1
EXHIBIT 4.5
UNIT PURCHASE AGREEMENT
GENERAC PORTABLE PRODUCTS, LLC
$19,500,000
SENIOR ZERO COUPON NOTES DUE JULY 1, 2006
GENERAC PORTABLE PRODUCTS, INC.
COMMON STOCK PURCHASE WARRANTS
UNIT PURCHASE AGREEMENT
DATED AS OF NOVEMBER 20, 2000
2
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I DEFINITIONS
ARTICLE II ISSUANCE AND PURCHASE OF THE UNITS
SECTION 2.1. Authorization of Issuance of the Units...............................................................9
SECTION 2.2. Purchase and Sale of Units..........................................................................10
SECTION 2.3. Execution of the Notes and the Warrant Certificates.................................................10
SECTION 2.4. Interest on the Notes...............................................................................10
SECTION 2.5. Maturity of the Notes; Prepayments..................................................................10
ARTICLE III OTHER PROVISIONS RELATING TO THE NOTES
SECTION 3.1. Making of Payments..................................................................................11
SECTION 3.2. Usury...............................................................................................11
SECTION 3.3. Ranking of Notes....................................................................................11
SECTION 3.4. Registration Rights.................................................................................11
ARTICLE IV CONDITIONS PRECEDENT TO PURCHASE OF THE UNITS
SECTION 4.1. No Injunction, etc..................................................................................11
SECTION 4.2. Documentation.......................................................................................12
SECTION 4.3. No Default, Etc.....................................................................................13
SECTION 4.4. Representations Accurate............................................................................13
SECTION 4.5. Performance.........................................................................................13
SECTION 4.6. Compliance with Laws................................................................................13
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND PARENT
SECTION 5.1. Corporate Status....................................................................................14
SECTION 5.2. Authorization; No Conflict..........................................................................14
SECTION 5.3. No Violation........................................................................................14
SECTION 5.4. Approvals...........................................................................................15
SECTION 5.5. Binding Obligations.................................................................................15
SECTION 5.6. Use of Proceeds.....................................................................................15
SECTION 5.7. Compliance with Statutes, Etc.......................................................................15
SECTION 5.8. Capitalization......................................................................................15
SECTION 5.9. Subsidiaries........................................................................................16
SECTION 5.10. Financial Statements; Financial Condition..........................................................16
SECTION 5.11. Absence of Certain Developments....................................................................17
SECTION 5.12. Related Party Transactions.........................................................................17
SECTION 5.13. Litigation.........................................................................................18
SECTION 5.14. Securities Laws....................................................................................18
SECTION 5.15. Investment Company Act.............................................................................18
3
SECTION 5.16. Public Utility Holding Company Act.................................................................18
SECTION 5.17. Real Property; Leases..............................................................................18
SECTION 5.18. Offering of Note and Warrants......................................................................18
SECTION 5.19. Authorization of Warrants..........................................................................19
SECTION 5.20. Compliance with ERISA..............................................................................19
SECTION 5.21. Tax Returns and Payments...........................................................................20
SECTION 5.22. Labor Relations....................................................................................21
SECTION 5.23. Environmental Matters..............................................................................21
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
SECTION 6.1. Corporate Existence.................................................................................22
SECTION 6.2. Authorization; No Conflict..........................................................................22
SECTION 6.3. Approvals...........................................................................................22
SECTION 6.4. Binding Obligations.................................................................................22
SECTION 6.5. Investment Representations and Covenants............................................................23
ARTICLE VII AFFIRMATIVE COVENANTS
SECTION 7.1. Preservation of Corporate Franchises................................................................23
SECTION 7.2. Books, Records and Inspections......................................................................23
SECTION 7.3. Compliance with Statutes............................................................................24
SECTION 7.4. Financial Information...............................................................................24
SECTION 7.5. Maintenance of Property; Insurance..................................................................26
SECTION 7.6. Performance of Obligations..........................................................................27
SECTION 7.7. Payment of Taxes....................................................................................27
SECTION 7.8. Compliance with Environmental Laws and ERISA........................................................27
SECTION 7.9. Further Guarantees..................................................................................27
SECTION 7.10. Further Assurances.................................................................................27
ARTICLE VIII NEGATIVE COVENANTS
SECTION 8.1. Liens...............................................................................................28
SECTION 8.2. Consolidation, Merger, Purchase of Sale of Assets, Etc..............................................30
SECTION 8.3. Successor Substituted...............................................................................31
ARTICLE IX EVENTS OF DEFAULT
SECTION 9.1. Events of Default...................................................................................31
SECTION 9.2. Remedies on Default.................................................................................32
ARTICLE X EXCHANGE; SUBSTITUTION OF NOTES AND WARRANT CERTIFICATES
SECTION 10.1. Transfer and Exchange of Notes and Warrant Certificates............................................33
SECTION 10.2. Replacement of Notes and Warrant Certificates......................................................34
ARTICLE XI ANTI-DILUTION PROVISIONS
SECTION 11.1. Determination of Fair Market Value.................................................................34
SECTION 11.2. Adjustment of Number of Warrant Shares.............................................................36
SECTION 11.3. Contest and Appraisal Rights.......................................................................46
4
SECTION 11.4. Fair Market Value Per Share........................................................................47
ARTICLE XII SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES
SECTION 12.1. Survival of Representations........................................................................47
SECTION 12.2. Agreement of the Company and the Parent to Indemnify...............................................47
SECTION 12.3. Conditions to Indemnification......................................................................48
SECTION 12.4. Remedies Cumulative................................................................................49
ARTICLE XIII MISCELLANEOUS
SECTION 13.1. Notices............................................................................................49
SECTION 13.2. No Waiver..........................................................................................50
SECTION 13.3. Amendment and Waiver...............................................................................50
SECTION 13.4. Successors and Assigns.............................................................................51
SECTION 13.5. Submission to Jurisdiction.........................................................................51
SECTION 13.6. WAIVER OF JURY TRIAL...............................................................................51
SECTION 13.7. GOVERNING LAW......................................................................................52
SECTION 13.8. Termination........................................................................................52
SECTION 13.9. Severability.......................................................................................52
SECTION 13.10. Expenses..........................................................................................52
SECTION 13.11. Filings and Consents..............................................................................52
SECTION 13.12. Counterparts......................................................................................52
SECTION 13.13. Entire Agreement..................................................................................53
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Warrant Certificate
Exhibit C - Form of Guarantee
5
UNIT PURCHASE AGREEMENT
This UNIT PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
November 20, 2000 among Generac Portable Products, Inc., a Delaware corporation
(the "PARENT"), Generac Portable Products, LLC, a Delaware limited liability
company (the "COMPANY"), and the purchasers listed on Schedule A hereto
(referred to herein collectively as "PURCHASERS" or individually as
"PURCHASER"). The parties hereto agree as follows:
WITNESSETH
WHEREAS, the Company and The Beacon Group III - Focus Value Fund, L.P.
(the "FUND") have entered into that certain Commitment Letter dated as of
October 18, 2000 (the "COMMITMENT") pursuant to which the Fund committed to
purchase (or cause one or more of its affiliates to purchase) units (the
"UNITS") composed of (i) the Company's Senior Zero Coupon Notes due July 1, 2006
in the aggregate principal amount of $19,500,000, and (ii) warrants to purchase
from the Parent an aggregate of 340 shares of the Parent's common stock, par
value $0.01 per share, at an initial exercise price of $0.01 per share (the
"WARRANTS"); and
WHEREAS, pursuant to Section 9(a) of that certain Stockholders'
Agreement dated as of July 9, 1998 among the Parent, the Fund and the other
stockholders named therein (the "STOCKHOLDERS AGREEMENT"), Parent delivered to
the stockholders that are parties to the Stockholders Agreement (the
"SHAREHOLDERS") a notice of its proposed sale of the Units to the Fund, and in
accordance with Section 9(a), gave each of said Shareholders the right to
purchase its pro rata portion of the Units; and
WHEREAS, the Shareholders that are Purchasers (other than the Fund)
have agreed to purchase their pro rata portion of the Units, as set forth on
Schedule A;
NOW, THEREFORE, in order to accomplish the matters contemplated by the
immediately preceding recitals and in consideration of the mutual premises
herein contained and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
In addition to the other terms defined herein, the following terms used
herein shall have the meanings herein specified (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"AFFILIATE" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such specified Person. The term "CONTROL" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the
6
2
management and policies of a person whether through ownership of
voting securities, by contract or otherwise; and the terms
"CONTROLLING" and "CONTROLS" have meanings correlative of the
foregoing.
"AGREEMENT" shall mean this Unit Purchase Agreement, as the
same may be amended or otherwise modified from time to time in
accordance with the terms hereof.
"APPLICABLE LAW" shall mean all applicable provisions of
constitutions, statutes, rules, regulations and orders of all
governmental bodies (domestic or foreign) and all orders and decrees of
all courts, tribunals and arbitrators including, without limitation,
Environmental Laws, Margin Regulations and ERISA.
"AUDITED FINANCIAL STATEMENTS" shall have the meaning given
such term in Section 5.10 hereof.
"BALANCE SHEET" shall have the meaning given such term in
Section 5.10 hereof.
"BALANCE SHEET DATE" shall have the meaning given such term in
Section 5.10 hereof.
"BUSINESS DAY" shall mean any day on which commercial banks
located in New York, New York are required or permitted by law to be
open for the purpose of conducting a commercial banking business.
"CAPITAL EXPENDITURES" shall mean, with respect to any Person,
all expenditures by such Person which should be capitalized in
accordance with generally accepted accounting principles, including all
such expenditures with respect to fixed or capital assets (including,
without limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with generally accepted accounting
principles) and the amount of Capitalized Lease Obligations incurred by
such Person.
"CAPITALIZED LEASE OBLIGATIONS" of any Person shall mean all
rental obligations which, under generally accepted accounting
principles, are or will be required to be capitalized on the books of
such Person, in each case taken at the amount thereof accounted for as
indebtedness in accordance with such principles.
"CASHLESS EXERCISE" has the meaning given such term in Section
11.1 hereof.
"CASHLESS EXERCISE RATIO" has the meaning given such term in
Section 11.1 hereof.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended
from time to time, 42 U.S.C. Section 9601 et seq.
"CHANGE OF CONTROL" shall mean the occurrence of one or more
of the following events: (i) the sale, lease, transfer, conveyance or
other disposition, in one or a series of related transactions, directly
or indirectly, of all or substantially all of the assets of the
7
3
Parent and the Company to any Person or "GROUP" of related Persons (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act),
(ii) the adoption of a plan relating to the liquidation or dissolution
of the Parent and the Company, (iii) except for the Fund, or affiliates
thereof, any Person or group (as defined above) is or becomes the
"BENEFICIAL OWNER" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "BENEFICIAL
OWNERSHIP" of all shares that any such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the total voting
power of the voting capital stock of the Parent, including by way of
merger, consolidation or otherwise, (iv) the replacement of a majority
of the members of the board of directors of the Parent over a two-year
period from the directors who constituted the board of directors of the
Parent at the beginning of such period, and such replacement shall not
have been approved by a vote of at least a majority of the board of
directors of the Parent then still in office who either were members of
such board of directors at the beginning of such period or whose
election as a member of the board of directors was previously approved,
or (v) a "change of control" or similar event shall occur as provided
in the Indenture or the Credit Agreement, as in effect on the date
hereof.
"CLOSING DATE" shall mean November 20, 2000, or such other
date as the Company, the Parent and the Purchasers may mutually
determine.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations promulgated thereunder
from time to time.
"COMMON STOCK" shall mean the common stock of the Parent, $.01
par value per share.
"COMPANY" has the meaning set forth in the preamble to this
Agreement, and shall include the Company's successors and assigns.
"CONSOLIDATED EBITDA" has the meaning given such term in the
Credit Agreement.
"CONSOLIDATED SUBSIDIARIES" means, as to any Person, all
Subsidiaries of such Person which are consolidated with such Person for
financial reporting purposes in accordance with U.S. generally accepted
accounting principles.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated)
under common control which, together with the Company, are treated as a
single employer under Section 414 of the Code.
"CREDIT AGREEMENT" means the Credit Agreement dated as of July
9, 1998, among the Company, the Parent the lenders party thereto in
their capacities as lenders thereunder and Bankers Trust Company, as
administrative agent, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise
modified from time to time,
8
4
including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount
of available borrowings thereunder or adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent,
lender or group of lenders; provided that the term "Credit Agreement"
shall not include any replacement, refinancing, extension or
restructuring in the form of an indenture, note purchase agreement or
other similar debt agreement.
"DEFAULT" means any event that, with notice or lapse of time
or both, would constitute an Event of Default.
"DISCLOSURE SCHEDULE" means the disclosure schedule delivered
by the Company and the Parent to the Purchaser on the date hereof.
"DOLLAR" and the sign "$" means the lawful money of the United
States of America.
"DOMESTIC SUBSIDIARY" shall mean each Subsidiary of the
Company that is incorporated or organized in the United States of
America, any State thereof, the United States Virgin Islands or Puerto
Rico.
"DOMESTIC WHOLLY-OWNED SUBSIDIARY" means each Domestic
Subsidiary which is a Wholly-Owned Subsidiary of the Company.
"ENCUMBRANCE" means any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement of any kind or
nature whatsoever (including, without limitation, any conditional sale
or other title retention agreement, any financing or similar statement
or notice filed under the UCC or any other similar recording or notice
statute, and any lease having substantially the same effect as any of
the foregoing).
"ENVIRONMENTAL CLAIMS" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, notices of noncompliance or violation,
investigations or proceedings relating in any way to any Environmental
Law or any permit issued, or any approval given, under any such
Environmental Law (hereafter, "Claims"), including, without limitation,
(a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or
damages pursuant to any applicable Environmental Law, and (b) any and
all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief in
connection with alleged injury or threat of injury to health, safety or
the environment due to the presence of Hazardous Materials.
"ENVIRONMENTAL LAWS" means any applicable Federal, state,
foreign or local statute, law, rule, regulation, ordinance, code,
binding and enforceable guideline, binding and enforceable written
policy and rule of common law now or hereafter in effect and in each
case as amended, and any judicial or administrative interpretation
thereof, including
9
5
any judicial or administrative order, consent decree or judgment, to
the extent binding on the Parent, the Company or any of their
respective Subsidiaries, relating to the environment, employee health
and safety or Hazardous Materials, including, without limitation,
CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et
seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3803 et seq.; the
Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the
Emergency Planning and the Community Right-to-Know Act of 1986, 42
U.S.C. Section 11001 et seq., the Hazardous Material Transportation
Act, 49 U.S.C. Section 1801 et seq. and the Occupational Safety and
Health Act, 29 U.S.C. Section 651 et seq. (to the extent it regulates
occupational exposure to Hazardous Materials); and any state and local
or foreign counterparts or equivalents, in each case as amended from
time to time.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as
in effect at the date of this Agreement and any subsequent provisions
of ERISA, amendatory thereof, supplemental thereto or substituted
therefor.
"ERISA AFFILIATE" means each person (as defined in Section
3(9) of ERISA) which together with the Parent, or a Subsidiary of the
Parent or the Company, or a Subsidiary of the Company would be deemed
to be a "single employer" within the meaning of Section 414(b), (c),
(m) or (o) of the Code.
"EVENT OF DEFAULT" means any of the events specified in
Section 9.1 hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" has the meaning given such term in Section
11.1.
"EXPIRATION DATE" means November 20, 2010.
"FACE AMOUNT" has the meaning given such term in Section 2.1
hereof.
"FAIR MARKET VALUE" has the meaning given such term in Section
11.1 hereof.
"FAIR MARKET VALUE PER SHARE" has the meaning given such term
in Section 11.4 hereof.
"FINANCIAL STATEMENTS" has the meaning given such term in
Section 5.10 hereof.
"FOREIGN PENSION PLAN" means any plan, fund (including,
without limitation, any superannuation fund) or other similar program
established or maintained outside the United States of America by the
Parent or any one or more of its Subsidiaries primarily for the benefit
of employees of the Parent or such Subsidiaries residing outside the
United States of America, which plan, fund or other similar program
provides, or results in, retirement income, a deferral of income in
contemplation of retirement or payments to be
10
6
made upon termination of employment, and which plan is not subject to
ERISA or the Code.
"FOURTH AMENDMENT TO CREDIT AGREEMENT" means the Fourth
Amendment to Credit Agreement, dated as of October 18, 2000, among the
parties to the Credit Agreement.
"FUND" has the meaning set forth in the recitals to this
Agreement.
"GUARANTEES" means the Guarantees in favor of the Purchasers
in the form of Exhibit C hereto.
"GUARANTORS" means the Parent, GPPW, Inc. and any Subsidiaries
that execute or are required to execute a Guarantee in accordance with
Section 7.9 hereof.
"HAZARDOUS MATERIALS" shall mean (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is
or could become friable, ureaformaldehyde foam insulation, transformers
or other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous substances," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or
words of similar import, under any applicable Environmental Law; and
(c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority under
Environmental Laws.
"INDEBTEDNESS" means, as to any Person, without duplication,
(i) all indebtedness (including principal, interest, fees and charges)
of such Person for borrowed money or for the deferred purchase price of
property or services, (ii) the maximum amount available to be drawn
under all letters of credit issued for the account of such Person and
all unpaid drawings in respect of such letters of credit, (iii) all
Indebtedness of the types described in clause (i), (ii), (iv), (v),
(vi) or (vii) of this definition secured by any Encumbrance on any
property owned by such Person, whether or not such Indebtedness has
been assumed by such Person (to the extent of the value of the
respective property), (iv) the aggregate amount required to be
capitalized under leases under which such Person is the lessee, (v) all
obligations of such person to pay a specified purchase price for goods
or services, whether or not delivered or accepted, i.e., take-or-pay
and similar obligations, (vi) all Contingent Obligations (as defined in
the Credit Agreement as in effect on the date hereof) of such Person
and (vii) all obligations under any interest rate protection agreement
or other hedging agreement or under any similar type of agreement.
"INDEMNIFIED CLAIM" has the meaning given such term in Section
12.2 hereof.
"INDEMNIFIED PARTIES" has the meaning given such term in
Section 12.2 hereof.
11
7
"INDENTURE" means the Indenture, dated as of July 1, 1998, by
and among the Company, the Parent and Marine Midland Bank, as Trustee,
relating to the Company's 11 1/4% Senior Subordinated Notes due 2006.
"INDEPENDENT FINANCIAL EXPERT" means a nationally-recognized
investment banking firm (1) which does not (and whose directors,
officers, employees and affiliates do not) have a direct or indirect
financial interest in the Company, the Parent or any of their
respective affiliates, (2) which has not been and, at the time it is
called upon to give independent financial advice or valuation, is not
(and none of whose directors, officers, employees or affiliates is) a
promoter, director or officer of the Company, the Parent or any of
their respective affiliates or an underwriter with respect to any of
the Company's or the Parent's securities and (3) which does not provide
any advice or opinions to the Company, the Parent or any of their
respective affiliates except as an Independent Financial Expert.
"LEASEHOLDS" of any Person means all the right, title and
interest of such Person as lessee or licensee in, to and under leases
or licenses of land, improvements and/or fixtures.
"MARGIN REGULATIONS" means Regulations T, U and X of the Board
of Governors of the Federal Reserve System, as in effect from time to
time.
"MARGIN STOCK" has the meaning assigned to it in the Margin
Regulations.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the properties, operations, business or financial condition or
prospects of the Parent or any of its Subsidiaries, taken as a whole,
or the Company or any of its Subsidiaries, taken as a whole, (b) the
Company's ability to pay the Notes in accordance with the terms
thereof, or (c) the Parent's or the Company's ability to perform their
respective obligations under the Transaction Documents.
"MATURITY DATE" means July 1, 2006.
"NOTES" means the Senior Notes due July 1, 2006, in the
aggregate principal amount of $19,500,000, issued by the Company
pursuant to Section 2.2 hereof in substantially the form of EXHIBIT A
hereto, maturing on the Maturity Date, or such earlier date as provided
herein, and bearing interest as set forth in this Agreement, and any
promissory notes delivered in substitution, extension or exchange for
any such Notes pursuant to the provisions of this Agreement.
"PARENT" has the meaning set forth in the preamble to this
Agreement, and shall include the Parent's successors and assigns.
"PARENT DETERMINATION" has the meaning given such term in
Section 11.1 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor
thereto.
12
8
"PERMITTED ENCUMBRANCES" has the meaning given such term in
the Credit Agreement as in effect on the date hereof.
"PERSON" means an individual, corporation, limited liability
company, partnership, joint venture, trust, unincorporated association
or other entity, or a government or any political subdivision or agency
thereof.
"PLAN" means any pension plan as defined in Section 3(2) of
ERISA, which is maintained or contributed to by (or to which there is
an obligation to contribute of) the Parent or a Subsidiary of the
Parent, or the Company or a Subsidiary of the Company, or an ERISA
Affiliate, and each such plan for the five year period immediately
following the latest date on which the Parent, or a Subsidiary of the
Parent or an ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan.
"PURCHASE PRICE" has the meaning given such term in Section
2.2 hereof.
"PURCHASERS" has the meaning set forth in the preamble to this
Agreement, and shall include such Purchasers' permitted successors and
assigns.
"RCRA" means the Resource Conservation and Recovery Act, as
the same may be amended from time to time, 42 U.S.C. Section 6901 et
seq.
"REAL PROPERTY" of any Person shall mean all the right, title
and interest of such Person in and to land, improvements and fixtures,
including Leaseholds.
"RELEASE" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping, disposing or migration into the environment.
"REPORTABLE EVENT" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan that is subject to Title IV of
ERISA other than those events as to which the 30-day notice period is
waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation
Section 4043.
"REQUIRED HOLDERS" means, at any time (i) with respect to the
Notes and amendments of this Agreement affecting the Notes, the holders
of more than 50% of the accreted principal value of the Notes and (ii)
with respect to the Warrant Certificates and amendments of this
Agreement affecting the Warrant Certificates, the holders of more than
50% of such Warrant Certificates.
"SEC" has the meaning given such term in Section 7.4(h).
"STOCKHOLDERS AGREEMENT" has the meaning set forth in the
recitals to this Agreement.
"SUBSIDIARY" means, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the
13
9
time stock of any class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency)
is at the time owned by such Person and/or one or more Subsidiaries of
such Person and (ii) any partnership, association, joint venture or
other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement,
the Notes, the Warrant Certificates and the Guarantees, in each case
either as originally executed or as the same may be amended or
otherwise modified from time to time.
"TRANSFER AGENT" has the meaning given such term in Section
11.2(c) hereof.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the relevant jurisdiction.
"UNAUDITED FINANCIAL STATEMENTS" has the meaning given such
term in Section 5.10 hereof.
"UNFUNDED CURRENT LIABILITY" of any Plan shall mean the
amount, if any, by which the actuarial present value of the accumulated
plan benefits under the Plan as of the close of its most recent plan
year, determined in accordance with actuarial assumptions at such time
consistent with Statement of Financial Accounting Standards No. 87,
exceeds the market value of the assets allocable thereto.
"UNITS" has the meaning set forth in the recitals to this
Agreement.
"WARRANT CERTIFICATES" means the Warrants issued and delivered
by the Parent on the Closing Date pursuant to Section 2.2 hereof, in
substantially the form of EXHIBIT B hereto, and any stock purchase
warrants issued and delivered in substitution or exchange for the
Warrant Certificates.
"WARRANTS" has the meaning set forth in the recitals of this
Agreement.
"WARRANT SHARES" has the meaning set forth in Section 5.2
hereof.
"WHOLLY-OWNED SUBSIDIARY" means, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's
qualifying shares) is at the time owned by such Person and/or one or
more Wholly-Owned Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person and/or
one or more Wholly-Owned Subsidiaries of such Person has a 100% equity
interest at such time.
ARTICLE II
ISSUANCE AND PURCHASE OF THE UNITS
SECTION 2.1. AUTHORIZATION OF ISSUANCE OF THE UNITS.
The Company and the Parent have duly authorized the issuance and sale,
on the terms and subject to the conditions set forth herein, to the Purchasers
of the Notes in the aggregate
14
10
principal amount of $19,500,000 (the "FACE AMOUNT"), to be dated as of the
Closing Date. The Parent has duly authorized the issuance and sale, on the terms
and subject to the conditions set forth herein, to the Purchasers of Warrant
Certificates evidencing the Warrants for the purchase of 340 shares of the
Common Stock of the Parent.
SECTION 2.2. PURCHASE AND SALE OF UNITS.
Subject to the terms and conditions of this Agreement, on the Closing
Date (x) the Company and the Parent shall issue and sell to the Purchasers and,
in reliance upon the representations and warranties of the Company contained
herein, the Purchasers shall purchase from the Company, the Notes and the
Warrant Certificates at an aggregate purchase price of $15,000,000 (the
"PURCHASE PRICE") and (y) the Purchasers shall deliver to the Company and Parent
the Purchase Price by wire transfer in immediately available funds.
SECTION 2.3. EXECUTION OF THE NOTES AND THE WARRANT CERTIFICATES.
The Notes and the Warrant Certificates shall be signed on behalf of the
Company or the Parent, as the case may be, by its president, its chief executive
officer or its chief financial officer.
Any Note and any Warrant Certificate may be signed on behalf of the
Company or the Parent, as the case may be, by any person who, at the actual date
of the execution of such Note or Warrant Certificate, shall be a proper officer
of the Company or the Parent, as the case may be, to sign such Note or Warrant
Certificate, although at the date of execution of this Agreement any such person
was not such an officer.
SECTION 2.4. INTEREST ON THE NOTES.
The Notes shall accrete at a rate per annum equal to 4.68489%,
compounded monthly, calculated on the basis of a 360-day year consisting of
30-day months, subject to the provisions of Article III hereof, unless the
Closing Date does not occur on or prior to November 20, 2000, in which case the
rate of accretion of the Notes shall be adjusted so that upon the Maturity Date
the principal amount of the Note shall equal the Face Amount. The principal
amount of the Notes on the Closing Date shall equal $15,000,000. The Company
shall pay interest on overdue amounts payable under the Notes, to the extent
lawful at a rate per annum that is 13% per annum.
SECTION 2.5. MATURITY OF THE NOTES; PREPAYMENTS.
(a) The outstanding principal amount of the Notes and any interest
thereon shall become due and payable on the Maturity Date.
(b) The Company may prepay the Notes in whole or in part at any time
upon three (3) Business Days' prior notice to the Purchasers at a redemption
price equal to the accreted value of the principal amount of the Notes to be
prepaid as of the date of redemption provided that the aggregate principal
amount of any such prepayment shall not be less than $100,000 and such
prepayment does not violate the Credit Agreement or the Indenture. In the event
the Company elects to prepay only a portion of the Notes, each Note then
outstanding shall be reduced by its pro rata portion of the total principal
amount of the Notes to be redeemed.
15
11
ARTICLE III
OTHER PROVISIONS RELATING TO THE NOTES
SECTION 3.1. MAKING OF PAYMENTS.
Except as otherwise expressly provided in this Agreement, the Company
shall make all payments of principal of and interest, if any, on the Notes not
later than 2:00 p.m. (Jefferson, Wisconsin time) on the day when due in dollars
by wire transfer of immediately available funds in U.S. dollars to one or more
accounts designated by the Purchasers. All payments received after that hour
shall be deemed to have been received by the Purchasers on the next following
Business Day.
SECTION 3.2. USURY.
In no event shall the amount of interest due or payable on the Notes
exceed the maximum rate of interest allowed by Applicable Law and, in the event
any such payment is made by the Company or received by one or more Purchaser,
then such excess sum shall be credited as a payment of principal. It is the
express intent of the parties hereto that the Company not pay, and the
Purchasers not receive, directly or indirectly, in any manner whatsoever,
interest in excess of that which may be lawfully paid by the Company under
Applicable Law.
SECTION 3.3. RANKING OF NOTES.
The Notes will be senior unsecured obligations of the Company and shall
rank pari passu with all other senior unsecured obligations of the Company. The
Purchasers acknowledge that the definition of "Senior Debt" in the Indenture
provides that indebtedness of the Company held by a Subsidiary or Affiliate of
the Company does not constitute "Senior Debt" under such definition for the
purposes of the subordination provisions of the Indenture.
SECTION 3.4. REGISTRATION RIGHTS.
The Warrant Shares shall be entitled to the registration rights set
forth in Sections 10 and 11 of the Stockholders Agreement and such other
registration rights as the Company and the Purchasers may agree upon.
ARTICLE IV
CONDITIONS PRECEDENT TO PURCHASE OF THE UNITS
The obligations of the Purchasers under this Agreement are subject to
the satisfaction (or waiver) of each of the following conditions on or prior to
the Closing Date:
SECTION 4.1. NO INJUNCTION, ETC.
No action, proceeding, investigation, regulation or legislation shall
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain or prohibit, or to obtain
substantial damages in respect of, this Agreement, the other Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby.
16
12
SECTION 4.2. DOCUMENTATION.
The Purchasers shall have received, on or prior to the Closing Date, the
following:
(1) the Notes, duly executed on behalf of the Company and dated the
Closing Date, each of which shall be reasonably satisfactory in form and
substance to the Purchasers;
(2) the Warrant Certificates, duly executed on behalf of the Parent and
dated the Closing Date, each of which shall be reasonably satisfactory in form
and substance to the Purchasers;
(3) the Guarantee, duly executed on behalf of the Guarantors and dated
the Closing Date which shall be reasonably satisfactory in form and substance to
the Purchasers;
(4) an executed copy of the Fourth Amendment to the Credit Agreement,
and such Fourth Amendment to the Credit Agreement shall be in effect in all
respects and there shall be in existence no default or event of default under
the Credit Agreement;
(5) a certificate of the Secretary of each of the Company, the Parent
and the Guarantors, dated as of the Closing Date, certifying as to (i) the
incumbency of the officers of the Company, the Parent or the Guarantors, as the
case may be, executing the Transaction Documents and all other documents
executed and delivered in connection herewith; (ii) the organizational documents
of the Company, the Parent and the Guarantors, as the case may be, as in effect
on and as of the Closing Date, and (iii) resolutions of the board of directors
of the Company, the Parent and the Guarantors, as the case may be, authorizing
and approving the execution, delivery and performance of the Transaction
Documents and any other documents, instruments and certificates required to be
executed by the Company, the Parent or the Guarantors in connection herewith or
therewith and all of the transactions contemplated hereby or thereby, and
stating that the transactions so contemplated comply with Section 4.03 of the
Indenture, each certified as of the Closing Date by the secretary of the
Company, the Parent and the Guarantors, as the case may be, as being in full
force and effect without modification or amendment;
(6) a certificate executed by the chief executive officer or president
of each of the Company and the Parent, dated as of the Closing Date, certifying
as to (i) the truth and correctness of the Company's or the Parent's, as the
case may be, representations and warranties contained herein as of the Closing
Date and (ii) the fulfillment of the conditions to the Company's or the
Parent's, as the case may be, obligations under this Agreement set forth in
Sections 4.5 and 4.6 of this Agreement;
(7) a duly executed counterpart of this Agreement;
(8) an opinion of King & Spalding, counsel to the Company, in form and
substance reasonably satisfactory to the Fund; and
17
13
(9) a copy of a fairness opinion given by Valuation Research
Corporation, as to the fairness of the transactions contemplated by the
Transaction Documents in accordance with Section 4.03 of the Indenture.
SECTION 4.3. NO DEFAULT, ETC.
No Default or Event of Default shall exist.
SECTION 4.4. REPRESENTATIONS ACCURATE.
All representations and warranties made by the Company and the Parent
herein or in any other Transaction Document shall be true and correct in all
material respects with the same effect as though such representations and
warranties had been made on and as of the Closing Date other than any such
representation or warranty expressly made as of a specified date which shall be
true and correct in all material respects as of such specified date.
SECTION 4.5. PERFORMANCE.
The Company and the Parent shall be in compliance with and shall have
performed all covenants and agreements and satisfied all conditions contained in
this Agreement required to be performed or satisfied by the Company and the
Parent prior to or at the Closing Date.
SECTION 4.6. COMPLIANCE WITH LAWS.
The Company, the Parent and the Guarantors shall be in compliance, in
all material respects, with all Applicable Laws including, without limitation,
all Environmental Laws and the Margin Regulations.
SECTION 4.7. PAYMENT OF FEES AND EXPENSES.
The Company shall pay all fees and expenses of the Purchasers,
including the reasonable fees and expenses of counsel.
SECTION 4.8. LITIGATION, ETC.
There shall not exist any action, suit, investigation, litigation or
proceeding pending or threatened in any court or before any arbitrator or
governmental authority that, in the opinion of the Purchasers, affects any of
the transactions contemplated hereby or that could have a Material Adverse
Effect on the Company or the Parent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND PARENT
Each of the Company and the Parent hereby represents and warrants to
the Purchasers that the following statements are true and correct:
18
14
SECTION 5.1. CORPORATE STATUS.
The Parent, the Company and each of their respective Subsidiaries (i)
is a duly organized and validly existing corporation or limited liability
company, as the case may be, in good standing under the laws of the jurisdiction
of its incorporation, (ii) has the corporate or other applicable power and
authority to own its property and assets and to transact the business in which
it is engaged and presently proposes to engage and (iii) is duly qualified and
is authorized to do business and is in good standing in each jurisdiction where
the conduct of its business requires such qualifications except for failures to
be so qualified which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
SECTION 5.2. AUTHORIZATION; NO CONFLICT.
Each of the Parent, the Company and each of the Guarantors has the
corporate or other applicable power and authority to execute, deliver and
perform the terms and provisions of each of the Transaction Documents to which
it is party and has taken all necessary corporate or other applicable action to
authorize the execution, delivery and performance by it of each of such
Transaction Documents, including the issuance sale and delivery of the Units in
accordance with this Agreement and the issuance and delivery of the shares of
Common Stock issuable upon the exercise of the Warrant Certificates (the
"WARRANT SHARES"). Each of the Parent, the Company and each of the Guarantors
has duly executed and delivered each of the Transaction Documents to which it is
party, and each of such Transaction Documents constitutes the legal, valid and
binding obligation of each of the Parent, the Company and each of the Guarantors
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
generally affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
SECTION 5.3. NO VIOLATION.
Neither the execution, delivery or performance by the Parent, the
Company or the Guarantors of the Transaction Documents to which it is a party,
nor compliance by it with the terms and provisions thereof, (i) will contravene
any provision of any Applicable Law, (ii) will conflict with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Encumbrance upon any of the properties or
assets of the Parent, the Company or any of their respective Subsidiaries
pursuant to the terms of any indenture, mortgage, deed of trust, credit
agreement or loan agreement, or any other material agreement, contract or
instrument, to which the Parent, the Company or any of their respective
Subsidiaries is a party or by which it or any of its property or assets is bound
or to which it may be subject or (iii) will violate any provision of the
Certificate of Incorporation or By-Laws (or equivalent organizational documents)
of the Parent, the Company or any of their respective Subsidiaries. The Parent
has reserved appropriate numbers of shares of Common Stock for issuance upon any
exercise of the Warrant by the Purchasers. The Units, when so issued, sold and
delivered against payment therefor in accordance with the provisions of this
Agreement, and the Warrant Shares when issued upon exercise of the Warrant and
payment of the Exercise Price therefor, will be duly and validly issued and, in
the case of the Warrant Shares, fully paid, non-assessable, free
19
15
from preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof.
SECTION 5.4. APPROVALS.
No order, consent, approval, license, authorization or validation of,
or filing, recording or registration with (except as have been obtained or
made), or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection
with, (i) the execution, delivery and performance of any Transaction Document,
including the issuance and delivery of the Units in accordance with the terms of
this Agreement or the Warrant Shares issuable upon conversion of the Warrant
Certificates, or (ii) the legality, validity, binding effect or enforceability
of any Transaction Document.
SECTION 5.5. BINDING OBLIGATIONS.
Each of the Transaction Documents to which the Company and/or the
Parent is a party constitutes a legal, valid and binding obligation of the
Company and/or the Parent, as the case may be, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
SECTION 5.6. USE OF PROCEEDS.
The proceeds of the Units will be used solely to repay outstanding
Indebtedness and for general corporate purposes. No part of the proceeds from
the issuance and sale of the Units will be used to purchase or carry any Margin
Stock or to extend credit for the purpose of purchasing or carrying any Margin
Stock. Neither the issuance of the Units nor the use of the proceeds therefrom
will violate, or be inconsistent with, the provisions of the Margin Regulations.
SECTION 5.7. COMPLIANCE WITH STATUTES, ETC.
The Parent, the Company and each of their respective Subsidiaries each
is in compliance with all Applicable Laws in respect of the conduct of its
business and the ownership of its property, except such non-compliances as could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 5.8. CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of the Parent
consists of 12,000 shares of common stock. All of the issued and outstanding
shares of the Parent's capital stock have been duly authorized and validly
issued and are fully paid and non-assessable, and all shares of capital stock
previously issued and sold by the Parent were issued and sold in compliance with
applicable federal and state securities laws. Except as set forth above or in
the Disclosure Schedule, (a) no other shares of the Parent's capital stock or
securities convertible into or exchangeable for shares of the Parent's capital
stock have been issued or reserved for issuance, (b) no subscription, warrant,
option, convertible security or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of the Parent is authorized or
20
16
outstanding, (c) there is not any commitment or offer by the Parent to issue any
subscription, warrant (other than the Warrant Certificates), option, convertible
security or other such right or to issue or distribute to holders of any shares
of its capital stock any evidences of Indebtedness or assets of the Parent, (d)
the Parent has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution in respect thereof and (e)
except for Sections 6, 8 and 12 of the Stockholders Agreement, there are no
restrictions on the transfer of the Parent's capital stock other than those
arising from securities laws. Except as contemplated by this Agreement, the
other Transaction Documents or Sections 9, 10 and 11 of the Stockholders
Agreement, no person or entity is entitled to (a) any preemptive or similar
right with respect to the issuance of any capital stock of the Parent, or (b)
any rights with respect to the registration of any capital stock of the Parent
under the Securities Act of 1933, as amended.
(b) 95% of the issued and outstanding member interests of the Company
are owned by GPPD, Inc. and 5% of such outstanding membership interests are
owned by GPPW, Inc. and have been duly authorized and validly issued and are
fully paid and non-assessable, and all member interests previously issued and
sold by the Company were issued and sold in compliance with applicable federal
and state securities laws. Both GPPD, Inc. and GPPW, Inc. are wholly owned
Subsidiaries of the Parent.
SECTION 5.9. SUBSIDIARIES.
Except with respect to the Parent's ownership of all of the issued and
outstanding capital stock of the Company, GPPW, Inc. and GPPD, Inc., the Parent
and the Company have no Subsidiaries other than those set forth on Schedule 5.9
hereto, and do not own, directly or indirectly, any interest in any corporation,
association or business entity.
SECTION 5.10. FINANCIAL STATEMENTS; FINANCIAL CONDITION.
(a) Included in the Disclosure Schedule are the consolidated unaudited
balance sheet (the "BALANCE SHEET") of the Parent as of September 30, 2000 (the
"BALANCE SHEET DATE"), and the related statements of operations for the
nine-month period ended September 30, 2000 (collectively, the "UNAUDITED
FINANCIAL STATEMENTS") and the audited consolidated balance sheet of the Parent
as of December 31, 1999, and the related statements of operations, stockholders'
equity and cash flows of the Parent for the fiscal year then ended which have
been audited by PricewaterhouseCoopers, independent auditors (the "AUDITED
FINANCIAL STATEMENTS" and, together with the Unaudited Financial Statements, the
"FINANCIAL STATEMENTS"). The Financial Statements (including the footnotes
thereto) (i) were prepared in accordance with U.S. generally accepted accounting
principles consistently applied during the periods covered thereby and (ii)
fairly present in all material respects the financial position of the Parent and
on the dates of such statements and the results of its operations for the
periods covered thereby, except that the Unaudited Financial Statements may not
contain all footnotes required by U.S. generally accepted accounting principles.
(b) On and as of the date hereof, on a pro forma basis after giving
effect to the transactions contemplated by this Agreement and the Transaction
Documents, with respect to each of the Company and the Parent and their
respective Subsidiaries, taken as a whole, (x) the
21
17
sum of the assets, at a fair valuation, of each such Person, individually, and
each such Person and its subsidiaries taken as a whole, will exceed its or their
debts; (y) it has not incurred and does not intend to incur, nor believes that
it will incur, debts beyond its ability to pay such debts as such debts mature;
and (z) it will have sufficient capital with which to conduct its business. For
purposes of this Section 5.10, "DEBT" means any liability on a claim and "CLAIM"
means (i) right to payment, whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(c) Except as fully disclosed in the Financial Statements, as of the
date hereof there were no liabilities or obligations with respect to the Parent,
the Company or any of their respective Subsidiaries of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether or not due)
which, either individually or in the aggregate, would have a Material Adverse
Effect. As of the date hereof, none of the Parent, the Company or any of the
Guarantors knows of any basis for the assertion against it of any liability or
obligation of any nature that is not fully disclosed in the Financial Statements
which, either individually or in the aggregate, could have a Material Adverse
Effect.
(d) Except as previously disclosed to the Purchasers, there has been no
material adverse change in the operations, properties, financial condition or
prospects of the Parent, the Company and their respective Subsidiaries taken as
a whole since September 30, 2000 and (y) if this representation is being made
(or deemed made) at any time after the date hereof after giving effect to the
transaction, nothing has occurred that has had or could reasonably be expected
to have a Material Adverse Effect.
SECTION 5.11. ABSENCE OF CERTAIN DEVELOPMENTS.
Since the Balance Sheet Date, there has been (a) no material adverse
change in the condition (financial or otherwise) of the Company or the Parent or
in the assets, liability, properties or business of the Company or the Parent,
(b) no declaration, setting aside or payment of any dividend or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of the Company or the Parent, (c) no
issuance of any note (other than the Notes), bond or other debt security, or
creation, incurrence, assumption or guarantee of any indebtedness for borrowed
money or capitalized lease obligation with an aggregate principal amount in
excess of $50,000, and (d) no agreements to do any of the foregoing.
SECTION 5.12. RELATED PARTY TRANSACTIONS.
Except as set forth in the Disclosure Schedule or in the Financial
Statements, no employee, officer, stockholder or director of the Company or the
Parent or member of his or her immediate family is indebted to the Company or
the Parent, nor is the Parent indebted to (or committed to make loans to or
extend or guarantee credit of) any of them, other than (i) for payment of salary
for services rendered, (ii) reimbursement for reasonable expenses incurred on
behalf of the Company or the Parent, and (iii) for other standard employee
benefits made
22
18
generally available to all employees (including stock option agreements under
any stock option plan approved by the Board of Directors). Except as set forth
on the Disclosure Schedule, neither any present or former officer, director or
stockholder of the Company or the Parent, nor any affiliates of such officers,
directors or stockholders, are currently a party to any transaction with the
Company or the Parent, including, without limitation, any agreement providing
for the employment of, furnishing of services by, rental of assets from or to,
or otherwise requiring payments to, any of the officers, directors, stockholders
or affiliates.
SECTION 5.13. LITIGATION.
There are no actions, suits or proceedings pending or, to the best
knowledge of the Parent and the Company, threatened (i) with respect to any
Transaction Document or (ii) that could reasonably be expected to have a
Material Adverse Effect.
SECTION 5.14. SECURITIES LAWS.
Assuming the accuracy of the representations and warranties of the
Purchasers contained in Article VI hereof, the offer, issuance, sale and
delivery of the Units and the Warrant Shares in accordance with this Agreement
are and will be in compliance with applicable federal and state securities laws,
as presently in effect.
SECTION 5.15. INVESTMENT COMPANY ACT.
None of the Parent, the Company or any of their respective Subsidiaries
is an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
SECTION 5.16. PUBLIC UTILITY HOLDING COMPANY ACT.
None of the Parent, the Company or any of their respective Subsidiaries
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" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
SECTION 5.17. REAL PROPERTY; LEASES.
The Company, the Parent and each of their respective Subsidiaries each
(i) possess good and marketable title to all of their properties and assets,
(ii) own or lease all properties necessary for the operation by it of its
business as currently conducted, and (iii) own or possess all licenses and
permits necessary for the operation by it of its business as currently
conducted.
SECTION 5.18. OFFERING OF NOTE AND WARRANTS.
Except as required by Section 9 of the Stockholders Agreement, neither
the Company nor the Parent nor, to the knowledge of the Company and the Parent,
anyone acting on their behalf has offered the Units, the Notes, the Warrant
Certificates or the Warrant Shares or any similar securities (except for similar
securities offered in connection with a licensing agreement to a
23
19
third party) 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 the Purchasers.
SECTION 5.19. AUTHORIZATION OF WARRANTS.
The Warrant Certificates have been duly authorized by the Parent for
issuance, and when executed by the Parent in accordance with the provisions of
this Agreement, and delivered to and paid for by the Purchasers in accordance
with the terms hereof, will have been duly executed, issued and delivered and
will be entitled to the benefits of this Agreement.
SECTION 5.20. COMPLIANCE WITH ERISA.
(a) Each Plan of the Parent and/or the Company (and each related trust,
insurance contract or fund) is in substantial compliance with its terms and with
all applicable laws, including without limitation ERISA and the Code; each Plan
(and each related trust, if any) which is intended to be qualified under Section
401(a) of the Code has received a determination letter from the Internal Revenue
Service to the effect that it meets the requirements of Sections 401(a) and
501(a) of the Code, or has been drafted with the intent that it meets the
requirements of Sections 401(a) and 501(a) of the Code and will be amended as
required by the Internal Revenue Service to meet such requirements since the
effective date of the Plan; no Reportable Event has occurred; no Plan which is a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA) is insolvent or
in reorganization; no Plan has an Unfunded Current Liability which, when added
to the aggregate amount of Unfunded Current Liabilities of all other Plans,
exceeds the aggregate amount of such Unfunded Current Liabilities that existed
as of the date hereof by $100,000; no Plan which is subject to Section 412 of
the Code or Section 302 of ERISA has an accumulated funding deficiency, within
the meaning of such sections of the Code or ERISA, or has applied for or
received a waiver of an accumulated funding deficiency or an extension of any
amortization period, within the meaning of Section 412 of the Code or Section
303 or 304 of ERISA; to the best knowledge of the Parent or the Company or any
of their respective Subsidiaries, all contributions required to be made with
respect to a Plan have been or will be timely made; neither the Parent or the
Company nor any Subsidiary thereof nor any ERISA Affiliate has incurred any
material liability (including any indirect, contingent or secondary liability)
to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or
4975 of the Code or expects to incur any such liability under any of the
foregoing sections with respect to any Plan; to the best knowledge of the Parent
and/or the Company or any of their respective Subsidiaries, no condition exists
which presents a material risk to the Parent and/or the Company or any of their
respective Subsidiaries or any ERISA Affiliate of incurring a liability to or on
account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no
proceedings have been instituted to terminate or appoint a trustee to administer
any Plan which is subject to Title IV of ERISA; to the best knowledge of the
Parent and/or the Company or any of their respective Subsidiaries, no action,
suit, proceeding, hearing, audit or investigation with respect to the
administration, operation or the investment of assets of any Plan (other than
routine claims for benefits) is pending, or, to the best knowledge of the Parent
and/or the Company or any of their respective Subsidiaries, expected or
threatened; using actuarial assumptions and computation methods consistent with
Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the
Parent, the Company and their respective Subsidiaries and its ERISA Affiliates
to all Plans which
24
20
are multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event
of a complete withdrawal therefrom, as of the close of the most recent fiscal
year of each such Plan, would not exceed $100,000; each group health plan (as
defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which
covers or has covered employees or former employees of the Parent and/or the
Company, any of their respective Subsidiaries, or any ERISA Affiliate has at all
times been operated in material compliance with the provisions of Part 6 of
subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed
under the Code or ERISA on the assets of the Parent and/or the Company or any of
their respective Subsidiaries or any ERISA Affiliate exists or is likely to
arise on account of any Plan; and the Parent, the Company and their respective
Subsidiaries may cease contributions to or terminate any Employee Benefit Plan
maintained by any of them without incurring any material liability.
(b) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. All
contributions required to be made with respect to a Foreign Pension Plan have
been or will be timely made. Neither the Parent, the Company nor any of their
respective Subsidiaries has incurred any obligation in connection with the
termination of or withdrawal from any Foreign Pension Plan. The excess of the
present value of the accrued benefit liabilities (whether or not vested) under
each Foreign Pension Plan, determined as of the end of the Parent's and/or the
Company's most recently ended fiscal year on the basis of actuarial assumptions,
each of which is reasonable, over the current value of the assets of each such
Foreign Pension Plan allocable to such benefit liabilities does not, in the
aggregate, have a Material Adverse Effect.
SECTION 5.21. TAX RETURNS AND PAYMENTS.
Each of the Parent, the Company and each of its Subsidiaries has filed
all federal income tax returns and all other tax returns, domestic and foreign,
required to be filed by it and has paid all taxes and assessments payable by it
which have become due, except for those contested in good faith and adequately
disclosed and fully provided for on the financial statements of the Parent, the
Company and its Subsidiaries in accordance with generally accepted accounting
principles. The Parent, the Company and each of its Subsidiaries have at all
times paid, or have provided adequate reserves (in the good faith judgment of
the management of the Parent) for the payment of, all federal, state and foreign
income taxes applicable for all prior fiscal years and for the current fiscal
year to date. There is no action, suit, proceeding, investigation, audit, or
claim now pending or, to the knowledge of the Parent, the Company or any of
their respective Subsidiaries, threatened by any authority regarding any taxes
relating to the Parent, the Company or any of their respective Subsidiaries
which could be reasonably expected to have a Material Adverse Effect. As of the
Closing Date, neither the Parent, the Company nor any of their respective
Subsidiaries has entered into an agreement or waiver or been requested to enter
into an agreement or waiver extending any statute of limitations relating to the
payment or collection of taxes of the Parent, the Company or any of their
respective Subsidiaries, or is aware of any circumstances that would cause the
taxable years or other taxable periods of the Parent, the Company or any of
their respective Subsidiaries not to be subject to the normally applicable
statute of limitations. None of the Parent, the Company or any Subsidiary
thereof has incurred,
25
21
or will incur, any material tax liability in connection with the execution,
delivery and performance of the Transaction Documents to which it is a party.
SECTION 5.22. LABOR RELATIONS.
Neither the Company nor the Parent nor any of their respective
Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Effect and there is (i) no unfair labor
practice complaint pending against the Company or the Parent nor any of their
respective Subsidiaries or, to the knowledge of the Company, the Parent or any
of their respective Subsidiaries, threatened against any of them, before the
National Labor Relations Board, and no material grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against the Company or the Parent or any of their respective
Subsidiaries or, to the knowledge of the Company and the Parent or any of their
respective Subsidiaries, threatened against any of them, (ii) no strike, labor
dispute, slowdown or is stoppage pending against the Company or the Parent or
any of their respective Subsidiaries or, to the knowledge of the Company, the
Parent or any of their respective Subsidiaries, threatened against the Company
or the Parent or any of their respective Subsidiaries and (iii) to the knowledge
of the Company, the Parent or any of their respective Subsidiaries, no union
representation proceeding is pending with respect to the employees of the
Company or the Parent or any of their respective Subsidiaries, except (with
respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as could not reasonably be expected to
have a Material Adverse Effect.
SECTION 5.23. ENVIRONMENTAL MATTERS.
(a) The Parent, the Company and each of their respective
Subsidiaries have complied with, and on the Closing Date will be in compliance
with, all applicable Environmental Laws and the requirements of any permits
issued under such Environmental Laws. There are no pending or, to the best
knowledge of the Parent and the Company after due inquiry, past or threatened
Environmental Claims against the Parent, the Company or any of their respective
Subsidiaries or any Real Property owned or operated by the Parent, the Company
or any of their respective Subsidiaries. There are no facts, circumstances,
conditions or occurrences in respect of any Real Property owned or operated by
the Parent, the Company or any of their respective Subsidiaries that, to the
best knowledge of the Parent or the Company after due inquiry, could reasonably
be expected (i) to form the basis of an Environmental Claim against the Parent,
the Company or any of their respective Subsidiaries or any such Real Property,
or (ii) to cause any such Real Property to be subject to any restrictions on the
ownership, occupancy, use or transferability of such Real Property by the
Parent, the Company or any of their respective Subsidiaries under any applicable
Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Real Property owned or
operated by the Parent, the Company or any of their respective Subsidiaries
where such generation, use, treatment or storage has violated or could
reasonably be expected to violate any Environmental Law. Hazardous Materials, to
the best knowledge of the Parent and the Company, have not been Released on or
from any Real Property owned or operated by the Parent, the Company or any of
their respective
26
22
Subsidiaries where such Release has violated or could reasonably be expected to
violate any applicable Environmental Law.
(c) Notwithstanding anything to the contrary in this Section 5.23,
the representations made in this Section 5.23 shall only be untrue if the
aggregate effect of all failures and noncompliances of the types described above
could reasonably be expected to have a Material Adverse Effect.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
Each of the Purchasers hereby represents and warrants, jointly and
severally, to the Company and the Parent that the following statements are true
and correct:
SECTION 6.1. EXISTENCE.
(a) Such Purchaser is a limited partnership duly organized,
validly existing and in good standing under the laws of its state of
organization and has all requisite power and authority to conduct its business
and to own its properties as presently conducted and to execute and deliver and
to perform all of its obligations under the Transaction Documents.
SECTION 6.2. AUTHORIZATION; NO CONFLICT.
The execution, delivery and performance by such Purchaser of the
Transaction Documents have been duly authorized by all necessary corporate or
other action, and do not violate any provision of any Applicable Law, the
organizational documents, if any, of such Purchaser or any material indenture or
instrument to which such Purchaser is a party or by which or any of its
properties are bound.
SECTION 6.3. APPROVALS.
No consent, authorization or approval of, and no notice to or filing
with, any governmental authority or regulatory body is required in connection
with the execution, delivery, performance, validity or enforcement of any
Transaction Document which has not been obtained or made as of the date hereof.
SECTION 6.4. BINDING OBLIGATIONS.
Each of the Transaction Documents constitutes a legal, valid and
binding obligation of such Purchaser, enforceable against such Purchaser in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
27
23
SECTION 6.5. INVESTMENT REPRESENTATIONS AND COVENANTS.
Such Purchaser is acquiring the Units, and will upon conversion of the
Warrant Certificate, acquire the Warrant Shares (as defined herein), for its own
account, for investment purposes and not with a view to the distribution
thereof. Each Purchaser: (a) is a sophisticated investor with knowledge and
experience in business and financial matters, (b) has received certain
information concerning the Company and the Parent, and has had the opportunity
to obtain additional information as desired, in order to evaluate the merits and
the risks inherent in holding the Notes, the Warrant Certificates and the
Warrant Shares, (c) is able to bear the economic risk and lack of liquidity
inherent in holding the Notes, the Warrant Certificates and the Warrant Shares,
and (d) is an "accredited investor" as defined in Rule 501 of Regulation D
adopted under the Securities Act of 1933, as amended.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Note or any Warrant Certificate shall remain
outstanding:
SECTION 7.1. PRESERVATION OF CORPORATE FRANCHISES.
The Parent and the Company will, and will cause each of their
respective Subsidiaries, to do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence and its material
rights, franchises, licenses and patents used in its business; provided,
however, that nothing in this Section 7.1 shall prevent (i) sales of assets,
consolidations or mergers by or involving the Parent, the Company or any of
their respective Subsidiaries which do not contravene the provisions of Section
8.1(b), (ii) the withdrawal by the Parent, the Company or any of their
respective Subsidiaries of their qualification as a foreign corporation in any
jurisdiction where such withdrawal could not reasonably be expected to have a
Material Adverse Effect or (iii) the abandonment by the Parent, the Company or
any of their respective Subsidiaries of any rights, franchises, licenses and
patents that the Company reasonably determines are not useful to its business.
SECTION 7.2. BOOKS, RECORDS AND INSPECTIONS.
The Parent and the Company will, and will cause each of their
respective Subsidiaries to, keep proper books of record and account in which
full, true and correct entries in conformity with generally accepted accounting
principles and all requirements of law shall be made of all dealings and
transactions in relation to its business and activities. The Parent and the
Company will, and will cause each of their respective Subsidiaries to, permit
officers and designated representatives of any holder of any Note or Warrant
Certificate to visit and inspect, during regular business hours and under
guidance of officers of the Parent, the Company or such Subsidiary, any of the
properties of the Parent and the Company or such Subsidiary, and to examine the
books of account of the Parent and the Company or such Subsidiary and discuss
the affairs, finances and accounts of the Parent, the Company or such Subsidiary
with, and be advised as to the same by, its and their officers and independent
accountants, all upon reasonable advance notice and at such reasonable times and
intervals and to such reasonable extent as the such holder of a Note or Warrant
Certificate may request.
28
24
SECTION 7.3. COMPLIANCE WITH STATUTES.
The Parent and the Company will, and will cause each of their
respective Subsidiaries to, comply with all Applicable Laws in respect of the
conduct of its business and the ownership of its property, except such
non-compliances as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
SECTION 7.4. FINANCIAL INFORMATION.
For as long as the Notes or the Warrant Certificates shall be
outstanding, the Parent and/or the Company will furnish to the Purchasers the
following information:
(a) MONTHLY REPORTS. Within 45 days after the end of each fiscal
month of the Parent (or, if earlier, at the time delivered by the Parent to its
board of directors), the management reports furnished by the Parent to its board
of directors, which report shall in any event include a consolidated balance
sheet of the Parent and its Consolidated Subsidiaries as at the end of such
month and the Consolidated EBITDA for such month, in each case setting forth
comparative figures for the corresponding month in the prior fiscal year.
(b) QUARTERLY FINANCIAL STATEMENTS. Within 45 days after the close
of the first three quarterly accounting periods in each fiscal year of the
Parent, (i) the consolidated balance sheets of the Parent and its Consolidated
Subsidiaries as at the end of such quarterly accounting period and the related
consolidated statements of income and cash flows, in each case for such
quarterly accounting period and for the elapsed portion of the fiscal year ended
with the last day of such quarterly accounting period, and in each case, setting
forth comparative figures for the related periods in the prior fiscal year and,
after the delivery of the first budget pursuant to Section 7.4(e), the budgeted
figures for such quarterly periods as set forth in the respective budget
delivered pursuant to Section 7.4(e), all of which shall be certified by the
Chief Financial Officer or Treasurer of the Parent, subject to normal year-end
audit adjustments and (ii) management's discussion and analysis of the important
operational and financial developments during the fiscal quarter and
year-to-date periods.
(c) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the close of
each fiscal year of the Parent, (i) the consolidated and consolidating balance
sheets of the Parent and its Consolidated Subsidiaries as at the end of such
fiscal year and the related consolidated and consolidating statements of income
and retained earnings and of cash flows for such fiscal year setting forth
comparative figures for the preceding fiscal year and certified (x) in the case
of such consolidated financial statements, by PricewaterhouseCoopers, or such
other independent certified public accountants of recognized national standing
selected by the Parent, together with a report of such accounting firm stating
that in the course of its regular audit of the financial statements of the
Parent and its Subsidiaries, which audit was conducted in accordance with
generally accepted auditing standards, such accounting firm obtained no
knowledge of any Default or Event of Default which has occurred and is
continuing or, if in the opinion of such accounting firm such a Default or Event
of Default has occurred and is continuing, a statement as to the nature thereof,
and (y) in the case of such consolidating financial statements, by the Chief
Financial Officer or Treasurer of the Parent, and (ii) management's discussion
and analysis of the important operational and financial developments during such
fiscal year.
29
25
(d) MANAGEMENT LETTERS. Promptly after the receipt thereof by the
Parent, the Company or any of their respective Subsidiaries, a copy of any
"management letter" received by any such Person from its certified public
accountants and the management's responses thereto.
(e) BUDGETS. No later than 30 days following the commencement of
the first day of each fiscal year of the Parent, a budget in form satisfactory
to the Required Holders for the Notes and the Warrant Certificates prepared by
the Parent for (x) each of the twelve months of such fiscal year prepared in
detail and (y) each of the five years immediately following such fiscal year
prepared in summary form, in each case, of the Parent and its Subsidiaries,
accompanied by the statement of the Chief Financial Officer or Treasurer of the
Parent to the effect that, to the best of his knowledge, the budget is a
reasonable estimate for the period covered thereby.
(f) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Section 7.4(b) and (c), a certificate of
the Chairman of the Board, the President, Chief Financial Officer or the
Treasurer of each of the Company and the Parent to the effect that, to the best
of such officer's knowledge, no Default or Event of Default has occurred and is
continuing or, if any Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof, which certificate shall,
in the case of any such financial statements delivered in respect of a period
ending on the last day of a fiscal quarter or year of the Parent, set forth the
calculations delivered under the Credit Agreement in connection with the
delivery of such financial statements.
(g) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event
within five Business Days after an officer of the Parent or the Company obtains
knowledge thereof, notice of (i) the occurrence of any event which constitutes a
Default or Event of Default and (ii) any litigation or governmental
investigation or proceeding pending or threatened (x) against the Parent, the
Company or any of their respective Subsidiaries which could reasonably be
expected to have a Material Adverse Effect, (y) with respect to any Indebtedness
in excess of $500,000 of the Parent, the Company or any of their respective
Subsidiaries or (z) with respect to any Transaction Document.
(h) OTHER REPORTS AND FILINGS. Promptly, copies of all financial
information, proxy materials and other information and reports, if any, which
the Parent, the Company or any of their respective Subsidiaries shall file with
the Securities and Exchange Commission or any successor thereto (the "SEC") or
deliver to holders of its Indebtedness pursuant to the terms of the
documentation governing such Indebtedness (or any trustee, agent or other
representative therefor).
(i) ENVIRONMENTAL MATTERS. Promptly upon, and in any event within
ten Business Days after, an officer of the Parent, the Company or any of their
respective Subsidiaries obtains knowledge thereof, notice of one or more of the
following environmental matters which occurs after the Closing Date, unless such
environmental matters could not, individually or when aggregated with all other
such environmental matters, be reasonably expected to have a Material Adverse
Effect:
30
26
(i) any Environmental Claim pending or threatened in
writing against the Parent, the Company or any of their respective
Subsidiaries or any Real Property owned or operated by the Parent, the
Company or any of their respective Subsidiaries;
(ii) any condition or occurrence on or arising from any
Real Property owned or operated by the Parent, the Company or any of
their respective Subsidiaries that (a) results in noncompliance by the
Parent, the Company or any of their respective Subsidiaries with any
applicable Environmental Law or (b) could reasonably be expected to
form the basis of an Environmental Claim against the Parent, the
Company or any of their respective Subsidiaries or any such Real
Property;
(iii) any condition or occurrence on any Real Property
owned or operated by the Parent, the Company or any of their respective
Subsidiaries that could reasonably be expected to cause such Real
Property to be subject to any restrictions on the ownership, occupancy,
use or transferability by the Parent, the Company or any of their
respective Subsidiaries of such Real Property under any Environmental
Law; and
(iv) the taking of any removal or remedial action in
response to the actual or alleged presence of any Hazardous Material on
any Real Property owned or operated by the Parent, the Company or any
of their respective Subsidiaries as required by any Environmental Law
or any governmental or other administrative agency; provided that in
any event the Parent and/or the Company shall deliver to the each
holder of a Note or a Warrant Certificate all material notices received
by it or any of their respective Subsidiaries from any government or
governmental agency under, or pursuant to, CERCLA.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial
action and the Parent's, the Company's or such Subsidiary's response
thereto. In addition, the Company will provide each holder of a Note or
a Warrant Certificate with copies of all material communications with
any government or governmental agency and all material communications
with any Person (other than the Parent's, the Company's or any
Subsidiary's attorneys) relating to any Environmental Claim of which
notice is required to be given pursuant to this Section 7.4(i), and
such detailed reports of any such Environmental Claim as may reasonably
be requested by such holders.
(j) OTHER INFORMATION. From time to time, such other information
or documents (financial or otherwise) with respect to the Parent, the Company or
their respective Subsidiaries as any holder of a Note or a Warrant Certificate
may reasonably request in writing.
SECTION 7.5. MAINTENANCE OF PROPERTY; INSURANCE.
The Company and the Parent will, and will cause each of their
Subsidiaries to, (i) keep all property necessary in their respective businesses
in good working order and condition (ordinary wear and tear and loss or damage
by casualty or condemnation excepted) and (ii) maintain insurance on all their
property in at least such amounts and against at least such risks as is
consistent and in accordance with industry practice.
31
27
SECTION 7.6. PERFORMANCE OF OBLIGATIONS.
The Company and the Parent will perform, and will cause each of their
respective Subsidiaries to perform, all of their respective obligations under
the terms of each mortgage, indenture, security agreement and other debt
instrument by which they are bound; provided, however, that any non-performances
that could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect shall not constitute a breach of this Section 7.6.
SECTION 7.7. PAYMENT OF TAXES.
Each of the Company and the Parent will pay and discharge, and will
cause each of their respective Subsidiaries to pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto and all lawful claims for sums that have become
due and payable which, if unpaid, might become an Encumbrance not otherwise
permitted under Section 8.1(a), provided that the Company, the Parent and their
Subsidiaries shall not be required to pay any such tax, assessment, charge, levy
or claim which is being contested in good faith and by proper proceedings if it
has maintained adequate reserves with respect thereto in accordance with U.S.
generally acceptable accounting principles.
SECTION 7.8. COMPLIANCE WITH ENVIRONMENTAL LAWS AND ERISA.
The Parent, the Company and each of their respective Subsidiaries shall
comply with the requirements the affirmative covenants of the Credit Agreement
regarding Environmental Laws and ERISA.
SECTION 7.9. FURTHER GUARANTEES
The Company and the Parent shall cause any of its Subsidiaries or
Affiliates that executes a guaranty of Indebtedness under the Credit Agreement
to become a Guarantor hereunder by executing and delivering a Guarantee in favor
of the Purchasers.
SECTION 7.10. STATE SECURITIES LAWS.
The Company and the Parent shall take all commercially reasonable
actions to permit the transfer of the Units and the Warrant Shares in conformity
with all applicable state securities law.
SECTION 7.11. FURTHER ASSURANCES.
Subject to the terms and conditions of this Agreement, the Company and
the Parent shall use all reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things reasonably necessary, proper,
or advisable under Applicable Laws and regulations to consummate the
transactions contemplated by this Agreement and to make effective the purchase
and sale of the Units pursuant to this Agreement, and to secure, as soon as
practicable after the date hereof, all approvals or consents of governmental
authorities or third parties, if any, as may be necessary to consummate the
transactions as contemplated hereby.
32
28
ARTICLE VIII
NEGATIVE COVENANTS
SECTION 8.1. LIENS.
For so long as any or all of the Notes are outstanding, the Company and
the Parent will not take, and will not permit any of their respective
Subsidiaries to take, any of the following actions:
(a) create, incur, assume or suffer to exist any Encumbrance upon or
with respect to any property or assets (real or personal, tangible or
intangible) of the Parent or the Company or any of their respective
Subsidiaries, whether now owned or hereafter acquired, or sell any such property
or assets subject to an understanding or agreement, contingent or otherwise, to
repurchase such property or assets (including sales of accounts receivable with
recourse to the Parent, the Company or any of their respective Subsidiaries), or
assign any right to receive income or permit the filing of any financing
statement under the UCC or any other similar notice of Encumbrance under any
similar recording or notice statute; provided that the provisions of this
Section 8.1 shall not prevent the creation, incurrence, assumption or existence
of the following:
(i) inchoate Encumbrances for taxes, assessments or
governmental charges or levies not yet due and payable or Liens for
taxes, assessments or governmental charges or levies being contested in
good faith and by appropriate proceedings for which adequate reserves
have been established in accordance with U.S. generally accepted
accounting principles;
(ii) Encumbrances in respect of property or assets of the
Company or any of its Subsidiaries imposed by law, which were incurred
in the ordinary course of business and do not secure indebtedness for
borrowed money, such as carriers', warehousemen's, materialmen's and
mechanics' liens and other similar Encumbrances arising in the ordinary
course of business, and (x) which do not in the aggregate materially
detract from the value of the property or assets of the Parent, the
Company or such Subsidiary and do not materially impair the use thereof
in the operation of the business of the Parent, the Company or such
Subsidiary or (y) which are being contested in good faith by
appropriate proceedings, which proceedings (or orders entered in
connection with such proceedings) have the effect of preventing the
forfeiture or sale of the property or assets subject to any such
Encumbrance;
(iii) Encumbrances in existence on the Closing Date which
are listed, and the property subject thereto described, in Schedule
8.1, but only to the respective date, if any, set forth in such
Schedule 8.1 for the removal and termination of any such Encumbrances,
plus renewals and extensions of such Encumbrances to the extent set
forth on Schedule 8.1, provided that (x) the aggregate principal amount
of the indebtedness, if any, secured by such Encumbrances does not
increase from that amount outstanding at the time of any such renewal
or extension and (y) any such renewal or extension does not encumber
any additional assets or properties of the Parent, the Company or any
of their respective Subsidiaries;
33
29
(iv) Permitted Encumbrances;
(v) Encumbrances created to secure amounts outstanding
under the Credit Agreement or senior credit facilities that refinance,
renew, extend or replace amounts outstanding under the Credit Agreement
(including an increase in the amount of commitments thereunder);
(vi) licenses, leases or subleases granted to other
Persons in the ordinary course of business not materially interfering
with the conduct of the business of the Parent, the Company and their
respective Subsidiaries taken as a whole;
(vii) Encumbrances placed upon assets used in the ordinary
course of business of the Parent, the Company or any of their
respective Subsidiaries at the time of acquisition thereof by the
Parent, the Company or any such Subsidiary or within 90 days thereafter
to secure Indebtedness incurred to pay all or a portion of the purchase
price thereof, provided that (x) the aggregate outstanding principal
amount of all Indebtedness secured by Encumbrances permitted by this
clause (vii) shall not at any time exceed $7,500,000 and (y) in all
events, the Encumbrance encumbering the assets so acquired does not
encumber any other asset (other than "proceeds" thereof as defined in
Article 9 of the UCC) of the Parent, the Company or such Subsidiary;
(viii) easements, rights-of-way, restrictions (including
zoning restrictions), covenants, encroachments, protrusions and other
similar charges or encumbrances, and minor title deficiencies, in each
case whether now or hereafter in existence, not securing Indebtedness
and not materially interfering with the conduct of the business of the
Parent, the Company and their respective Subsidiaries taken as a whole;
(ix) Encumbrances arising from precautionary UCC financing
statement filings regarding operating leases entered into by the
Parent, the Company or any of their respective Subsidiaries in the
ordinary course of business;
(x) Encumbrances arising out of judgments or awards in
respect of which the Parent, the Company or any of their respective
Subsidiaries shall in good faith be prosecuting an appeal or
proceedings for review in respect of which there shall have been
secured a subsisting stay of execution pending such appeal or
proceedings, provided that the aggregate amount of all such judgments
or awards does not exceed $2,500,000 at any time outstanding;
(xi) statutory and common law landlords' liens under
leases or subleases to which the Parent, the Company or any of their
respective Subsidiaries is a party;
(xii) Encumbrances (other than any Encumbrance imposed by
ERISA) (x) incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and
other types of social security, (y) to secure the performance of
tenders, statutory obligations (other than excise taxes), surety, stay,
customs and appeal bonds, statutory bonds, bids, leases, government
contracts, trade contracts, performance and return of money bonds and
other similar obligations (exclusive of obligations for the payment of
borrowed money) or (z) arising by virtue of deposits made
34
30
in the ordinary course of business to secure liability for premiums to
insurance carriers, provided that the aggregate amount of deposits at
any time pursuant to sub-clause (y) and sub-clause (z) shall not exceed
$2,500,000 in the aggregate; and
(xiii) any interest or title of a lessor, sublessor,
licensee or licensor under any lease or license agreement permitted by
this Agreement.
SECTION 8.2. CONSOLIDATION, MERGER, PURCHASE OF SALE OF ASSETS, ETC.
(a) The Company and the Parent will not, in a single transaction or
series of related transactions, consolidate or merge with or into any Person, or
sell, assign, transfer, lease, convey or otherwise dispose of (or cause or
permit any Subsidiary of the Company or the Parent to sell, assign, transfer,
lease, convey or otherwise dispose of) all or substantially all of the Company's
or the Parent's assets (determined on a consolidated basis for the Company or
the Parent and their Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless: (i) either (1) the Company or the Parent, as the
case may be, shall be the surviving or continuing entity or (2) the Person (if
other than the Company or the Parent, as the case may be) formed by such
consolidation or into which the Company or the Parent is merged or the Person
which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company or the Parent and of their
Subsidiaries substantially as an entirety (the "SURVIVING ENTITY") (x) shall be
a corporation or a partnership or a limited liability company, in each case
organized and validly existing under the laws of the United States or any State
thereof or the District of Columbia and (y) shall expressly assume by an
amendment hereto (in form and substance satisfactory to the Purchasers) executed
and delivered to the Purchasers, the due and punctual payment of the principal
of, and premium, if any, and interest on all of the Notes and the performance of
every covenant of the Notes, the Warrants and this Agreement on the part of the
Company or the Parent to be performed or observed, provided that at any time the
Company or the Parent or its successor is a limited liability company, there
shall be a co-issuer of the Notes that is a corporation; (ii) immediately before
and immediately after giving effect to such transaction and the assumption
contemplated by subsection (i)(2)(y) above (including, without limitation,
giving effect to any Indebtedness incurred or anticipated to be incurred and any
Encumbrance granted in connection with or in respect of the transaction), no
Default or Event of Default shall have occurred or be continuing; and (iii) the
Company or the Parent or the Surviving Entity, as the case may be, shall have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if an amendment is required in connection
with such transaction, such amendment comply with the applicable provisions of
this Agreement and that all conditions precedent in this Agreement relating to
such transaction have been satisfied. Notwithstanding the foregoing subsection
(ii), (a) any Subsidiary may consolidate with merge into or transfer all or part
of its properties and assets to the Company or to another Subsidiary (provided
that a Guarantor may only merge with another Guarantor) and (b) the Company may
merge with or transfer all of its properties and assets to an Affiliate
incorporated or formed solely for the purpose of either reforming the Company in
another State of the United States or changing the legal structure of the
Company to a corporation so long as the amount of Indebtedness of the Company
and its Subsidiaries is not increased thereby (it being understood that after
the transfer of such property and assets for the purpose of changing its legal
structure to a corporation, the Company may dissolve).
35
31
(b) For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Company or the Parent, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company or the Parent,
shall be deemed to be the transfer of all or substantially all of the properties
and assets of the Company or the Parent.
SECTION 8.3. SUCCESSOR SUBSTITUTED.
(a) Upon any consolidation, combination or merger or any transfer of
all or substantially all of the assets of the Company or the Parent in
accordance with Section 8.2(a) or (b), in which the Company or the Parent is not
the continuing corporation, the successor Person formed by such consolidation or
into which the Company or the Parent is merged or to which such conveyance,
lease or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company or the Parent under this
Agreement, the Notes and the Warrants with the same effect as if such surviving
entity had been named as such herein.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1. EVENTS OF DEFAULT.
Each of the following shall constitute an Event of Default:
(a) failure of the Company or the Parent to pay when due any amount on
the Notes; or
(b) failure of the Company or the Parent to perform or observe the
covenants contained in Section 8.1 or 8.2; or
(c) failure of the Company or the Parent to perform or observe any
other term, covenant or agreement contained in this Agreement and such failure
remains unremedied for 30 days after written notice thereof to the Company and
the Parent by one or more of the Purchasers; or
(d) any representation, warranty or statement made by the Company or
the Parent herein or in any other Transaction Document as of the date hereof or
in any certificate delivered pursuant hereto or thereto as of the date hereof is
false or misleading in any material respect when made; or
(e) (i) failure of the Company or the Parent to pay any indebtedness,
or any interest or premium thereon, when due (or, if permitted by the terms of
the relevant document, within any applicable grace period), whether such
indebtedness shall become due by scheduled maturity, by required prepayment, by
demand or acceleration or otherwise; or (ii) failure of the Company or the
Parent to perform any term, covenant or condition on its part to be performed
under any agreement or instrument evidencing, securing or relating to any such
Indebtedness, when required to be performed, and in the case of (ii), such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Indebtedness, if the effect of such
failure is to accelerate the maturity of such indebtedness, provided that it
shall not
36
32
be a Default or Event of Default under this Section 9.1(e) unless the aggregate
amount of all Indebtedness as described in the preceding clauses (i) and (ii) is
at least $2,500,000;
(f) failure of the Company or the Parent to pay their debts generally
as they come due, or the filing by the Company or the Parent of a petition or
action for relief under any bankruptcy, reorganization, insolvency or moratorium
or similar law or the Company or the Parent consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or the Parent or any of their
Subsidiaries or for all or substantially all of the property and assets of the
Company, the Parent or any of their Subsidiaries or any general assignment for
the benefit of creditors; or
(g) the filing of an involuntary petition under any bankruptcy statute
against the Company or the Parent, or the appointment of a custodian, receiver,
trustee, assignee or similar official for the benefit of creditors (or other
similar official) to take possession, custody, or control of the properties of
the Company or the Parent or the winding up or liquidation of the affairs of the
Parent, the Company or any of their Subsidiaries, unless such petition or
appointment is set aside or withdrawn or ceases to be in effect within sixty
(60) days from the date of said filing or appointment, or an order for relief
shall be entered in any such involuntary petition; or
(h) a final judgment or judgments not covered by insurance for the
payment of money aggregating in excess of $2,500,000 is entered against the
Company or the Parent or any of their Subsidiaries and any one of such judgments
remains undischarged and unstayed for a period of 60 consecutive days from the
date of its entry; or
(i) an Event of Default (as defined in the Credit Agreement) shall have
occurred and be continuing under the Credit Agreement; or
(j) a Change of Control of the Parent shall have occurred; or
(k) the Guarantees shall be set aside or held to be unenforceable or
any guarantor denies or disaffirms its obligations under such Guarantees.
SECTION 9.2. REMEDIES ON DEFAULT.
(a) Upon the occurrence and during the continuation of an Event of
Default (other than an Event of Default described in clause (f) or (g) of
Section 9.1 hereof), the Purchasers holding 25% of the then outstanding accreted
value of the Notes may declare all amounts payable by the Company under the
Notes to be forthwith due and payable and the same shall thereupon become
immediately due and payable without demand, presentment, protest or further
notice of any kind, all of which are hereby expressly waived.
(b) Upon the occurrence of any Event of Default set forth in clause (f)
or (g) of Section 9.1 hereof, without any notice to the Company or the Parent or
any other act by the Purchasers, all amounts payable by the Company under the
Notes shall be immediately due and payable, without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived by the Company
and the Parent.
37
33
(c) No remedy herein conferred or reserved is intended to be exclusive
of any other available remedy or remedies, but each and every such remedy shall
be cumulative and shall be in addition to every other remedy given under the
Transaction Documents or now or hereafter existing at law or in equity. No delay
or omission to exercise any right or power accruing upon any Default or Event of
Default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right or power may be exercised from time to time
and as often as may be deemed expedient. In order to exercise any remedy
reserved to the Purchasers in the Transaction Documents, it shall not be
necessary to give any notice, other than such notice as may be expressly
required.
(d) The Purchasers representing a majority of the accreted value of the
Notes may waive all past defaults (except with respect to nonpayment of amounts
due hereunder) and rescind any acceleration with respect to the Notes and its
consequences if (1) rescission would not conflict with any judgement or decree
of a court of a competent jurisdiction and (2) all existing Events of Default,
other than the nonpayment of the principal and interest on the Notes that have
come due solely by such declaration of acceleration, have been rescinded or
cured.
ARTICLE X
EXCHANGE; SUBSTITUTION OF NOTES AND WARRANT CERTIFICATES
SECTION 10.1. TRANSFER AND EXCHANGE OF NOTES AND WARRANT CERTIFICATES.
Subject to the provisions of Section 6 of the Warrant Certificates (the
form of which is attached hereto as Exhibit B), upon surrender of one or more
Notes or Warrant Certificates, as the case may be, at the principal executive
office of the Company or the Parent 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 or its attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or Warrant Certificate, or part
thereof), the Company and the Parent shall execute and deliver, at their
expense, one or more (as requested by the registered holder thereof) Note or
Warrant Certificate, as applicable, in exchange therefor. Any such replacement
Note shall be in an aggregate principal amount of the surrendered Note and any
such replacement Warrant Certificate shall be for the purchase of an aggregate
amount of shares of Common Stock equal to amount of shares issuable upon
exercise of the surrendered Warrant Certificate. Each such new Note shall be
payable to and each such new Warrant Certificate shall be issued in the name of
such Person or Persons as such registered holder shall request and shall be
substantially in the form of EXHIBIT A and EXHIBIT B, respectively (the terms of
each of which are expressly incorporated herein). 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 Note shall not be transferred in denominations
of less than $10,000. Transfers hereunder shall be made by the Company and the
Parent to the extent permitted by Applicable Law. The Company and the Parent, as
the case may be, shall maintain a register on which it will record the amount
and holder of each Note and Warrant Certificate, as the case may be, as well as
all transfers thereof.
38
34
SECTION 10.2. REPLACEMENT OF NOTES AND WARRANT CERTIFICATES.
Upon receipt by the Company and the Parent of notice from a Purchaser
of the loss, theft, destruction or mutilation of any Note held by such Purchaser
and (a) in the case of loss, theft or destruction, of security reasonably
satisfactory to the Company and the Parent, or (b) in the case of mutilation,
upon surrender and cancellation thereof, the Company and the Parent, at their
own expense, shall execute and deliver, in lieu thereof, 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.
Upon receipt by the Company and the Parent of notice from a Purchaser of the
loss, theft, destruction or mutilation of the Warrant Certificate held by such
Purchaser and (a) in the case of loss, theft or destruction, of security
reasonably satisfactory to the Company and the Parent, or (b) in the case of
mutilation, upon surrender and cancellation thereof, the Parent, at its own
expense, shall execute and deliver, in lieu thereof, a new Warrant Certificate.
ARTICLE XI
ANTI-DILUTION PROVISIONS
SECTION 11.1. DETERMINATION OF FAIR MARKET VALUE.
(a) The initial exercise price per share at which Warrant Shares
shall be purchasable upon the exercise of Warrants (as adjusted herein, the
"EXERCISE PRICE") shall be $0.01 per share. Subject to the terms of this
Agreement, each Purchaser shall have the right which may be exercised until 5:00
p.m., New York City time on November 20, 2010, to receive from the Parent the
number of fully paid and nonassessable Warrant Shares which the holder may at
the time be entitled to receive on exercise of such Warrants and the payment of
the Exercise Price then in effect for such Warrant Shares.
In the alternative, to the extent that the Parent would be permitted to
purchase the requisite number of its Warrant Shares at such time under
applicable law, without the payment of cash, then the Warrants may be exercised
and payment made by reducing the number of Warrant Shares that would be
obtainable upon the exercise of a Warrant and the payment of the Exercise Price
in cash so as to yield a number of Warrant Shares upon the exercise of such
Warrant equal to the product of (a) the number of Warrant Shares for which such
Warrant is exercisable as of the date of exercise (if such Exercise Price were
being paid in cash) and (b) the Cashless Exercise Ratio (as defined herein).
"CASHLESS EXERCISE RATIO" means a fraction, the numerator of which is the excess
of the fair market value (as defined herein) per share on the exercise date over
the Exercise Price per share as of the exercise date and the denominator of
which is the fair market value per share on the exercise date. An exercise of
Warrants pursuant to the immediately foregoing shall represent a "CASHLESS
EXERCISE." Each Warrant not exercised prior to 5:00 p.m., New York City time, on
November 20, 2010 shall become void and all rights thereunder and all rights in
respect thereof under this Agreement shall cease as of such time. No adjustments
as to dividends will be made upon exercise of the Warrants. For purposes of this
paragraph, "FAIR MARKET VALUE" shall be (1) if the Common Stock is reported on
an interdealer quotation system, the last reported sales price per share, or if
there is no reported sales price, the average of the last bid and ask per share,
of the Common Stock on the trading day immediately prior to the exercise date,
(2) if the Common Stock is listed on a securities exchange, the average
39
35
of the closing prices of the Common Stock for the five consecutive trading days
on the principal securities exchange on which the Common Stock is so listed
immediately prior to the exercises date, or (3) if the Common Stock is not so
reported or listed, as reasonably determined by the Parent's board of directors
(which determination may include, at the discretion of such board, an opinion of
an independent investment bank).
A Warrant may be exercised upon surrender to the Parent at its
principal office of the Warrant Certificates to be exercised with the form of
election to purchase on the reverse thereof duly filled in and signed and such
other documentation as the Parent may reasonably request, and upon payment of
the Exercise Price as adjusted as herein provided, for the number of Warrant
Shares in respect of which such Warrants are then exercised. Payment of the
aggregate Exercise Price shall be made (i) in cash or by certified or official
bank check payable to the order of the Parent in New York Clearing House Funds,
or the equivalent thereof or (ii) by Cashless Exercise.
Subject to the provisions of Section 11.2 hereof, upon such surrender
of Warrants and payment of the Exercise Price, the Parent shall issue and cause
to be delivered with all reasonable dispatch to and in such name or names as the
Purchaser may designate, a certificate or certificates for the number of full
Warrant Shares issuable upon the exercise of such Warrants, together with cash,
as provided in Section 11.3; provided, however, that if any consolidation,
merger or lease or sale of assets is proposed to be effected by the Parent as
described in Section 11.2(m) hereof, or a tender offer or an exchange offer for
shares of Common Stock of the Parent shall be made, upon such surrender of
Warrants and payment of the Exercise Price as aforesaid, the Parent shall, as
soon as reasonably practicable, but in any event not later than three business
days thereafter, issue and cause to be delivered the full number of Warrant
Shares issuable upon the exercise of such Warrants in the manner described in
this sentence, together with cash, as provided in Section 11.3. Such certificate
or certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such Warrants and payment of
the Exercise Price.
The Warrants shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part and, in the event that
Warrant Certificate is exercised in respect of fewer than all of the Warrant
Shares issuable on such exercise at any time prior to the date of expiration of
the Warrants, a new certificate evidencing the remaining Warrant or Warrants
will be issued.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled by the Parent. Such canceled Warrant Certificates shall then be
disposed of by the Parent in its customary manner.
(b) The Parent will pay all documentary stamp taxes attributable
to the initial issuance of Warrant Shares upon the exercise of Warrants;
provided, however, that the Parent shall not be required to pay any tax or taxes
which may be payable in respect of any transfer involved in the issue of any
Warrant Certificates or any certificates for Warrant Shares in a name other than
that of the registered holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Parent shall not be required to issue or deliver
such Warrant Certificates
40
36
unless or until the person or persons requesting the issuance thereof shall have
paid to the Parent the amount of such tax or shall have established to the
satisfaction of the Parent that such tax has been paid.
(c) The Parent will at all times reserve and keep available out of
the aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Parent or, if appointed, the transfer agent for the Common Stock
(the "TRANSFER AGENT") and every subsequent transfer agent for any shares of the
Parent's Common Stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Parent will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Parent's Common
Stock issuable upon the exercise of the rights of purchase represented by the
Warrants.
Before taking any action which would cause an adjustment pursuant to
Section 11.2 hereof to reduce the Exercise Price below the then par value (if
any) of the Warrant Shares, the Parent will take any commercially reasonable
corporate action which may, in the opinion of its counsel (which may be counsel
employed by the Parent), be necessary in order that the Parent may validly and
legally issue fully paid and nonassessable Warrant Shares at the Exercise Price
as so adjusted.
(d) The Parent will from time to time take all commercially
reasonable actions which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed on
the principal securities exchanges and markets within the United States of
America, if any, on which other shares of Common Stocks are then listed.
SECTION 11.2. ADJUSTMENT OF NUMBER OF WARRANT SHARES.
The number of Warrant Shares issuable upon the exercise of each Warrant
is subject to adjustment from time to time upon the occurrence of the events
enumerated in this Section 11.2. For purposes of this Section 11.2 only, "COMMON
STOCK" means shares now or hereafter authorized of any class of common stock of
the Parent and any other stock of the Parent, however designated, that has the
right (subject to any prior rights of any class or series of preferred stock) to
participate in any distribution of the assets or earnings of the Parent without
limit as to per share amount.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK.
If the Parent:
(1) pays a dividend or makes a distribution on its Common
Stock, in either case in shares of its Common Stock;
41
37
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares
of its capital stock,
then the number of shares of Common Stock issuable upon exercise of
each Warrant immediately prior to such action shall be proportionately adjusted
so that the holder of any Warrant Certificate thereafter exercised shall receive
the aggregate number and kind of shares of capital stock of the Parent which he
would have owned immediately following such action if such Warrant had been
exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the effective
date in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) ADJUSTMENT FOR RIGHTS ISSUE. If the Parent distributes any rights,
options or warrants to all holders of its Common Stock entitling them to
purchase shares of Common Stock at a price per share less than the current
market price per share on the record date for determining holders entitled to
the distribution of rights, options or warrants, the number of shares of Common
Stock issuable upon exercise of each Warrant shall be adjusted in accordance
with the formula:
N' = N x O + A
--------------
O + (A x P/M)
where:
N' = the adjusted number of shares of Common Stock
issuable upon exercise of each Warrant.
N = the current number of shares of Common Stock
issuable upon exercise of each Warrant.
O = the number of shares of Common Stock outstanding on
the record date.
A = the number of additional shares of Common Stock
offered.
P = the purchase price per share of the additional
shares.
M = the current market price per share of Common Stock
on the record date.
42
38
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable (after giving effect to any
amendment to such period of exercisability), not all rights, options or warrants
shall have been exercised, the number of shares of Common Stock issuable upon
exercise of each Warrant shall be immediately readjusted to what it would have
been if "N" in the above formula had been the number of shares actually issued
at the end of the period.
(c) ADJUSTMENT FOR OTHER DISTRIBUTIONS. If the Parent distributes to
all holders of its Common Stock any of its assets (including cash) or debt
securities or any rights, options or warrants to purchase debt securities,
assets or other securities of the Parent, the number of shares of Common Stock
issuable upon exercise of each Warrant shall be adjusted in accordance with the
formula:
N' = N x M
-------
M - F
where:
N'= the adjusted number of shares of Common Stock
issuable upon exercise of each Warrant.
N = the current number of shares of Common Stock
issuable upon exercise of each Warrant.
M = the current market price per share of Common Stock
on the record date mentioned below.
F = the fair market value on the record date of the
assets, securities, rights or warrants distributable
to one share of Common Stock after taking into
account, in the case of any rights, options or
warrants, the consideration required to be paid upon
exercise thereof. The board of directors shall
reasonably determine the Fair Market Value in
accordance with Section 11.1.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This subsection (c) does not apply to regular quarterly cash dividends
including increases thereof, or rights, options or warrants referred to in
subsection (b) of this Section 11.2. If any adjustment is made pursuant to this
subsection (c) as a result of the issuance of rights, options or warrants and at
the end of the period during which any such rights, options or warrants are
exercisable (after giving effect to any amendment to such period of
exercisability), not all such rights, options or warrants shall have been
exercised, the Warrant shall be immediately readjusted as if "F" in the above
formula was the fair market value described in the definition of
43
39
"F" on the record date of the indebtedness or assets actually distributed upon
exercise of such rights, options or warrants divided by the number of shares of
Common Stock outstanding on the record date. Notwithstanding anything to the
contrary contained in this subsection (c), if "M-F" in the above formula is less
than $1.00, the Parent may elect to, and if "M-F" is a negative number, the
Parent shall, in lieu of the adjustment otherwise required by this subsection
(c), distribute to the holders of the Warrant Certificates, upon exercise
thereof, the evidences of indebtedness, assets, rights, options or warrants (or
the proceeds thereof) which would have been distributed to such holders had such
Warrants been exercised immediately prior to the record date for such
distribution.
(d) ADJUSTMENT FOR COMMON STOCK ISSUE. If the Parent issues shares of
Common Stock for a consideration per share less than the current market price
per share on the date the Parent fixes the offering price of such additional
shares, the number of shares of Common Stock issuable upon exercise of each
Warrant shall be adjusted in accordance with the formula:
N' = N x A
------------
O + P/M
where:
N' = the adjusted number of shares of Common Stock
issuable upon exercise of each Warrant.
N = the current number of shares of Common Stock
issuable upon exercise of each Warrant.
O = the number of shares outstanding immediately prior
to the issuance of such additional shares.
P = the aggregate consideration received for the
issuance of such additional shares.
M = the current market price per share on the date of
issuance of such additional shares.
A = the number of shares outstanding immediately after
the issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections (b) and
(c) of this Section 11.2,
44
40
(2) the exercise of Warrants, or the conversion or exchange of
other securities convertible or exchangeable for Common Stock, or the
issuance of Common Stock upon the exercise of rights or warrants issued
to the holders of Common Stock,
(3) Common Stock (and options exercisable therefore) issued to
the Parent's employees, officers, directors, consultants or advisors
(whether or not still in such capacity on the date of exercise) under
bona fide employee benefit plans or stock option plans adopted by the
board of directors of the Parent and approved by the holders of Common
Stock when required by law, if such Common Stock would otherwise be
covered by this subsection (d) (but only to the extent that the
aggregate number of shares excluded hereby and issued after the date
hereof do not exceed 5% of the Common Stock outstanding on the date
hereof),
(4) Common Stock issued in a bona fide public offering,
(5) Common Stock issued in a bona fide private placement to
non-affiliates of the Parent, including without limitation the issuance
of equity as consideration or partial consideration for acquisitions
from persons that are not affiliates of the Parent.
(e) ADJUSTMENT FOR CONVERTIBLE SECURITIES ISSUE. If the Parent issues
any securities convertible into or exchangeable for Common Stock (other than
securities issued in transactions described in subsections (b) and (c) of this
Section 11.2) for a consideration per share of Common Stock initially
deliverable upon conversion or exchange of such securities less than the current
market price per share on the date of issuance of such securities, the number of
shares of Common Stock issuable upon exercise of each Warrant shall be adjusted
in accordance with this formula:
N' = N x O + D
----------
O + P/M
where:
N' = the adjusted number of shares of Common Stock
issuable upon exercise of each Warrant.
N = the current number of shares of Common Stock
issuable upon exercise of each Warrant.
O = the number of shares outstanding immediately prior
to the issuance of such securities.
P = the aggregate consideration received for the
issuance of such securities.
M = the current market price per share on the date of
issuance of such securities.
D = the maximum number of shares deliverable upon
conversion or in exchange for such securities at the
initial conversion or exchange rate.
45
41
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such securities have not been issued when such securities are no longer
outstanding, then the number of shares of Common Stock issuable upon exercise of
each Warrant shall promptly be readjusted to what it would have been had the
adjustment upon the issuance of such securities been made on the basis of the
actual number of shares of Common Stock issued upon conversion or exchange of
such securities.
This subsection (e) does not apply to:
(1) convertible securities issued in a bona fide public
offering or
(2) convertible securities issued in a bona fide private
placement to non-affiliates of the Parent, including the issuance of
convertible securities as consideration or partial consideration for
acquisitions from persons that are not affiliates of the Parent.
(f) CURRENT MARKET PRICE. In subsections (b), (c), (d) and (e) of this
Section 11.2, the current market price per share of Common Stock on any date
means (i) if the security is not registered under the Exchange Act, the fair
market value of the security as determined in good faith by the Parent's board
of directors (which determination may include, at the discretion of the board,
an opinion of an independent investment bank) and (ii) if the security is
registered under the Exchange Act, the average of the last reported sale price
of the security (or the equivalent in an over-the-counter market) for each
business day during the period commencing 20 business days before such date and
ending on the date one day prior to such date, or if the security has been
registered under the Exchange Act for less than 20 consecutive business days
before such date, the average of the daily closing bid prices (or such
equivalent) for all of the business days before such date for which daily
closing bid prices are available (provided, however that if the closing bid
price is not determined for at least 10 business days in such period, the
"current market price" of the security shall be determined as if the security
were not registered under the Exchange Act).
(g) CONSIDERATION RECEIVED. For purposes of any computation respecting
consideration received pursuant to subsections (d) and (e) of this Section 11.2,
the following shall apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that
in no case shall any deduction be made for any commissions, discounts
or other expenses incurred by the Parent for any underwriting or other
sale or disposition of the issue or otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the Fair Market Value thereof as
determined by the board of directors of the Parent in accordance with
Section 11.1; and
46
42
(3) in the case of the issuance of securities convertible into
or exchangeable for shares, the aggregate consideration received
therefore shall be deemed to be the consideration received by the
Parent for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Parent upon the conversion
or exchange thereof for the maximum number of shares used to calculate
the adjustment (the consideration in each case to be determined in the
same manner as provided in clauses (1) and (2) of this subsection).
(h) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED. No adjustment in the
number of shares of Common Stock issuable upon exercise of each Warrant need be
made unless the adjustment would require an increase or decrease of at least 1%
in such number. Any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment.
All calculations under this Section 11.2 shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
(i) WHEN NO ADJUSTMENT REQUIRED. No adjustment need be made for a
transaction referred to in subsections (b), (c), (d) or (e) of this Section 11.2
if Warrant Certificate holders are to participate, without requiring the
Warrants to be exercised, in the transaction on a basis and with notice that the
Board of Directors of the Parent reasonably determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
participate in the transaction.
No adjustment need be made for a change in the par value or no par
value of the Common Stock.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the amount of cash into which such Warrants are
exercisable. Interest will not accrue on the cash.
(j) NOTICE OF ADJUSTMENT. Whenever the number of shares of Common Stock
issuable upon exercise of each Warrant is adjusted, the Parent shall give notice
as provided in subsection (q) of this Section 11.2.
(k) VOLUNTARY INCREASE. The Parent from time to time may increase the
number of shares of Common Stock issuable upon exercise of each Warrant by any
amount for any period of time (including, without limitation, permanently) if
such period is at least 5 days.
Whenever the number of shares of Common Stock issuable upon exercise of
each Warrant is increased, the Parent shall mail to Warrant Certificate holders
a notice of the increase. The Company shall mail the notice at least 15 days
before the date the increased Exercise Price takes effect. The notice shall
state the increased number of shares of Common Stock issuable upon exercise of
each Warrant and the period it will be in effect.
A voluntary increase of the number of shares of Common Stock issuable
upon exercise of each Warrant does not change or adjust the number of shares of
Common Stock issuable upon exercise of each Warrant for purposes of subsections
(a), (b), (c), (d) and (e) of this Section 11.2.
47
43
(l) NOTICE OF CERTAIN TRANSACTIONS.
If:
(1) the Parent takes any action that would require an
adjustment in the Exercise Price pursuant to subsection (o) of this
Section 11.2 as a result of adjustments made pursuant to subsections
(a), (b), (c), (d) or (e) of this Section 11.2 and if the Parent does
not arrange for Warrant holders to participate pursuant to subsection
(i) of this Section 11.2;
(2) the Company takes any action that would require a
supplemental Unit Purchase Agreement pursuant to subsection (m) of this
Section 11.2; or
(3) there is a liquidation or dissolution of the Parent,
(4) the Parent shall mail to Warrant Certificate holders a
notice stating the proposed record date for a dividend or distribution
or the proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease, liquidation
or dissolution. The Parent shall mail the notice at least 15 days
before such date. Failure to mail the notice or any defect in it shall
not affect the validity of the transaction.
(m) REORGANIZATION OF PARENT. If the Parent consolidates or merges with
or into, enters into a share exchange or transfers or leases all or
substantially all its assets to, any person, upon consummation of such
transaction the Warrants shall automatically become exercisable for the kind and
amount of securities, cash or other assets which the holder of a Warrant
Certificate would have owned immediately after the consolidation, merger, share
exchange, transfer or lease if such holder had exercised the Warrant immediately
before the effective date of the transaction; provided that (i) if the holders
of Common Stock were entitled to exercise a right of election as to the kind or
amount of securities, cash or other assets receivable upon such consolidation or
merger, then the kind and amount of securities, cash or other assets for which
each Warrant shall become exercisable shall be deemed to be the kind and amount
so receivable per share by a plurality of the holders of Common Stock in such
consolidation or merger or (ii) if a tender or exchange offer shall have been
made to and accepted by the holders of Common Stock under circumstances in
which, upon completion of such tender or exchange offer, the maker thereof,
together with members of any group (within the meaning of Rule 13d-5(b)(1) under
the Exchange Act) of which such maker is a part, and together with any affiliate
or associate of such maker (within the meaning of Rule 12b-2 under the Exchange
Act) and any members of any such group of which any such affiliate or associate
is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange
Act) more than 50% of the outstanding shares of Common Stock, the holder of a
Warrant Certificate shall be entitled to receive the highest amount of cash,
securities or other property to which such holder would actually have been
entitled as a shareholder if such Warrant Certificate holder had exercised the
Warrant prior to the expiration of such tender or exchange offer, accepted such
offer and all of the Common Stock held by such holder had been purchased
pursuant to such tender or exchange offer, subject to adjustments (from and
after the consummation of such tender or exchange offer) as nearly equivalent as
possible to the adjustments provided for in this Section 11.2. Concurrently with
the
48
44
consummation of any such transaction, the corporation or other entity formed
by or surviving any such consolidation or merger if other than the Parent, or
the person to which such sale or conveyance shall have been made, shall enter
into a supplemental Unit Purchase Agreement so providing and further providing
for adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section. The successor to the Parent shall mail
to Warrant Certificate holders a notice describing the supplemental Unit
Purchase Agreement.
If the issuer of securities deliverable upon exercise of Warrants under
the supplemental Unit Purchase Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Unit Purchase Agreement.
If this subsection (m) applies, subsections (a), (b), (c), (d) and (e)
of this Section 11.2 do not apply.
(n) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED. In any case in which this
Section 11.2 shall require that an adjustment in the number of shares of Common
Stock issuable upon exercise of each Warrant be made effective as of a record
date for a specified event, the Parent may elect to defer until the occurrence
of such event issuing to the holder of any Warrant Certificate exercised after
such record date the Warrant Shares and other capital stock of the Parent, if
any, issuable upon such exercise over and above the Warrant Shares and other
capital stock of the Parent, if any, issuable upon such exercise on the basis of
the number of shares of Common Stock issuable upon exercise of each Warrant and
paying to such holder any amount in cash in lieu of a fractional share purchased
pursuant to Section 11.3; provided, however, that the Parent shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional Warrant Shares, other capital stock and cash
upon the occurrence of the event requiring such adjustment.
(o) ADJUSTMENT IN EXERCISE PRICE. Upon each event that provides for an
adjustment of the number of shares of Common Stock issuable upon exercise of
each Warrant pursuant to this Section 11.2, each Warrant outstanding prior to
the making of the adjustment shall thereafter shall have an adjusted Exercise
Price (calculated to the nearest ten millionth) obtained from the following
formula:
E' = E x N
---
N'
where:
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
N' = the adjusted number of Warrant Shares issuable upon
exercise of a Warrant by payment of the adjusted
Exercise Price.
N = the number of Warrant Shares previously issuable
upon exercise of a Warrant by payment of the Exercise
Price prior to adjustment.
49
45
Following any adjustment to the Exercise Price pursuant to
this Section 11.2, the amount payable, when adjusted and together with any
consideration allocated to the issuance of the Warrants, shall never be less
than the par value per Warrant Share at the time of such adjustment. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(p) FORM OF WARRANTS. Irrespective of any adjustments in the Exercise
Price or the number or kind of shares issuable upon the exercise of the
Warrants, Warrants theretofore or thereafter issued may continue to express the
same number and kind of shares and Exercise Price as are stated in the Warrants
initially issuable pursuant to this Agreement.
(q) NOTICE TO HOLDERS. (i) Upon any adjustment of the number of shares
or of the Exercise Price pursuant to the foregoing provisions of this Section
11.2 the Parent shall, within five days of such adjustment, cause to be given to
each holder of a Note and/or a Warrant Certificate written notice of such
adjustment, by first class mail, postage pre-paid.
(ii) In case:
(a) the Parent shall authorize the issuance to all holders of shares of
Common Stock of rights, options or warrants to subscribe for or purchase shares
of Common Stock or of any other subscriptions rights or warrants; or
(b) the Parent shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other than
regular cash dividends or dividends payable in shares of Common Stock or
distributions referred to in subsection Section 11.2(b) hereof); or
(c) of any consolidation or merger or share exchange to which the
Parent is a party and for which approval of any shareholders of the Parent is
required, or of the conveyance or transfer of the properties and assets of the
Parent substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Parent; or
(e) The Parent proposes to take any action (other than actions of the
character described in Section 11.2(a) hereof) which would require an adjustment
to the number or type of securities issuable upon exercise of the Warrants;
then the Parent shall cause to be given to each of the registered holders of the
Warrant Certificates at least 5 calendar days prior to the applicable record
date hereinafter specified, or as promptly as practicable under the
circumstances in the case of events for which there is no record date, by
first-class mail, postage prepaid, a written notice stating (i) the date as of
which the holders of record of shares of Common Stock to be entitled to receive
any such rights, options, warrants or distribution are to be determined, or (ii)
the initial expiration date set forth in any
50
46
tender offer or exchange offer for shares of Common Stock, or (iii) the date on
which any such consolidation, merger, share exchange, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, share exchange, conveyance, transfer, dissolution,
liquidation or winding up. The failure to give the notice required by this
subsection (q) or any defect therein shall not affect the legality or validity
of any distribution, right, option, warrant, consolidation, merger, share
exchange, conveyance, transfer, dissolution, liquidation or winding up, or the
vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of directors of the Parent or any other
matter, or any rights whatsoever as shareholders of the Parent, unless and until
Warrant Shares are issued to any such holders.
(r) OTHER DILUTIVE EVENTS. In case any event shall occur affecting the
Parent, as to which the provisions of this Section 11 are not strictly
applicable, but would impact the holders of Warrants adversely as compared to
holders of Common Stock, and the failure to make any adjustment would not fairly
protect the purchase rights represented by the Warrants as decided by a majority
vote of the Parent's directors in accordance with the essential intent and
principles of this Section 11 then, in each such case, the board of directors of
the Parent shall determine (which determination may include, at the discretion
of such board, an opinion of an independent investment bank) the adjustment, if
any, on a basis consistent with the essential intent and principles established
in this Section 11, necessary to preserve, without dilution, the purchase rights
represented by the Warrants.
SECTION 11.3. FRACTIONAL INTERESTS.
(a) The Parent shall not be required to issue fractional Warrant Shares
on the exercise of Warrants. If more than one Warrant shall be presented for
exercise in full at the same time by the same holder, the number of full Warrant
Shares which shall be issuable upon the exercise thereof shall be computed on
the basis of the aggregate number of Warrant Shares purchasable on exercise of
the Warrants so presented. If any fraction of a Warrant Share would, except for
the provisions of this Section 11.3, be issuable on the exercise of any Warrants
(or specified portion thereof), the Parent shall pay an amount in cash equal to
the fair market value on the day immediately preceding the date the Warrant is
presented for exercise, multiplied by such fraction.
(b) Warrants may be issued in fractional interests. Holders of
fractional interests in Warrants will be entitled to purchase a number of
Warrant Shares equal to the product obtained by multiplying the number of
Warrant Shares issuable with respect to a full Warrant multiplied by the
fractional interest owned by such holder in the Warrant.
SECTION 11.4. CONTEST AND APPRAISAL RIGHTS.
If (i) the Purchasers shall disagree with the Parent Determination and
shall by notice to the Parent given within ten (10) days after the Parent's
notice of the Parent Determination, elect
51
47
to dispute the Parent Determination, then the Fair Market Value shall be
determined by an Independent Financial Expert chosen by the Parent and the
Purchasers. In the event the parties are unable to agree upon an Independent
Financial Expert, each of them shall select an Independent Financial Expert,
which shall prepare a determination of the Fair Market Value. The average of the
two determinations of Fair Market Value shall constitute the Fair Market Value,
unless such determinations of Fair Market Value vary by more than ten percent
(10%), in which event such Independent Financial Experts shall select a third
Independent Financial Expert who shall make a determination of the Fair Market
Value. In such an instance, the average of the three determinations of Fair
Market Value shall constitute the Fair Market Value. Such determination of Fair
Market Value shall be binding upon the Company and the Parent and all holders of
Notes and Warrant Certificates and shall be effective as the Fair Market Value
for the date as of which such determination is made and for 180 days thereafter
for all purposes of this Agreement and the other Transaction Documents. In
making its determination of the Fair Market Value, each Independent Financial
Expert shall use one or more valuation methods that such Independent Financial
Expert, in its best professional judgment, determines to be most appropriate;
however, in all cases, the determination of Fair Market Value shall be made
without giving effect to any discount for (i) a minority interest or (ii) any
lack of liquidity of the Common Stock due to the lack of a public market for
such common stock.
SECTION 11.5. FAIR MARKET VALUE PER SHARE.
In any instance where the Fair Market Value per Share (the "FAIR MARKET
VALUE PER SHARE") as of any date shall be required to be determined under this
Agreement or any of the other Transaction Documents, such determination shall be
made by dividing the Fair Market Value as of such date as determined in
accordance with this Article XI by the number of outstanding shares of Common
Stock as of such date (calculated on a fully-diluted basis).
ARTICLE XII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES
SECTION 12.1. SURVIVAL OF REPRESENTATIONS.
All representations, warranties, covenants, and indemnities made by any
party to this Agreement herein or pursuant hereto shall also be deemed made on
and as of the Closing Date as though such representations, warranties,
covenants, and indemnities were made on and as of such date, and all the
representations, warranties, covenants, and indemnities shall survive the
execution and delivery of this Agreement and the Closing Date.
SECTION 12.2. AGREEMENT OF THE COMPANY AND THE PARENT TO INDEMNIFY.
Subject to the conditions and provisions of this Article XII, the
Company and the Parent hereby agree to indemnify, defend and hold harmless each
Purchaser and their respective affiliates, controlling persons, officers,
directors, employees, advisors and agents (collectively, the "INDEMNIFIED
PARTIES") from and against any loss, liability, cost or expense incurred in
respect of the issuance and sale of the Units, this Agreement and the
Transaction Documents including, but not limited to, any out-of-pocket expenses
actually paid by the Purchasers to obtain financing for the purchase of the
Units or the use or proceeds by the Parent and the
52
48
Company, except to the extent such loss, liability, cost or expense is found by
a final, non-appealable judgment of a court of competent jurisdiction or other
arbiter mutually agreed upon by the Company, the Parent and the Purchasers, to
arise from the willful misconduct or gross negligence of such Indemnified Party
resulting from any misrepresentation or breach of any representation or
warranty, or noncompliance with any covenants or other agreements, given or made
by the Company or the Parent pursuant to this Agreement, the other Transaction
Documents or in the Disclosure Schedule attached hereto, or any document
furnished by or on behalf of the Company or the Parent pursuant to this
Agreement (each, an "INDEMNIFIED CLAIM").
SECTION 12.3. CONDITIONS TO INDEMNIFICATION.
The obligations and liabilities of the Company and the Parent under
this Article XII resulting from any Indemnified Claim shall be subject to the
following additional terms and conditions:
(a) The Indemnified Party asserting an Indemnified Claim shall give
prompt written notice to the Company and the Parent of any Indemnified Claim
which is asserted against, resulting to, imposed upon or incurred by such
Purchaser and which may give rise to liability of the Company or the Parent
pursuant to this Article XII, stating (to the extent known or reasonably
anticipated) the nature and basis of such Indemnified Claim and the amount
thereof. The omission of an Indemnified Party to so notify the Company or the
Parent of any Indemnified Claim shall not relieve the Company and the Parent
from any liability it may have hereunder except to the extent that (A) the
liability was caused or increased by such omission, or (B) the ability of the
Company or the Parent to reduce the liability was adversely affected by the
omission. The Indemnified Party shall not settle or compromise any claim by any
third party for which it is entitled to indemnification hereunder without the
prior written consent of the Company and the Parent (which consent shall not be
unreasonably delayed or withheld).
(b) The Company and the Parent may engage counsel with respect to any
such Indemnified Claim, the representation (including the compromise or
settlement of any Indemnified Claim) to be undertaken on behalf of the
Indemnified Party. In the event the Company and/or the Parent elect not to
undertake the defense of such Indemnified Claim by its own counsel, the
Indemnified Party will undertake the defense thereof by counsel or other
representatives designated by it. If either the Parent or the Company assumes
the defense of any third party claim, the Indemnified Party shall be entitled to
participate in but not control the defense of such third party claim with its
own counsel and at its own cost and expense; provided, however, that if the
Indemnified Party asserts that there exists a conflict of interest that would
make it inappropriate for the same counsel to represent the Parent or the
Company and the Indemnified Party, then the Parent and the Company shall
reimburse the Indemnified Party for the reasonable fees and expenses of separate
counsel, to the extent such fees and expenses are incurred solely in connection
with the matters with respect to which there is a conflict of interest.
Notwithstanding anything in this Section 12.3 to the contrary, the Parent and
the Company will not, without the written consent of the Indemnified Party, (i)
settle or compromise any third party claim or consent to the entry of any
judgment which does not include as an unconditional term thereof the delivery by
the claimant or plaintiff to the Indemnified Party of a written release from all
liability in respect of such third party claim or (ii) settle or compromise any
third party claim
53
49
in any manner that (A) involves the sale, forfeiture or loss of, or the creation
of any Encumbrance on, any property of such Indemnified Party or (B) involves
equitable remedies against the Indemnified Party or any of its affiliates.
SECTION 12.4. REMEDIES CUMULATIVE.
The remedies provided herein shall be cumulative and shall not preclude
the assertion by the Parent or the Purchaser of any other rights or the seeking
of any other remedies against the other, or their respective successors or
assigns.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. NOTICES.
All notices, requests and other communications to any party hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person or by facsimile (with confirmed receipt thereof) and on the next
business day when sent by overnight courier service, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to the Company or the Parent:
Generac Portable Products, Inc.
1 Generac Way
Jefferson, Wisconsin 53549
Attn: Gary J. Lato
Telephone No.: (920) 674-1764
Facsimile No.: (920) 674-5663
with a copy to:
King & Spalding
1185 Avenue of the Americas
New York, New York 10036
Attn : Mark Zvonkovic, Esq.
Telephone No.: (212) 556-2100
Facsimile No.: (212) 556-2222
54
50
If to the Purchasers, at the addresses set forth on Exhibit A:
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York
Attn: Arthur Robinson, Esq.
Telephone No.: 212-455-7086
Facsimile No.: 212-455-2502
SECTION 13.2. NO WAIVER.
No delay or failure on the part of the Purchasers in the exercise of
any right, power or privilege granted under any other Transaction Document or
available at law or in equity, shall impair any such right, power or privilege
or be construed as a waiver of any Event of Default or any acquiescence therein.
No single or partial exercise of any such right, power or privilege shall
preclude the further exercise of such right, power or privilege.
SECTION 13.3. AMENDMENT AND WAIVER.
(a) This Agreement, the Notes or the Warrant Certificates, as the
case may be, may be amended, and the observance of any term thereof waived
(either retroactively or prospectively), with (and only with) the written
consent of the Parent, the Company, as the case may be, and the Required
Holders, provided, however, that no amendment or waiver shall, unless in writing
and signed by each holder of a Note, do any of the following: (a) reduce the
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (b) postpone the Maturity Date, (c) pay amounts due under the Notes
in any currency other than dollars, (d) impair the right of any holder of a Note
to receive any payment hereunder or under the Notes or (e) amend this Section
13.3 or the definition of "Required Holders" as either relates to the Notes, and
provided, further, that that no amendment or waiver shall, unless in writing and
signed by each holder of a Warrant Certificate, do any of the following: (x)
increase the Exercise Price or (y) amend this Section 13.3 or the definition of
"Required Holders" as either relates to the Warrant Certificates.
(b) Neither the Parent nor the Company will 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 or Warrant Certificates as consideration for or as an inducement to the
entering into by any holder of Notes or Warrant Certificates or 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 or Warrant Certificates, and the case may be,
then outstanding even if such holder did not consent to such waiver or
amendment.
(c) Any amendment or waiver consented to as provided in this
Section 13.3 applies equally to all holders of Notes and Warrant Certificates
and is binding upon them and upon each future holder of any Note or Warrant
Certificate and upon the Parent and the Company without regard to whether such
Note or Warrant Certificate has been marked to indicate such amendment
55
51
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 among the Parent,
the Company and the holder of any Note or Warrant Certificate, nor any delay in
exercising any rights hereunder or under any Note or Warrant Certificate, shall
operate as a waiver of any rights of any holder of such Note or Warrant
Certificate. 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.
(d) Solely for the purpose of determining whether the Required
Holders or all holders of the Notes or Warrant Certificates, as the case may be,
approved or consented to any amendment or waiver to be given under this
Agreement, the Notes or the Warrant Certificates, or have directed the taking of
any action provided herein, in the Notes or in the Warrant Certificates to be
taken upon the direction of the Required Holders, or all holders of the Notes or
Warrant Certificates, as the case may be, Notes and or Warrant Certificates
directly or indirectly owned by the Company or any of its Affiliates shall be
deemed not to be outstanding.
SECTION 13.4. SUCCESSORS AND ASSIGNS.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns; provided, that the neither the Company, the Parent nor the Purchasers
may assign or otherwise transfer any of their rights or obligations under this
Agreement, the Notes, or the Warrant Certificates to any Person without the
prior written consent of the other Parties. Notwithstanding anything to the
contrary herein, the Fund may assign its rights and obligations under this
Agreement and the Units without the consent of the Company and the Parent
following which assignment the (x) assignee will succeed all of the same rights
and obligations of the Fund and (y) the Fund will be released from all of its
obligations hereunder.
SECTION 13.5. SUBMISSION TO JURISDICTION.
Each of the Parent, the Company and the Purchaser (i) irrevocably
submits to the non-exclusive jurisdiction of any New York State court or Federal
court sitting in New York City in any action arising out of this Agreement, (ii)
agrees that all claims in such action may be decided in such court, (iii)
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum and (iv) consents to the service of process by mail. A final
judgment in any such action shall be conclusive and may be enforced in other
jurisdictions. Nothing herein shall affect the right of any party to serve legal
process in any manner permitted by law or affect its right to bring any action
in any other court.
SECTION 13.6. WAIVER OF JURY TRIAL.
THE PARENT, THE COMPANY AND THE PURCHASER EACH HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OTHER INSTRUMENT OR
DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.
56
52
SECTION 13.7. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
SECTION 13.8. TERMINATION.
This Agreement and all of the parties' rights and obligations hereunder
(excluding the rights and obligations under Section 12.2 which shall continue in
effect) shall terminate upon December 31, 2000 unless the transactions
contemplated hereunder shall have been consummated prior to such date.
SECTION 13.9. SEVERABILITY.
If any part of any provision contained in this Agreement shall be
invalid or unenforceable under applicable law, said part shall be ineffective to
the extent of such invalidity only, without in any way affecting the remaining
parts of said provision or the remaining provisions.
SECTION 13.10. EXPENSES.
The Company and the Parent, jointly and severally, shall be responsible
for (a) all reasonable out-of-pocket expenses of the Purchasers associated with
the commitment to acquire the Units and the preparation, execution, delivery and
administration of this Agreement and the Transaction Documents and any
amendments or modifications thereto (including reasonable fees, disbursements
and other charges of counsel) and (b) all out-of-pocket expenses of the
Purchasers (including the fees, disbursements and other charges of counsel) in
connection with the enforcement of this Agreement and the Transaction Documents.
SECTION 13.11. FILINGS AND CONSENTS.
Each of the Company and the Parent, on the one hand, and the
Purchasers, on the other hand, shall use all reasonable efforts to obtain and to
cooperate in obtaining any order, license, consent, approval, waiver, permit or
authorization of, or notice to, or declaration, filing or registration with,
preparing applications to, conducting negotiations with, and the taking of any
other action in respect of, any governmental agency or body or other person not
a party to this Agreement required in connection with the execution, delivery or
performance of this Agreement. The Company and the Parent, on the one hand, and
the Purchasers, on the other hand, will furnish to one another such necessary
information and reasonable assistance as may be requested in connection with
obtaining any necessary consent, approval, authorization or order.
SECTION 13.12. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which, taken together, shall
constitute one and the same instrument.
57
53
SECTION 13.13. ENTIRE AGREEMENT.
This Agreement, the Notes, the Warrant Certificates and the other
Transaction Documents, together with any exhibits and schedules attached hereto
and thereto, constitute the entire understanding of the parties with respect to
the subject matter hereof and thereof, and any other prior or contemporaneous
agreements, whether written or oral, with respect hereto or thereto are
expressly superseded hereby.
[Signatures on Following Pages]
58
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized officers all as of the day and year first above
written.
PARENT:
GENERAC PORTABLE PRODUCTS, INC.
By: /s/ Eric Wilkinson
--------------------------------------------
Eric Wilkinson
President
COMPANY:
GENERAC PORTABLE PRODUCTS, LLC
By: Dorrance J. Noonan, Jr.
--------------------------------------------
Dorrance J. Noonan, Jr.
Managing Director
PURCHASER:
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
By: /s/ Eric Wilkinson
--------------------------------------------
Eric Wilkinson
Managing Director
59
SCHEDULE A
PURCHASERS
The Beacon Group III - Focus Value Fund, L.P.
60
DISCLOSURE SCHEDULE
See attached.
61
SCHEDULE 5.9
OTHER SUBSIDIARIES
None.
62
SCHEDULE 8.1
ENCUMBRANCES
None.
63
2
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT OR
SUCH SECURITIES LAWS.
For purposes of Section 1273 of the Internal Revenue Code of 1986, as
amended, the issue price of this Senior Zero Coupon Note is 76.9230769% of its
principal amount and the issue date is November 20, 2000.
GENERAC PORTABLE PRODUCTS, LLC
SENIOR ZERO COUPON NOTE
$19,500,000 November 20, 2000
GENERAC PORTABLE PRODUCTS, LLC, a Delaware limited liability company
(the "ISSUER"), for value received, promises and agrees to pay to the order of
The Beacon Group III - Focus Value Fund, L.P., a Delaware limited partnership
(the "PURCHASER"), or its registered assigns permitted pursuant to the terms of
the Unit Purchase Agreement (as defined below) (the "HOLDER"), at such place as
the Holder has designated under the Unit Purchase Agreement (as defined below)
(or such other place as the Holder may designate from time to time as provided
in said Unit Purchase Agreement) the principal sum of NINETEEN MILLION FIVE
HUNDRED THOUSAND AND 00/100 DOLLARS ($19,500,000), in lawful money of the United
States of America and in immediately available funds on the Maturity Date. The
principal amount of this Note on the date hereof shall equal $15,000,000, and
shall accrete in accordance with the Unit Purchase Agreement until the principal
amount of the Note shall equal the Face Amount. Any amounts not paid when due
hereunder shall accrue interest at a rate equal to 13.0% per annum, such rate in
no event, however, to exceed the maximum rate permitted by Applicable Law and
any such amount shall be payable upon demand.
Except for notices which are specifically required by the Unit Purchase
Agreement (as defined below), the Issuer and any and all co-makers, endorsers,
guarantors and sureties severally waive notice (including but not limited to
notice of intent to accelerate and notice of acceleration, notice of protest and
notice of dishonor), demand, presentment for payment, protest, diligence in
collecting and the filing of suit for the purpose of fixing liability, and
consent that the time of payment hereof may be extended and re-extended from
time to time without notice to any of them.
This Note is issued pursuant to that certain Unit Purchase Agreement
dated as of November 20, 2000, among the Issuer, Generac Portable Products,
Inc., and the Purchasers parties thereto as the same may, from time to time be
amended or modified, (the "UNIT PURCHASE AGREEMENT"). Capitalized terms used but
not otherwise defined in this Note shall have the respective meanings given them
in the Unit Purchase Agreement. Reference is made to the Unit
2
64
3
Purchase Agreement for all pertinent purposes, and this Note shall be entitled
to all of the benefits afforded to this Note and the holders thereof by the Unit
Purchase Agreement and the other Transaction Documents. The Unit Purchase
Agreement additionally provides for the acceleration of the maturity of this
Note upon the occurrence of certain events and for prepayment hereof. The
transfer and exchange of the Notes shall be made in accordance with the Unit
Purchase Agreement.
This Note is the senior unsecured obligation of the Company and ranks
pari passu with all other senior unsecured obligations of the Company. Reference
is made to the definition of "Senior Debt" and to provisions in the Indenture
regarding the effect under the Indenture of a Subsidiary or Affiliate of the
Issuer holding this Note.
If action is instituted to collect this Note, the Issuer shall pay all
costs and expenses of collection, including reasonable attorneys' fees.
No failure or delay by the Holder to insist upon the strict performance
of any term, condition, covenant or agreement of this Note, or to exercise any
right, power or remedy consequent upon a breach thereof, shall constitute a
waiver of any such term, condition, covenant or agreement, or of any such
breach, or preclude the Holder from exercising any such right, power or remedy
at any later time or times. By accepting payment after the due date of any
amount payable under the terms of this Note, the Holder shall not be deemed to
have waived the right either to require prompt payment when due of all other
amounts payable under the terms of this Note or to declare a default for the
failure to effect such prompt payment of any such other amount. No course of
dealing or conduct shall be effective to amend, modify, waive, release or change
any provision of this Note.
In the event any one or more of the provisions (or any part of any
provision) of this Note shall for any reason be held to be invalid, illegal or
unenforceable in any respect, or in the event that any one or more of the
provisions of this Note operates or would prospectively operate to invalidate
this Note, then and in either of those events, such provision or provisions (or
part or parts thereof) only shall be deemed null and void and shall not affect
any other provisions (or remaining part of the affected provision) of this Note
and the remaining provisions (or remaining part of the affected provision) of
this Note shall remain operative and in full force and effect and shall in no
way be affected, prejudiced or disturbed thereby.
3
65
4
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.
GENERAC PORTABLE PRODUCTS, LLC
By: /s/ Dorrance J. Noonan, Jr.
-------------------------------------------
Name: Dorrance J. Noonan, Jr.
Title: Chief Executive Officer
4
66
5
EXHIBIT B
THIS STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT
BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER THE ACT OR SUCH STATE SECURITIES LAWS.
WARRANT CERTIFICATE
This stock purchase warrant (this "WARRANT") is issued as of this 20th
day of November, 2000 by GENERAC PORTABLE PRODUCTS, INC., a Delaware corporation
(the "ISSUER"), to The Beacon Group III - Focus Value Fund, L.P., a Delaware
limited partnership (the "PURCHASER"; the Purchaser or any registered assignee
or transferee hereof, a "HOLDER").
SECTION 1. ISSUANCE OF WARRANTS; TERM.
(a) For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Issuer hereby grants to Holder the right to
purchase 340 shares of the Issuer's common stock, $0.01 par value per share (the
"COMMON STOCK"). The number of Warrant Shares and Exercise Price thereof may be
adjusted from time to time in accordance with the Unit Purchase Agreement.
(b) The shares of Common Stock issuable upon exercise of this Warrant
are hereinafter referred to as the "Warrant Shares." This Warrant shall be
exercisable at any time and from time to time after the first anniversary of the
Closing Date and prior to the Expiration Date provided, that this Warrant shall
be exercisable before the first anniversary of the Closing Date immediately upon
the occurrence of a Change in Control.
(c) The holders of the Warrants are entitled to certain registration
rights with respect to the Common Stock purchasable upon exercise thereof. Said
registration rights are set forth in full in a Stockholders Agreement dated as
of July 8, 1998, among the Issuer, the Company and certain investors named
therein (the "STOCKHOLDERS AGREEMENT"). A copy of the Stockholders Agreement may
be obtained by the holder hereof upon written request to the Issuer.
(d) This Warrant (and the right to purchase securities upon exercise
hereof) shall terminate upon the Expiration Date. Holder may exercise this
Warrant prior to or concurrently with the closing of the Expiration Date.
SECTION 2. EXERCISE PRICE.
The exercise price per Warrant Share for which all or any of the
Warrant Shares may be purchased pursuant to the terms of this Warrant shall be
$0.01, unless validly adjusted in
5
67
6
accordance with the Unit Purchase Agreement, (as defined below) in which case
such adjusted exercise price shall apply.
The Exercise Price shall be subject to adjustment from time to time in
accordance with Section 5 hereof.
SECTION 3. EXERCISE.
This Warrant may be exercised by the Holder hereof as to all or any of
the Warrant Shares, upon delivery of written notice of intent to exercise to the
Issuer at the following address: 1 Generac Way, Jefferson, Wisconsin 53549,
Attention: Gary Lato, Chief Financial Officer (or such other address as the
Issuer shall designate in a written notice to the Holder), together with this
Warrant (with the form of election on the reverse hereof completed) and payment
to the Issuer of the aggregate Exercise Price of the Warrant Shares so
purchased, such payment made (i) in cash or by certified or official bank check
payable to the order of the Parent in New York Clearing House funds, or the
equivalent thereof, or (ii) by Cashless Exercise. Upon exercise of this Warrant
as aforesaid, the Issuer shall as promptly as practicable execute and deliver to
the Holder a certificate or certificates for the total number of whole Warrant
Shares for which this Warrant is being exercised in such names and denominations
as are requested by such Holder. If this Warrant shall be exercised with respect
to less than all of the Warrant Shares, the Holder shall be entitled to receive
a new Warrant Certificate covering the number of Warrant Shares in respect of
which this Warrant shall not have been exercised, which new Warrant Certificate
shall in all other respects be identical to this Warrant Certificate. The Issuer
covenants and agrees that it will pay when due any and all state and federal
issue taxes which may be payable in respect of the issuance of this Warrant or
the issuance of any Warrant Shares upon exercise of this Warrant. If any
fraction of a Warrant Share would, except for the provisions of Section 11.3 of
the Agreement, be issuable on the exercise of any Warrants (or specified portion
thereof), the Issuer shall pay an amount in cash equal to the Fair Market Value
on the day immediately preceding the date on which the Warrant is presented for
exercise, multiplied by such fraction.
SECTION 4. COVENANTS AND CONDITIONS.
The above provisions are subject to the following:
(a) RESTRICTIVE LEGEND. Neither this Warrant nor the Warrant Shares
have been registered under the Securities Act of 1933, as amended ("SECURITIES
ACT") or any state securities laws ("BLUE SKY LAWS"). This Warrant has been
acquired for investment purposes and not with a view to distribution or resale
and may not be pledged, hypothecated, sold, made subject to a security interest,
or otherwise transferred without (i) an effective registration statement under
the Securities Act and such applicable Blue Sky Laws, or (ii) an exemption from
the registration requirements under the Securities Act or under any applicable
Blue Sky Laws. Transfer of Warrant Shares issued upon the exercise of this
Warrant shall be restricted in the same manner and to the same extent as the
Warrant and the certificates representing such Warrant Shares shall, subject to
Section 6 hereof, bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED
6
68
7
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER THE ACT OR SUCH STATE SECURITIES LAWS.
(b) STOCK TO BE RESERVED. The Issuer covenants and agrees that all
Warrant Shares which may be issued upon exercise of this Warrant will, upon
issuance and payment therefor, be legally and validly issued and outstanding,
fully paid and nonassessable, free from all taxes, liens, charges and preemptive
rights, if any, with respect thereto or to the issuance thereof. The Issuer
shall at all times reserve and keep available for issuance upon the exercise of
this Warrant such number of authorized but unissued shares of Common Stock as
will be sufficient to permit the exercise in full of this Warrant.
SECTION 5. PROTECTION AGAINST DILUTION; ADJUSTMENT OF EXERCISE PRICE
AND NUMBER OF SHARES ISSUABLE.
The Exercise Price and the number of Warrant Shares (or other
securities or property) issuable upon exercise of this Warrant shall be subject
to adjustment from time to time upon the occurrence of any of the events
enumerated in Section 11.2 of the Unit Purchase Agreement, which provisions are
incorporated herein by reference.
SECTION 6. TRANSFER OF WARRANT.
Subject to the provisions of Section 4 hereof, this Warrant may be
transferred, in whole or in part, by presentation of the Warrant to the Issuer
with written instructions for such transfer. Upon such presentation for
transfer, the Issuer shall promptly execute and deliver a new Warrant
Certificate or Certificates in the form hereof in the name of the assignee or
assignees and, in the case of partial assignment of this Warrant, assignors and
in the denominations specified in such instructions.
SECTION 7. WARRANT HOLDER NOT STOCKHOLDER.
This Warrant shall not entitle the Holder to any of the rights of a
stockholder of the Issuer, except as expressly contemplated herein. No provision
of this Warrant, in the absence of the actual exercise of such Warrant and
receipt by the Holder of Warrant Shares issuable upon such exercise, shall give
rise to any liability on the part of such Holder as a stockholder of the Issuer,
whether such liability shall be asserted by the Issuer or by creditors of the
Issuer, or to any of the rights of a Stockholder.
SECTION 8. UNIT PURCHASE AGREEMENT.
This Warrant Certificate is issued pursuant to that certain Unit
Purchase Agreement dated as of November 20, 2000, among the Issuer, Generac
Portable Products, LLC, The Beacon Group III - Focus Value Fund, L.P. and the
other purchasers parties thereto (such Note and Warrant Purchase Agreement,
together with all amendments and modifications thereto, the "UNIT PURCHASE
AGREEMENT"). Capitalized terms used but not otherwise defined in this Warrant
7
69
8
Certificate shall have the respective meanings given them in the Unit Purchase
Agreement. Reference is made to the Unit Purchase Agreement for all pertinent
purposes, and this Warrant shall be entitled to all of the benefits afforded to
the Warrants and the holders thereof by the Unit Purchase Agreement and the
other Transaction Documents.
SECTION 9. REGISTRATION RIGHTS AGREEMENT.
The Holder of this Warrant Certificate and the holder of any Warrant
Shares issued or issuable upon the exercise hereof are each entitled to the
benefits of the Registration Rights Agreement.
SECTION 10. MISCELLANEOUS.
This Warrant and any term hereof may be changed, waived, discharged or
terminated only in accordance with Section 13.3 of the Unit Purchase Agreement.
This Warrant shall be construed and enforced in accordance with and governed by
the laws of the State of New York. The section headings in this Warrant
Certificate are for purposes of convenience only and shall not constitute a part
hereof.
[Signature on Following Page]
8
70
IN WITNESS WHEREOF, the Issuer has caused this Warrant to be duly
executed, as of the date first above written.
GENERAC PORTABLE PRODUCTS, INC.
By: /s/ Eric Wilkinson
--------------------------------------
Name: Eric Wilkinson
Title: President
[SIGNATURE PAGE TO WARRANT]
71
[FORM OF CERTIFICATE]
[REVERSE]
ELECTION TO PURCHASE
(TO BE EXECUTED UPON EXERCISE OF WARRANT)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to receive _____ shares of Common Stock and
herewith tenders payment for such shares to the order of Generac Portable
Products, Inc. in the amount of $_______ in accordance with the terms hereof
unless the holder is exercising Warrants pursuant to the net exercise provisions
of Section 11.1 of the Unit Purchase Agreement. The undersigned requests that a
certificate for such shares be registered in the name of __________, whose
address is ____________________ and that such shares be delivered to __________
whose address is ____________________. If said number of shares is less than all
of the shares of Common Stock purchasable hereunder, the undersigned requests
that a new Warrant Certificate representing the remaining balance of such shares
be registered in the name of __________, whose address is ____________________,
and that such Warrant Certificate be delivered to __________, whose address is
____________________.
Signature:
Date:
Signature Guaranteed:
72
2
EXHIBIT C
GUARANTEE
GUARANTEE AGREEMENT ("AGREEMENT"), dated as of November 20, 2000, by
GENERAC PORTABLE PRODUCTS, INC., a Delaware corporation and GPPW, INC., a
Wisconsin corporation (collectively, the "GUARANTORS" and each individually a
"GUARANTOR") and in favor of The Beacon Group - Focus Value Fund III (the
"PURCHASERS").
WHEREAS, Generac Portable Products, Inc. (the "PARENT"), Generac
Portable Products, LLC (the "COMPANY") and the Purchasers have entered into a
Unit Purchase Agreement, dated as of November 20, 2000 (the "UNIT PURCHASE
AGREEMENT"), pursuant to which the Company and the Parent will issue and sell to
the Purchasers, and the Purchasers will purchase Units (as defined in the Unit
Purchase Agreement) in exchange for an aggregate amount of $15,000,000 in cash;
and
WHEREAS, it is a condition precedent to consummation of the
transactions contemplated in the Unit Purchase Agreement that the Guarantors
enter into and deliver this Agreement in favor of the Purchasers.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth and in order to induce the
Purchasers to enter into the Unit Purchase Agreement and in recognition of the
direct benefit that the Guarantors will receive from the proceeds of the sale of
the Units, each Guarantor hereby jointly and severally agrees with the
Purchasers as follows (capitalized terms used herein but not defined shall have
the meaning assigned to such terms in the Unit Purchase Agreement):
1. Guarantee. Each Guarantor hereby unconditionally and
irrevocably guarantees as primary obligor, and not merely as surety, the full
and prompt payment when due, whether upon maturity, acceleration or otherwise,
of any and all of the obligations of the Company to the Purchasers on the Notes
(the "GUARANTEED OBLIGATIONS"). If any or all of the Guaranteed Obligations of
the Company to the Purchasers becomes due and payable hereunder, each Guarantor
irrevocably and unconditionally promises to pay such indebtedness to the
Purchasers, or order, on demand, together with any and all expenses which may be
incurred by the Purchasers in collecting any of the Guaranteed Obligations. If
claim is ever made upon any Purchaser for repayment or recovery of any amount or
amounts received in payment or on account of any of the Guaranteed Obligations
and any of the aforesaid Purchasers repays all or part of said amount by reason
of (i) any judgment, decree or order of any court or administrative body, or
(ii) any settlement or compromise of any such claim effected by such Purchasers
with any such claimant (including the Company), then and in such event each
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon such Guarantor, notwithstanding any revocation of the
Guarantee (as defined below) or other instrument evidencing any liability of the
Company, and each Guarantor shall be and remain liable to the aforesaid
Purchasers hereunder for the amount so repaid or recovered to the same extent as
if such amount had never originally been received by any such Purchaser.
2
73
3
2. Bankruptcy. Additionally, each Guarantor unconditionally and
irrevocably guarantees the payment of any and all of the Guaranteed Obligations
of the Company to the Purchasers, whether or not due or payable by the Company,
upon the occurrence of an Event of Default under any of the events specified in
Section 9.1(f) or (g) of the Unit Purchase Agreement, and unconditionally
promises to pay such indebtedness to the Purchasers, or order, on demand, in
lawful money of the United States of America. The obligations of the Guarantors
set forth in Sections 1 and 2 of this Agreement are collectively referred to
herein as the "GUARANTEE".
3. Nature of Liability. The liability of each Guarantor hereunder
is exclusive and independent of any security for, or other guaranty, of the
Guaranteed Obligations of the Company whether executed by such Guarantor, any
other guarantor or by any other party, and the liability of such Guarantor
hereunder is not affected or impaired by (a) any direction as to application of
payment by the Company or by any other party, or (b) any other continuing
obligation or other guaranty, undertaking or maximum liability of a Guarantor or
of any other party as to the Guaranteed Obligations of the Company, or (c) any
payment on, or in reduction of, any such other guaranty or undertaking, or (d)
any dissolution, termination or increase, decrease or change in personnel by the
Company, or (e) any payment made to any Purchaser on the Guaranteed Obligations
which any such Purchaser repays to the Company pursuant to court order in any
bankruptcy, reorganization, arrangement, moratorium or other debtor relief
proceeding, and each Guarantor waives any right to the deferral or modification
of its obligations hereunder by reason of any such proceeding.
4. Independent Obligation. The obligations of each Guarantor
hereunder are independent of the obligations of any other guarantor, any other
party or the Company, and a separate action or actions may be brought and
prosecuted against each Guarantor whether or not action is brought against any
other guarantor, any other party or the Company and whether or not any other
guarantor, any other party or the Company be joined in any such action or
actions. Each Guarantor waives, to the full extent permitted by law, the benefit
of any statute of limitations affecting its liability hereunder or the
enforcement thereof. Any payment by the Company or other circumstance which
operates to toll any statute of limitations as to the Company shall operate to
toll the statute of limitations as to each Guarantor.
5. Authorization. Each Guarantor authorizes the Purchasers
without notice or demand (except as shall be required by applicable statute and
cannot be waived), and without affecting or impairing its liability hereunder,
from time to time to:
(a) change the manner, place or terms of payment of,
and/or change or extend the time of payment of, renew, increase, accelerate or
alter, any of the Guaranteed Obligations or any liability incurred directly or
indirectly in respect thereof or agree to amend, supplement or modify in any way
the obligations of the Company and the Parent under the Unit Purchase Agreement
of any of the Transaction Documents and the Guarantee herein made shall apply to
the Guaranteed Obligations as so changed, extended, renewed or altered;
(b) take and hold security for the payment of the
Guaranteed Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any
3
74
4
order any property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset there against;
(c) exercise or refrain from exercising any rights
against the Company, the Guarantors or others or otherwise act or refrain from
acting;
(d) release or substitute any one or more endorsers,
guarantors, the Company or other obligors;
(e) settle or compromise any of the Guaranteed
Obligations, any security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect thereof or hereof, and
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Company to its creditors other than the
Purchasers;
(f) apply any sums by whomsoever paid or howsoever
realized to any liability or liabilities of the Company to the Purchasers
regardless of what liability or liabilities of the Company remain unpaid;
(g) consent to or waive any breach of, or any act,
omission or default under, the Notes or the Unit Purchase Agreement or any of
the instruments or agreements referred to therein, or otherwise amend, modify or
supplement the Notes or the Unit Purchase Agreement or any of such other
instruments or agreements; and/or
(h) take any other action which would, under otherwise
applicable principles of common law, give rise to a legal or equitable discharge
of such Guarantor from its liabilities under this Agreement.
6. Subordination. Any of the indebtedness of the Company now or
hereafter owing to each Guarantor is hereby subordinated to the Guaranteed
Obligations of the Company owing to the Purchasers; and if the Purchasers so
request at a time when an Event of Default exists, all such indebtedness of the
Company to such Guarantor shall be collected, enforced and received by such
Guarantor for the benefit of the Purchasers and be paid over to the Fund to be
held for the benefit of the Purchasers on account of the Guaranteed Obligations
of the Company to the Purchasers, but without affecting or impairing in any
manner the liability of such Guarantor under the other provisions of this
Agreement. Prior to the transfer by a Guarantor of any note or negotiable
instrument evidencing any of the indebtedness of the Company to such Guarantor,
such Guarantor shall mark such note or negotiable instrument with a legend that
the same is subject to this subordination. Without limiting the generality of
the foregoing, each Guarantor hereby agrees with the Purchasers that it will not
exercise any right of subrogation which it may at any time otherwise have as a
result of this Agreement (whether contractual, under Section 509 of the United
States Bankruptcy Code or otherwise) until all Guaranteed Obligations have been
irrevocably paid in full in cash.
4
75
5
7. Waiver.
(a) Each Guarantor waives any right (except as shall be
required by applicable statute and cannot be waived) to require any Purchaser to
(i) proceed against the Company, any other guarantor or any other party, (ii)
proceed against or exhaust any security held from the Company, any other
guarantor or any other party or (iii) pursue any other remedy in any Purchaser's
power whatsoever. Each Guarantor waives any defense based on or arising out of
any defense of the Company, any other guarantor or any other party, other than
payment in full of the Guaranteed Obligations, based on or arising out of the
disability of the Company, any other guarantor or any other party to perform any
or all of its obligations, or the validity, legality or unenforceability of the
Guaranteed Obligations or any part thereof from any cause, or the cessation from
any cause of the liability of the Company other than payment in full of the
Guaranteed Obligations. The Purchasers may, at their election, exercise any
right or remedy the Purchasers may have against the Company or any other party,
or any security, without affecting or impairing in any way the liability of any
Guarantor hereunder except to the extent the Guaranteed Obligations have been
paid. Each Guarantor waives any defense arising out of any such election by the
Purchasers, even though such election operates to impair or extinguish any right
of reimbursement or subrogation or other right or remedy of any Guarantor
against the Company or any other party or any security.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Agreement, and notices of the existence, creation or incurring of new or
additional Guaranteed Obligations. Each Guarantor assumes all responsibility for
being and keeping itself informed of the Company's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks which
such Guarantor assumes and incurs hereunder.
8. Maximum Liability. It is the desire and intent of each
Guarantor and the Purchasers that this Agreement shall be enforced against such
Guarantor to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. If, however, and to
the extent that, the obligations of a Guarantor under this Agreement shall be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers), then the amount of the Guaranteed
Obligations of such Guarantor shall be deemed to be reduced and such Guarantor
shall pay the maximum amount of the Guaranteed Obligations which would be
permissible under applicable law.
9. Severability. If any part of any provision contained in this
Agreement shall be invalid or unenforceable under applicable law, said part
shall be ineffective to the extent of such invalidity only, without in any way
affecting the remaining parts of said provision or the remaining provisions.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same instrument.
5
76
6
11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
12. Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
[Signatures on following page]
6
77
7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized officers all as of the day and year first above
written.
GUARANTORS:
GENERAC PORTABLE PRODUCTS, INC.
By: /s/ Eric Wilkinson
------------------------------
Name: Eric Wilkinson
Title: President
GPPW, INC.
By: /s/ Faith Rosenfeld
------------------------------
Name: Faith Rosenfeld
Title: President
7