
91
e. We express no opinion concerning the applicability or effect of, or
compliance with, usury laws or the enforceability of usury savings clauses.
f. We express no opinion concerning the enforceability of any
provisions relating to the waiver of a right to jury trial or forum selection
and consent to jurisdiction.
g. We are of the opinion that the transaction evidenced by the
Transaction Documents constitutes a "qualified transaction" under Section 35.51
of the Texas Business and Commerce Code and that such transaction "bear(s) a
reasonable relation" to Texas. Although we are unaware of any reported decisions
interpreting Section 35.51, we are of the opinion that Section 35.51(b) reflects
the intent of the legislature to permit the parties to a qualified transaction
to choose which law governs the interpretation and construction of their
agreement, regardless of whether to do so would otherwise violate or be contrary
to a fundamental or public policy of Texas.
We express no opinion as to any matters other than as expressly set forth above,
and no opinion is to be implied or inferred herefrom, and specifically, we
express no opinion as to (i) the financial ability of any of the Denali Parties
to meet its respective obligations under the Transaction Documents; (ii) the
truthfulness or accuracy of any applications, reports, plans, documents,
financial statements or other facts furnished to you by any of the Denali
Parties or any other Person in conjunction with the Transaction Documents; or
(iii) the truthfulness or accuracy of any statements of fact made by any of the
Denali Parties in the Transaction Documents or any other documents described
herein, except to the extent that such matters are expressly addressed herein.
Our engagement by the Denali Parties is limited to the specific matters set
forth herein, and the Denali Parties in some instances use other legal counsel
for other matters. Accordingly, there may exist matters of a legal and/or
factual nature which are not addressed by this opinion and with respect to which
we have not been consulted.
Inasmuch as you had independent counsel in connection with the transactions
relating to the Transaction Documents, the opinions expressed herein are subject
to the correctness of our understanding that neither you nor any of the
individual lawyers who have worked on these transactions as counsel on your
behalf have any actual knowledge of any facts or circumstances upon which you or
any such individual lawyers have formed a conclusion which is contrary to any
opinions expressed herein.
While certain members of this firm are admitted to practice in other states, we
have not examined the laws of any state other than Texas and the corporate laws
of the State of Delaware or consulted with members of this firm who are admitted
in other jurisdictions for the purposes of the foregoing opinions except for
examining the applicable federal laws of the United States of America. No
opinion is expressed concerning the enforceability of the Transaction Documents
under the laws of any other State and this opinion is so limited.
[remainder of page intentionally left blank]
92
This opinion is being furnished solely for your benefit, and for the benefit of
other institutional investor holders from time to time of the Notes purchased by
you today, in connection with the Closing held today of the transactions
contemplated by the Transaction Documents, and may not be relied upon by any
other person for any purpose without my prior written consent. Further, this
opinion is rendered as of the date hereof, and we undertake no, and hereby
disclaim any, obligation to advise you of any changes in, or any new
developments which might affect, any matters or opinions set forth herein.
Very truly yours,
GARDERE ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Attachments: Schedule 1: Transaction Documents
Exhibit A: Officer's Certificate
93
EXHIBIT A
OFFICER'S CERTIFICATE
The undersigned, R. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Financial Officer of Denali
Incorporated ("Denali"), hereby certifies to Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇,
L.L.P. after due inquiry that the following information is accurate and
complete, and Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P. may rely on this certification
in rendering its opinion to be delivered on behalf of Denali in connection with
the Note and Warrant Purchase Agreement (the "Purchase Agreement") dated as of
June 30, 1999, among Denali Incorporated, a Delaware corporation ("Denali"), and
the several Purchasers identified therein ("Purchasers"), (all documents to be
executed in connection with the Purchase Agreement are collectively referred to
herein as the "Transaction Documents"). Capitalized terms used herein without
definition have the meanings ascribed thereto in the Purchase Agreement.
A. There is no (i) action, suit, investigation or proceeding pending or
threatened in writing against Denali or any Domestic Subsidiary (as
defined in the Opinion Letter delivered in conjunction with this
Officer's Certificate) or the assets of any of them before any court,
administrative agency, governmental authority or arbitrator, and (ii)
there is no outstanding judgment, order, writ, injunction or decree
against or affecting Denali or any Domestic Subsidiary or their assets.
B. There is no material agreement to which Denali or any of the Domestic
Subsidiaries is a party, which would be contravened by the execution,
delivery, or performance of the Transaction Documents.
C. Each of Denali and the Domestic Subsidiary is primarily engaged,
directly or through wholly owned subsidiaries, in a business other than
that of investing, reinvesting, owning, holding or trading in
securities, and none of Denali, nor any Domestic Subsidiary nor any
Person controlling Denali or any Domestic Subsidiary is or is required
to be registered as an investment company under the Investment Company
Act of 1940, as amended. Neither Denali nor any of the Domestic
Subsidiaries is a "holding company" as defined in, or otherwise subject
to regulation under, the Public Utility Holding Company Act of 1935.
Neither Denali nor any of the Domestic Subsidiaries is subject to
regulation under any Federal or state statute or regulation which
limits its ability to incur indebtedness.
Executed as of the 30th day of June, 1999.
/s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------
R. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Financial Officer of
Denali Incorporated
94
DENALI INCORPORATED
OFFICER'S CERTIFICATE
The undersigned, being the duly elected, qualified and acting Chief
Financial Officer of Denali Incorporated, a Delaware corporation (the
"Company"), hereby certifies the following facts in connection with a rendering
of a legal opinion by Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P. in connection with
the purchase and sale of up to $15 million in aggregate principal amount of the
12% Senior Subordinated Notes due 2006 of Denali (the "Senior Subordinated
Notes") and warrants to purchase 534,873 shares of the common stock, $0.01 par
value per share of Denali (the "Warrants") pursuant to that certain Note and
Warrant Purchase Agreement dated June 30, 1999 (the "Agreement").
1. In connection with the sale of the Senior Subordinated Notes and the
Warrants by the Company pursuant to the Agreement, the Company has made
available to each purchaser thereof at a reasonable time prior to such
sale the opportunity to ask questions and receive answers concerning
the terms and conditions of the offering of the Senior Subordinated
Notes and the Warrants.
2. Neither the Company nor any person acting on its behalf has made any
offer to sell or sold any of the Senior Subordinated Notes or the
Warrants by any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio.
IN WITNESS WHEREOF, this Certificate has been executed to be effective
as of June 30, 1999 by R. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Financial Officer of the Company.
/s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------
R. ▇▇▇▇▇ ▇▇▇▇▇▇▇
95
EXHIBIT 4.4(a)
DENALI INCORPORATED
June 30, 1999
To each of the Purchasers whose name appears
in the Acceptance Forms to the within-mentioned
Note and Warrant Purchase Agreement
Re: Denali Incorporated 12% Senior Subordinated Notes and Warrants
Ladies and Gentlemen:
I am the General Counsel of Denali Incorporated, a Delaware corporation
("Denali"), Specialty Solutions, Inc., a Delaware corporation ("SSI"),
Containment Solutions, Inc., a Delaware corporation ("CSI"), Ershigs, Inc., a
Washington corporation ("Ershigs"), SEFCO, Inc., an Oklahoma corporation
("Sefco"), Containment Solutions Services, Inc., a Delaware corporation
("CSSI"), Denali Holdings Management, L.L.C., a Nevada limited liability company
("DHM"), Fibercast Company, an Oklahoma corporation ("FC"), Denali Management,
Inc., a Delaware corporation ("DMI"), Denali Operating Management, Ltd., a Texas
limited partnership ("DOM"), Plasti-Fab, Inc., a Delaware corporation
("Plasti-Fab"), Belco Manufacturing Company, Inc. ("Belco"), and Instrumentation
Solutions, Inc., a Delaware corporation ("ISI") (SSI, Ershigs, Sefco, CSI, CSSI,
DHM, FC, DMI, DOM, Plasti-Fab, Belco, and ISI, are sometimes collectively
referred to herein as the "Domestic Subsidiaries"; and Denali and Domestic
Subsidiaries are sometimes collectively referred to herein as the "Denali
Parties"). I am furnishing the opinion set forth below to you in compliance with
Section 4.4 of the Note and Warrant Purchase Agreement (the "Purchase
Agreement") dated of even date herewith, between Denali and the several
Purchasers named therein. Terms not otherwise defined herein shall have the
respective meanings assigned to such terms in the Purchase Agreement.
In rendering the opinions set forth below, I have examined copies of
the documents listed in Schedule I attached hereto (the "Transaction
Documents"). I have also examined originals, or copies certified or otherwise
identified, of the certificates or articles of incorporation and bylaws or other
applicable organizational documents, each as amended to date, of Denali and each
Subsidiary Guarantor, corporate records of Denali and the Domestic Subsidiaries,
including minute books of Denali and the Domestic Subsidiaries, certificates of
public officials and of representatives of Denali and the Domestic Subsidiaries,
statutes and other instruments and documents as a basis for the opinions
hereinafter expressed.
On the basis of the assumptions, and subject to the limitations and
qualifications hereinafter set forth, I am of the opinion that:
96
1. Denali is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly qualified and in
good standing as a foreign corporation in every other jurisdiction in which the
ownership of its property or the conduct of its business requires such licensing
and qualification (except to the extent that the failure to be so qualified
could not have a Material Adverse Effect).
2. Each Subsidiary Guarantor is duly organized, validly existing and in
good standing under the laws of the state of its organization and is duly
qualified and in good standing as a foreign entity in every other jurisdiction
in which the ownership of its property or the conduct of its business requires
such licensing and qualification (except to the extent that the failure to be so
qualified could not, in the aggregate, have a Material Adverse Effect).
3. Denali and each of the Domestic Subsidiaries have the corporate
power and authority to carry on their respective businesses as now being
conducted, to execute and deliver the Transaction Documents and to perform their
respective obligations thereunder. The transactions contemplated by the
Transaction Documents and the execution, delivery of and performance by Denali
and by each of the Domestic Subsidiaries of their respective obligations under
the Transaction Documents to which they are a party have been duly authorized,
executed and delivered and constitute a legal, valid and binding agreement of
Denali and each Domestic Subsidiary enforceable against each, in accordance with
their respective terms. The officers executing the Transaction Documents on
behalf of Denali and on behalf of Domestic Subsidiaries have been duly
authorized to execute and deliver such documents.
4. The execution and delivery of the Transaction Documents, the
consummation of the transactions therein contemplated, and the fulfillment of
and compliance with the terms, conditions and provisions thereof or of any
instruments required thereby, will not conflict with, violate or result in a
breach of (a) the Certificate of Incorporation or bylaws of Denali or (b) the
Articles or Certificate of Incorporation or bylaws, or other organizational
documents of any Subsidiary Guarantor.
5. Denali has duly authorized and reserved for issuance 534,873 shares
of Denali's Common Stock, par value $0.01 per share, for issuance upon exercise
of Warrants and when so issued, such shares will be fully paid and
non-assessable and not subject to any preemptive rights.
6. Except for matters disclosed in the Disclosure Documents, there is
no action, suit, investigation or proceeding pending or threatened in writing
against Denali or any Domestic Subsidiary or the assets of any of them in any
court or before any arbitrator of any kind or before any Governmental Authority.
7. There is no state or federal statute, rule or regulation, or any
writ, order or decision of any court, arbitrator or Governmental Authority
binding on any of the Denali Parties, or material agreement to which Denali or
any Domestic Subsidiary is a party, which would be contravened by the execution,
delivery, or performance of the Transaction Documents.
In making the foregoing opinions, I have relied upon such
representations from public officials as I have deemed necessary. I am a member
of the Texas and Utah State Bars and the matters herein are limited in all
respects to matters of the laws of the States of Texas and Utah, the corporate
law of the State of Delaware, and applicable federal law.
This opinion is being furnished solely for your benefit, and for the
benefit of other institutional investor holders from time to time of the Notes
purchased by you today, in connection with the Closing
97
held today of the transactions contemplated by the Transaction Documents, and
may not be relied upon by any other person for any purpose without my prior
written consent. Further, this opinion is rendered as of the date hereof, and I
undertake no, and hereby disclaim any, obligation to advise you of any changes
in, or any new developments which might affect, any matters or opinions set
forth herein.
Sincerely,
▇▇▇▇▇ ▇. ▇▇▇▇▇,
General Counsel
Attachment: Schedule 1: Transaction Documents
98
EXHIBIT 4.4(A)
VAN GIJZEN ADVOCATEN EN NOTARISSEN
To: Each of the Purchasers whose name appears in the
Acceptance Forms to the Note and Warrant Purchase
Agreement among the Shareholder and the Pledgees,
as Purchaser, dated at June 30, 1999 (the "Note and
warrant Purchase Agreement")
CONFIDENTIAL
Amsterdam, July 1, 1999
RE: DENALI - THE DEED OF PLEDGE,
Ladies and Gentlemen:
We have acted as special Netherlands counsel to Denali Incorporated (the
"Shareholder") in connection with the execution and delivery of the Deed of
Pledge by the Shareholder concerning the pledge by the Shareholder to the
Purchasers of shares in Denali ▇▇▇▇▇ Europe B.V., a limited liability company
organised under Netherlands law (the "Company").
In connection with this opinion we have examined the following documents and
such other documents as we have considered relevant for the purpose of giving
this opinion, including:
a A copy of the executed Deed of Incorporation of the Company, dated May
12, 1999, including the Articles of Association of the Company;
b An extract dated June 30, 1999 with respect to the Company (the
"Company Extract") from the Trade Register of the Chamber of Commerce
and Industry in Amsterdam (the "Amsterdam Trade Register"), which
Company Extract proves to be unchanged in all respects, material for
rendering this opinion, as confirmed to us by telephone by the
Amsterdam Trade Register on the date hereof;
c A copy of the shareholders register of the Company (the "Shareholders
Register")
d A faxed copy of a certificate of an officer of the Shareholder, dated
as of June 30, 1999 (the "Shareholder Officer's Certificate")
certifying as to the matters set forth herein;
e A copy of the notarial deed of pledge, dated as of July 1, 1999 (the
"Deed of Pledge");
99
Our examination referred to above has been limited to the review of the
documents.
In giving this opinion, we have made the following assumptions:
a all documents submitted to us as originals and the signatures and
initials thereon are genuine, and all documents submitted to us as
photocopies or facsimile copies are in conformity with the originals;
b The Deed of Pledge has been duly executed on behalf of any party other
than the Company and the Shareholder, and constitutes the legal, valid
and binding obligations of each of the parties thereto (other than the
Company and the Shareholder) enforceable against it (other than the
Company and the Shareholder) in accordance with its terms, under the
laws of the Netherlands;
c The Deed of Pledge, accurately describes and contains the mutual
understanding of the parties thereto;
d the Shareholders Register is accurate and complete, all required
registrations by the management board of the Company have been
registered therein and there are no unregistered pledges on the Shares;
e all terms and conditions set forth in the Deed of Pledge are at arm's
length;
f the Company has not been dissolved ("ontbonden"), granted suspension of
payments ("surseance van betaling verleend") or declared bankrupt
("failliet verklaard"); it being hereby confirmed that our inquiries
with the said Trade Registry and the District Court of Amsterdam have
not revealed any information that any such event has occurred with
respect to the Company, but it should be noted that his is not
conclusive evidence that no such event has occurred, and;
g The Note and Warrant Purchase Agreement is enforceable against the
Shareholder in accordance with its terms.
We are an independent partnership consisting of lawyers qualified under the laws
of the Netherlands. We have not investigated the laws of any jurisdiction other
than the Netherlands - meaning the part of the Kingdom of the Netherlands in
Europe - and do not express an opinion on the laws of any jurisdiction other
than the Netherlands as it stands and has been interpreted in published case law
of the courts of the Netherlands as at the date of this opinion.
We expressly do not represent ourselves to be familiar with the laws of (or any
part of) the United States or any other country and have made no independent
investigation of the laws of any other jurisdiction as a basis for the opinions
hereinafter expressed.
100
Terms and expressions of law and of legal concepts as used in this opinion have
the meaning in this opinion attributed to them under the laws of the Netherlands
and this opinion should be read and understood accordingly.
Based solely upon the foregoing and subject to the qualifications, assumptions
and limitations set forth herein, as well as to any fact, circumstance, event or
document not disclosed to us in the course of our examination referred to above,
we are, at the date hereof, of the following opinion:
1. Neither the execution or the delivery of , nor the performance by the
Shareholder under the Deed of Pledge with respect to the pledge of the
shares of the Company (the "Shares") will (i) contravene any provisions
of any law, statute, rule or regulation of the Netherlands or (ii) to
the best or our knowledge and based upon the Shareholder Officer's
Certificate, contravene any order, judgement, injunction or decree of
any court or public authority or governmental agency of the Netherlands
binding on the Shareholder.
2. Under Netherlands law of general applicability, no order, consent,
approval, license, authorisation or validation of or filings, recording
or registration with or exemption by any public authority or
governmental agency of the Netherlands or any subdivision thereof will
be required to authorise or will be required in connection with the
execution, delivery and performance by the Shareholder of the Deed of
Pledge.
3. The security interest with respect to the pledge of the Shares
contemplated by the Deed of Pledge constitutes a first priority
perfected security interest in the Shares, and Purchasers will be
entitled to all the priorities and benefits provided for similar
perfected security interests under Netherlands law. No filings or
recordings, other than the notation of the pledge of the Shares in the
Shareholders Register are required in order to perfect the security
interest in the Shares.
4. The provisions of the Deed of Pledge concerning the pledge of the
Shares comply with Netherlands law, in so far as applicable, and the
description in the Deed of Pledge of the Shares pledged thereby is
adequate to create the security interest contemplated thereby.
5. Upon the occurrence of an Event of Default (as defined in the Deed of
Pledge) the Purchasers will have, subject to the limitations as set
forth in the Deed of Pledge and insofar not contravening with the
public policy ("ordre public") of the Netherlands, all rights and
remedies relating to the Shares a purchaser has under Netherlands law.
6. The Deed of Pledge constitutes the legal, valid and binding obligations
of the Shareholder as are evident in this Deed, enforceable against the
Shareholder in accordance with the Deed's terms and Dutch law.
Our opinions above are subject to the following qualifications, assumptions,
limitations and exceptions:
101
a This opinion is limited by any applicable bankruptcy, insolvency and
other similar law affecting the rights of creditors in general.
b The enforcement of the Deed of Pledge and foreign judgements in the
Netherlands will be subject to the rules of civil procedure as applied
by the Netherlands courts.
c With respect to the opinion expressed in paragraph 5 above it should be
noted that in connection with the enforcement of legal proceedings
against the Shareholder in the Netherlands, the Netherlands courts may
(i) apply rules of Netherlands law in a situation where those rules are
mandatory irrespective of the law otherwise applicable to any contract
concerned, (ii) give effect to the mandatory rules of the laws of any
other country with which the situation adjudicated has a close
connection, if and insofar as, under the laws of such country, those
rules must be applied whatever the law applicable to the contract
concerned, (iii) refuse the application of the law of the State of New
Your or any other law as the case may be if such application is
manifestly incompatible with the public policy ("ordre public") of the
Netherlands and (iv) require that the relevant content of the laws of
the State of New York or any other law are duly proved in such
proceedings.
This opinion and the matters addressed herein are as of the date hereof, and we
undertake no, and hereby disclaim any, obligation to advise you of any change in
any matter set forth herein occurring after the date hereof. This opinion is
strictly limited to the matters stated herein and may not be read as extending
by implication to any matters not specifically referred to herein. Nothing in
this opinion should be taken as expressing an opinion in respect of any
representations or warranties, or other information contained in the Deed of
Pledge or any other document in connection therewith or with this opinion except
as expressly confirmed herein.
This opinion is addressed to an may be relied upon only by the Addressees, other
institutional investors holders from time to time of the Notes purchased by you
today under the Note and Warrant Purchase Agreement and the Pledgees. Without
our prior written consent this opinion letter may not be transmitted to, filed
with or relied upon by any other person, firm, company or institution.
This opinion is subject to Netherlands law and a Dutch judge will be solely
competent vis a vis Van Gijzen Advocaten en Notarissen to decide any dispute
regarding this opinion.
Sincerely yours,
Van Gijzen Advocaten en Notarissen
B.M.M. ▇▇▇▇▇▇▇▇▇▇▇ A.M. Wiedijk
102
EXHIBIT 4.4(B)
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ 30, 1999
Re: Denali Incorporated
12% Senior Subordinated Notes due 2006 and Warrants
The Variable Annuity Life Insurance Company
A.G. Investment Advisory Services, Inc.
c/o American General Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
We have acted as your special counsel in connection with the issuance
by Denali Incorporated (the "Company") of its 12% Senior Subordinated Notes due
2006 in an aggregate principal amount of $15,000,000 (the "Notes") and warrants
(the "Warrants") evidencing the right to purchase an aggregate of 534,873 shares
of the Company's Common Stock, par value $0.01 per share (the "Common Stock"),
and the several purchases by you and other purchasers pursuant to the Note and
Warrant Purchase Agreement made by you and such other purchasers with the
Company under date of June 30, 1999 (the "Purchase Agreement") of Notes in the
respective principal amounts and Warrants for the purchase of the respective
numbers of shares of Common Stock set forth opposite your names in Schedule A to
the Purchase Agreement. All capitalized terms used herein without definition
shall have the meanings ascribed thereto in the Purchase Agreement.
We have examined such corporate records of the Company, agreements and
other instruments, certificates of officers and representatives of the Company,
certificates of public officials, and such other documents, as we have deemed
necessary in connection with the opinions hereinafter expressed. In such
examination we have assumed the genuineness of all signatures, the authenticity
of documents submitted to us as originals and the conformity with the authentic
originals of all documents submitted to us as copies. As to questions of fact
material to such opinions we have, when relevant facts were not independently
established, relied upon the representations set forth in the Purchase Agreement
and upon certifications by officers or other representatives of the Company. In
this connection we note specifically that we have relied, without independent
investigation, upon the representations of such other purchasers in Section 6.1
of the Purchase Agreement.
In addition, we attended the closing held today at our offices at which
you and such other purchasers purchased and made payment for Notes in the
respective principal amounts and
103
Warrants to purchase the respective numbers of shares of Common Stock to be
purchased by you and them, all in accordance with the Purchase Agreement.
Based upon the foregoing and having regard for legal considerations
that we deem relevant, we render our opinion to you pursuant to Section 4.4(b)
of the Purchase Agreement as follows:
1. The Company is a validly existing corporation in good standing under
the laws of the State of Delaware and has the corporate power to execute and
deliver the Purchase Agreement, the Notes and the Warrants and to perform its
obligations thereunder.
2. The Purchase Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms.
3. The Notes and Warrants being purchased by you today have been duly
authorized, executed and delivered by the Company and constitute legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms.
4. No consent, approval or authorization of, or declaration,
registration or filing with, any New York or Federal Governmental Authority is
required to be obtained or made as a condition to the validity of the execution
and delivery by the Company of the Purchase Agreement or said Notes or Warrants
or for the performance by the Company of its respective obligations under the
Purchase Agreement and said Notes and Warrants, except as may be necessary to
comply with the registration requirements of Section 11 of the Warrants.
5. It was not necessary in connection with the offering, sale and
delivery of said Notes and Warrants, under the circumstances contemplated by the
Purchase Agreement, to register said Notes or Warrants under the Securities Act
of 1933, as amended, or to qualify an indenture in respect of the Notes under
the Trust Indenture Act of 1939, as amended.
6. The opinions of even date herewith of Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇,
LLP, special counsel for the Company, and ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., General Counsel
of the Company, delivered to you pursuant to Section 4.4(a) of the Purchase
Agreement, are satisfactory to us in form and scope with respect to the matters
specified therein and we believe that you are justified in relying thereon.
The opinions expressed above as to the enforceability of any
agreement or instrument in accordance with its terms are subject to the
exception that such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and (ii) general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
We express no opinion as to Section 22.3 of the Purchase Agreement
insofar as said Section relates to (i) the subject matter jurisdiction of a
United States Federal District Court sitting in New York to adjudicate any
controversy relating to the Purchase Agreement, the Notes or any other document
related thereto, (ii) the waiver of inconvenient forum with respect to
proceedings in any such United States District Court or (iii) the waiver of the
right to jury trial. We also express no opinion as to the indemnities provided
for in Section 22.7 of the Purchase Agreement and Section 11.6 of the Warrants,
the enforceability of which may be subject to limitations based upon public
policy.
104
We are members of the bar of the State of New York and do not herein
intend to express any opinion as to any matters governed by any laws other than
Federal laws, the laws of the State of New York and the General Corporation Law
of the State of Delaware.
This opinion is given solely for your benefit and for the benefit
of Institutional Investor holders from time to time of the Notes and Warrants
purchased by you today, in connection with the closing held today of the
transactions contemplated by the Purchase Agreement, and may not be relied upon
by any other person for any purpose without our prior written consent.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
105
EXHIBIT 4.14
VAN GIJZEN ADVOCATEN EN NOTARISSEN
DEED OF PLEDGE
in: DENALI ▇▇▇▇▇ EUROPE B.V.
Deed dated 1 July 1999
Today, the first day of July nineteen hundred and ninety-nine, appeared before
me, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ van der Beek, Candidate Civil Law Notary, of Amsterdam, The
Netherlands, hereinafter to be referred to as: "Notary", as deputy of ▇▇▇▇▇▇
▇▇▇▇ van Waateringe, Civil Law Notary (Notaris) in Amsterdam, The Netherlands:
▇▇▇▇▇ Catharina Geertruida Steltenpool, Candidate Civil Law Notary, born in
Saarbrucken, Germany, on the fourth day of July nineteen hundred and
sixty-seven, holder of a valid passport of the Kingdom of The Netherlands,
number N11469756, living at ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, unmarried, and not registered nor ever having been registered at
the (Dutch) Civil Registry as a partner within the meaning of "registered
personal partnerships" as defined in Sections 1:80a through 80e of the Dutch
Civil Code, in this matter acting in her capacity as attorney in fact authorized
in writing of:
1. DENALI INCORPORATED, a corporation established under the laws of the
State of Delaware, United States of America, having its principal place
of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America; hereinafter referred to as the
"PLEDGOR";
2.a. THE VARIABLE ANNUITY LIFE INSURANCE COMPANY, a corporation organized
under the laws of the state of Texas, United States of America, having
its place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America;
b. A.G. INVESTMENT ADVISORY SERVICES, INC., a corporation organized under
the laws of the state of Delaware, United States of America, having its
place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America;
c. EMC EQUITY FUND, L.P., a limited partnership organized under the laws
of the state of Texas, United States of America, having its place of
business at ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ of America;
▇. ▇▇▇▇▇▇▇▇ INVESTMENT PARTNERS, L.P., a limited partnership organized
under the laws of the state of Texas, United States of America, having
its place of
106
business at ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ of America;
e. ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., director, born in Winston-Salem, North
Carolina on the tenth day of September nineteen hundred and forty-four,
residing at ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, married, acting in
his capacity of trustee of the ▇▇▇▇▇▇▇ FAMILY TRUST, a Texas trust;
f. ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. aforementioned, acting in his capacity of
trustee of the ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. MARITAL TRUST, a Texas trust;
g. ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇. aforementioned, acting in his capacity of
private person;
h. ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ STAFF, director, born in San Antonio, Texas, on the
eighteenth day of January nineteen hundred and forty-four, residing at
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America,
▇. ▇▇▇▇▇▇▇ TRUST CO., LTD., a company organized under the laws of the
state of Texas, United States of America, and its place of business at
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of
America,
j. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, trustee, born in Houston, Texas on the eleventh
day of November nineteen hundred and forty, residing at ▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America, married, hereby
acting in her capacity of trustee of the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ REVOCABLE
TRUST, a Texas trust;
k. Mr ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, JR., retired Chief Executive Officer,
born in New Orleans, Louisiana, on the twentieth day of December
nineteen hundred and fifty-one, residing at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America, married;
l. ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, company president, born in ▇▇▇▇▇▇▇ City,
Missouri, on the twenty-fifth day of February nineteen hundred and
forty-five, residing at ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America, married;
m. ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, retired Financial Officer, born in Kansas City,
Missouri, on the twenty-seventh day of September nineteen hundred and
thirty-one, residing at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America, married;
n. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇'▇▇▇▇▇▇, custodian, born in Baltimore, Maryland, on
the twenty-fourth day of July nineteen hundred and fifty-seven,
residing at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of
America, unmarried, and not registered nor ever having been registered
at the (Dutch) Civil Registry as a partner within the meaning of
"registered personal partnerships" as defined in Sections 1:80a through
80e of the Dutch Civil Code, of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Inc., a company
with place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ of America, as custodian for and on behalf of the ▇▇▇ ▇. ▇▇▇▇▇▇▇
PROFIT-SHARING PLAN DATED 12/11/89, a Texas profit sharing plan;
hereinafter referred to, individually, as a "PLEDGEE" and collectively,
as the "PLEDGEES";
107
3. DENALI ▇▇▇▇▇ EUROPE B.V., a private company with limited liability
established under the laws of the Netherlands, with registered seat in
Amsterdam, the Netherlands, and having its principal place of business
at ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇, filed with the Trade Register in
Amsterdam under number 34115077; hereinafter referred to as the
"SUBSIDIARY".
The powers of attorney granted to the appearing person, appear from sixteen
private instruments, which are attached hereto. The existence of these powers of
attorney has been satisfactorily proved to me, Notary. The appearing person,
acting as stated, declared:
WHEREAS:
A. by a Note and Warrant Purchase Agreement dated as of the thirtieth day
of June nineteen hundred and ninety-nine, as amended, modified or
supplemented from time to time (the "AGREEMENT") made by and among:
(i) Denali Incorporated as seller; and
(ii) each Pledgee as a party to the Agreement;
Denali Incorporated has agreed to issue and sell its "12% Senior
Subordinated Notes due 2006" (the "NOTES") in an aggregate original
principal amount of fifteen million US Dollars (USD 15,000,000) and
warrants (the "WARRANTS") to the Pledgees on such terms and conditions
set out in the Agreement;
B. it is agreed, as a condition to the subscription and purchase of Notes
and Warrants by the Pledgees pursuant to the Agreement, that Denali
Incorporated shall provide and continue to provide security to the
Pledgees in the form of a pledge over a number of shares, representing
sixty-five per cent (65%) of the outstanding capital, on a fully
diluted basis, of the Subsidiary; and
C. the Pledgor is the holder of all issued and outstanding shares in the
capital of the Subsidiary (forty (40) shares), each share having a
nominal value of five hundred Euro (EUR 500);
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. INTERPRETATION
1.1 Words and expressions defined in the Agreement shall, unless otherwise
defined herein or unless the context otherwise requires, have the same
meaning when used herein. In this Deed of Pledge (the "DEED OF PLEDGE")
the following words and expressions shall have the following meanings:
"ARTICLES OF ASSOCIATION" means the articles of association (statuten)
of the Subsidiary dated as of the twelfth day of May nineteen hundred
and ninety nine;
"EVENT OF DEFAULT" means (1) an Event of Default, as defined in the
Agreement, (2) the Pledgor or the Subsidiary shall register or permit
any registration to be made for the transfer of any Shares without the
prior written
108
consent of the Majority Holders, or (3) the Pledgor or the Subsidiary
shall fail otherwise to comply with the terms hereof;
"COLLATERAL AGENT" means the collateral agent for the holders of the
Notes designated by the Majority Holders in accordance with Section 3.2
hereof;
"FUTURE SHARES" means any and all shares in the capital of the
Subsidiary which will be issued after the date of this Deed of Pledge
and provide for a continuing pledge over sixty-five per cent (65%) of
the voting stock of the Subsidiary;
"OBLIGATIONS" means (1) the due and punctual payment of (i) all amounts
at any time owing by the Pledgor under the Notes and any extensions,
renewals or modifications thereof, (ii) all fees and all other amounts
owing to the Collateral Agent or the Pledgees by the Pledgor hereunder,
under the Agreement, the Notes or any of the Note Documents, and under
any extensions, renewals, replacements or modifications of any of the
foregoing, and (iii) all other indebtedness, obligations and
liabilities of any kind of the Pledgor to the Collateral Agent or the
Pledgees, whether absolute or contingent, secured or unsecured, due or
to become due, now existing or hereafter incurred, arising out of or in
connection with the transactions contemplated by the Agreement, the
Notes or any of the Note Documents (including, without limitation,
under any other existing or future agreements or instruments executed
in connection with any such transactions) and (2) the due and punctual
performance of all terms, covenants, conditions, agreements,
obligations and liabilities of the Pledgor under the agreements and
instruments referred to in clause (1) hereof;
"SECURITY PERIOD" means the period beginning on the date hereof and
ending on the date upon which all the Obligations have been irrevocably
paid and discharged in full and in cash;
"PRESENT SHARES" means twenty-six (26) issued and outstanding ordinary
shares, numbered 1 through 26, with a nominal value of five hundred
Euro (EUR 500) each, in the capital of the Subsidiary, which shares are
all registered in the name of the Pledgor;
"SHARES" means the Present Shares and the Future Shares.
1.2 INTERPRETATION
Headings are for convenience of reference only. Whenever the context
may require, the singular includes the plural and vice versa.
References to the Pledgor, a Pledgee, the Pledgees, the Collateral
Agent or any other person shall, where applicable, be deemed to be
references to or include their respective successors and assigns.
References to "Section" shall mean the respective Section of this Deed
of Pledge.
1.3 UNDERTAKING TO PLEDGE
The Pledgor and the Pledgees hereby agree that the Pledgor shall grant
to the Pledgees the right of pledge purported to be granted pursuant to
the Agreement, this Deed of Pledge, and any other Note Documents.
109
2. PLEDGE OF THE SHARES
2.1 In order to secure the Obligations now or hereafter owed or to be
performed by the Pledgor and in order to comply with Dutch legislation,
the Pledgor HEREBY pledges (verpandt) to the Pledgees, by way of a
first priority perfected security interest and right of pledge (eerste
pandrecht), free of all encumbrances (beperkte rechten) and
attachments, all of the Present Shares as well as all cash dividends
paid or payable at any time hereafter on all or any of the Present
Shares, and the Pledgees, hereby accept such pledge (proportionally
based on the Notes held by each such Pledgee as of any date of
determination.)
2.2 The Pledgor hereby unconditionally and irrevocably undertakes to pledge
by way of a possessory or disclosed pledge (vuistpandrecht of openbaar
pandrecht), which shall always create and constitute a first priority
perfected security interest, Future Shares, all cash dividends payable
on such Future Shares, free and clear of all encumbrances, by way of
supplemental deeds or other instruments in writing on terms the same or
similar to this Deed of Pledge.
2.3 If, with the Majority Holders' written consent, any of the Shares are
changed, classified or reclassified, subdivided, consolidated or
converted through (statutory) merger, or otherwise, or the rights
attaching to the Shares are altered in any way, the shares or other
securities resulting from such event shall automatically become subject
to the pledge (pandrecht) hereby created. Where this is not possible,
the Pledgor shall execute one or more pledge agreements in such form
and substance satisfactory to the Majority Holders in respect of such
shares or other securities.
2.4 Unless and until there shall have occurred and be continuing an Event
of Default, all cash dividends, cash distributions, cash proceeds and
other cash amounts payable in respect of the Shares shall be paid to
the Pledgor. The Pledgees shall be entitled to receive directly, and to
retain as part of the collateral, all other stock, notes, interests,
instruments or other securities or property related to the pledged
Shares.
2.5 Unless and until there shall have occurred and be continuing an Event
of Default, the Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Shares, and to
give consents, waivers or ratifications in respect thereof, provided,
that, in each case, no vote shall be cast or any consent, waiver or
ratification given or any action taken or omitted to be taken which
would violate or be inconsistent with any of the terms of the
Agreement, any other Note Documents or any other related document, or
which would have the effect of impairing the value of the Shares or any
part thereof in any material respect or the priority, position or
interests of the Pledgees. All such rights of the Pledgor to vote and
to give consents, waivers and ratifications shall cease in case an
Event of Default has occurred and is continuing, and Sections 11 and 12
of the Agreement shall become applicable. The parties hereby agree, and
the Pledgor, in its capacity as sole shareholder of the Subsidiary, has
approved as evidenced by a
110
document attached hereto, and in so far as necessary hereby approves,
that the voting rights pertaining to the Shares will, at the Majority
Holders' written request to the Pledgor and the Subsidiary, pass to the
Pledgees upon the occurrence of an Event of Default.
2.6 By signing this Deed of Pledge, the Subsidiary confirms (and the other
parties agree) that a written notice from any Pledgee to the Subsidiary
stating that an Event of Default has occurred and is continuing, shall
be sufficient for the Subsidiary to accept the Pledgees as being
exclusively entitled to such rights and other powers which they are
entitled to exercise pursuant to this Section 2 upon the occurrence and
during the continuance of such an Event of Default.
3. FURTHER ASSURANCES/DELIVERY OF DOCUMENTS AND COLLATERAL AGENT
3.1 Each of the Pledgor and the Subsidiary shall at its own expense execute
such agreements, deeds, confirmations and notices and do all such
assurances, acts and things as the Pledgees may require for giving full
effect to this Deed of Pledge, for creating, perfecting or protecting
the Pledgees' security interest and rights in respect of the Shares,
for assuring, confirming or facilitating the exercise of all rights,
powers, authorities, discretions and remedies vested in the Pledgees
under this Deed of Pledge in respect of the Shares.
3.2 In furtherance of the foregoing and upon the request of the Majority
Holders delivered at anytime (either before or after the occurrence of
an Event of Default), each of the Pledgor and the Subsidiary agrees (a)
to the appointment of a Collateral Agent (designated by the Majority
Holders) who will act for the benefit of the Pledgees, (b) to cooperate
with such Collateral Agent, (c) to pay all fees and expenses relating
to such Collateral Agent or to the performance of its duties by the
Collateral Agent (including reasonable fees and expense of counsel) and
(d) to enter into one or more amendments to this Deed of Pledge deemed
necessary or desirable by any Pledgee to evidence the appointment of
the Collateral Agent. The rights and powers of the Collateral Agent
appointed by the Majority Holders shall be determined by the Majority
Holders and all the Pledgees hereby expressly agree to such appointment
and to such determination. After the appointment of the Collateral
Agent, and notwithstanding anything to the contrary contained herein,
the Collateral Agent shall have the sole authority (and no Pledgee
shall have the right to take any direct action under this Deed of
Pledge) to take any and all action under this Deed of Pledge after
consultation with the Majority Holders or as determined by the Majority
Holders. The Collateral Agent shall act or refrain from acting in
accordance with written instructions from the Majority Holders, as
applicable under the Agreement or, in the absence of such instructions,
in accordance with its discretion.
4. PERFECTION OF THE PLEDGE
By signing this Agreement, the Subsidiary:
(i) acknowledges the first priority perfected security interest
and right of pledge of the Present Shares and undertakes to
register such first
111
priority perfected security interest and right of pledge in
its shareholders' register;
(ii) undertakes to provide each Pledgee forthwith after the
execution of this Deed of Pledge with a copy of the relevant
entry in its shareholders' register;
(iii) undertakes to acknowledge and register the first priority
perfected security interest and right of pledge of Future
Shares (if any); and
(iv) with the knowledge of the Pledgor, waives any preemptive right
or right of first refusal granted under the Articles of
Association or otherwise (where applicable) of the Subsidiary
that may impede the exercise by the Pledgees of the security
interest rights of pledge and the other rights conferred
hereunder.
5. DEFAULT AND REMEDIES
5.1 Without prejudice to any other right or remedy available to any
Pledgee, upon the occurrence of any Event of Default or at any time
thereafter, the Pledgees may, by giving written notice to the Pledgor,
declare the security hereby constituted immediately enforceable and the
Pledgees may immediately exercise in respect of any or all of the
Shares any or all of its rights and powers set out in this Deed of
Pledge irrespective of whether any Pledgee shall have proceeded against
or claimed payment from any party liable for any of the Obligations.
The Pledgor hereby waives any right it may have requiring the Pledgees
first so to proceed or so to claim or to enforce any security granted
by any other person before enforcing this Deed of Pledge. In
particular, the Pledgor irrevocably waives the defense of eviction
conferred by Section 3:234 Netherlands Civil Code.
5.2 Upon the occurrence of an Event of Default, the Pledgees shall be
entitled to the fullest extent permitted by applicable law, without
further notice, advertisement, hearing or process of law of any kind,
to sell and transfer all or part of the Shares in accordance with the
laws of The Netherlands, and, where applicable, the Articles of
Association including, but not limited to:
(a) selling the Shares at a public auction in accordance with
local custom and conditions in accordance with Section 3:250
Netherlands Civil Code; or
(b) applying for a court order (which right of application the
Pledgor is hereby excluded from pursuing and which the Pledgor
hereby waives and agrees not to exercise) authorizing the sale
of the Shares in the manner determined by the court, or
authorizing that the Shares remain with the Pledgees or any of
them (and be transferred accordingly) in payment of such
amount as will be determined by the Court in accordance with
Section 3:251 Netherlands Civil Code.
To the extent permissible under the laws of The Netherlands and the
Articles of Association, the Pledgor hereby irrevocably waives,
renounces and agrees not to exercise any preemptive rights or rights of
first refusal upon a sale by any Pledgee or the Collateral Agent (after
its appointment).
112
The Pledgor further covenants to approve a transfer of the Shares to
any Pledgee pursuant to a court order as referred to in paragraph (b)
above. The Pledgees shall also be irrevocably authorized (without
obligation) by the Pledgor in the event of such a sale:
(i) to offer the Shares for sale in the manner prescribed by the
Articles of Association or to seek the approval of the
corporate body designated under the Articles of Association as
empowered to approve all proposed transfers of shares, as the
case may be, and to exercise the Pledgor's rights in
connection with the sale and transfer of the Shares as
provided in Section 2:198 Netherlands Civil Code;
(ii) to cause notice of such sale of the Shares, to be served, also
on behalf of the Pledgor, upon the Subsidiary in accordance
with the laws of The Netherlands and the Articles of
Association; and
(iii) to cause any of the Shares to be registered in the name of the
new owner(s) following the sale to the extent required on
behalf of the Pledgor, to do all such acts and to sign all
such documents as are necessary for that purpose pursuant to
the laws of The Netherlands or the provisions of the Articles
of Association.
5.3 The Pledgees shall have the right to impose such limitations and
restrictions on the sale of the Shares as the Pledgees may deem
necessary or appropriate to comply with any law, rule or regulation
applicable to the sale. The Pledgor shall cooperate with the Pledgees
in obtaining any necessary permits, exemptions or consents of competent
authorities and in ensuring that the sale of the Shares does not
violate any applicable securities laws.
5.4 The rights, powers and remedies given to the Pledgees and the
Collateral Agent by this Deed of Pledge shall be in addition to all
rights, powers and remedies by virtue of any statute or rule of law
(including, without limitation, pursuant to the Uniform Commercial Code
as in effect from time to time in the State of New York). Any
forbearance or failure or delay by the Pledgees or the Collateral Agent
in exercising any right, power or remedy hereunder shall not be deemed
to be a waiver of such right, power or remedy, and any single or
partial exercise of any right, power or remedy hereunder shall not
preclude the further exercise thereof; and every right, power and
remedy of the Pledgees or the Collateral Agent shall continue in full
force and effect until such right, power or remedy is specifically
waived by the Pledgees or the Collateral Agent by an instrument in
writing.
6. COVENANTS
6.1 The Pledgor shall obtain, comply with the terms of and do all that is
necessary to maintain in full force and effect all authorizations,
approvals, licences and consents required in or by the laws and
regulations of The Netherlands or any other jurisdiction to enable it
lawfully to execute, deliver and perform its obligations under this
Deed of Pledge or to ensure the legality, validity, priority,
enforceability or admissibility in evidence in The Netherlands of this
Deed of Pledge.
113
6.2 Without the prior written consent of the Pledgees, the Pledgor shall
not:
(a) create or permit to subsist any security interest, liens or
encumbrances (beperkte rechten) over all or any of the Shares;
or
(b) cause the Subsidiary to issue any shares in addition to or in
substitution for the Present Shares, except to the Pledgor; or
(c) part with, sell, assign, transfer, pledge or otherwise dispose
of or encumber or agree to part with, sell, assign, transfer,
pledge or otherwise dispose of or encumber all or any of the
Shares or any rights or interests therein or thereto; or
(d) cooperate in the issue of depositary receipts (certificaten
van aandelen) in respect of the Shares; or
(e) do any act or deed or omit to do any act or deed which would
result in:
(i) any representation or statement made by it or by the
Subsidiary in the Agreement, any other Note Documents
(including this Deed of Pledge) and/or in related
documents to which it or the Subsidiary is a party or
in any notice or other document, certificate or
statement delivered by it or by the Subsidiary
pursuant thereto or in connection therewith being or
becoming incorrect or misleading in any respect; or
(ii) it or the Subsidiary breaching any of its or the
Subsidiary's respective covenants under the
Agreement, any other Note Documents (including this
Deed of Pledge) and/or related documents.
6.3 The Pledgor shall, at its own cost and expense take all such steps as
may be necessary or desirable to defend its right, title and interest
in and to the Shares against the claims and demands of any person,
where necessary in cooperation with the Pledgees.
7. CONTINUING AND INDEPENDENT SECURITY
7.1 This Deed of Pledge and the security hereby created shall be a
continuing security and in particular, but without limitation, shall
not be, nor be considered as, satisfied by any intermediate payment or
satisfaction on account of any of the monies and liabilities hereby
secured or any settlement of accounts between the Pledgor or any other
party that has assumed liability for, and/or provided security in
respect of, the Obligations and the Pledgees.
7.2 Where any discharge (whether in respect of this Deed of Pledge, any
other security for the Obligations or otherwise) is made in whole or in
part or any arrangement is made on the faith of any payment, security
or other disposition which is subsequently avoided or must be restored
in bankruptcy, liquidation or otherwise without limitation, the
liability of the Pledgor under the Agreement, this Deed of Pledge, any
other Note Document and the pledge hereby created shall continue as if
there had been no discharge or arrangement. The Pledgees shall be
entitled to concede or compromise any claim that any such payment,
security or other disposition is liable to avoidance or repayment.
7.3 To the extent possible under the laws of The Netherlands, the security
created hereby shall not be prejudiced, affected or diminished by any
act, omission or
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circumstance which, but for this provision, might operate to release,
discharge or otherwise exonerate the Pledgor from its liability to the
Pledgees or otherwise in respect of any of the Obligations or affect
such obligations, including without limitation:
(i) any extension or postponement of the time of payment or other
indulgence granted to or any acceptance of partial payment by
or any settlement, composition or adjustment with the Pledgor
or any other person;
(ii) any novation, amendment or variation of, or extension of the
due date for performance of any term of the Agreement, this
Deed of Pledge, any other Note Document or any other agreement
in connection with the Obligations or any increase, reduction,
exchange, acceleration, renewal, surrender, release or loss of
or failure to perfect any of the Obligations or any security
therefor or any non-presentment or non observance of any
formality in respect of any instruments;
(iii) the transfer by any Pledgee of all or any of its rights,
benefits and/or obligations under the Agreement, this Deed of
Pledge, any other Note Document or any other agreement to
which it is a party to another person or entity;
(iv) any irregularity, unenforceability or invalidity of any (but
not all) of the Obligations or of the obligations of any other
person or any present or future law or order of any government
or authority (whether of right or in fact) purporting to
reduce or otherwise affect any of such obligations to the
extent that the Pledgor's obligations under this Deed of
Pledge shall remain in full force and this Deed of Pledge and
the term "OBLIGATIONS" shall be construed accordingly as if
there were no such irregularity, unenforceability, invalidity,
law or order;
(v) the bankruptcy or liquidation or any change in the name or
constitution of the Pledgor, the Subsidiary or any other
person; or
(vi) the taking, variation, compromise, renewal or release of, or
refusal or neglect to perfect or enforce, any rights, remedies
or securities against or granted by the Pledgor, the
Subsidiary or any other person.
To the extent possible under the laws of The Netherlands, the term
"OBLIGATIONS" shall include all items which would be Obligations but
for the liquidation, absence of legal personality or incapacity of the
Pledgor or any statute of limitation.
7.4 The Pledgees need not before exercising any of the rights, powers or
remedies conferred upon it by this Deed of Pledge or by law
(i) take proceedings or obtain judgment against the Pledgor or any
other person in any court,
(ii) make or file any claim or proof in a winding-up or dissolution
of the Pledgor or of any other person or
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(iii) enforce or seek to enforce any other security which the
Pledgee may now or at any time hereafter hold for or in
connection with obligations.
8. APPLICATION OF PROCEEDS
Any monies received by any Pledgee (or the Collateral Agent) pursuant
to this Deed of Pledge and/or under the powers hereby conferred, shall
after the security interest hereby constituted has been enforced be
applied by such Pledgee (or the Collateral Agent) as follows:
FIRST, to the payment of all fees, costs and expenses (including but
not limited to fees and expenses of any Pledgee's or the Collateral
Agent's counsel and other experts employed by any Pledgee or the
Collateral Agent to assist it in performing its duties hereunder) then
owed to the Collateral Agent, or the Pledgees pursuant to this Deed of
Pledge or any of the other Note Documents; and
SECOND, to the payment in full of all amounts then owed with respect to
the Notes as interest, such payments to be made ratably to the Persons
entitled thereto without any preference or priority; and
THIRD, to the payment in full of all amounts then owed with respect to
the Notes as principal or premium, such payments to be made ratably to
the Persons entitled thereto without preference or priority; and
FOURTH, to the payment in full of all other amounts then owed with
respect to the Obligations; and
FIFTH, the balance, if any, to or at the direction of the Pledgor. Any
Pledgee or the Collateral Agent may make distributions hereunder in
cash or in kind or in a combination of cash and property.
9. REPRESENTATIONS AND WARRANTIES
9.1 The Pledgor further represents and warrants to the Pledgees that:
(i) the Present Shares have been duly authorized and validly
issued, fully paid, and as of the date hereof constitute
sixty-five per cent (65%) of the issued and outstanding share
capital of the Subsidiary; it is not aware of any adverse
claim against the Present Shares and the Present Shares are
not subject to any encumbrance (beperkt recht);
(ii) The Pledgor acquired the legal title to the Present Shares
through subscription upon incorporation of the Subsidiary by
deed executed before a deputy of ▇▇▇▇▇▇ ▇▇▇▇ van Waateringe,
Civil Law Notary in Amsterdam, on the twelfth day of May
nineteen hundred and ninety nine;
(iii) The Pledgor has thus been the sole shareholder of the
Subsidiary since the twelfth day of May nineteen hundred and
ninety-nine and is presently and will at all times during the
Security Period be the sole, legal and beneficial owner of the
Present Shares free and clear of any encumbrances (beperkte
rechten), except for this Deed of Pledge; the Pledgor has not
transferred in advance any Future Shares , nor created in
advance any encumbrances (beperkte rechten) on such future
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assets; no depositary receipts (certificaten van aandelen)
have been issued with respect to the Present Shares and no
person or entity has any right or option to purchase or
acquire the Shares or any of them; and
(iv) the Pledgor has not:
(a) sold or agreed to sell or otherwise transferred or
agreed to transfer the benefit of any part or all of
its right, title and interest in and to the Shares;
or
(b) taken any action or omitted to take any action or
allowed the Subsidiary or any of its directors to
take or omit any action that impedes or may in future
impede the Pledgees' rights hereunder; or
(c) granted or agreed to grant any encumbrance (beperkt
recht) over the Shares.
9.2 The SUBSIDIARY represents and warrants to the Pledgees that:
(i) the Present Shares have been duly authorized and validly
issued, fully paid, and do now and will - together with the
Future Shares - at all times during the Secured Period
constitute sixty-five per cent (65%) of its issued share
capital;
(ii) no deed of transfer (akte van overdracht) or pledge (pandakte)
or other document granting or purporting to grant a security
interest or a security right or other encumbrance (beperkt
recht) in relation to any of the Present Shares has been
served upon or otherwise notified or submitted to it or
acknowledged by it and it has never been a party to any such
deed or other document and the Pledgor is, therefore, the
sole, legal and beneficial owner of the Present Shares, free
and clear of any encumbrances whatsoever, except for this Deed
of Pledge; and
(iii) no depositary receipts (certificaten van aandelen) have been
issued with respect to the Present Shares and no depositary
receipts will be issued with the respect to Future Shares with
its cooperation.
10. MISCELLANEOUS PROVISIONS
10.1 The Pledgor will indemnify out of its own funds or reimburse the
Pledgees and the Collateral Agent for any and all costs, fees,
expenses, duties, taxes and payments (including, without limitation,
all notarial and legal fees and expenses) payable or incurred by the
Pledgees (and keep the Pledgees and the Collateral Agent indemnified
against any failure or delay in paying the same) in connection with the
negotiation, preparation, execution, perfection and enforcement of this
Deed of Pledge, the realization of the security granted hereunder, as
well as in connection with:
(i) any variation of, or amendment or supplement to, any of the
terms of this Deed of Pledge; and/or
(ii) any consent or waiver required from the Pledgees in relation
to this Deed of Pledge; and in each case, regardless of
whether the same is actually implemented, completed or
granted, as the case may be.
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10.2 The Pledgor shall pay promptly all duties and taxes to which this Deed
of Pledge may be subject or give rise and shall indemnify the Pledgees
and the Collateral Agent on demand against any and all liabilities with
respect to or resulting from any delay or emission on the part of the
Pledgor to pay any such duties or taxes.
10.3 The amount of all such costs, fees, expenses, duties, taxes and
payments and all interest thereon shall be payable on first demand of
the Pledgees or the Collateral Agent (whether or not occasioned by any
act, neglect or default of the Pledgor), shall be included in the
Obligations for the purpose hereof and shall carry interest from the
date of the same being incurred or becoming payable as referred to in
the Agreement, this Deed of Pledge or any other Note Document.
10.4 All amounts received, recovered or realized by any Pledgee under the
Agreement (including the proceeds of any conversion of currency) may,
in the sole discretion of the Pledgees and to the extent possible under
applicable law, be credited to any bank account and may be held in such
account for so long as the Pledgees shall think fit (with interest
accruing thereon at such rate, if any, as the Pledgees may deem fit)
pending their application from time to time (as the Pledgees shall be
entitled to do in their sole discretion) in or towards the discharge of
any of the Obligations.
10.5 For the purpose of or pending the discharge of any of the Obligations,
the Pledgee may convert any monies received, recovered or realized or
subject to application by the Pledgee under the Agreement, this Deed of
Pledge or any other Note Document (including the proceeds of any
previous conversion under this Section 10.5) from their existing
currency of denomination into such other currency of denomination as
the Pledgees may deem advisable, and any such conversion shall be
effected at the Pledgees' then prevailing spot selling rate of exchange
for such other currency against the existing currency.
References herein to any currency extend to any funds of that currency
and for the avoidance of doubt funds of one currency may be converted
into different funds of the same currency.
11. POWER TO ASSIGN
Any Pledgee shall, subject to the terms of the Agreement, be entitled
to assign and/or transfer all or part of its rights and obligations
under this Deed of Pledge to any assignee and/or transferee of all or
part of its rights and obligations under the Agreement of the Notes and
the Pledgor hereby gives its irrevocable consent and continuing
agreement to any such assignment and/or transfer hereunder.
12. REDEMPTION OF SECURITY
At the end of the Security Period, the Pledgees shall as soon as
reasonably practicable at the request and cost of the Pledgor release
or otherwise discharge the Shares or cause the Shares to be released or
otherwise discharged.
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13. RESCISSION
Each party hereby waives its right to rescind (ontbinden) or annul
vernietigen) the legal acts (rechtshandelingen) represented by this
Deed of Pledge.
14. NOTICES
Each communication to be made hereunder shall be made and shall be
deemed to be made in the manner set out in Section 19 of the Agreement.
15. GOVERNING LAW
This pledge shall be governed by and construed in accordance with the
laws of The Netherlands.
16. JURISDICTION
16.1 The Subsidiary and the Pledgor agree for the benefit of the Pledgees
that the District Court (arrondissementsrechtbank) of Amsterdam, The
Netherlands, shall have exclusive jurisdiction to hear and determine
any suit, action or proceeding and to settle any disputes which may
arise out of or in connection with this Deed of Pledge subject to
appeal (▇▇▇▇▇ beroep) and appeal in second instance (cassatie), except
that the Pledgees may elect to start any such suit, action or
proceeding against the Pledgor or the Subsidiary in any other court of
competent jurisdiction.
16.2 The taking of proceedings in one or more jurisdictions shall not
preclude the taking of proceedings in any other jurisdiction, whether
concurrently or not.
16.3 The Pledgor and the Subsidiary irrevocably waive any objection which
they may now or in the future have to any court referred to in this
Section 16 as a venue for any proceedings and any claim which they may
now or in the future be able to make that any proceedings in any such
court have been instituted in an inconvenient or inappropriate forum.
16.4 Each party further waives trial by jury in any action brought on or
with respect to this deed of pledge or any document executed in
connection herewith.
The appearing person is known to me, Notary.
This deed, drawn up in one original copy, was executed in Amsterdam, The
Netherlands, on the date first before written.
After the substance of this deed had been stated to the appearing person, she
declared that she had noted the contents of this deed and did not require it to
be read out in full.
Subsequently, following a partial reading in accordance with the law, this deed
was signed by the appearing person, and by me, Notary.
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EXHIBIT A
FORM OF A ACQUISITION ABSTRACT
[date]
Canadian Imperial Bank of Commerce, as Administrative Agent
for the financial institutions party to the
credit Agreement referred to below
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned refers to the Credit Agreement dated as of January 12,
1999 (as amended, restated, modified, or supplemented from time to time, the
"Credit Agreement", the defined terms of which are used herein unless otherwise
defined herein), among Denali Incorporated (the "Borrower"), the financial
institutions party thereto (the "Lenders"), Canadian Imperial Bank of Commerce,
as administrative agent for the Lenders ("Administrative Agent") and ING (U.S.)
Capital LLC, as documentation agent.
The Borrower intends to make a Permitted Acquisition (the "Proposed
Acquisition"), and in connection therewith hereby certifies the following to the
Administrative Agent and the Lenders:
1. Attached hereto as Exhibit A is a summary of the proposed Permitted
Acquisition, including a description of the business operations and assets to be
acquired, the rationale for the acquisition, strategic reasons for the
acquisition and the consideration to be paid (including assumed indebtedness,
stock, earn-outs, liabilities and subordinated debt proposed to be issued in
connection therewith), and such summary fairly presents the contemplated
transaction.
120
2. Attached hereto as Exhibit B are historical financial statements
regarding the Acquired Business covering the period of the most recently
completed twelve calendar months of the Borrower, the Borrower's proposed
adjustments to the historical financial statements reflecting nonrecurring
expenses and income, and historical proforma financial statements for the
operations to be acquired in the proposed Permitted Acquisition giving effect to
such adjustments.
3. Attached hereto as Exhibit C are consolidated historical proforma
financial statements for the Borrower for the most recently completed four
fiscal quarters of the Borrower giving effect to the proposed Permitted
Acquisition as set forth in the historical proforma financial statements
described in paragraph 2 above.
4. Attached hereto as Exhibit D is a completed Borrowers Base
Certificate and certificate of a Responsible Officer of the Borrower,
demonstrating the Borrower's compliance with the covenants contained in Section
10.1 and the requirements of the definition of "Permitted Acquisition" of the
Credit Agreement on a proforma basis after giving effect to the proposed
Permitted Acquisition in accordance with the consolidated historical proforma
financial statements described in paragraph 3 above.
5. The following sets forth the information to demonstrate compliance
with the requirements of the definition of "Permitted Acquisition" in connection
with the proposed Permitted Acquisition:
(a) the Senior Leverage Ratio, as of the last day of the
calendar month preceding the calendar month in which the Acquisition Closing
Date occurs, for the twelve consecutive months immediately preceding such date
(calculated on a pro-forma basis, taking into account the acquisition of the
Acquired Business, as if such Permitted Acquisition had been consummated as of
the first day of such twelve month period) is_______ to 1.00 for such period
[not to be greater than 3.50 to 1.00]; and
(b) the Leverage Ratio, as of the last day of the calendar
month preceding the calendar month in which the Acquisition Closing Date occurs,
for the twelve consecutive months immediately preceding such date (calculated on
a pro-forma basis as if such Permitted Acquisition had been consummated as of
the first day of such twelve month period) is________ to 1.00 for such period
{not to be greater than 4.00 to 1.00].
The Borrower represents and warrants that it has conducted appropriate
customary environmental, legal, accounting and other diligence in connection
with the proposed acquisition and there are no contingent liabilities, including
environmental liabilities, litigation liabilities, and assumed contractual
liabilities, associated with the Proposed Acquisition that could reasonably be
expected to have a Material Adverse Effect.
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[the Borrower hereby requests the Majority Banks' approval as required
by the definition of "Permitted Acquisitions" of the Credit Agreement.]
[the Borrower hereby further requests the following waivers and
consents in connection with the Proposed Acquisition.]
Very truly yours,
DENALI INCORPORATED
By:
------------------------
Name:
Title: