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EXHIBIT 4.1
SUBORDINATED SECURED NOTES PURCHASE AGREEMENT
This Subordinated Secured Notes Purchase Agreement (this "Agreement"),
dated as of May 23, 2001, among Sheldahl, Inc., a Minnesota corporation (the
"Company"), the wholly-owned subsidiaries of the Company listed on Schedule I
attached hereto, as guarantors (the "Guarantors" and, together with the Company,
the "Obligors"), the purchasers listed on Schedule II attached hereto (sometimes
referred to herein as a "Purchaser" and collectively as the "Purchasers") and
Ampersand IV Limited Partnership, as agent for the Purchasers (the "Agent").
PRELIMINARY STATEMENT
Subject to the terms and conditions set forth in this Agreement, the
Company desires to issue and sell to the Purchasers and the Purchasers severally
desire to purchase from the Company 22% Senior Subordinated Secured Notes in an
aggregate principal amount of $5,000,000 (the "Notes") subject to the terms and
conditions of this Agreement.
Accordingly, the Obligors and the Purchasers agree as follows:
ARTICLE I
ISSUANCE OF THE NOTES AND THE WARRANTS
1.1 Authorization of Issuance.
The Company has authorized the issuance of Notes in the aggregate
principal amount of $5,000,000, such Notes to be substantially in the form of
Exhibit A attached hereto. The Notes are sometimes referred to herein as the
"Securities."
1.2 Purchase Commitments.
(a) Morgenthaler Venture Partners V, L.P. ("Morgenthaler") agrees to
purchase in accordance with and subject to the terms and conditions hereof Notes
in the aggregate principal amount of $3,000,000.
(b) Ampersand IV Limited Partnership ("Ampersand LP") agrees to purchase
in accordance with and subject to the terms and conditions hereof Notes in the
aggregate principal amount of $1,000,000.
(c) Molex Incorporated ("Molex") agrees to purchase in accordance with
and subject to the terms and conditions hereof Notes in the aggregate principal
amount of $1,000,000.
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1.3 The Closing.
(a) The closing of the purchase and sale of the Notes (the "Closing")
shall take place at the offices of Lindquist & Vennum P.L.L.P., 4200 IDS Center,
80 South 8th Street, Minneapolis, Minnesota. The date of the Closing is
hereinafter referred to as the "Closing Date."
(b) At the Closing:
(1) the Company shall deliver or caused to be delivered to each
Purchaser (A) Notes in the principal amount set forth below the name of
such Purchaser on Schedule II attached hereto, dated the Closing Date
and duly executed by the Company; and (B) all other documents,
instruments and writings required to have been delivered at or prior to
the Closing by the Obligors to the Purchasers pursuant to this
Agreement, and
(2) each Purchaser shall deliver to the Company the purchase
price set forth below the name of such Purchaser on Schedule II attached
hereto by wire transfer of same day funds to an account designated by
the Company in writing two (2) business days before the Closing.
ARTICLE II
PROVISIONS OF THE NOTES
2.1 Interest Payments.
(a) The Company shall pay interest on the outstanding principal balance
of the Notes at a rate equal to 22% per annum, compounded quarterly on each of
March 31, June 20, September 30 and December 31, of each year, and payable on
the date that the Notes are repaid in full.
(b) In the event the interest on the Notes is payable at a rate that
exceeds the maximum rate of interest permissible under any applicable law (the
"Maximum Legal Rate") at any time, the interest on the Notes shall be payable at
a rate equal to the Maximum Legal Rate at such time.
2.2 Default Interest. If the Company defaults in the payment of the
principal of, premium, if any, or accrued interest on, the Notes, or on any
other amount due hereunder, the Company shall, on or upon demand from time to
time, pay interest on such overdue amount from the date when due up to and
including the date of actual payment (before as well as after judgment) at a
rate equal to the lower of 24% per annum or the Maximum Legal Rate.
2.3 Payments. Subject to the provisions for optional payments in Section
2.4 hereof and Article VIII hereof, the aggregate principal amount of the Notes,
together with all interest accrued thereon, shall be due and payable
simultaneously with the repayment in full of all of the
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Company's obligations under the Credit and Security Agreement, dated as of June
19, 1998, as amended, restated and replaced and refinanced from time to time,
provided that any restatement or refinancing occurs prior to the sale of the
Materials Business (as defined in Section 2.5(b)) or otherwise with the consent
of the Agent (the "Credit Agreement") by and among the Company, the lenders
party thereto, and Wells Fargo Bank, National Association f/k/a Norwest Bank
Minnesota, National Association (such date being referred to herein as the
"Maturity Date") or earlier in accordance with the terms hereof if permitted
pursuant to the terms of the Credit Agreement and the Subordination Agreement as
defined herein. The Company shall make payment of principal of and premium, if
any, or accrued interest on the Notes, or any other amount due to the Purchasers
under this Agreement, as provided herein or in the Notes. All payments hereunder
shall be in United States dollars by wire transfer of same day funds. If any
payment hereunder shall be due on a day that is not a business day, the date for
payment shall be extended to the next succeeding business day, and in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. If at any time any payment made by the Company
hereunder is rescinded or must otherwise be restored or returned upon the
insolvency, bankruptcy or reorganization of any Obligor or otherwise, such
payment obligations of the Company hereunder shall be reinstated as though such
payment had been due but not made when due.
2.4 Optional Redemption of the Notes. Upon notice given as provided in
Section 2.6 below, the Company, at its option, but subject to the terms of the
Credit Agreement and the Subordination Agreement, may redeem the Notes as a
whole, or from time to time in part (in a minimum amount of $100,000 and
otherwise in multiples of $100,000), in each case at the principal amount so to
be prepaid, together with interest accrued thereon to the date fixed for such
prepayment and the Commitment Fee (as defined in Section 2.11 hereof).
2.5 Mandatory Redemption.
(a) Except as otherwise provided in Section 2.7 hereof, concurrently
with the receipt by the Company or any of its subsidiaries of the cash proceeds
from (i) the issuance of any shares, interests, participations or other
equivalents of corporate stock or membership interests ("Capital Stock") of any
of the Company's subsidiaries or options or warrants to acquire Capital Stock of
any of the Company's subsidiaries or (ii) any sale or other disposition of
assets by the Company or any of its subsidiaries (excluding granting any
Permitted Liens as defined in Section 7.2 hereof), the Company shall apply such
cash proceeds (net of expenses payable by the Company or any of its subsidiaries
to any person other than an affiliate of the Company in connection with the
issuance thereof and net of accrued interest as a result of such redemption) to
the redemption of Notes, together with interest accrued thereon to the date of
such prepayment, and the Commitment Fee; provided, however, that the Company may
first apply such cash proceeds to repay the Company's obligations under the
Credit Agreement and any excess proceeds remaining thereafter shall be applied
to redeem the Notes as provided in this Section 2.5(a) and provided, further,
that the Company shall have no obligation to apply to such redemption the first
$1,000,000 of net cash proceeds received by the Company or any subsidiary from
all such issuances of Capital Stock subsequent to the Closing Date.
(b) Notwithstanding the foregoing, if the Company or any of its
subsidiaries sells or disposes of equipment in the ordinary course of business,
the Company shall not be obligated to use such cash proceeds to redeem the Notes
pursuant to this Section 2.5.
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(c) If the Company enters into any agreement with any party other than
any of the Purchasers that contains (i) provisions granting an exclusive option
to purchase the Company's Materials Business or (ii) any financial obligations
on the part of the Company to any potential acquirer of the Company's Materials
Business (other than any of the Purchasers) in the event that the Company's
Materials Business is not acquired by such potential acquirer, then either such
potential acquirer must purchase from the Purchasers all of the Notes for a
purchase price equal the aggregate unpaid principal balance thereof plus accrued
interest thereon plus the Commitment Fee or the Company must redeem all of the
Notes in accordance with the terms of Section 2.4 hereof, in each case within
three (3) business days of the execution of such agreement. For purposes of this
Agreement, "Materials Business" shall mean the Company's adhesive-based tapes,
laminates and composite materials business, excluding the Company's Accentia,
Comclad and lithium batteries products and assets associated exclusively with
these products. The Materials Business shall also exclude the Company's flexible
interconnect division, including Novaclad, Novaflex and Flexbase products and
assets associated exclusively with that division.
2.6 Notice of Redemption. The Company shall give the holder of each Note
irrevocable written notice of any redemption pursuant to Section 2.4 hereof not
less than five (5) days nor more than twenty (20) days prior to the date
specified for such redemption, specifying such date and the principal amount of
the Notes held by such holder to be redeemed on such date and stating that such
redemption is to be made pursuant to Section 2.4 hereof. Notice of redemption
having been given as aforesaid, the principal amount of the Notes specified in
such notice, together with accrued and unpaid interest thereon through the
redemption date with respect thereto and the Commitment Fee, shall become due
and payable on such redemption date.
2.7 Change in Control.
(a) In the event of any Change in Control (as hereinafter defined), each
holder of Note or Notes shall have the right, at its option, subject to the
terms of the Credit Agreement and the Subordination Agreement to require the
Company to purchase all or any portion of such holder's Note(s) on the date (the
"Change in Control Payment Date") which is twenty (20) business days after the
date the Change in Control Notice (as hereinafter defined) is required to be
mailed, together with payment of the Commitment Fee.
(b) For purposes of this Agreement, the term "Change in Control" means
the occurrence of any of the following: (i) the sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, of all or substantially all of the
assets of the Company and its subsidiaries, taken as a whole, to any "person" or
"group" (as such terms are used in Section 13(d)(3) and Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than
Morgenthaler and its affiliates, Ampersand LP and its affiliates, Ampersand CFLP
and its affiliates or Molex and its affiliates (collectively, the "Permitted
Holders"); (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company; (iii) any person or group (as defined above), other
than the Permitted Holders, becomes the "beneficial owner" (as such term is used
in Section 13(d)(3) of the Exchange Act) of 35% or more of the voting power of
the voting stock of the Company; or (iv) during any consecutive two-year period,
individuals, who at the beginning of such period constituted the Board of
Directors (together with any new directors whose election
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by the Board of Directors or whose nomination for election by the stockholders
of the Company was approved by a vote of a majority of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors then in office. For so
long as the Permitted Holders hold a majority of the outstanding shares of the
Company's Series G Convertible Preferred Stock (the "Series G Stock"), those
directors elected by the holders of the Series G Stock shall not be considered
in applying clause (iv) above. In addition, any change in the identity of a
person occupying a board seat resulting from the loss by the holders of the
Series G Stock of the right to elect one or more directors shall not be
considered in applying clause (iv) above.
(c) The Company shall send all holders of the Notes, within five (5)
business days after the occurrence of any Change in Control, a notice of the
occurrence of such Change in Control (the "Change in Control Notice") and each
holder of Notes who wishes to have its Notes repurchased pursuant to this
Section 2.7 shall so indicate by written notice delivered to the Company within
ten (10) business days of receipt of the Change in Control Notice. Each Change
in Control Notice shall state:
(1) the Change in Control Payment Date;
(2) the date by which the right to have Notes purchased must be
exercised;
(3) that such right is conditioned on receipt of notice from the
holders;
(4) the purchase price, if the right to have Notes purchased is
exercised;
(5) a description of the procedure which the holders of Notes
must follow to exercise the right to have Notes purchased;
(6) that the purchase is being made pursuant to this Section
2.7;
(7) that any Note not tendered will continue to accrue interest
if interest is then accruing; and
(8) that, unless the Company defaults in making payment
therefor, any Note purchased shall cease to accrue interest after the
Change in Control Payment Date.
(d) No failure of the Company to give the Change in Control Notice shall
limit any holder's right to exercise a right to have Notes purchased.
(e) If any indebtedness is outstanding under the Credit Agreement, or
any amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change in Control, prior to the mailing of the Change in Control
Notice to holders of the Notes, but in any event within ten (10) business days
after the date the Change in Control Notice is required to be mailed, the
Company shall (i) repay in full all obligations and terminate all commitments
under or in respect of such indebtedness under the Credit Agreement or (ii)
obtain the requisite consents under the Credit Agreement to permit the
repurchase of the Notes as described above. The Company must first comply with
the covenant described in the preceding sentence before it
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shall be required to purchase Notes pursuant to this Section 2.7 in the event of
a Change in Control; provided, however, that the Company's failure to timely
comply with the covenant described in the preceding sentence shall constitute an
Event of Default as described in Section 8.1(c) hereof.
(f) The Company shall not be required to purchase all or any portion of
the Notes under subparagraph (a) of this Section 2.7 if a third party offers to
purchase the Notes in the manner, at the time and otherwise in compliance with
the requirements set forth in this Section 2.7, and timely purchases all Notes
or portions thereof validly tendered and not withdrawn under this Section 2.7.
2.8 Partial Redemptions Pro Rata. Upon any partial redemption of the
Notes pursuant to Section 2.4 or 2.5 hereof, the principal amount so redeemed
shall be allocated to all Notes at the time outstanding in proportion to the
respective outstanding principal amounts thereof.
2.9 Retirement of the Notes. The Company shall not redeem or otherwise
retire in whole or in part prior to the Maturity Date (other than by redemption
pursuant to Section 2.4, 2.5 or 2.7 hereof or upon acceleration of such Maturity
Date pursuant to Section 8.1 hereof), or purchase or otherwise acquire, directly
or indirectly, Notes held by any holder unless the Company shall have offered to
redeem or otherwise retire, purchase or acquire, as the case may be, the same
proportion of the aggregate principal amount of Notes held by each holder of
Notes at the time outstanding upon the same terms and conditions. Any Notes so
redeemed or otherwise retired, purchased or acquired by the Company shall not be
deemed to be outstanding for any purpose under this Agreement.
2.10 Subordination. The Purchasers agree to subordinate their interest
in and to the unpaid principal amount of and interest on the Notes to the
interest of lenders under the Credit Agreement (collectively, the "Senior
Lenders") in the obligations of the Company under the Credit Agreement pursuant
to the terms of a Subordination Agreement among the Purchasers, the Senior
Lenders and the Company substantially in the form of Exhibit B attached hereto;
provided however, that the holders of the Notes will not be obligated to
subordinate their interests to more than an aggregate of $45,000,000 of
Indebtedness owed to such Senior Lenders under the Credit Agreement, provided
further that this restriction on the obligation of such holders to subordinate
their interests shall not apply to Indebtedness under the Credit Agreement
agented by Wells Fargo Bank Minnesota, National Association ("Senior Debt"). To
the extent that any provisions in this Agreement or the Notes conflict with the
provisions of such Subordination Agreement, the provisions of such Subordination
Agreement shall govern.
2.11 Commitment Fee. The Company shall pay to the Agent for the ratable
benefit of the Purchasers in accordance with their respective commitments as set
forth on Schedule II hereto a commitment fee in the amount of $500,000 (the
"Commitment Fee"). The Commitment Fee shall become fully payable upon the
earlier of the Maturity Date or the date on which the Notes are repaid in full
(the "Commitment Fee Payment Date").
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Obligors. The Obligors hereby
represent and warrant to the Purchasers as follows:
(a) Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota. Each
Guarantor is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of the subsidiaries of the
Obligors is a corporation or limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. Each of the Obligors and its subsidiaries has the
requisite corporate power and authority to own, operate or lease its properties
and to carry on its business as it is now being conducted, and is duly qualified
or licensed to do business, and is in good standing, in each jurisdiction in
which the nature of its business or the properties owned, operated or leased by
it makes such qualification, licensing or good standing necessary, except where
the failure to have such power or authority, or the failure to be so qualified,
licensed or in good standing, would not have a Material Adverse Effect (as
defined in Section 5.1(c) hereof) on the Obligors. The term "subsidiary" or
"subsidiaries" means, with respect to any Obligor, any person, corporation,
partnership, joint venture or other legal entity of which such Obligor (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, stock or other equity interests the holders of which are generally
entitled to more than 50% of the vote for the election of the Board of Directors
or other governing body of such corporation or other legal entity.
(b) Authorization. The execution, delivery and performance by each of
the Obligors of each Loan Document (as hereinafter defined) to which it is a
party have been duly authorized by all requisite corporate action by such
Obligor, and each of the Loan Documents constitutes a valid and binding
obligation of each Obligor which is a party thereto, enforceable in accordance
with its terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting creditors' rights generally and to general
principles of equity. As used herein, the term "Loan Documents" means,
collectively, this Agreement, each of the Notes and each of the other
instruments, documents or certificates delivered in connection herewith.
(c) Conflicts. The execution and delivery of each of the Loan Documents
by each Obligor which is a party thereto, the consummation of the transactions
contemplated thereby and the compliance with the provisions thereof by the
Obligors and the issuance, sale and delivery of the Notes by the Company, will
not:
(1) violate any provision of law, statute, rule or regulation,
or any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body applicable to any
Obligor; or
(2) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with due notice or lapse of
time, or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, the
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certificate of incorporation or by-laws of any Obligor, or under any
note, indenture, mortgage, lease, purchase or sales order or other
material contract, agreement or instrument to which any Obligor is a
party or by which it or any of its property is bound or affected; or
(3) result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of any
Obligor other than in favor of the Agent and the Purchasers.
(d) Securities Laws Compliance. The Company has not offered the
Securities or any other security the offering of which would be integrated (as
that term is used in Rule 502 of Regulation D promulgated under the Securities
Act of 1933, as amended (the "Securities Act")) with the offer or sale of the
Securities for sale to, or solicited any offers to buy any of the foregoing
from, or otherwise approached or negotiated in respect thereof, with any Person
other than a limited number of institutional or other sophisticated investors
deemed to be "accredited investors" as such term is defined in rule 501(a) of
Regulation D adopted under the Securities Act.
(e) No Consent or Approval Required. Except for the filing of any notice
subsequent to the date hereof that may be required under applicable federal or
state securities laws (which, if required, shall be filed on a timely basis as
may be so required) and the filing of financing statements under the Uniform
Commercial Code in order to perfect the security interests granted to the Agent
for the benefit of the Purchasers pursuant to Section 9 hereof, no permit,
consent, approval or authorization of, or declaration to, or filing with, any
person (governmental or private) is required for the valid authorization,
execution, delivery and performance by the Obligors of this Agreement or for the
valid authorization, issuance, sale and delivery by the Company of the Notes, or
the carrying out by the Obligors of the transactions contemplated hereby which
has not been obtained.
(f) No Default or Violation. Neither any Obligor nor any subsidiary (i)
is in default under or in violation of any indenture, loan or credit agreement
or any other agreement or instrument to which it is a party or by which it or
any of its properties is bound, other than the Credit Agreement; or (ii) is in
violation of any order of any court, arbitrator or governmental body, except for
purposes of clauses (i) or (ii) as could not reasonably be expected to, in any
such case (individually or in the aggregate) have or result in a Material
Adverse Effect.
(g) Compliance with Laws. The Obligors and their respective subsidiaries
are in compliance, in all material respects, with any applicable law, rule or
regulation of any United States federal, state, local, or foreign government or
agency thereof which affects the business, properties or assets of the Obligors
and their respective subsidiaries, the non-compliance with which would have a
Material Adverse Effect on any Obligor and no notice, charge, claim, action or
assertion has been received by any Obligor or any of its subsidiaries or has
been filed, commenced or, to the Obligors' knowledge, threatened against any
Obligor or any of its subsidiaries alleging any such violation.
(h) Use of Proceeds; Margin Stock. None of the proceeds of the sale of
the Securities will be used for the purpose of purchasing or carrying any
"margin stock" as defined in Regulations U, T, or X of the Board of Governors of
the Federal Reserve System, or for the
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purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry "margin stock," or for any other purpose which might
constitute transactions contemplated by this Agreement a "purpose credit" within
the meaning of Regulations U, T or X. The Obligors are not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stocks. The Obligors have not taken and will not take any action which might
cause any violation of Regulations U, T or X or any other regulations of the
Board of Governors of the Federal Reserve System or any violation of Section 7
of the Exchange Act, or any rule or regulation promulgated thereunder, in each
case as now in effect or as the same may hereinafter be in effect.
(i) The Security Documents. The provisions of this Agreement are
effective to create in favor of the Agent for the ratable benefit of the
Purchasers a legal, valid and enforceable security interest in all right, title
and interest of the Collateral (as hereinafter defined) to the extent that a
security interest can be created therein under the UCC, and, on the Closing
Date, the Agent for the ratable benefit of the Purchasers will have a fully
perfected lien on, and security interest in the Collateral (to the extent such
security interest can be perfected by filing a UCC-1 financing statement or by
taking possession of the Collateral), subject to no other liens other than
Permitted Liens.
(j) Assets. Each Obligor has good and marketable title to all of its
properties and assets (including real property and tangible and intangible
personal property), in each case free and clear of all liens other than
Permitted Liens.
(k) Insurance. All material fire and casualty, general liability,
business interruption, product liability and sprinkler and water damage
insurance policies maintained by the Obligors or any of their subsidiaries are
with nationally recognized insurance carriers, provide coverage for all normal
risks incident to the business of the Obligors and their subsidiaries and their
respective properties and assets and are in character and amount appropriate for
the business conducted by the Obligors, except as would not, individually or in
the aggregate, have a Material Adverse Effect on any Obligor.
(l) Disclosure. The representations, warranties and other statements of
the Obligors contained in this Agreement and the other certificates furnished to
the Purchasers by the Obligors pursuant hereto, taken as a whole, do not contain
any untrue statement of a material fact or, to the best of the knowledge of the
Obligors, omit to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances made, not
materially misleading as of the date hereof.
(m) Knowledge. Whenever a representation or warranty made by any Obligor
refers to the best of the knowledge of such Obligor or its subsidiaries, such
knowledge shall be deemed to consist only of the actual knowledge of the
executive officers of such Obligor or its subsidiaries.
3.2 Representations, Warranties and Agreements of the Purchasers. Each
Purchaser severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Authorization. The execution, delivery and performance by Purchaser
of this Agreement has been duly authorized by all requisite entity action by
Purchaser, and this
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Agreement constitutes a valid and binding obligation of Purchaser, enforceable
in accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors, rights generally
and to general principles of equity.
(b) Conflicts. The consummation of the transactions contemplated hereby
and compliance with the provisions hereof by Purchaser, will not:
(1) violate any provision of law, statute, rule or regulation,
or any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body applicable to
Purchaser; or
(2) conflict with or result in any breach of any of the terms or
provisions of, or constitute a default (or give rise to any right of
termination, cancellation or acceleration) under, the organizational
documents of Purchaser or under any note, indenture, agreement or
instrument to which Purchaser is a party or by which it or any of its
properties is bound or affected.
(c) Purchase for Investment. Purchaser is acquiring the Notes for its
own account, for investment and not with a view to the distribution thereof
within the meaning of the Securities Act.
(d) No Registration. Purchaser understands that the Securities have not
been, nor will it or they be, registered under the Securities Act, by reason of
its or their issuance by the Company in a transaction exempt from the
registration requirements of the Securities Act; and that the Notes must be held
by Purchaser indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from registration.
(e) Restrictions on Resale. Purchaser understands that the exemption
from registration afforded by Rule 144 (the provisions of which are known to
Purchaser) promulgated under the Securities Act depends on the satisfaction of
various conditions, and that, if and when applicable, Rule 144 may only afford
the basis for sales in limited amounts.
(f) Accredited Investor.
(1) Purchaser is an "accredited investor" as defined in Rule
501(a) of Regulation D promulgated under the Securities Act and, by
reason of its business and financial experience and the business and
financial experience of those persons retained by it to advise it with
respect to its investment in the Notes, has such knowledge,
sophistication and experience in business and financial matters so as to
be capable of evaluating the merits and risks of the prospective
investment, is able to bear the economic risk of such investment and, at
the present time, is able to afford a complete loss of such investment;
and
(2) Purchaser is familiar with the business of the Company and
has had the opportunity to ask questions of the officers and directors
of the Company and to obtain such information about the financial
condition of the Company as it has requested.
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(g) Reliance. Each Purchaser understands and acknowledges that (i) the
Securities are being offered and sold to the Purchaser without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act under Section 4(2) of the
Securities Act or Regulation D promulgated thereunder; and (ii) the availability
of such exemption depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the foregoing representations and such Purchaser
hereby consents to such reliance.
(h) No Affiliation. No Purchaser is an "interested shareholder" of the
Company or an "affiliate" or "associate" thereof, as such terms are defined in
Section 302A.011 of the MBCA resulting from any share purchase, contract,
arrangement or understanding, other than this Agreement and the other Loan
Documents, the Subordinated Notes and Warrant Purchase Agreement, the Merger
Agreement (as defined in the Subordinated Notes and Warrant Purchase Agreement)
or any acquisition of shares approved by a committee of the Board of Directors
of the Company as required in Section 302A.673, subdivision 1(d) of the MBCA.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) If any Purchaser should decide to dispose of any of the Securities
held by it, such Purchaser understands and agrees that it may do so only
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from the registration requirements
of the Securities Act. In connection with any transfer of any Securities other
than pursuant to an effective registration statement or to the Company or to an
affiliate of such Purchaser or pursuant to Rule 144 under the Securities Act
("Rule 144"), the Company may require the transferor thereof to provide to the
Company a written opinion of counsel experienced in the area of United States
securities laws selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act.
(b) Each Purchaser agrees to the imprinting, so long as is required, of
the following legends on the Notes:
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
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THIS NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT IN FAVOR
OF WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, AS AGENT FOR
CERTAIN SENIOR LENDERS, DATED AS OF MAY __, 2001.
4.2 Use of Proceeds. The Company shall use the net proceeds from the
issuance of the Securities for working capital and other general corporate
purposes.
4.3 Commercially Reasonable Efforts. Subject to the terms and conditions
herein provided and to applicable legal requirements, each of the parties hereto
agrees to use its commercially reasonable efforts to take, or cause to be taken,
all action, and to do, or cause to be done, and assist and cooperate with the
other parties hereto in doing, as promptly as practicable, all things necessary,
proper or advisable under applicable laws and regulations to ensure that the
conditions set forth in Article V hereof are satisfied.
4.4 Consents. Each of the parties will use its commercially reasonable
efforts to obtain as promptly as practicable all consents and approvals of any
governmental authority or other person necessary in connection with the
execution, delivery and performance of this Agreement and the Notes.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligation of the Purchasers to Purchase
the Securities on the Closing Date. The obligation of each Purchaser hereunder
to acquire and pay for the Securities is subject to the satisfaction or waiver
by such Purchaser, at or before the Closing, of each of the following
conditions:
(a) Accuracy of the Obligors' Representations and Warranties. The
representations and warranties of the Obligors contained herein shall be true
and correct, in all material respects, as of the date hereof.
(b) Performance by the Obligors. The Obligors shall have performed,
satisfied and complied with in all material respects all covenants and
agreements required by this Agreement to be performed, satisfied or complied
with by the Obligors at or prior to the Closing Date.
(c) No Material Adverse Effect. There shall not have occurred any
change, circumstance or event that has had or may reasonably be expected to have
(i) a material adverse effect on the business, financial condition, assets,
results of operations or prospects of the Obligors and their subsidiaries, taken
as a whole, or (ii) prevent or materially delay the ability of the Obligors to
consummate the transactions contemplated by this Agreement and the other Loan
Documents (a "Material Adverse Effect").
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
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(e) Legal Opinion. The Obligors shall have delivered to the Purchasers a
legal opinion of Lindquist & Vennum, P.L.L.P., dated the Closing Date,
substantially in the form of Exhibit C attached hereto.
(f) Required Approvals. The Obligors shall have obtained the consent or
approval of the Senior Lenders under the Credit Agreement and any other
governmental authority or person which may be necessary in connection with the
execution, delivery and performance of this Agreement and the Notes.
(g) Delivery of Notes. The Company shall have delivered to such
Purchaser or such Purchaser's designee duly executed Notes at the Closing to be
received by each Purchaser, in the name of such Purchaser or such Purchaser's
designee, each in form satisfactory to such Purchaser or such Purchaser's
designee.
(h) Secretary's Certificate and Other Documents. The Purchasers shall
have received from each Obligor on the Closing Date (i) except to the extent
waived by the Agent, a copy of such Obligor's certificate of incorporation,
including all amendments thereto, certified by the Secretary of State of its
jurisdiction of incorporation and a certificate as to the good standing of the
Obligor in such jurisdiction as of the Closing Date, (ii) a certificate of an
officer of such Obligor dated as of the Closing Date certifying to the
Purchasers that the Purchasers have received (A) a correct and complete copy of
such Obligor's certificate of incorporation and bylaws as in effect on the
Closing Date and at all times subsequent to the date of the resolutions
described in the following clause (B), (B) a correct and complete copy of
resolutions duly adopted by the Board of Directors of such Obligor authorizing
the execution, delivery and performance of the Loan Documents, the sale of the
Notes hereunder, and the other transactions contemplated hereby and thereby, as
applicable, and (C) as to the incumbency and specimen signature of each officer
of such Obligor who shall execute any Loan Document or any other document
delivered in connection therewith; and (iii) such other documents as the
Purchasers and their counsel may reasonably request.
(i) Officer's Certificate. The Company shall have delivered to the
Purchasers on the Closing Date a certificate signed on its behalf by its
President, Chief Executive Officer or Chief Financial Officer certifying that
the conditions specified in Sections 5.1(a) and (b) hereof have been fulfilled.
(j) Subordination Agreement. The Purchasers and the Senior Lenders shall
have executed a Subordination Agreement on terms consistent with those contained
herein, in the form of Exhibit B attached hereto.
(k) Perfection Certificate and UCC Financing Statements. On the Closing
Date, each Obligor shall have duly authorized, executed and delivered a
Perfection Certificate in the form of Exhibit D hereto and all the UCC Financing
Statements and such other instruments and documents as may be required by the
Purchasers to perfect the security interests created by this Agreement.
(l) Expenses. All fees and expenses (including reasonable attorneys'
fees) incurred by the Agent and the Purchasers in connection with the
negotiation, preparation, filing
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and recording of this Agreement, any documents necessary under this Agreement
and the other Loan Documents shall be paid in full on the date of the Closing.
(m) Ninth Amendment to Credit Agreement. The Company shall have executed
the Ninth Amendment to the Credit Agreement in substantially the same form as
previously provided to the Purchasers by the Company.
(n) Letter Agreement. The Company and the Purchasers shall have executed
the Letter Agreement relating to the proposed purchase of the assets of the
Company relating to its Materials Business.
(o) Total Bank Debt. The Total Bank Debt (as hereinafter defined) of the
Obligors and their subsidiaries as of the Closing Date shall not have exceeded
[$30,000,000]. For purposes of this Section 5.1(n), "Total Bank Debt" shall mean
all outstanding bank debt included in current liabilities and long term
liabilities including but not limited to all outstanding mortgages.
5.2 Conditions Precedent to the Company's Obligations on the Closing
Date. The obligations of the Company to consummate the Closing hereunder are
subject to the following conditions:
(a) Accuracy of the Representations and Warranties of the Purchasers.
The representations and warranties of the Purchasers contained herein shall be
true and correct in all material respects as of the Closing Date.
(b) Performance by the Purchasers. The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) Payment of Purchase Price. Each Purchaser shall have paid the
purchase price set forth below the Purchaser's name on Schedule II attached
hereto for the Securities being purchased by such Purchaser at the Closing.
ARTICLE VI
AFFIRMATIVE COVENANTS
Each of the Obligors hereby covenants and agrees with the Purchasers
that, immediately after the Closing Date and for so long as any Note or any
monetary obligation under this Agreement remains outstanding, the Obligors shall
comply with the covenants set forth in this Article VI:
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6.1 Payment of Principal, Premium, Interest, Fees and Expenses. Subject
to the terms of the Subordination Agreement referred to in Section 2.10, the
Company shall duly and punctually pay the principal of (and premium, if any) and
interest on the Notes in accordance with the terms of the Notes, this Agreement
and the other Loan Documents and all fees and expenses due under this Agreement
when payable.
6.2 Corporate Existence. Each Obligor shall do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
corporate existence and any necessary state or other qualifications (other than
any qualifications the absence of which, in the aggregate, would not have a
Material Adverse Effect).
6.3 Obligations and Taxes. Each Obligor shall pay or discharge, or cause
to be paid or discharged, before the same shall become delinquent (a) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its business or property unless such taxes,
assessments or governmental charges are being paid in accordance with the terms
of an agreement with the applicable taxing authority, (b) all lawful claims for
labor, materials and supplies, (c) all required payments under any Indebtedness
and (d) all other obligations; provided however, that, in each case, it shall
not be required to pay or discharge or to cause to be paid or discharged any
such amount so long as the validity or amount thereof shall be contested in good
faith in an appropriate manner and appropriate reserves and accruals have been
made with respect thereto.
6.4 Performance under Agreements. Each Obligor shall perform its
obligations under this Agreement, each other Loan Document, and each other
contract to which it is a party; provided however, that the Obligors shall not
be required to so perform its obligations under any contract (other than this
Agreement, any other Loan Document and the Subordinated Note and Warrant
Purchase Agreement) to the extent it is reasonably contesting such obligations
in good faith and in an appropriate manner and, if required by GAAP, it has made
appropriate reserves and accruals with respect thereto.
6.5 Access to Properties and Inspections. The Obligors shall maintain
financial records in accordance with accounting practices and controls
sufficient to allow the Obligors to prepare the financial statements,
certificates and reports required by Section 6.10 hereof; and, upon written
notice, at all reasonable times and as often as the Purchasers may reasonably
request, permit any authorized representative or agent of any Purchaser to visit
and inspect their physical properties and reports and permit any authorized
representative or agent of any Purchaser to discuss their affairs, finances and
condition with such officers, key employees and independent chartered
accountants acting as auditors as the Purchasers shall deem appropriate.
Delivery of a copy of this Agreement to the respective independent accountants
acting as auditors shall constitute instructions to such accountants to discuss
the financial condition of the Obligors with the Purchasers and their
representatives, and to permit the Purchasers and their representatives to
inspect, copy and make extracts from all financial statements, analyses, work
papers and other documents and information (including electronically stored
documents and information) prepared by such accountants with respect to the
Obligors.
6.6 Defense of Claims. Each Obligor shall diligently defend itself and
its properties from and against any lawsuits or claims.
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6.7 Notice of Litigation, Claims, Etc. The Obligors shall promptly upon
obtaining notice of the occurrence thereof (but in no event more than ten (10)
days after obtaining notice of the occurrence thereof), provide the Purchasers
with written notice of any of the following events:
(a) the issuance by any governmental authority of any injunction, order
or decision involving any Obligor or any of its properties;
(b) the filing or commencement of any action, suit or proceeding against
or affecting any Obligor or the properties of any Obligor, whether at law or in
equity or by or before any court if such event might reasonably be interpreted
to have a Material Adverse Effect;
(c) the imposition of any lien which is not a Permitted Lien (as defined
in Section 7.2 hereof);
(d) any claim, demand or action impairing title to any of the properties
or assets of any Obligor;
(e) any other adverse action by or notice from a governmental authority
with respect to any Obligor or any of its respective properties;
(f) any default by any Obligor under any contract of indebtedness in
excess of $250,000 other than a lease or conditional sales contract for
immaterial amounts; and
(g) any development in the business or affairs of any Obligor which is
likely, in the reasonable judgment of such Obligor, to have a Material Adverse
Effect.
Each notice shall specify, as applicable, (i) the nature and extent of
the subject matter being disclosed, (ii) any rights of any other parties thereto
with respect to termination, acceleration or similar provisions and (iii) any
corrective action taken or proposed to be taken with respect thereto.
6.8 Proceeds. The Company shall use the net proceeds from the issuance
of the Securities for general corporate purposes, including the retirement of
existing indebtedness.
6.9 Compliance. Each Obligor shall comply in all material respects with all
applicable laws and maintain all required clearances, consents, permits and
approvals of governmental authorities.
6.10 Financial Statements and Reports. The Obligors shall furnish to the
Purchasers:
(a) as soon as available but in any event within ninety (90) days after
the end of each fiscal year, consolidated balance sheets, income statements and
cash flow statements of the Obligors and their subsidiaries, showing their
financial condition as at the end of such fiscal year and the results of their
operations for such fiscal year, all the foregoing financial statements (other
than any consolidating schedules) to be audited by independent chartered
accountants of nationally-recognized standing reasonably acceptable to the
Purchasers and prepared in accordance with GAAP.
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(b) as soon as available but in any event within forty-five (45) days
after the end of each fiscal quarter, commencing with the fiscal quarter
including the Closing Date, the unaudited consolidated balance sheets, income
statements and cash flow statements (along with comparisons to budget), showing
the financial condition as at the end of such fiscal quarter, and the results of
operations for such fiscal quarter and for the then elapsed portion of the
fiscal year, for the Obligors in each case prepared in accordance with GAAP,
subject to normal year-end adjustments (none of which alone or in the aggregate
would result in a Material Adverse Effect) and the absence of notes thereto;
(c) as soon as received, copies of any notice of potential liability or
charge or complaint received by any Obligor from any governmental authority
which could reasonably cause the Obligors or any of their subsidiaries to incur
liabilities in excess of $250,000;
(d) concurrently with the statements provided pursuant to clauses (a)
and (c) a certificate of the Chief Financial Officer of the Company containing a
narrative management discussion and analysis of the financial condition and
results of operations of the Company for the periods covered by such statements;
(e) promptly upon their becoming available, copies of any statements,
reports and other communications, if any, which the Company shall have generally
provided to its stockholders, or to the Senior Lenders, or material statements,
reports and other communications to particular stockholders or to the Company's
directors;
(f) promptly upon receipt thereof, copies of all financial and
management reports submitted to the Obligors by their independent auditors in
connection with each annual audit of the books of the Obligors;
(g) promptly, from time to time, such other information (in writing if
so requested) regarding the assets and properties (including the collateral) and
operations, business affairs and financial condition of the Obligors as the
Purchasers may reasonably request; and
(h) all filings with the Securities and Exchange Commission.
Each certificate of the Chief Financial Officer of the Company (and, in
the case of year-end financial statements and reports, the independent auditors
of the Company) delivered under this Section 6.10 shall certify that the
statement or report to which such certificate relates fairly presents in all
material respects the financial position and results of operations of the
Obligors at the dates thereof and for the periods then ended and has been
prepared in accordance with GAAP, in the case of unaudited financial statements,
subject to normal year-end audit adjustments (none of which alone or in the
aggregate would result in a Material Adverse Effect) and the absence of notes
thereto, no Event of Default has occurred and is continuing and to the best of
the Chief Financial Officer's knowledge no event or condition has occurred which
would have a Material Adverse Effect on the Obligors. The audit report with
respect to the financial statements referred to in clause (a) shall not contain
a "going concern" or like qualification or exception or any qualification
arising out of the scope of the audit.
6.11 Insurance. Each Obligor shall maintain insurance on its business
and properties to such extent and against such risks, including fire and other
risks insured against by extended coverage, and workers' compensation insurance
and public liability insurance against claims for
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personal injury or death or property damage occurring upon, in, about or in
connection with, the use of any properties owned, occupied or controlled by such
Obligor, in each case as is customary with companies similarly situated and in
the same or similar businesses, and shall provide evidence to the Purchasers of
such insurance upon their request.
6.12 Notification of Event of Default. The Obligors shall immediately
notify the Purchasers in writing of (a) the occurrence of any default or any
Event of Default hereunder or under the Credit Agreement of which they become
aware and (b) any event or condition which has or could reasonably be expected
to have a Material Adverse Effect and specify what steps, if any, are being
taken to cure the same.
6.13 Fiscal Year. The Obligors shall maintain their current fiscal year
for financial reporting purposes; provided, however, that the Obligors may
without the consent of the Purchasers change their fiscal year as may be
approved by its Board of Directors so long as the Obligors deliver written
notice to the Purchasers of such change within thirty (30) days of Board
approval of such change.
6.14 Further Assurances. Each Obligor shall duly execute and deliver, or
cause to be duly executed and delivered, at its own cost and expense, such
further instruments and documents and take or cause to be taken all such action,
in each case as may be necessary or proper in the reasonable judgment of the
Purchasers, to carry out the provisions and purposes of this Agreement and the
other Loan Documents and to better assure and confirm unto the Purchasers, its
rights and remedies under this Agreement and the other Loan Documents.
6.15 Maintenance of Properties. Each Obligor shall keep and maintain all
property material to the conduct of its business as in good working order and
condition, ordinary wear and tear excepted, as such property is in as of the
date hereof.
ARTICLE VII
NEGATIVE COVENANTS
The Obligors hereby covenant and agree with the Purchasers that,
immediately after the Closing Date and for so long as any Note or any monetary
obligation under this Agreement remains outstanding, the Obligors shall, except
to the extent waived by the holders of at least seventy-five percent (75%) of
the outstanding principal amount of the Notes, comply with the covenants set
forth in this Article VII:
7.1 Indebtedness. The Obligors shall not, and shall not permit any of
their respective subsidiaries to, incur, create, assume or suffer or permit to
exist any indebtedness, except (a) indebtedness under and pursuant to the terms
of this Agreement and the other Loan Documents (including the issuance of the
Additional Notes), (b) indebtedness under that certain Amended Restated
Subordinated Note and Warrant Purchase Agreement, dated as of December 29, 2000,
as amended from time to time, by and among the Company and the Purchasers party
thereto (the "Subordinated Note and Warrant Purchase Agreement"), (c)
indebtedness under capital or operating leases entered into within the ordinary
course of the Obligors' business consistent with past practice, and (d)
indebtedness to the Senior Lenders under the Credit Agreement.
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7.2 Liens. No Obligor or subsidiary shall incur, create, assume or
suffer or permit to exist any lien on any of their property or assets or on any
income or rights in respect of any thereof, except (the "Permitted Liens"):
(a) liens incurred and arising out of surety bonds, appeal bonds,
statutory obligations, bids, performance and return of money and similar
obligations and pledges or deposits made in the ordinary course of business in
connection with worker compensation, unemployment insurance, old age pensions
and other social security benefits;
(b) liens imposed by law, including carriers', warehousemen's,
mechanics', materialmen's and vendors' liens incurred in the ordinary course of
business and securing obligations which are not yet due or which are being
contested in good faith by appropriate proceedings, and in any such case as to
which it shall have set aside adequate cash reserves in accordance with GAAP;
(c) liens securing the payment of taxes, assessments and governmental
charges or levies, either not yet due and payable or being contested in good
faith by appropriate legal or administrative proceedings, and in any such case
as to which it shall have set aside adequate cash reserves in accordance with
GAAP;
(d) zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, restrictions on the use of property or minor
irregularities of title which do not in the aggregate impair the use of any
parcel of property material to the operation of the business of the any Obligor
or the value of such property for the purpose of the business of any Obligor;
(e) liens securing purchase money indebtedness; provided, however, that
each such lien does not secure any other indebtedness and does not encumber any
property other than that property acquired with the proceeds of such
indebtedness;
(f) extensions and renewals of liens permitted hereunder; provided,
however, that the indebtedness secured thereby is not increased and the lien
does not encumber any property not encumbered by the lien so extended or
renewed;
(g) liens securing capital or operating leases within the ordinary
course of business consistent with past practice;
(h) liens securing indebtedness under the Credit Agreement;
(i) liens existing on the date of the Subordinated Notes and Warrant
Purchase Agreement and listed on Part 3.1(m) of the Disclosure Letter (as
defined in the Subordinated Notes and Warrant Purchase Agreement); and
(j) Liens securing the Notes.
7.3 Restricted Payments. No Obligor shall declare or make, or permit any
of its subsidiaries to declare or make (a) any dividend or other distribution on
any shares of the capital stock of such Obligor or its subsidiaries (other than
(i) in the case of the Company, stock splits, stock dividends or the
distribution of shares of capital stock of the Company pursuant to the
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exercise of warrants and dividends payable in the form of the Company's common
stock to holders of the Company's Series D, E, F and G Convertible Preferred
Stock and (ii) in the case of the Guarantors or any other subsidiaries of the
Company, distributions to the Obligors), or (b) any payment on account of the
purchase, redemption, retirement or acquisition of (i) any shares of capital
stock of such Obligor or its subsidiaries or (ii) any option, warrant or other
right to acquire shares of the capital stock of such Obligor or its
subsidiaries.
7.4 Nature of Business; Place of Business. No Obligor shall conduct, or
permit any of its subsidiaries to conduct, any business or operations other than
the business or operations conducted on the date hereof; provided, however, that
the Obligors and their subsidiaries may engage in business or operations which
are complementary to the business and operations of the Obligors and their
subsidiaries. No Obligor shall change, or permit any of its subsidiaries to
change, its corporate structure or its principal place of business. No Obligor
shall change its state of incorporation without providing thirty (30) days prior
written notice to the Purchasers and executing and delivering, or causing to be
executed and delivered, to the Agent such financing statements and other
documents as the Agent may require to protect, perfect or preserve any lien
granted to the Agent pursuant to the Loan Documents.
7.5 Charter, Bylaw and Loan Document Amendment. No Obligor shall amend,
modify or supplement its charter or bylaws in any manner that the Purchasers
deem will adversely affect the rights of the Purchasers under this Agreement or
any other Loan Document or their ability to enforce the same or amend, modify or
supplement the Loan Documents without the consent of the Purchasers.
7.6 Transactions with Affiliates. No Obligor will enter into, or permit
any of its subsidiaries to enter into, any transaction, including, without
limitation, the purchase, sale, lease or exchange of property, real or personal,
the purchase or sale of any security, the borrowing or lending of any money, or
the rendering of any service, with any person or entity affiliated with such
Obligor or any of its subsidiaries (including officers, directors and
shareholders owning 3% (three percent) or more of the Company's outstanding
capital stock (other than the holders of the Series G Stock)), except in the
ordinary course of and pursuant to the reasonable requirements of its business
and upon fair and reasonable terms not less favorable than would be obtained in
a comparable arms-length transaction with any other person or entity not
affiliated with such Obligor.
7.7 Mergers. No Obligor or subsidiary shall, in a single transaction or
through a series of related transactions, merge or consolidate with another
corporation or other business entity, except that any Guarantor may merge with
another Guarantor or with the Company (so long as the Company is the surviving
corporation).
7.8 Asset Sales. No Obligor or subsidiary shall, directly or indirectly,
in a single transaction or a series of related transactions, sell, lease,
transfer or otherwise dispose of or suffer to be sold, leased, transferred,
abandoned or otherwise disposed of, all or any part of its assets except: (i)
assets related to the Obligors' Material Business, (ii) inventory sold in the
ordinary course of business, (iii) equipment sold or disposed of in the ordinary
course of business and (iv) assets in transactions not otherwise permitted by
subsections (i), (ii) and (iii) so long as (A) such Obligor or applicable
subsidiary receives consideration at the time of such transaction equal to at
least the fair market value of the assets sold; (B) not less than 80% of the
consideration received
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by such Obligor or such subsidiary was in the form of cash or cash equivalents;
and (C) the sale of such assets would not have a Material Adverse Effect.
7.9 Use of Proceeds. The Company shall not use the net proceeds from the
issuance of the Securities to purchase or carry "margin securities."
7.10 Contracts. The Obligors shall prohibit their subsidiaries from
entering into any contract, commitment, understanding, or arrangement by which
the subsidiaries are restricted from making distributions or other payments to
the Obligors. No Obligor will, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement (other than this Agreement,
the Credit Agreement and the Subordinated Notes and Warrant Purchase Agreement)
that prohibits, restricts or imposes any condition upon the ability of any
Obligor to create, incur or permit to exist any lien upon any of its property or
assets (other than Permitted Liens); provided that the foregoing shall not apply
to customary provisions in capital or operating leases but solely with respect
to the property being leased, and restrictions and conditions imposed by law or
by this Agreement, the Credit Agreement or the Subordinated Notes and Warrant
Purchase Agreement.
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Events. In case of the happening of any of the following events
(each, an "Event of Default"):
(a) the Company shall fail to make any payment on principal of the Notes
when and as the same shall become due and payable, whether at the due date
thereof, by acceleration or otherwise; or
(b) the Company shall fail to pay any premium, interest, fee or other
obligation due hereunder when and as the same shall become due and payable,
whether at the due date thereof, by acceleration or otherwise; or
(c) the Company shall fail timely to perform its obligations under
Section 2.7(e) hereof; or
(d) default shall be made in the due observance or performance by any
Obligor of any covenant or agreement contained in Section 6.1 or 6.2 or Article
VII of this Agreement, and such default shall continue unremedied for thirty
(30) days after written notice thereof to the Company by the Purchasers; or
(e) default shall be made in the due observance or performance by any
Obligor of any other covenant or agreement to be observed or performed under
this Agreement or any other Transaction Document, and such default shall
continue unremedied for thirty (30) days (or such lesser period as may be
required as a result of such default) after written notice thereof to the
Company by the Purchasers; or
(f) any representation or warranty made by any Obligor contained in this
Agreement or in any other Loan Document or in any certificate, financial
statement or other
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instrument furnished by or on behalf of any Obligor pursuant to this Agreement
or such other Loan Document shall prove to have been false or misleading in any
material respect when made or furnished; or
(g) any Obligor or any of its subsidiaries shall (i) voluntarily
commence any proceeding or file any petition or proposal or any notice of its
intent to commence or file any such proceeding, petition or proposal seeking
relief under the U.S. Bankruptcy Code or any other federal, state bankruptcy,
insolvency or similar law, (ii) consent to the institution of, or fail to
controvert in a timely and appropriate manner, any such proceeding or the filing
of any such petition or proposal, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator or similar official for any such
person or for any substantial part of its property or assets, (iv) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors,
(vi) fail generally to pay its debts as they become due or (vii) take any
corporate or stockholder action in furtherance of any of the foregoing; or
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of any Obligor or any of its subsidiaries or of any substantial part
of the property or assets thereof, under Title 11 of the United States Code or
any other federal, state bankruptcy, insolvency or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator or similar official
for any Obligor or any of its subsidiaries or for any substantial part of their
property or (iii) the winding-up or liquidation of any Obligor or any of its
subsidiaries, and such proceeding, petition or order shall continue unstayed and
in effect for a period of sixty (60) consecutive days; or
(i) a final judgment for the payment of money in an amount in excess of
$500,000 shall be rendered by a court or other tribunal against any Obligor or
any of its subsidiaries and shall remain undischarged for a period of sixty (60)
consecutive days during which such judgment and any levy or execution thereof
shall not have been effectively stayed or vacated; or
(j) any event shall occur or condition shall exist or fail to occur or
exist if the effect of such occurrence, existence or failure is to accelerate
the maturity of any indebtedness of any Obligor or any of its subsidiaries in a
principal amount in excess of $500,000 or any such indebtedness shall not be
paid when due, whether at maturity, by acceleration or otherwise, or the holder
of any lien upon property of any Obligor shall commence foreclosure of such
lien; or
(k) any Loan Document shall cease to be in full force and effect and
enforceable against any Obligor which is a party thereto in accordance with its
terms; or
(l) there shall have occurred with respect to the Company a Change in
Control; or
(m) the security interest in the Collateral granted hereunder shall
cease to be, in any material respect, in full force and effect, or shall cease,
in any material respect, to give the Agent for the ratable benefit of the
Purchasers, rights, powers and privileges purported to be created thereby or any
Obligor shall default in the due performance or observance of any material term,
covenant or agreement on its part to be performed or observed pursuant to
Article IX
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hereof and such default shall continue for thirty (30) or more days after
written notice to the Company; or
(n) any Obligor or an ERISA Affiliate (as defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) shall fail to pay
when due an amount or amounts aggregating in excess of $500,000 which it shall
have become liable to pay under Title IV of ERISA; or notice of intent to
terminate an "employee pension benefit plan" (a "Benefit Plan") shall be filed
under Title IV of ERISA by any ERISA Affiliate, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate, to impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer any Benefit Plan; or a condition shall exist by reason
of which the PBGC would be entitled to obtain a decree adjudicating that any
Benefit Plan must be terminated; or there shall occur a complete or partial
withdrawal from or a default, within the meaning of Section 4219 (c) (5) of
ERISA, with respect to, one or more multi-employer plans which could cause one
or more ERISA Affiliates to incur a payment obligation in excess of $500,000; or
(o) there shall have occurred any event which would constitute a
Material Adverse Effect; or
(p) any Guarantor shall assert that its obligations hereunder or under
any other Loan Document shall be invalid or unenforceable or that it has no
further obligations or liabilities hereunder;
then, and in any such event, and at any time thereafter during the continuance
of such event, subject to the terms of the Subordination Agreement, the Agent or
the holders of at least seventy-five (75%) percent in aggregate principal amount
of the Notes then outstanding may, by notice to the Company, take any of the
following actions at the same or different times: (i) terminate forthwith the
commitment hereunder to purchase the Notes and (ii) declare the Notes (if
outstanding) to be forthwith due and payable, whereupon the entire unpaid
principal of the Notes, together with accrued interest thereon, the then
applicable redemption premium, if any, and all other obligations, shall become
forthwith due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by the Company,
anything contained herein or in the Notes or the other Loan Documents to the
contrary notwithstanding (except for the Subordination Agreement), and (iii)
exercise any and all other remedies provided under any Loan Document upon the
occurrence and continuance of an Event of Default.
Notwithstanding the foregoing, in the case of an Event of Default arising under
subsections (g) or (h) of Section 8.1 hereof with respect to any Obligor or any
subsidiary of any Obligor, all outstanding Notes will ipso facto become due and
payable without further action or notice.
All rights and remedies of the Agent and the Purchasers under this Agreement and
all covenants and obligations of the Company hereunder, are subject to the terms
and conditions of the Subordination Agreement. In the event of any conflict
between the terms of this Agreement and the terms of the Subordination
Agreement, the terms of the Subordination Agreement shall control.
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ARTICLE IX
SECURITY
9.1 Security Interest. As security for the due and punctual payment and
performance of the Secured Obligations (as hereinafter defined), each Obligor
hereby grants to the Agent for the ratable benefit of the Purchasers a
continuing security interest in and lien on all tangible and intangible personal
property and Manufacturing Fixtures (as defined below) of such Obligor, whether
now owned or existing or hereafter acquired or arising, together with any and
all additions thereto and replacements therefor and proceeds and products
thereof (collectively referred to for purposes of this Agreement as
"Collateral"), including without limitation the property described below:
(a) all tangible personal property, including without limitation all
present and future goods, inventory (including, without limitation, all
merchandise, raw materials, work in process, finished goods and supplies),
machinery, equipment, motor vehicles, rolling stock, tools, furniture,
Manufacturing Fixtures, office supplies, computers, computer software and
associated equipment, whether now owned or hereafter acquired, including,
without limitation, all tangible personal property used in the operation of the
business of such Obligor;
(b) all rights under all present and future authorizations, permits,
licenses and franchises issued, granted or licensed to such Obligor for the
operation of its business;
(c) all patents issued or assigned to and all patent applications made
by such Obligor and all exclusive and nonexclusive licenses to such Obligor from
third parties or rights to use patents owned by such third parties, including,
without limitation, the patents, patent applications and licenses listed on
Schedule III hereto, along with any and all (a) inventions and improvements
described and claimed therein, (b) reissues, divisions, continuations,
extensions and continuations-in-part thereof, (c) income, royalties, damages,
claims and payments now and hereafter due and/or payable under and with respect
thereto, including, without limitation, damages and payments for past or future
infringements thereof, (d) rights to sue for past, present and future
infringements thereof, and (e) any other rights corresponding thereto throughout
the world (collectively, "Patents");
(d) all trademarks (including service marks), federal and state
trademark registrations and applications made by such Obligor (other than
Federal Intent to Use Applications prior to the filing of a verified Statement
of Use under 15 U.S.C. ss.1051(d)), common law trademarks and trade names owned
by or assigned to such Obligor, all registrations and applications for the
foregoing and all exclusive and nonexclusive licenses from third parties of the
right to use trademarks of such third parties, including, without limitation,
the registrations, applications, unregistered trademarks, service marks and
licenses listed on Schedule IV hereto, along with any and all (1) renewals
thereof, (2) income, royalties, damages and payments now and hereafter due
and/or payable with respect thereto, including, without limitation, damages,
claims and payments for past or future infringements thereof, (3) rights to sue
for past, present and future infringements thereof, and (4) foreign trademarks,
trademark registrations, and trade name applications for any thereof and any
other rights corresponding thereto throughout the world (collectively,
"Trademarks");
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(e) all copyrights, whether statutory or common law, owned by or
assigned to such Obligor, and all exclusive and nonexclusive licenses (other
than nonexclusive licenses to use off-the-shelf software products) to such
Obligor from third parties or rights to use copyrights owned by such third
parties, including, without limitation, the registrations, applications and
licenses listed on Schedule V hereto, along with any and all (1) renewals and
extensions thereof, (2) income, royalties, damages, claims and payments now and
hereafter due and/or payable with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (3) rights to sue for past, present and future infringements thereof,
and (4) foreign copyrights and any other rights corresponding thereto throughout
the world (collectively, "Copyrights");
(f) the entire goodwill of such Obligor's business and other general
intangibles (including know-how, trade secrets, customer lists, proprietary
information, inventions, domain names, methods, procedures and formulae)
connected with the use of and symbolized by any Patents, Trademarks or
Copyrights of such Obligor;
(g) any other intellectual property of such Obligor;
(h) all rights under all present and future vendor or customer contracts
and all franchise, distribution, design, consulting, construction, engineering,
management and advertising and related agreements;
(i) all rights under all present and future leases of real and personal
property; and
(j) all other personal property, including, without limitation, all
present and future accounts, accounts receivable, cash, cash equivalents,
deposits, deposit accounts, loss carry back, tax refunds, insurance proceeds,
premiums, rebates and refunds, choses in action, investment property,
securities, contracts, contract rights, general intangibles (including without
limitation, all customer and advertiser mailing lists, intellectual property,
patents, copyrights, trademarks, trade secrets, trade names, domain names,
goodwill, customer lists, advertiser lists, catalogs and other printed
materials, publications, indexes, lists, data and other documents and papers
relating thereto, blueprints, designs, charts, and research and development,
whether on paper, recorded electronically or otherwise), all websites (including
without limitation, all content, HTML documents, audiovisual material, software,
data, hardware, access lines, connections, copyrights, trademarks, patents and
trade secrets relating to such websites) and domain names, any information
stored on any medium, including electronic medium, related to any of the
personal property of such Obligor, all financial books and records and other
books and records relating, in any manner, to the business of such Obligor, all
proposals and cost estimates and rights to performance, all instruments and
promissory notes, documents and chattel paper, and all debts, obligations and
liabilities in whatever form owing to such Obligor from any person, firm or
corporation or any other legal entity, whether now existing or hereafter
arising, now or hereafter received by or belonging or owing to such Obligor; and
all guaranties and security therefor, and all letter of credit and other
supporting obligations in respect of such debts, obligations and liabilities.
Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and no Obligor shall not be deemed to have granted a
security interest in any of such Obligor's rights or interests in any lease,
license, contract, permit or agreement (including, without
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limitation, any such agreement which shall grant a security interest in the
assets of any Obligor) to which any Obligor is a party or any of its rights or
interests thereunder to the extent, but only to the extent, that such a grant
would, under the terms of such lease, license, contract, permit or agreement or
otherwise, result in a breach of the terms of, or constitute a default under, or
cause a termination of, such lease, license, contract, permit or agreement to
which such Obligor is a party (other than to the extent that the other party to
such lease, license, contract, permit or agreement has consented to such grant
or to the extent that any such term would be rendered ineffective pursuant to
the Uniform Commercial Code, as amended and in effect from time to time (the
"UCC"), or any other applicable law (including the U.S. Bankruptcy Code) or
principles of equity), provided, that (x) the foregoing grant of security
interest shall extend to, and the Collateral shall include, any and all proceeds
of any such lease, license, contract, permit or agreement to the extent that the
assignment or encumbering of such proceeds is not so restricted and is permitted
by applicable law and (y) immediately upon the ineffectiveness, lapse, waiver or
termination of any such provision or restriction, the Collateral shall include,
and the Obligors shall be deemed to have granted a security interest in, all
such rights and interests as if such provision or restriction had never been in
effect.
As used herein, the term "Secured Obligations" shall mean (a) principal
of and premium, if any, and interest on the Notes, (b) any and all other
obligations of any of the Obligors to the Agent and the Purchasers or any of
them, whether now existing or hereafter arising, under the this Agreement and
the Notes, all as amended from time to time, and (c) any and all other
Guaranteed Obligations (as hereinafter defined) and Indebtedness of any of the
Obligors to the Agent and the Purchasers or any of them, whether direct or
indirect, absolute or contingent, due or to become due or now existing or
hereafter arising, including, without limitation, any and all other fees,
premiums, penalties or other Guaranteed Obligations or Indebtedness of the
Obligors to the Agent and the Purchasers or any of them, in each case in
connection with this Agreement and the Notes, all as amended from time to time.
As used herein, "Manufacturing Fixtures" shall refer to any equipment
used in the manufacturing operations of the Obligors which is deemed to be a
fixture under applicable law.
9.2 Revised UCC Article 9. The parties to this Agreement acknowledge and
agree to the following provisions of this Agreement in anticipation of the
possible application, in one or more jurisdictions to the transactions
contemplated hereby, of Revised Article 9. For purposes of this Agreement,
"Revised Article 9" shall mean the Revised Article 9 of the UCC in the form or
substantially in the form included in the 1999 official text of the UCC as
approved by the American Law Institute and the National Conference of
Commissioners on Uniform State Law.
(a) In applying the law of any jurisdiction in which Revised Article 9
is in effect, the Collateral is all assets of each Obligor whether or not within
the scope of Revised Article 9. The Collateral shall include the following
categories of assets as defined in Revised Article 9: goods (including
inventory, equipment and any accessions thereto), instruments (including
promissory notes), documents, accounts (including health-care-insurance
receivables), chattel paper (whether tangible or electronic), deposit accounts,
letter-of-credit rights (whether or not the letter of credit is evidenced by a
writing), commercial tort claims, securities and all other investment property,
general intangibles (including payment intangibles and software), supporting
obligations and any and all proceeds of any thereof, wherever located, whether
now owned and hereafter acquired. If any Obligor shall at any time, whether or
not Revised Article 9
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is in effect in any particular jurisdiction, acquire a commercial tort claim, as
defined in Revised Article 9, such Obligor shall immediately notify the Agent in
a writing signed by such Obligor of the brief details thereof and grant to the
Agent for the benefit of the Purchasers in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance reasonably satisfactory to the Agent.
(b) The Agent may, at any time and from time to time, pursuant to the
provisions of this Section 9, file financing statements, continuation statements
and amendments thereto that describe the Collateral as all tangible and
intangible personal property and Manufacturing Fixtures of each Obligor or words
of similar effect and which contain any other information required by Revised
Article 9 (including Part 5 thereof) for the sufficiency or filing office
acceptance of any financing statement, continuation statement or amendment,
including whether each Obligor is an organization, the type of organization and
any organization identification number issued to such Obligor. Each Obligor
agrees to furnish any such information to the Agent promptly upon request. Any
such financing statements, continuation statements or amendments may be signed
by the Agent on behalf of each Obligor and may be filed at any time in any
jurisdiction whether or not Revised Article 9 is then in effect in that
jurisdiction.
(c) Each Obligor shall, at any time and from time to time, whether or
not Revised Article 9 is in effect in any particular jurisdiction, take such
steps as the Agent may reasonably request for the Agent (i) to obtain an
acknowledgment, in form and substance reasonably satisfactory to the Agent, of
any bailee having possession of any of the Collateral that such bailee holds
such Collateral for the Agent for the benefit of the Purchasers, (ii) to obtain
"control" of any investment property, deposit accounts, letter-of-credit rights
or electronic chattel paper (as such terms are defined in Revised Article 9 with
corresponding provisions in revised Sections 9-104, 9-105, 9-106 and 9-107 (or
such other corresponding section) relating to what constitutes "control" for
such items of Collateral), with any agreements establishing control to be in
form and substance reasonably satisfactory to the Agent, and (iii) otherwise to
insure the continued perfection and priority of the Purchasers' security
interest in any of the Collateral and of the preservation of its rights therein,
whether in anticipation of or following the effectiveness of Revised Article 9
in any jurisdiction.
(d) Nothing contained in this Section 9.2 shall be construed to narrow
the scope of the Purchasers' security interest in any of the Collateral or the
perfection or priority thereof or to impair or otherwise limit any of the
rights, powers, privileges or remedies of the Purchasers hereunder except (and
then only to the extent) mandated by Revised Article 9 to the extent then
applicable.
9.3 Special Warrants and Covenants. Each Obligor hereby warrants and
covenants to the Agent and the Purchasers that:
(a) Each Obligor has delivered to the Agent a Perfection Certificate in
substantially the form of Exhibit D hereto. All information set forth in such
Perfection Certificate is true and correct in all material respects and the
facts contained in such Perfection Certificate are accurate in all material
respects as of the date of this Agreement. Each Obligor agrees to supplement its
Perfection Certificate promptly after obtaining information which would require
a correction or addition to such Perfection Certificate.
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(b) No Obligor will change its jurisdiction of organization, principal
or any other place of business, or the location of any Collateral from the
locations set forth in the Perfection Certificate delivered by such Obligor, or
make any change in its name or conduct its business operations under any
fictitious business name or trade name, without, in any such case, providing at
least thirty (30) days' prior written notice to the Agent and executing and
delivering, or causing to be executed and delivered, such financing statements
and other documents as the Agent shall require in connection therewith; provided
that any Obligor's inventory may be in the possession of manufacturers or
processors in any jurisdiction in which all necessary UCC financing statements
have been filed by the Agent, provided that no UCC financing statement shall be
required to be filed in any jurisdiction outside the United States to cover
inventory transferred to such jurisdiction in the ordinary course of the
Obligor's business, as currently conducted.
(c) Except for the liens created in favor of the Agent under the Loan
Documents and except for Permitted Liens, each Obligor is the owner of its
Collateral free from any lien and such Obligor will defend its Collateral
against all claims and demands of all persons at any time claiming the same or
any interest therein, except as expressly permitted hereunder.
(d) Except for Collateral that is obsolete or no longer used in such
Obligor's businesses, each Obligor will keep the Collateral in good order and
repair (normal wear excepted) and adequately insured at all times. Each Obligor
will pay promptly when due all taxes and assessments on the Collateral or for
its use or operation. Following the occurrence and during the continuance of an
Event of Default, the Agent may at its option discharge any taxes or liens to
which any Collateral is at any time subject (other than Permitted Liens), and
may, upon the failure of any Obligor to do so in accordance with this Agreement,
purchase insurance on any Collateral and pay for the repair, maintenance or
preservation thereof, and each Obligor agrees to reimburse the Agent on demand
for any payments or expenses incurred by the Agent or the Purchasers pursuant to
the foregoing authorization.
(e) Each Obligor will promptly execute and deliver to the Agent such
financing statements, certificates and other documents or instruments as may be
necessary to enable the Agent to perfect or from time to time renew the liens
granted in favor of the Agent hereunder, including, without limitation, such
financing statements, certificates and other documents as may be necessary to
perfect a security interest in any additional Collateral hereafter acquired by
such Obligor or in any replacements or proceeds thereof. Each Obligor authorizes
and appoints the Agent, in case of need, to execute such financing statements,
certificates and other documents pertaining to the Agent's liens on the
Collateral in its stead if such Obligor fails to so execute such documents, with
full power of substitution, as such Obligor's attorney in fact. The Agent may
from time to time request and each Obligor shall deliver copies of all customer
lists and vendor lists. Each Obligor further agrees that a carbon, photographic
or other reproduction of a security agreement or financing statement is
sufficient as a financing statement under this Agreement and the other Loan
Documents.
(f) Each Obligor agrees that it will join with the Agent in executing
and, at its own expense, will file and refile, or permit the Agent to file and
refile such financing statements, continuation statements and other documents
(including, without limitation, this Agreement and licenses to use software and
other property protected by copyright), in such offices (including, without
limitation, the United States Patent and Trademark Office, the United States
Copyright
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Office, and appropriate state patent, trademark and copyright offices), as the
Agent may reasonably deem necessary or appropriate, wherever required or
permitted by law in order to perfect and preserve the rights and interests
granted to the Agent in Patents, Trademarks and Copyrights hereunder. Each
Obligor will give the Agent notice of each office at which records of such
Obligor pertaining to all intangible items of Collateral are kept. Except as may
be provided in such notice, the records concerning all intangible Collateral are
and will be kept at the address shown in the respective Perfection Certificate
for the applicable Obligor as the principal place of business of such Obligor.
(g) While the Notes are outstanding, each Obligor shall, annually by the
end of the first calendar quarter following the previous calendar year, provide
written notice to the Agent of all applications for registration of Patents,
Trademarks or Copyrights, to the extent such applications exist, made during the
preceding calendar year. Each Obligor shall file and prosecute diligently all
applications for registration of Patents, Trademarks or Copyrights now or
hereafter pending that would be necessary to the businesses of such Obligor to
which any such applications pertain, and to do all acts, in any such instance,
necessary to preserve and maintain all rights in such registered Patents,
Trademarks or Copyrights unless such Patents, Trademarks or Copyrights are not
material to such Obligor's businesses, as reasonably determined by such Obligor
consistent with prudent and commercially reasonable business practices. Any and
all costs and expenses incurred in connection with any such actions shall be
borne by the Obligors. Except in accordance with prudent and commercially
reasonable business practices, no Obligor shall abandon any right to file a
Patent, Trademark or Copyright application or any pending Patent, Trademark or
Copyright application or any registered Patent, Trademark or Copyright, in each
case material to its business, without the consent of the Agent.
9.4 Fixtures. It is the intention of the parties hereto that none of the
Collateral shall become fixtures and the Obligors will take all such reasonable
action or actions as may be necessary to prevent any of the Collateral from
becoming fixtures.
9.5 Right of Agent to Dispose of Collateral. Upon the occurrence of any
Event of Default, such Event of Default not having previously been waived,
remedied or cured, but subject to the terms of the Subordination Agreement and
the provisions of the UCC or other applicable law, in addition to all other
rights under applicable law and under the Loan Documents, the Agent shall have
the right to take possession of the Collateral and, in addition thereto, the
right to enter upon any premises on which the Collateral or any part thereof may
be situated and remove the same therefrom. The Agent may require the Obligors to
make the Collateral (to the extent the same is moveable) available to the Agent
at a place to be designated by the Agent which is reasonably convenient to both
parties or transfer any information related to the Collateral to the Agent by
electronic medium. Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, the
Agent will give the Obligors at least seven (7) days' prior written notice of
the time and place of any public sale thereof or of the time after which any
private sale or any other intended disposition thereof is to be made. Any such
notice shall be deemed to meet any requirement hereunder or under any applicable
law (including the UCC) that reasonable notification be given of the time and
place of such sale or other disposition.
9.6 Right of Agent to Use and Operate Collateral. Upon the occurrence
and during the continuance of any Event of Default, subject to the provisions of
the Subordination Agreement
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and the UCC or other applicable law, the Agent shall have the right and power
(a) to take possession of all or any part of the Collateral, and to exclude the
Obligors and all persons claiming under the Obligors wholly or partly therefrom,
and thereafter to hold, store, and/or use, operate, manage and control the same,
and (b) to grant a license to use, or cause to be granted a license to use, any
or all of the Patents, Trademarks and Copyrights (in the case of Trademarks,
along with the goodwill associated therewith), but subject to the terms of any
licenses. Upon any such taking of possession, the Agent may, from time to time,
at the expense of the Obligors, make all such repairs, replacements,
alterations, additions and improvements to and of the Collateral as the Agent
may deem proper. In any such case the Agent shall have the right to manage and
control the Collateral and to carry on the business and to exercise all rights
and powers of the Obligors in respect thereto as the Agent shall deem best,
including the right to enter into any and all such agreements with respect to
the operation of the Collateral or any part thereof as the Agent may see fit;
and the Agent shall be entitled to collect and receive all rents, issues,
profits, fees, revenues and other income of the same and every part thereof.
Such rents, issues, profits, fees, revenues and other income shall be applied to
pay the expenses of holding and operating the Collateral and of conducting the
business thereof, and of all maintenance, repairs, replacements, alterations,
additions and improvements, and to make all payments which the Agent may be
required or may elect to make, if any, for taxes, assessments, insurance and
other charges upon the Collateral or any part thereof, and all other payments
which the Agent may be required or authorized to make under any provision of
this Agreement (including legal costs and reasonable attorneys' fees). The Agent
shall apply the remainder of such rents, issues, profits, fees, revenues and
other income as provided in Section 9.7 hereof.
9.7 Proceeds of Collateral. After deducting all reasonable costs and
expenses of collection, storage, custody, sale or other disposition and delivery
(including reasonable legal costs and attorneys' fees) and all other charges
against the Collateral, the Agent shall remit the residue of the proceeds of any
such sale or disposition of the Collateral for the benefit of the Agent and the
Purchasers to the Purchasers to be applied to the Secured Obligations in
accordance with the terms hereof and any surplus shall be returned to the
Obligors or to any person or party lawfully entitled thereto. In the event the
proceeds of any sale, lease or other disposition of the Collateral are
insufficient to pay all of the Secured Obligations in full, the Obligors will be
liable for the deficiency, together with interest thereon at the rate set forth
in Section 2.2 hereof, and the cost and expenses of collection of such
deficiency, including (to the extent permitted by law), without limitation,
reasonable attorneys' fees, expenses and disbursements.
9.8 Waivers. Each Obligor hereby waives presentment, demand, notice,
protest and, except as is otherwise provided herein or in the other Loan
Documents, all other demands and notices in connection with this Agreement or
the enforcement of the Agent's rights hereunder or in connection with any of the
Notes or any Collateral; consents to and waives notice of the granting of
renewals, extensions of time for payment or other indulgences to any Obligor or
to any account debtor in respect of any account receivable or to any other third
party, or substitution, release or surrender of any Collateral, the addition or
release of persons primarily or secondarily liable on any Note or on any account
receivable or other Collateral, the acceptance of partial payments on any Note
or on any account receivable or other Collateral and/or the settlement or
compromise thereof. No delay or omission on the part of the Agent or any
Purchaser in exercising any right hereunder shall operate as a waiver of such
right or of any other right hereunder. Any waiver of any such right on any one
occasion shall not be construed as a
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bar to or waiver of any such right on any future occasion. Each Obligor's
waivers under this section have been made voluntarily, intelligently and
knowingly and after such Obligor has been apprised and counseled by their
attorneys as to the nature thereof and its possible alternative rights.
9.9 Termination of Security Interest; Reinstatement. When all the
Secured Obligations have been paid in full and have been terminated, the
security interest in the Collateral created by this Agreement shall terminate.
In such event, the Agent agrees to execute appropriate releases of liens on the
Collateral upon the request of the Obligors and at the Obligors' expense.
Notwithstanding the forgoing, the security interest in the Collateral created by
this Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any amount received by the Agent or any Purchaser in respect
of the Secured Obligations is rescinded or must otherwise be restored or
returned by the Agent or such Purchaser upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any Obligor or upon the
appointment of any intervener or conservator of, or trustee or similar official
for any Obligor or any substantial part of any of its properties, or otherwise,
all as though such payments had not been made.
ARTICLE X
THE AGENT
10.1 Appointment and Authorization. Each of the Purchasers hereby
irrevocably appoints the Agent as its agent and authorizes the Agent to take
such actions on its behalf and to exercise such powers as are delegated to the
Agent by the terms of this Agreement and the other Loan Documents, together with
such actions and powers as are reasonably incidental thereto.
10.2 Agent's Right as a Purchaser. The Purchaser serving as the Agent
hereunder shall have the same rights and powers in its capacity as a Purchaser
hereunder as any other Purchaser and may exercise the same as though it were not
the Agent, and the Agent and its affiliates may generally engage in any kind of
business with the Company or any subsidiary or other affiliate thereof as if it
were not the Agent hereunder.
10.3 Agent's Duties. The Agent shall not have any duties or obligations
except those expressly set forth in this Agreement and the other Loan Documents.
Without limiting the generality of the foregoing, (a) the Agent shall not be
subject to any fiduciary or other implied duties, regardless of whether an Event
of Default has occurred and is continuing, (b) the Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by this Agreement and the
other Loan Documents, and (c) except as expressly set forth herein and in the
other Loan Documents, the Agent shall not have any duty to disclose, nor shall
be liable for the failure to disclose, any information relating to the Company
or any of its subsidiaries that is communicated to or obtained by the Agent or
any of its affiliates in any capacity. The Agent shall be not liable for any
action taken or not taken by it with the consent or at the request of the
Purchasers, or in the absence of its own gross negligence or willful misconduct.
The Agent shall not be deemed to have knowledge of any Event of Default unless
and until written notice thereof is given to the Agent by the Company or a
Purchaser, and the Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in,
or in
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connection with, this Agreement or the other Loan Documents, (ii) the contents
of any certificate, report or other document delivered hereunder or under any of
the other Loan Documents or in connection herewith of therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, the other Loan
Documents or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article 5 or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Agent. The Agent shall not, except to the extent the Agent expressly instructed
by the Purchasers with respect to the Collateral hereunder, be required to
initiate or conduct any litigation or collection proceedings hereunder or under
any other Loan Document; provided, however, that the Agent shall not be required
to take any action which exposes the Agent to personal liability or which is
contrary to the Loan Documents or applicable law.
10.4 Reliance by Agent. The Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper person. The
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper person, and shall not incur any
liability for relying thereon. The Agent may consult with legal counsel (who may
be counsel for the Company), independent accountants and other experts selected
by it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Purchasers as it deems appropriate or it shall
first be indemnified to its satisfaction by the Purchasers against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action (it being understood that this provision
shall not release the Agent from performing any action with respect to the
Company expressly required to be performed by it pursuant to the terms hereof)
under this Agreement. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement and the other Loan Documents
in accordance with a request of the Purchasers, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the
Purchasers and all future holders of the Notes.
10.5 Purchasers' Independent Decisions. Each Purchaser acknowledges that
it has, independently and without reliance upon the Agent or any other Purchaser
and based on such documents and information as it has deemed appropriate, made
its own decision to enter into this Agreement. Each Purchaser also acknowledges
that it will, independently and without reliance upon the Agent or any other
Purchaser and based on such documents and information as it shall from time to
time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement and the other Loan Documents,
any related agreement or any document furnished hereunder or thereunder. Except
as explicitly provided herein, the Agent has no duty or responsibility, either
initially or on a continuing basis, to provide any Purchaser with any
information with respect to such operations, business, property, condition or
creditworthiness, whether such information comes into its possession on or
before the first Event of Default or at any time thereafter. The Agent shall not
be deemed a trustee or other fiduciary on behalf of any party.
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10.6 Indemnification. Each Purchaser agrees to indemnify and hold
harmless the Agent (to the extent not reimbursed under Section 12.9, but without
limiting the obligations of the Obligors under Section 12.9) ratably in
accordance with the aggregate principal amount of the respective Notes held by
the Purchasers for any and all liabilities (including pursuant to any
environmental law), obligations, losses, damages, penalties, actions, judgments,
deficiencies, suits, costs, expenses (including reasonable attorney's fees) or
disbursements of any kind and nature whatsoever that may be imposed on, incurred
by or asserted against the Agent (including by any Purchaser) arising out of or
by reason of any investigation in or in any way relating to or arising out of
any Loan Document or any other documents contemplated by or referred to therein
for any action taken or omitted to be taken by the Agent under or in respect of
any of the Loan Documents or other such documents or the transactions
contemplated thereby (including the costs and expenses that the Obligors are
obligated to pay under Section 12.9, but excluding, unless an Event of Default
has occurred and is continuing, normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or of any such other documents; provided,
however, that no Purchaser shall be liable for any of the foregoing to the
extent they are determined by a court of competent jurisdiction in a final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of the party to be indemnified. The agreements set forth in this
Section 10.6 shall survive the payment of all Notes and other obligations
hereunder and shall be in addition to and not in lieu of any other
indemnification agreements contained in any other Loan Document.
ARTICLE XI
AMENDMENTS AND WAIVERS
The Company and the holders of the Notes may amend, supplement or waive
any provision of this Agreement and the Notes with the written consent of the
holders of Notes of at least seventy-five (75%) percent in aggregate principal
amount of the Notes then outstanding. Notwithstanding the foregoing, without the
consent of each holder of the Notes affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder of Notes):
(a) reduce the aggregate principal amount of the Notes held by any
holder;
(b) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes;
(c) reduce the rate of or change the time for payment of interest on any
Note or reduce the amount or change the payment terms of the Commitment Fee;
(d) waive an Event of Default in the payment of principal of or premium,
if any, or interest on the Notes (except a rescission of acceleration of the
Notes by the holders of at least seventy-five percent (75%) in aggregate
principal amount of the then outstanding Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that stated herein or in
the Notes;
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(f) make any change in the provisions of this Agreement relating to
waivers of past Events of Default or the rights of holders of Notes to receive
payments of principal of or interest on the Notes;
(g) waive a payment of a premium or mandatory redemption with respect to
any Note; or
(h) make any change in the foregoing amendment and waiver provisions.
ARTICLE XII
GUARANTEE
12.1 The Guarantee. Subject to the terms of the Subordination Agreement
referred to in Section 2.10, each Guarantor hereby jointly and severally
guarantees to each Purchaser and the Agent and their respective successors and
assigns the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the principal of and interest on the Notes and all
other amounts from time to time owing to the Purchasers or the Agent by the
Company hereunder or under any other Loan Document, in each case strictly in
accordance with the terms thereof (such obligations being herein collectively
called the "Guaranteed Obligations"). Each Guarantor hereby further agrees that
if the Company shall fail to pay in full when due (whether at stated maturity,
by acceleration or otherwise) any of the Guaranteed Obligations, each Guarantor
will promptly pay the same, without any demand or notice whatsoever, and that in
the case of any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the terms of
such extension or renewal.
12.2 Obligations Unconditional. Subject to the terms of the
Subordination Agreement referred to in Section 2.10, the obligations of each
Guarantor under Section 12.1 are absolute and unconditional irrespective of the
value, genuineness, validity, regularity or enforceability of this Agreement,
the other Loan Documents or any other agreement or instrument referred to herein
or therein, or any substitution, release or exchange of any other guarantee of
or security for any of the Guaranteed Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 12.2 that the
obligations of the Guarantors hereunder shall be absolute and unconditional
under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of the Guarantors hereunder which shall
remain absolute and unconditional as described above:
(a) at any time or from time to time, without notice to such Guarantors,
the time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;
(b) any of the acts mentioned in any of the provisions hereof or of the
other Loan Documents or any other agreement or instrument referred to herein or
therein shall be done or omitted;
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(c) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right hereunder or under the
other Loan Documents or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in whole or
in part or otherwise dealt with; or
(d) any lien or security interest granted to, or in favor of, the Agent
or any Purchaser or Purchasers as security for any of the Guaranteed Obligations
shall fail to be perfected.
The Guarantors hereby expressly waive diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that the Agent
or any Purchaser exhaust any right, power or remedy or proceed against the
Company hereunder or under the other Loan Documents or any other agreement or
instrument referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.
12.3 Reinstatement. The obligations of each Guarantor under this Article
12 shall be automatically reinstated if and to the extent that for any reason
any payment by or on behalf of the Company in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise, and each of the Guarantors agrees that it will
indemnify the Agent and each Purchaser on demand for all reasonable costs and
expenses (including fees and expenses of counsel) incurred by the Agent or any
Purchaser in connection with such rescission or restoration, including any such
costs and expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law.
12.4 Subrogation. Until such time as the Guaranteed Obligations shall
have been indefensibly paid in full, each Guarantor hereby waives all rights of
subrogation or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Federal
Bankruptcy Code of 1978, as amended) or otherwise by reason of any payment by it
pursuant to the provisions of this Article 12 and further agrees with the
Company for the benefit of each of its creditors (including, without limitation,
each Purchaser and the Agent) that any such payment by it shall constitute a
contribution of capital by such Guarantor to the Company.
12.5 Remedies. Each Guarantor agrees that, as between such Guarantor and
the Purchasers, the obligations of the Company hereunder may be declared to be
forthwith due and payable as provided in Section 8, Section 2.5 or Section 2.7,
as applicable (and shall be deemed to have become automatically due and payable
in the circumstances provided in Section 8.1, Section 2.5 or Section 2.7, as
applicable) for purposes of Section 12.1 notwithstanding any stay, injunction or
other prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Company and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by the
Company) shall forthwith become due and payable by such Guarantor for purposes
of Section 12.1.
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12.6 Instrument for the Payment of Money. Each Guarantor hereby
acknowledges that the guarantee in this Article 12 constitutes an instrument for
the payment of money, and consents and agrees that any Purchaser or the Agent,
at its sole option, in the event of a dispute by the Guarantors in the payment
of any moneys due hereunder, shall have the right to summary judgment or such
other expedited procedure as may be available for a suit on a note or other
instrument for the payment of money.
12.7 Continuing Guarantee. The guarantee in this Article 12 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
12.8 Rights of Contribution. The Guarantors hereby agree, as between
themselves, that if any Guarantor shall become an Excess Funding Guarantor (as
defined below) by reason of the payment by such Guarantor of any Guaranteed
Obligations, each other Guarantor shall, on demand of such Excess Funding
Guarantor (but subject to the next sentence), pay to such Excess Funding
Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below
and determined, for this purpose, without reference to the properties, debts and
liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined
below) in respect of such Guaranteed Obligations. The payment obligation of a
Guarantor to any Excess Funding Guarantor under this Section 12.8 shall be
subordinate and subject in right of payment to the prior payment in full of the
obligations of such Guarantor under the other provisions of this Article 12 and
such Excess Funding Guarantor shall not exercise any right or remedy with
respect to such excess until payment and satisfaction in full of all of such
obligations.
For purposes of this Section 12.8, (i) "Excess Funding Guarantor" means,
in respect of any Guaranteed Obligations, a Guarantor that has paid an amount in
excess of its Pro Rata Share of such Guaranteed Obligations, (ii) "Excess
Payment" means, in respect of any Guaranteed Obligations, the amount paid by an
Excess Funding Guarantor in excess of its Pro Rata Share of such Guaranteed
Obligations and (iii) "Pro Rata Share" means, for any Guarantor, the ratio
(expressed as a percentage) of (x) the amount by which the aggregate present
fair saleable value of all properties of such Guarantor (excluding any shares of
stock of, or ownership interest in, any other Guarantor) exceeds the amount of
all the debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of such Guarantor hereunder and any obligations of any other
Guarantor that have been Guaranteed by such Guarantor) to (y) the amount by
which the aggregate fair saleable value of all properties of all of the Obligors
exceeds the amount of all the debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of the Company and the Guarantors hereunder and under the other Loan
Documents) of all of the Obligors, determined as of the closing date.
12.9 General Limitation on Guarantee Obligations. In any action or
proceeding involving any state or non-U.S. corporate law, or any state or
Federal or non-U.S. bankruptcy, insolvency, reorganization or other law
affecting the rights of creditors generally, if the obligations of any Guarantor
under Section 12.1 would otherwise, taking into account the provisions of
Section 12.8, be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under Section 12.1, then, notwithstanding any other provision
hereof to the contrary, the amount of such liability shall, without any further
action by such Guarantor, any Purchaser, the Agent or other Person, be
automatically limited and reduced to the highest amount that is valid and
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enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.
ARTICLE XIII
MISCELLANEOUS
13.1 Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered on a business day after
during normal business hours where such notice is to be received); or (b) on the
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to any Obligor: Sheldahl, Inc.
1150 Sheldahl Road
Northfield, MN 55057-9444
Attn: Donald R. Friedman
Fax: (507) 663-8326 or
(507) 663-8435
With copies to: Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis MN 55402
Attn: Charles P. Moorse, Esq.
Fax: (612) 371-3207
If to a Purchaser: To the address set forth on Schedule II attached
hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
13.2 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
13.3 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Neither any Obligor nor any Purchaser may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding anything to the contrary contained herein, each Purchaser may
assign its rights hereunder in connection with any sale or transfer of such
Purchaser's Securities to any "Affiliate" or "Associate" (as such terms are
defined in Rule 12b-2 under the Exchange Act) of such Purchaser as long as the
transferee Affiliate or Associate agrees in writing to be bound by the
applicable provisions of this Agreement, in which case the term
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"Purchaser" shall be deemed to refer to such transferee as though such
transferee were an original signatory hereto.
13.4 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
13.5 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of The Commonwealth of
Massachusetts without regard to the principles of conflicts of law thereof.
13.6 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become binding with respect to each Purchaser on the
date the acceptance form hereto is executed by such Purchaser and with respect
to each Obligor on the date executed by such Obligor, it being understood that
both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
13.7 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
13.8 Survival of Representations and Warranties. The representations and
warranties made in this Agreement, or in any instrument delivered pursuant to
this Agreement shall survive indefinitely. All covenants and agreements shall
survive in accordance with their respective terms.
13.9 Indemnity; Expenses.
(a) The Obligors jointly and severally agree to pay, or reimburse the
Agent or the Purchasers, as applicable, for paying, (i) all reasonable
out-of-pocket expenses incurred by the Agent and the Purchasers and their
respective affiliates, including the reasonable fees, charges and disbursements
of its legal counsel, in connection with the preparation of this Agreement and
the other Loan Documents or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all out-of-pocket expenses
incurred by the Agent, or any Purchaser, including the fees, charges and
disbursements of any counsel for the Agent or any Purchaser, in connection with
the enforcement or protection of its rights in connection with this Agreement
and the other Loan Documents, including its rights under this Section 13.9, or
in connection with the Notes, including in connection with any workout,
restructuring or negotiations in respect thereof, and (iii) all taxes levied by
any governmental authority in respect of this Agreement or any of the other Loan
Documents or any other document referred to herein or therein and all costs,
expenses, taxes, assessments and other charges incurred in connection with any
filing,
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registration, recording or perfection of any security interest contemplated by
any Loan Document or any other document referred to therein.
(b) The Obligors jointly and severally agree to indemnify the Agent and
each Purchaser and each of their respective affiliates (each such Person being
called an "Indemnitee") against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including the
fees, charges and disbursements of any counsel for any Indemnitee and settlement
costs, incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement, the other Loan Documents or any agreement or instrument contemplated
hereby, the performance by the parties hereto and thereto of their respective
obligations hereunder or thereunder or the consummation of the transactions
contemplated hereby or any other transactions contemplated hereby or thereby,
(ii) any Note or the use of the proceeds therefrom, (iii) any actual or alleged
presence or release of hazardous materials on or from any property owned, leased
or operated by any Obligor or any of its subsidiaries, or any environmental
liability related in any way to any Obligor or any of its Subsidiaries, or (iv)
any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory and regardless of whether any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee. In connection with any such claim, litigation, investigation or
proceeding involving claims brought by any party other than the Obligors, the
Agent and each Purchaser shall give any Obligor subject to such claim the
opportunity to participate in the defense against such claim and shall not
settle any such claim, litigation, investigation or proceeding without the
written consent of such Obligor.
(c) To the extent that the Obligors fail to pay any amount required to
be paid by them to the Agent under paragraph (a) or (b) of this Section 13.9,
each Purchaser severally agrees to pay to the Agent such unpaid amount in
accordance with such Purchaser's respective commitment as set forth on Schedule
II hereto; provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against the Agent in its capacity as such.
(d) To the extent permitted by applicable law, each Obligor shall not
assert, and each Obligor hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, the other Loan Documents or any agreement or
instrument contemplated hereby or thereby, the transactions contemplated hereby,
any Note or the use of the proceeds thereof.
(e) All amounts due under this Section 13.9 shall be payable promptly
after written demand therefor, provided that all fees and expenses (including
reasonable attorneys' fees) referred to in Section 13.9(a)(i) incurred in
connection with the negotiation and preparation of this Agreement and the other
Loan Documents shall be paid on the Closing Date.
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IN WITNESS WHEREOF, each Obligor and the Agent have caused this
Agreement to be duly executed by its authorized representative and each
Purchaser has caused this Agreement to be executed by signing in counterpart the
acceptance form attached to this Agreement.
OBLIGORS:
COMPANY:
SHELDAHL, INC.
By: /s/ Donald R. Friedman
--------------------------------------
Name: Donald R. Friedman
Title: President and Chief Executive
Officer
GUARANTORS:
INTERNATIONAL FLEX HOLDINGS, INC.
By: /s/ John D. Lutsi
--------------------------------------
Name: John D. Lutsi
Title: President
INTERNATIONAL FLEX TECHNOLOGIES, INC.
By: /s/ Donald R. Friedman
--------------------------------------
Name: Donald R. Friedman
Title: Chief Executive Officer
AGENT:
AMPERSAND IV LIMITED PARTNERSHIP,
as Agent for the Purchasers
By: AMP-IV MANAGEMENT COMPANY
LIMITED LIABILITY COMPANY,
Its general partner
By: /s/ Stuart A. Auerbach
---------------------------------------
Name: Stuart A. Auerbach
Title: Managing Member
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ACCEPTANCE
The undersigned hereby accepts the terms and conditions set forth in the
Subordinated Secured Notes Purchase Agreement, dated May 23, 2001, among
Sheldahl, Inc., a Minnesota corporation (the "Company"), the wholly-owned
subsidiaries of the Company listed on Schedule I attached thereto, as guarantors
(the "Guarantors" and, together with the Company, the "Obligors"), certain
Purchasers listed in Schedule II attached thereto, and Ampersand IV Limited
Partnership, as agent for the Purchasers (the "Agent"), as the terms and
conditions applicable to the purchase of Note of the Company by the undersigned.
By execution of this Acceptance, the undersigned hereby makes each of the
representations contained in Section 3.2 of the Subordinated Secured Notes
Purchase Agreement.
PURCHASER:
MORGENTHALER VENTURE PARTNERS V, L.P.
By: /s/ John D. Lutsi
--------------------------------------
Name: John D. Lutsi
Title: General Partner
42
ACCEPTANCE
The undersigned hereby accepts the terms and conditions set forth in the
Subordinated Secured Notes Purchase Agreement, dated May 23, 2001, among
Sheldahl, Inc., a Minnesota corporation (the "Company"), the wholly-owned
subsidiaries of the Company listed on Schedule I attached thereto, as guarantors
(the "Guarantors" and, together with the Company, the "Obligors"), certain
Purchasers listed in Schedule II attached thereto, and Ampersand IV Limited
Partnership, as agent for the Purchasers (the "Agent"), as the terms and
conditions applicable to the purchase of Note of the Company by the undersigned.
By execution of this Acceptance, the undersigned hereby makes each of the
representations contained in Section 3.2 of the Subordinated Secured Notes
Purchase Agreement.
PURCHASER:
AMPERSAND IV LIMITED PARTNERSHIP
By: AMP-IV MANAGEMENT COMPANY
LIMITED LIABILITY COMPANY,
Its general partner
By: /s/ Stuart A. Auerbach
--------------------------------------
Name: Stuart A. Auerbach
Title: Managing Member
43
ACCEPTANCE
The undersigned hereby accepts the terms and conditions set forth in the
Subordinated Secured Notes Purchase Agreement, dated May 23, 2001, among
Sheldahl, Inc., a Minnesota corporation (the "Company"), the wholly-owned
subsidiaries of the Company listed on Schedule I attached thereto, as guarantors
(the "Guarantors" and, together with the Company, the "Obligors"), certain
Purchasers listed in Schedule II attached thereto, and Ampersand IV Limited
Partnership, as agent for the Purchasers (the "Agent"), as the terms and
conditions applicable to the purchase of Note of the Company by the undersigned.
By execution of this Acceptance, the undersigned hereby makes each of the
representations contained in Section 3.2 of the Subordinated Secured Notes
Purchase Agreement.
PURCHASER:
MOLEX INCORPORATED
By: /s/ Robert Mahoney
-------------------------------------
Name: Robert Mahoney
Title: Vice President,
Chief Financial Officer
44
SCHEDULE I
GUARANTORS
- ------------------------------------------------- -----------------------------------------------
NAME OF GUARANTOR JURISDICTION OF ORGANIZATION
- ------------------------------------------------- -----------------------------------------------
International Flex Holdings, Inc. Delaware
- ------------------------------------------------- -----------------------------------------------
International Flex Technologies, Inc. Delaware
- ------------------------------------------------- -----------------------------------------------
45
SCHEDULE II
SCHEDULE OF PURCHASERS
Morgenthaler Ampersand IV Molex Incorporated
Venture Limited 222 Wellington Court
Partners V, Partnership Lisle, IL 60532
L.P. 55 William Street
Terminal Tower Suite 240
50 Public Square Wellesley, MA
Suite 2700 02481
Cleveland, OH
44113
PRINCIPAL AMOUNT
OF NOTES PURCHASED
AT CLOSING $3,000,000 $1,000,000 $1,000,000
CLOSING PURCHASE
PRICE $3,000,000 $1,000,000 $1,000,000
STATE OF RESIDENCE OH MA IL