EXHIBIT 4.1
SUBORDINATED NOTES AND WARRANT PURCHASE AGREEMENT
This Subordinated Notes and Warrant Purchase Agreement (this
"Agreement"), dated as of October 25, 2001, among Sheldahl, Inc., a Minnesota
corporation (the "Company), the wholly-owned subsidiaries of the Company listed
on Schedule I attached hereto, as guarantors (individually, a "Guarantor," and
collectively and together with any subsidiary of the Company that becomes a
Guarantor pursuant to Section 6.16, the "Guarantors" and the Guarantors 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 Morgenthaler Partners VII, L.P., a Delaware 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 17% Subordinated Notes in an aggregate
principal amount of $7,000,000 (the "Notes"). In consideration for the agreement
of the Purchasers to purchase the Notes, the Company desires to issue to the
Purchasers and the Purchasers desire to acquire from the Company warrants (the
"Warrants") to purchase in the aggregate 3,132,096 shares of common stock, par
value $.25 per share, of the Company, all subject to the terms and conditions of
this Agreement.
Accordingly, the Company and the Purchasers agree as follows:
ARTICLE I
ISSUANCE OF THE NOTES AND THE WARRANTS
1.1 Authorization of Issuance.
(a) The Company has authorized the issuance and sale of the
Notes in the aggregate original principal amount of Seven Million and No/100
Dollars ($7,000,000), such Notes to be substantially in the form of Exhibit A
attached hereto.
(b) The Company has authorized the issuance and sale of
Warrants to purchase an aggregate of 3,132,096 shares of Common Stock, such
Warrants to be in the form of Exhibit B attached hereto.
(c) Each Purchaser shall be entitled to receive the number of
Warrants set forth opposite its name on Schedule II plus any additional Warrants
to be issued pursuant to Section 1.2.
(d) The Notes and the Warrants are sometimes collectively
referred to herein as the "Securities." As used herein, the term "Warrant"
refers to a warrant to purchase one share of Common Stock (or such other number
of shares of Common Stock as a result of any
adjustments made pursuant to the anti-dilution provisions of the Warrants) and a
designated number of Warrants refers to warrants to purchase the same number of
shares of Common Stock (or such other number of shares of Common Stock as a
result of any adjustments made pursuant to the anti-dilution provisions of the
Warrants).
1.2 Additional Warrants. On each anniversary date of the Closing Date
if any portion of the principal amount of the Notes remains outstanding, the
Company shall issue and deliver a Warrant to each Purchaser representing its pro
rata share (based on the initial principal amount of the Notes purchased by the
Purchaser under this Agreement) of 261,010 shares of Common Stock, such Warrants
to be in the form of Exhibit B attached hereto and, when and if issued, deemed
to be "Warrants" hereunder. In no event shall the Company be obligated to issue
additional Warrants hereunder to the extent such additional issuances would
require the Company to obtain shareholder approval thereof pursuant to Rule
4350(i) (or similar or replacement provision) under the rules of the Nasdaq
Stock Market.
1.3 Purchase Commitments. Each Purchaser agrees to purchase in
accordance with and subject to the terms and conditions hereof Notes in the
aggregate principal amount set forth below such Purchaser's Name on Schedule II
and a corresponding number of Warrants as set forth on Schedule II and
determined in accordance with Section 1.1(c) hereof.
1.4 The Closing.
(a) The closing of the purchase and sale of the Notes and
Warrants (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, (B) the number of Warrants set forth below the
name of such purchaser on Schedule II attached hereto, dated
the Closing Date and duly executed by the Company, and (C) all
other documents, instruments and writings required to have
been delivered at or prior to the Closing by the Company 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.
(c) The Purchasers' obligation to purchase Securities
hereunder shall be several, not joint, but it shall be a condition to each
Purchasers' obligation to purchase Securities hereunder that all Securities to
be purchased hereunder are purchased simultaneously.
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1.5 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 $140,000 (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.
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 17% per annum as provided in
the Note. Interest shall be computed on the basis of a 360-day year of twelve
(12) months.
(b) Notwithstanding any provision to the contrary contained in
this Agreement or any Loan Document, the Company shall not be required to pay,
and the Purchasers shall not be permitted to contract for, take, reserve, charge
or receive, any compensation that constitutes interest under applicable law in
excess of the maximum amount of interest permitted by law ("Excess Interest").
If any Excess Interest is provided for or determined in a final, non-appealable
judgment by a court of competent jurisdiction or otherwise contracted for,
taken, reserved, charged or received, then in such event: (a) the provisions of
this Section 2.1(b) shall govern and control; (b) the Company shall not be
obligated to pay any Excess Interest; (c) any Excess Interest that any Purchaser
may have contracted for, taken, reserved, charged or received hereunder shall
be, at that Purchaser's option, (i) applied as a credit against the outstanding
principal balance of the Notes held by that Purchaser or accrued and unpaid
interest (not to exceed the maximum amount permitted by law), (ii) refunded to
the payor thereof, or (iii) any combination of the foregoing; (d) the interest
provided for shall be automatically reduced to the maximum lawful rate allowed
from time to time under applicable law (the "Maximum Rate"), and the Loan
Documents shall be deemed to have been, and shall be, reformed and modified to
reflect such reduction; and (e) the Company shall have no action against the
Purchaser for any damages arising due to any Excess Interest. Notwithstanding
the foregoing, if for any period of time interest on any of the Notes is
calculated at the Maximum Rate rather than the applicable rate under this
Agreement, and thereafter such applicable rate becomes less than the Maximum
Rate, the rate of interest payable on that Note shall remain at the Maximum Rate
until the holder of that Note shall have received the amount of interest that
such holder would have received during such period with respect to that Note had
the rate of interest not been limited to the Maximum Rate during such period.
All sums paid or agreed to be paid under the Loan Documents for the use,
forbearance or detention of sums due shall, to the extent permitted by
applicable law, be amortized, pro-rated, allocated and spread throughout the
full term of the Notes until payment in full so that the rate or amounts of
interest on account of the Notes does not exceed the Maximum Rate. The terms of
this Section 2.1(b) shall be deemed incorporated into each of the Loan Documents
and any other document or instrument between the Company and the Purchasers or
directed to the Company by the Purchasers, whether or not specific reference to
this Section 2.1(b) is made.
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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 20% per annum, subject to Section 2.1(b).
2.3 Payments.
(a) Subject to the provisions for redemption 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 on the
fifth anniversary of the Closing Date or earlier in accordance with the terms
hereof if permitted pursuant to the terms of the Credit Agreement (as defined
herein) and the Subordination Agreement (as defined in Section 2.10) (such date
being referred to herein as the "Maturity Date"). As used in this Agreement, the
term "Credit Agreement" shall mean the Credit and Security Agreement, dated as
of June 19, 1998, by and among the Company, the lenders party thereto, and Wells
Fargo Bank, National Association f/k/a Norwest Bank Minnesota, National
Association, as amended or restated from time to time (with such lenders under
the Credit Agreement being referred to as "Senior Lenders") (the debt financing
to the Company of the Senior Lenders being called the "Senior Debt").
(b) 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 the Company 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.
(a) Upon notice given as provided in Section 2.6 below and
subject to Section 2.4(c), the Company, at its option, but subject to the terms
of Senior Debt 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.
(b) Each prepayment under this Section 2.4 shall be applied
first to accrued interest on the principal amount prepaid, second to
installments of principal in the inverse order of their maturities, and third to
any expenses and/or damages to which the Purchasers may be entitled. The amount
of any such prepayment may not be reborrowed by the Company. The
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Company shall have no right to prepay the Notes except as provided in this
Section 2.4 or in Section 2.5 or Section 2.7.
(c) If the Company elects to prepay any of its obligations, it
shall prepay its obligations, in the following order of priority, under: (v) the
Senior Debt, (w) the May Debt Agreement, (x) the Notes, (y) the August Debt
Agreement, and (z) the December Debt Agreement
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; provided, however, that the Company shall first apply such cash
proceeds to repay the Company's obligations, in the following order of priority,
under: (v) the Senior Debt, (w) the May Debt Agreement, (x) the Notes, (y) the
August Debt Agreement, and (z) the December Debt Agreement, as provided in this
Section 2.5(a); provided, further, that the Company shall have no obligation to
apply to such redemption of Notes hereunder or under the May Debt Agreement,
August Debt Agreement or December Debt Agreement 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) "December Debt Agreement" shall mean the indebtedness and
other obligations of the Company pursuant to that certain Subordinated Notes and
Warrant Purchase Agreement dated as of November 10, 2000 by and among the
Company and the Purchasers party thereto, as amended by the Amended and Restated
Subordinated Note and Warrant Purchase Agreement dated December 29, 2000, as
amended from time to time and related documents, including, without limitation,
the warrants issued pursuant thereto. "May Debt Agreement" shall mean the
indebtedness and other obligations of the Company pursuant to that certain
Subordinated Secured Notes Purchase Agreement dated as of May 23, 2001 by and
among the Company and the Purchasers party thereto and related documents.
"August Debt Agreement" shall mean the indebtedness and other obligations of the
Company pursuant to that certain Subordinated Notes and Warrant Purchase
Agreement dated as of August 13, 2001 by and among the Company and the
Purchasers party thereto and related documents, including, without limitation,
the warrants issued pursuant thereto.
(c) 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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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 or
Section 2.5 hereof not less than five (5) business days nor more than twenty
(20) business 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 or Section 2.5 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, shall become due and payable (i) in the case of an event of
redemption under Section 2.5(a)(ii), within ninety (90) days of the redemption
date (ii) in all other cases, 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 Subordination Agreement to require the Company to
purchase all or any portion of such holder's Note(s), at a purchase price equal
to the principal amount of Note(s) to be so purchased plus accrued interest
thereon, 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.
(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 Venture Partners VII, L.P. and its
affiliates, Ampersand IV Limited Partnership and its affiliates, Ampersand IV
Companion Fund Limited Partnership and its affiliates or Molex Incorporated
("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 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.
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(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 Senior Debt is outstanding, 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 Senior Debt or (ii) obtain the requisite consents under the
Senior Debt 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 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.
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2.8 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 Subordinated Notes held by each
holder of Subordinated Notes at the time outstanding upon the same terms and
conditions. Any Subordinated 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 the Senior Lenders pursuant to the terms of a Subordination
Agreement among the Purchasers, the Senior Lenders and the Company substantially
in the form of Exhibit C attached hereto (the "Subordination Agreement");
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 (as defined in Section 7.1) owed to such Senior Lenders. 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.
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 of the subsidiaries of the Company 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 Company 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 Company. The term "subsidiary" or "subsidiaries" means, with respect to
the Company, any person, corporation, partnership, joint venture or other legal
entity of which the Company (either alone or through or together with any other
subsidiary), owns, directly or indirectly, stock or other equity interests the
holders of which
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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 Company has the requisite corporate
power and authority to enter into and perform its obligations hereunder and
under the other Loan Documents (as hereinafter defined). The execution, delivery
and performance by the Company of each Loan Document has been duly authorized by
all requisite corporate action by the Company, and each of the Loan Documents
constitutes a valid and binding obligation of the Company, 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, the Security Agreement (as defined in
Section 5.1(j)), each of the Notes, and each of the Warrants and each of the
other instruments, documents or certificates delivered in connection herewith.
(c) Conflicts. Except as provided in Schedule 3.1(c), the
execution and delivery of each of the Loan Documents by the Company, the
consummation of the transactions contemplated thereby and the compliance with
the provisions thereof by the Company and the issuance, sale and delivery of the
Notes and Warrants 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 the Company; 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 certificate of incorporation or by-laws of the
Company, or under any note, indenture, mortgage, lease,
purchase or sales order or other material contract, agreement
or instrument to which the Company 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 (as defined in
Section 7.2) upon any of the properties or assets of the
Company, except as provided in the Security Agreement.
(d) Securities Laws Compliance. Other than pursuant to the
August Debt Agreement, 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 (as defined herein) 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. For purposes of this Agreement, "Person" means
any individual, sole proprietorship, corporation, business trust, unincorporated
organization, association, company, partnership, joint
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venture, governmental authority (whether a national, federal, state, county,
municipality or otherwise, and shall include without limitation any
instrumentality, division, agency, body or department thereof), or other entity.
(e) No Consent or Approval Required. Except as provided herein
or on Schedule 3.1(e) and except for the filing of any notice subsequent to the
date hereof that may be required under applicable federal or state securities
laws, including filings with the Nasdaq Stock Market (which, if required, shall
be filed on a timely basis as may be so required), 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 Company of this Agreement or for the valid authorization,
issuance, sale and delivery by the Company of the Notes or the Warrants, or the
carrying out by the Company of the transactions contemplated hereby which has
not been obtained.
(f) No Default or Violation. Except as provided in Schedule
3.1(f), neither the Company 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 Company and its 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 Company and its respective subsidiaries, the non-compliance with which would
have a Material Adverse Effect on the Company and no notice, charge, claim,
action or assertion has been received by the Company or any of its subsidiaries
or has been filed, commenced or, to the Company's knowledge, threatened against
the Company 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 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 Company is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stocks. The Company has
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 the Security
Agreement are effective to create in favor of the Agent for the ratable benefit
of the Purchasers a legal, valid and
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enforceable security interest in all right, title and interest of the Company in
and to the Collateral (as defined in the Security Agreement) 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) Subsidiaries and Capitalization. Except for the Guarantors
and as set forth on Schedule 3.1(l), the Company has no subsidiaries. All the
issued and outstanding shares of capital stock of the Company and of each
Guarantor are duly authorized, validly issued, fully paid and nonassessable. The
capitalization of the Company and of each Guarantor on the Closing Date is set
forth on Schedule 3.1(l). No violation of any preemptive rights of shareholders
of the Company has occurred by virtue of the transactions contemplated under
this Agreement or any other Loan Document. There are no outstanding contracts,
options, warrants, instruments, documents or agreements binding upon any Obligor
granting to any Person or group of Persons any right to purchase or acquire
shares of any Obligor's capital stock, except pursuant to the Warrant and as
described on Schedule 3.1(l).
(m) Disclosure. The representations, warranties and other
statements of the Company contained in this Agreement and the other certificates
furnished to the Purchasers by the Company 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 Company, 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.
(n) Knowledge. Whenever a representation or warranty made by
the Company refers to the best of the knowledge of the Company or its
subsidiaries, such knowledge shall be deemed to consist only of the actual
knowledge of the executive officers of the Company 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:
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(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 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
Securities 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 Securities, 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
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(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.
(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 December Debt Agreement, the Merger Agreement (as
defined in the December Debt Agreement), the May Debt Agreement, the August Debt
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 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,
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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.
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 OCTOBER 25, 2001.
(c) Each Purchaser agrees to the imprinting, so long as is
required, of the following legends on the Warrants:
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.
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, but not for the repayment of indebtedness to any Senior Lender.
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.
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4.5 Waivers. Notwithstanding any terms to the contrary set forth in
this Agreement, the December Debt Agreement, August Debt Agreement or the May
Debt Agreement, the Purchasers hereby consent to the transactions contemplated
by this Agreement and consent and agree that neither this Agreement, nor any of
the transactions contemplated herein, including, but not limited to those
actions permitted by Section 7.8 of this Agreement and the creation of any
Permitted Lien, will constitute a default of or entitle any of the Purchasers to
accelerate any payment under the December Debt Agreement, August Debt Agreement
or the May Debt Agreement or any document or instrument entered into in
connection herewith. Molex further consents and agrees, with respect to
issuances of Securities under this Agreement, to waive any preemptive rights or
any right to notice of preemptive rights it may have pursuant to that certain
Amended and Restated Agreement Relating to Sheldahl dated as of November 10,
2000 by and between the Company and Molex.
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 Company's Representations and Warranties.
The representations and warranties of the Company contained herein shall be true
and correct, in all material respects, as of the date hereof.
(b) Performance by the Company. The Company 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 Company 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 Company and its subsidiaries, taken as
a whole, or (ii) prevent or materially delay the ability of the Company 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) Required Approvals. The Company shall have obtained the
consent or approval of the Senior Lenders under the Credit Agreement in
connection with the execution, delivery and performance of this Agreement and
the Notes.
(f) Delivery of Notes and Warrants. The Company shall have
delivered to such Purchaser or such Purchaser's designee duly executed Notes and
Warrants 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.
(g) Secretary's Certificate and Other Documents. The
Purchasers shall have received from the Company on the Closing Date (i) a copy
of the Company'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 Company in such jurisdiction as of no
more than five (5) days prior to the Closing Date, (ii) a certificate of an
officer of the Company dated as of the Closing Date certifying to the Purchasers
that the Purchasers have received (A) a correct and complete copy of the
Company'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 the Company authorizing the execution,
delivery and performance of the Loan Documents, the sale of the Notes and
Warrants hereunder, and the other transactions contemplated hereby and thereby,
as applicable, and (C) as to the incumbency and specimen signature of each
officer of the Company 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.
(h) 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.
(i) 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 C attached hereto.
(j) Security Agreement. The Obligors and the Agent shall have
executed a Security Agreement in the form attached hereto as Exhibit D hereto
(the "Security Agreement").
(k) Expenses. All fees and expenses (including reasonable
attorneys' fees) incurred by the Agent and the Purchasers in connection with the
negotiation, preparation, filing 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.
(l) 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 E attached hereto.
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(m) Factoring and Security Commitment. The Company and
Greenfield Commercial Credit L.L.C. shall have entered into a factoring and
security commitment on terms and conditions satisfactory to the Purchasers.
(n) Amendment to the Credit Agreement. The Company and the
Senior Lenders shall have entered into an amendment to the Credit Agreement on
terms and conditions satisfactory to the Purchasers.
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:
6.1 Payment of Principal, Premium, Interest, Fees and Expenses. 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
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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 an Obligor shall not be
required to so perform its obligations under any contract (other than this
Agreement, any other Loan Document and the December Debt Agreement) to the
extent it is reasonably contesting such obligations in good faith and in an
appropriate manner and, if required by GAAP (as defined herein), it has made
appropriate reserves and accruals with respect thereto. For purposes of this
Agreement, "GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question.
6.5 Access to Properties and Inspections. Each Obligor shall maintain
financial records in accordance with accounting practices and controls
sufficient to allow that Obligor 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 Company 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.
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
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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, any subsidiary of any
Obligor or any Obligor's properties;
(b) the filing or commencement of any action, suit or
proceeding against or affecting any Obligor, any subsidiary of any Obligor or
the properties of any Obligor or its subsidiaries, 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;
(d) any claim, demand or action impairing title to any of the
properties or assets of any Obligor or any of its subsidiaries;
(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 the Company, 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, 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 Company 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 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
Company and its subsidiaries 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 Company.
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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 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 that 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 Company 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 it becomes
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 the Company's 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.
6.16 Certain Obligations Respecting Guarantors. The Company will, and
will cause each Guarantor to, take such action from time to time as shall be
necessary to ensure that the Company, directly or indirectly, owns all of the
equity securities or other ownership interests of each Guarantor. In the event
that the Company or any Guarantor shall form or acquire any new subsidiary, the
Company or the respective subsidiary will cause such new subsidiary to become a
"Guarantor" hereunder pursuant to a written instrument in form and substance
satisfactory to each Purchaser and to deliver such proof of action, incumbency
of officers, opinions of counsel and other documents as are reasonably requested
by any Purchaser.
ARTICLE VII
NEGATIVE 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
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Agreement remains outstanding, the Obligors shall, except to the extent waived
by the holders of the Required Percent (as defined below), 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, (b) indebtedness under the
December Debt Agreement, (c) indebtedness under the May Debt Agreement, (d)
indebtedness under the August Debt Agreement, (e) indebtedness under capital or
operating leases entered into within the ordinary course of the Company'
business consistent with past practice, (f) indebtedness to the Senior Lenders
in an amount not to exceed $45,000,000 in the aggregate and (g) indebtedness
hereinafter incured in connection with the Permitted Liens under Section 7.2.
For purposes of this Agreement, "Indebtedness" means for any Obligor without
duplication, all obligations, contingent or otherwise, of that Obligor which in
accordance with GAAP should be classified upon the balance sheet of that Obligor
as liabilities for borrowed money, but in any event including: (i) all
indebtedness, whether or not represented by bonds, debentures, notes,
securities, or other evidences of indebtedness, for the repayment of money
borrowed, (ii) all indebtedness representing deferred payment of the purchase
price of property or assets, (iii) all indebtedness under any lease which, in
conformity with GAAP, is required to be capitalized for balance sheet purposes
and leases of property or assets made as a part of any sale and lease-back
transaction if required to be capitalized, (iv) all indebtedness under
guaranties, endorsements, assumptions, or other contractual obligations,
including any letters of credit, or the obligations in respect of, or to
purchase or otherwise acquire, indebtedness of others, (v) all indebtedness
secured by a Lien existing on property owned, subject to such Lien, whether or
not the indebtedness secured thereby shall have been assumed by the owner
thereof, (vi) swaps, hedging or similar agreements, and (vii) all amendments,
renewals, extensions, modifications and refundings of any indebtedness or
obligations referred to in clauses (i) through (vi) above.
7.2 Liens. No Obligor or subsidiary of an Obligor shall incur, create,
assume or suffer or permit to exist any lien, mortgage, security interest, tax
lien, pledge, encumbrance, financing statement, or conditional sale or title
retention agreement, or any other interest in property designed to secure the
repayment of Indebtedness or any other obligation, whether arising by agreement,
operation of law, or otherwise (each of the foregoing, a "Lien") on any of its
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;
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(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 any Obligor
or its subsidiaries or the value of such property for the purpose of the
business of any Obligor or its subsidiaries;
(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 Senior Debt;
(i) Liens existing on the date of the December Debt Agreement
and listed on Part 3.1(m) of the Disclosure Letter (as defined in the December
Debt Agreement) or Liens listed on Schedule 7.2(i); and
(j) Liens securing the notes under the May Debt Agreement.
(k) Liens relating to non-domestic accounts receivable.
7.3 Restricted Payments. No Obligor shall declare or make, or permit
any of its subsidiaries to declare nor make (a) any dividend or other
distribution on any shares of the capital stock of that 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 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 any subsidiary of the Company,
distributions to the Company), or (b) any payment on account of the purchase,
redemption, retirement or acquisition of (i) any shares of capital stock of that
Obligor or its subsidiaries or (ii) any option, warrant or other right to
acquire shares of the capital stock of that 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
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conducted on the date hereof; provided, however, that the Obligors and their
subsidiaries may engage in business or operations that are complementary to the
business and operations of the Company and its 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 not 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 the Company 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 the Company.
7.7 Mergers. No Obligor or any of its subsidiaries 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 wholly-owned
subsidiary of the Company may merge with another wholly-owned subsidiary of the
Company or with the Company (so long as the Company is the surviving
corporation).
7.8 Asset Sales. No Obligor or any of its subsidiaries 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) inventory sold in the ordinary course of business; (ii) equipment
sold or disposed of in the ordinary course of business and (iii) non-domestic
accounts receivables.
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 Company shall prohibit its subsidiaries from
entering into any contract, commitment, understanding, or arrangement by which
the subsidiaries are restricted from making distributions or other payments to
the Company. The Company will not, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement (other than this Agreement,
the Credit Agreement, the December Debt Agreement, the August Debt Agreement
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and the May Debt Agreement) that prohibits, restricts or imposes any condition
upon the ability of the Company 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
December Debt Agreement, the August Debt Agreement and the May Debt Agreement.
7.11 Required Percent. As used in this Agreement, the term "Required
Percent" shall mean no less than sixty-six and two-thirds percent (66-2/3 %) of
the then outstanding principal amount of the Subordinated Notes.
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 (a "Principal Payment Default"). A
Principal Payment Default shall be deemed to have occurred notwithstanding the
fact that the Principal Payment Default results from compliance with or
enforcement of the subordination provisions of the Subordination Agreement; or
(b) the Company shall fail to pay any premium, interest, fee
or other obligation due hereunder or under the Notes when and as the same shall
become due and payable, whether at the due date thereof, by acceleration or
otherwise (an "Interest Payment Default"). An Interest Payment Default shall not
be deemed to have occurred if the Interest Payment Default results from
compliance with or enforcement of the subordination provisions of the
Subordination Agreement; 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 the Company 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 the Company of any other covenant or agreement to be observed or performed
under this Agreement or any other Loan 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
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(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 instrument furnished by or on behalf of the 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 or
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 in accordance with its terms; or
(l) there shall have occurred with respect to the Company a
Change in Control; or
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(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 the
Security Agreement 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 occur a material breach by the Company of its
obligations under the Warrants; or
(p) payment of any amount due under the Notes, except for
accrued interest, is prevented due to compliance with or enforcement of the
subordination provisions of the Subordination Agreement, or any amounts
previously paid to the Purchasers must be repaid or held in trust by the
Purchasers due to compliance with or enforcement of the subordination provisions
contained in the Subordination Agreement; or
(q) there shall have occurred any event which would constitute
a Material Adverse Effect; or
(r) 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; or
(s) any Obligor shall fail to pay when due and after passage
of any applicable notice and cure periods (whether upon acceleration or
otherwise) any Indebtedness;
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 or the
holders of the Required Percent, 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
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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 the Company or any
subsidiary of the Company, all outstanding Notes will ipso facto become due and
payable without further action or notice.
8.2 Conflict with Subordination Agreement. 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.
ARTICLE IX
AGENT
9.1 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.
9.2 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.
9.3 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
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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 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 or 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 V 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 is 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 that exposes
the Agent to personal liability or that is contrary to the Loan Documents or
applicable law.
9.4 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 that 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.
9.5 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,
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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.
9.6 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 attorneys' 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 9.6 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 X
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 the Required Percent. 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;
(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 the Required Percent and a waiver of
the payment default that resulted from such acceleration);
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(e) make any Note payable in money other than that stated
herein or in the Notes;
(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 XI
GUARANTEE
11.1 The Guarantee. Subject to the terms of the Subordination
Agreement, 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 hereof and 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.
11.2 Obligations Unconditional. Subject to the terms of the
Subordination Agreement, the obligations of each Guarantor under Section 11.1
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 11.2 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:
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(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;
(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.
11.3 Reinstatement. The obligations of each Guarantor under this
Article XI 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.
11.4 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 XI 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.
11.5 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
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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 11.1 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 11.1.
11.6 Instrument for the Payment of Money. Each Guarantor hereby
acknowledges that the guarantee in this Article XI 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.
11.7 Continuing Guarantee. The guarantee in this Article XI is a
continuing guarantee, and shall apply to all Guaranteed obligations whenever
arising.
11.8 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 11.8 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 XI 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 11.8, (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
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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.
11.9 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 11.1 would otherwise, taking into account the provisions of
Section 11.8, 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 11.1, 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
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.
ARTICLE XII
MISCELLANEOUS
12.1 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 the Company: Sheldahl, Inc.
1150 Sheldahl Road
Northfield, MN 55057-9444
Attn: Benoit Pouliquen
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.
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or such other address as may be designated in writing hereafter, in the same
manner, by such person.
12.2 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.
12.3 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Neither the Company 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 "Purchaser"
shall be deemed to refer to such transferee as though such transferee were an
original signatory hereto.
12.4 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.
12.5 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Minnesota
without regard to the principles of conflicts of law thereof.
12.6 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 the Company on the date executed by the Company, 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.
12.7 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.
12.8 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.
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12.9 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 12.9, 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, 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 12.9,
each Purchaser severally agrees to pay to the Agent such unpaid amount in
accordance with such Purchaser's respective
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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 12.9 shall be payable promptly
after written demand therefor, provided that all fees and expenses (including
reasonable attorneys' fees) referred to in Section 12.9(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.
(f) Conflict among Agreements. The Company, the Purchasers and
Ampersand IV Companion Fund Limited Partnership agree that notwithstanding any
provision to the contrary in the December Debt Agreement, the May Debt Agreement
or the August Debt Agreement, the priority for payments upon a mandatory or
optional prepayment of the Notes or of any indebtedness or other obligations
arising under those agreements shall be made in the order of priority set forth
in Sections 2.4(c) and 2.5(a) of this Agreement.
12.11 Registration Rights. The Purchasers are hereby granted the
registration rights with respect to any shares issued or issuable upon exercise
of the Warrants (the "Warrant Shares") on the same terms set forth in the
Registration Rights Agreement, dated as of December 28, 2000, among the Company
and the individuals and entities listed on Schedule I to that agreement (the
"Registration Rights Agreement"), mutatis mutandis, provided, however, that the
Company shall be required to file a Shelf Registration Statement (as defined in
the Registration Rights Agreement) only at such time as the Company is eligible
to register for resale the Warrant Shares on Form S-3 (or any successor form)
and, provided further, that the Company shall not be required to file a Shelf
Registration Statement unless and until a Purchaser has made a written request
therefor.
12.12 Entire Agreement. This Agreement, together with the Exhibits and
Schedules attached hereto and the other Loan Documents contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral or written, with
respect to such matters.
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IN WITNESS WHEREOF, each Obligor has 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/ Benoit Y. Pouliquen
--------------------------------------------------
Name: Benoit Y. Pouliquen
Title: President and Chief Executive Officer
GUARANTORS:
INTERNATIONAL FLEX HOLDINGS, INC.
By: /s/ Benoit Y. Pouliquen
--------------------------------------------------
Name: Benoit Y. Pouliquen
Title: President and Chief Executive Officer
INTERNATIONAL FLEX TECHNOLOGIES, INC.
By: /s/ Benoit Y. Pouliquen
--------------------------------------------------
Name: Benoit Y. Pouliquen
Title: President and Chief Executive Officer
AGENT:
MORGENTHALER PARTNERS VII, L.P.,
as Agent for the Purchasers
By: /s/ John D. Lutsi
--------------------------------------------------
Name: John D. Lutsi
Title: General Partner
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ACCEPTANCE
The undersigned hereby accepts the terms and conditions set forth in
the Subordinated Notes and Warrant Purchase Agreement, dated October 25, 2001,
among Sheldahl, Inc., a Minnesota corporation (the "Company"), the wholly-owned
subsidiaries of the Company listed on Schedule I attached thereto, as
guarantors, and certain Purchasers listed in Schedule II attached thereto, and
Morgenthaler Partners VII, L.P., as Agent for the Purchasers, as the terms and
conditions applicable to the purchase of Notes and Warrants 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 Notes
and Warrant Purchase Agreement.
PURCHASER:
MOLEX INCORPORATED
By: /s/ Robert Mahoney
------------------------------------------------
Name: Robert Mahoney
Title: Vice President, Chief Financial Officer
ACCEPTANCE
The undersigned hereby accepts the terms and conditions set forth in
the Subordinated Notes and Warrant Purchase Agreement, dated October 25, 2001,
among Sheldahl, Inc., a Minnesota corporation (the "Company"), the wholly-owned
subsidiaries of the Company listed on Schedule I attached thereto, as
guarantors, and certain Purchasers listed in Schedule II attached thereto, and
Morgenthaler Partners VII, L.P., as Agent for the Purchasers, as the terms and
conditions applicable to the purchase of Notes and Warrants 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 Notes
and Warrant Purchase Agreement.
PURCHASER:
MORGENTHALER VENTURE PARTNERS VII, L.P.
By: /s/ John D. Lutsi
------------------------------------------------
Name: John D. Lutsi
Title: General Partner
ACCEPTANCE
The undersigned hereby accepts the terms and conditions set forth in
the Subordinated Notes and Warrant Purchase Agreement, dated October 25, 2001,
among Sheldahl, Inc., a Minnesota corporation (the "Company"), the wholly-owned
subsidiaries of the Company listed on Schedule I attached thereto, as
guarantors, and certain Purchasers listed in Schedule II attached thereto, and
Morgenthaler Partners VII, L.P., as Agent for the Purchasers, as the terms and
conditions applicable to the purchase of Notes and Warrants 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 Notes
and Warrant Purchase Agreement.
PURCHASER:
AMPERSAND IV LIMITED PARTNERSHIP
By: AMP-IV MANAGEMENT COMPANY
LIMITED LIABILITY COMPANY
By: /s/ Stuart A. Auerbach
------------------------------------------------
Name: Stuart A. Auerbach
Title: Managing Member
ACCEPTANCE
The undersigned hereby acknowledges, agrees to and accepts the terms
set forth in Section 12.10 of the Subordinated Notes and Warrant Purchase
Agreement, dated October 25, 2001, among Sheldahl, Inc., a Minnesota corporation
(the "Company"), the wholly-owned subsidiaries of the Company listed on Schedule
I attached thereto, as guarantors, and certain Purchasers listed in Schedule II
attached thereto, and Morgenthaler Partners VII, L.P., as Agent for the
Purchasers.
AMPERSAND IV COMPANION FUND
LIMITED PARTNERSHIP
By: AMP-IV MANAGEMENT COMPANY
LIMITED LIABILITY COMPANY
By: /s/ Stuart A. Auerbach
------------------------------------------------
Name: Stuart A. Auerbach
Title: Managing Member
SCHEDULE II
SCHEDULE OF GUARANTORS
NAME OF GUARANTOR JURISDICTION OF ORGANIZATION
----------------- ----------------------------
International Flex Holdings, Inc. Delaware
International Flex Technologies, Inc. Delaware
SCHEDULE II
SCHEDULE OF PURCHASERS
<Table>
Purchaser Morgenthaler Partners Ampersand IV Molex Incorporated
VII, L.P. Limited Partnership 222 Wellington Court
Terminal Tower 55 William Street Lisle, IL 60532
50 Public Square Suite 240 Attn: Bob Mahoney
Suite 2700 Wellesley, MA
Cleveland, OH 44113 02481
Attn: John D. Lutsi Attn: Stuart A. Auerbach
Principal Amount $4,600,000 $1,200,000 $1,200,000
of Notes Purchased
at Closing
Number of Warrants
State of Residence/
Incorporation Delaware Massachusetts Illinois
Common Shares
Issuable upon 2,058,234 536,931 536,931
Exercise of the
Warrants
</Table>