<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Period Ended September 30, 1998
Commission File Number: 0-21737
ZIMMERMAN SIGN COMPANY
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(Exact name of Registrant as specified in its charter)
TEXAS 75-0864498
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(State of Incorporation) (I.R.S. Employer Identification No.)
9846 HIGHWAY 31 EAST, TYLER, TEXAS 75705
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (903) 535-7400
NOT APPLICABLE
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Former name, former address and fiscal year, if changed since last report.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days Yes X . No .
--- ---
1,854,692 SHARES OF COMMON STOCK, $0.01 PAR VALUE
- -------------------------------------------------------------------------------
Common Stock Outstanding as of October 30, 1998
<PAGE>
ZIMMERMAN SIGN COMPANY
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NO.
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<S> <C>
Item 1. Financial Statements
Balance Sheets as of September 30, 1998 (unaudited)
and December 31, 1997 . . . . . . . . . . . . . . . . . . . . . 1
Statements of Operations (unaudited) for the three and nine months
ended September 30, 1998 and 1997. . . . . . . . . . . . . . . . 2
Statements of Cash Flows (unaudited) for the nine months
ended September 30, 1998 and 1997. . . . . . . . . . . . . . . . 3
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition . . . . . . . . . . . . . . . . . . . . . . 6
PART II - OTHER INFORMATION
- ---------------------------
Item 2. Changes in Securities and Use of Proceeds . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . 11
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE>
ZIMMERMAN SIGN COMPANY
Balance Sheets
September 30, 1998 and December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
------
Current assets:
Cash $ 4,148 $ 129,678
Accounts receivable, net of allowance for doubtful accounts
of $140,638 in 1998 and $100,000 in 1997 8,326,287 10,386,830
Inventories 15,967,399 14,595,234
Prepaids and other current assets 199,007 325,418
Refundable income taxes 158,450 --
Deferred tax assets 584,156 540,547
----------- -----------
Total current assets 25,239,447 25,977,707
Property, plant and equipment, net 2,977,366 3,005,662
Other assets 533,859 463,562
Deferred tax assets 35,675 34,000
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$28,786,347 $29,480,931
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Current installments of long-term debt $ 1,164,000 $ 1,644,000
Accounts payable 7,323,296 6,593,422
Accrued expenses 1,475,555 1,513,384
Income taxes payable -- 78,695
Dividend payable -- 1,000,000
Customer deposits 384,421 1,026,834
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Total current liabilities 10,347,272 11,856,335
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Long-term debt, excluding current installments 21,222,486 26,011,000
Redeemable preferred stock, 8% Series A, $.01 par value,
redemption value of $5,250,000. Authorized 2,000,000
shares; 52,500 shares issued and outstanding 4,961,346 --
Stockholders' deficit:
Common stock, $.01 par value. Authorized 15,000,000
shares; 1,854,692 shares issued and outstanding 18,547 18,547
Additional paid in capital 100,000 --
Accumulated deficit (7,863,304) (8,404,951)
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Total stockholders' deficit (7,744,757) (8,386,404)
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$28,786,347 $29,480,931
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</TABLE>
See accompanying notes to financial statements
1
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ZIMMERMAN SIGN COMPANY
Statements of Operations
Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $11,859,278 $11,086,233 $35,327,230 $32,441,677
Cost of goods sold 9,385,859 8,804,218 27,923,994 25,435,827
----------- ----------- ----------- -----------
Gross Profit 2,473,419 2,282,015 7,403,236 7,005,851
Selling, general and administrative
expenses 1,456,192 1,360,163 4,304,229 4,202,991
Interest expense, net 553,010 615,935 1,716,362 1,807,142
----------- ----------- ----------- -----------
Income before income taxes
and extraordinary item 464,217 305,917 1,382,645 995,717
Federal income taxes 151,281 74,391 471,991 354,138
----------- ----------- ----------- -----------
Income before extraordinary
item 312,936 231,526 910,654 641,579
Extraordinary item-debt restructure
(net of income tax) (369,007) -- (369,007) --
----------- ----------- ----------- -----------
Net income (loss) $(56,071) $231,526 $541,647 $641,579
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic and diluted net income (loss)
per common share:
Income before extraordinary
item $0.17 $0.12 $0.49 $0.35
Extraordinary item (0.20) -- (0.20) --
----------- ----------- ----------- -----------
Net income (loss) $(0.03) $0.12 $0.29 $0.35
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of
common shares outstanding 1,854,692 1,854,692 1,854,692 1,854,692
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements
2
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ZIMMERMAN SIGN COMPANY
Statements of Cash Flows
Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $541,647 $641,579
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary item 369,007 --
Depreciation and amortization 520,836 535,915
Provision for losses on accounts receivable 40,638 20,581
Deferred income tax benefit (45,284) (93,738)
Changes in operating assets and liabilities:
Accounts receivable 2,019,905 847,570
Inventories (1,372,165) (1,128,359)
Prepaids and other current assets (158,605) (31,951)
Other assets (276,015) (3,000)
Accounts payable and accrued expenses 613,350 1,548,379
Customer deposits (642,413) 168,840
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Net cash provided by operating activities 1,610,901 2,505,816
----------- -----------
Cash flows used in investing activities:
Purchases of property, plant and equipment (375,231) (182,133)
----------- -----------
Cash flows from financing activities:
Net borrowings (payments) on revolving line of credit 75,000 (1,600,000)
Principal payments on long-term debt (4,830,000) (822,000)
Proceeds from issuance of long-term debt 5,500,000 --
Proceeds from issuance of preferred stock and related warrants 5,250,000 --
Issuance costs related to preferred stock (202,168) --
Proceeds from issuance of subordinated debt and related warrants 4,000,000 --
Issuance costs related to subordinated debt (154,032) --
Dividends paid (1,000,000) --
Principal payment of Subordinated Debt (10,000,000) --
----------- -----------
Net cash used in financing activities (1,361,200) (2,422,000)
----------- -----------
Net decreases in cash (125,530) (98,317)
Cash at beginning of period 129,678 132,483
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Cash at end of period $4,148 $34,166
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</TABLE>
See accompanying notes to financial statements
3
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ZIMMERMAN SIGN COMPANY
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial statements have been prepared by Zimmerman Sign
Company (the Company), without audit. In the opinion of management, all
adjustments (which consist only of normal recurring adjustments) necessary
to present fairly the financial position, results of operations and changes
in cash flows at September 30, 1998 and for all periods presented have been
made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's 1997 Annual Report to Stockholders. The
results of operations for the periods ended September 30, 1998 are not
necessarily indicative of the operating results for the full year.
2. Refinancing Transaction
On September 30, 1998, the Company entered into new credit facilities with
its existing lender totaling $23.5 million (of which $12.9 million was
outstanding on the revolving credit line and $5.5 million was outstanding
on the term notes) to replace an existing credit facility with a revolving
credit line and term loan totalling $20.6 million (of which $16.5 million
was outstanding immediately preceding this transaction) of available
credit. The terms and conditions of the new credit facilites are
substantially the same as the previous facility except that the terms were
extended and the available credit was increased.
Also on September 30,1998, the Company entered into a Senior Subordinated
Note, Preferred Stock and Warrant Purchase Agreement with Bank of America
Capital Investors ("B of A") and certain members of Company management
pursuant to which the Company issued $4.0 million of senior subordinated
notes ("Notes") and 52,500 shares of preferred stock, 8% Series A
("Preferred Stock") which has a liquidation and redemption value of $5.25
million and is mandatorily redeemable on September 30, 2006. The Preferred
Stock is also redeemable at the option of the Company and if redeemed prior
to September 30, 2003, the redemption value would increase between 1% to
5%. In connection with the issuance of the Notes and Preferred Stock, the
Company issued warrants representing the right to purchase up to 37% of the
Company's common stock or up to 161,880 shares of common stock and
1,036,034 shares of common stock, respectively, at an exercise price of
$3.79 per share, the approximate market price of the common stock at the
transaction date. The carrying values of the Notes and Preferred Stock have
been reduced to reflect the estimated fair value of the warrants, $0.084
per share, which has been included in additional paid in capital. The
valuation of the warrants, for financial statement purposes, has not been
finalized, and upon final determination the value assigned to the warrants
could change. Additionally, Preferred Stock issuance costs of $202,168 were
netted against the proceeds received upon issuance and the subordinated
debt issuance costs of $154,032 are included in other assets. The Notes and
Preferred Stock will be accreted from their current carrying values to
their redemption values over the life of the instruments.
On September 30, 1998 the Company repaid its existing $10.0 million
subordinated loan maturing in 2001 and paid the $1.0 million dividend
payable. As part of the Refinancing Transaction described above, debt
issuance costs associated with the retired borrowings were written off as
an extraordinary item. These costs were formerly being amortized over the
life of the subordinated and senior loans.
4
<PAGE>
Long-term debt consists of the following at September 30, 1998 and
December 31, 1997:
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Revolving line of credit to a bank, due September 30, 2001,
monthly interest at prime plus .25% or LIBOR plus 2.75%
(8.75% at September 30, 1998) $12,900,000 $12,825,000
Secured term notes payable to a bank, due between October
1, 2002, and October 1, 2005, monthly payments of
$97,250 plus interest at prime plus .25% to 1.5%
or LIBOR plus 2.75% to 4.0% (8.75% to 10.0% at
September 30, 1998) 5,500,000 4,830,000
Subordinated notes, due October 31, 2001, quarterly
payments of interest at prime plus 0.5% or bank off-shore
rate plus 1.6875% (7.28125% at September 30, 1998) -- 10,000,000
Subordinated notes, due September 30, 2005, quarterly
payments of principal and interest at 12% due beginning
September 30, 2003 3,986,486 --
----------- -----------
22,386,486 27,655,000
Less current installments 1,164,000 1,644,000
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$21,222,486 $26,011,000
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</TABLE>
3. Pending Capital Stock Transactions
On September 30, 1998, the Company acquired options at $0.25 per share to
purchase 357,143 shares of its common stock from its largest shareholder at
a total cost, including the option payment, of $3.50 per share. The options
are exercisable in early January 1999 and the total consideration for the
357,143 share purchase, assuming the options are exercised, would consist
of $625,000 in cash and 6,250 shares of the Company's 6% Series C Preferred
Stock, which has a liquidation and redemption value of $625,000.
Separately, an officer of the Company acquired an option to purchase
428,000 shares of Zimmerman Sign Company common stock from the Company's
largest shareholder exercisable in early January 1999 at a price of
$3.50 per share and has agreed to sell 228,000 shares of such stock to the
Company in January 1999 at a price of $3.50 per share, consisting of, in
the aggregate, $98,000 in cash and 7,000 shares of the Company's 6%
Series B Preferred Stock, which has a liquidation and redemption value
of $700,000.
On September 29, 1998 the Company's Directors authorized the issuance of
the Series A, Series B and Series C preferred stock and the stock
transactions contemplated by the option purchase agreements referenced
above. Assuming completion of the above transactions, the liquidation value
of preferred stock outstanding will increase from $5,250,000 to $6,575,000
and the number of common shares issued and outstanding, assuming no stock
options are exercised in the intervening period, will decrease from the
September 30, 1998 amount of 1,854,692 shares to 1,269,549 shares.
Assuming completion of the pending capital stock transactions, the number
of warrants exercisable will be 854,259 and the total number of diluted
common shares will be 2,308,808 including warrants and stock options
issuable under the 1996 stock option plan.
5
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE ATTACHED
UNAUDITED FINANCIAL STATEMENTS AND NOTES THERETO, AND WITH ZIMMERMAN SIGN
COMPANY'S (THE COMPANY) ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997, INCLUDING AUDITED FINANCIAL STATEMENTS AND NOTES THERETO
FOR THE YEAR ENDED DECEMBER 31, 1997.
The Company's net sales for the three month period ended September 30, 1998
increased $773,000 or 7.0% to $11,859,000 from $11,086,000 for the same
period last year. Net sales for the nine months ended September 30, 1998
increased $2,885,000 or 8.9% to $35,327,000 compared to $32,442,000 for the
same period in 1997. The net sales increases are due to increased sales to
general retailing, automotive and financial services customers.
The Company's gross profit margin for the three months ended September 30,
1998 increased to 20.9% from 20.6% for the same period in 1997. For the nine
months ended September 30, 1998, the gross profit percentage decreased to
21.0% from 21.6% for the same period in 1997. The decrease is primarily due
to higher factory overhead expenses.
Selling, general and administrative expenses were $1,456,000 or 12.3% as a
percentage of sales for the quarter ended September 30, 1998 compared to
$1,360,000 or 12.3% as a percentage of sales for the same period in the prior
year. For the nine months ended September 30, 1998, selling, general and
administrative expenses increased $101,000 to $4,304,000 or 12.3% as a
percentage of sales as compared to $4,203,000 or 13.0% as a percentage of
sales for the nine months ended September 30, 1997. The decrease as a
percentage of sales for the nine month period is primarily the result of
lower administrative expenses related to office payroll and related costs,
lower travel expenses, lower property and casualty insurance costs and
reductions in costs related to being a public company.
Interest expense decreased to $553,000 for the three month period ended
September 30, 1998 from $616,000 for the same period in the prior year.
Interest expense for the nine months ended September 30, 1998 decreased to
$1,716,000 from $1,807,000 for the nine months ended September 30, 1997.
This was primarily the result of a lower average debt balance in the first
nine months of 1998.
Income before federal income taxes increased $158,000 to $464,000 for the
three month period ended September 30, 1998 compared to $306,000 for the same
period in the prior year. Income before federal income taxes for the nine
months ended September 30, 1998 increased $387,000 to $1,383,000 from
$996,000 for the same period in 1997. This increase primarily resulted from
higher sales volume and lower interest expenses, along with lower selling,
general and administrative expenses as a percentage of sales, as noted above.
LIQUIDITY AND CAPITAL RESOURCES
Operating working capital (defined as accounts receivable plus inventories,
less accounts payable, including accrued expenses and customer deposits)
decreased $738,000 to $15,110,000 at September 30, 1998 from $15,848,000 at
December 31, 1997. The decrease in operating working capital resulted almost
entirely from decreased accounts receivable being partially offset by
increased inventories and decreased current liabilities.
6
<PAGE>
Net cash of $1,457,000 were provided by operating activities for the nine
months ended September 30, 1998 compared to $2,506,000 for the nine months
ended September 30, 1997. Decreases in net receivables along with an
increase in accounts payable were the primary sources of cash, which were
partially offset by increases in inventory and prepaids, and decreases in
customer deposits.
Investing activities used $375,000 for the first nine months of 1998 as a
result of property and equipment purchases. Financing activities used
$1,207,000 as a result of decreased net borrowings under the Company's line
of credit and repayments of bank term loans.
The Company's future capital expenditures will relate principally to the
acquisition of new machinery and equipment designed to increase productivity
and factory efficiency. The Company believes its cash generated from
operations and funds available under the senior credit facilities are
sufficient for its planned requirements during 1998.
On September 30, 1998, the Company entered into new credit facilities with
its existing lender totaling $23.5 million (of which $12.9 million was
outstanding on the revolving credit line and $5.5 million was outstanding on
the term notes) to replace an existing credit facility with a revolving
credit line and term loan totalling $20.6 million (of which $16.5 million
was outstanding immediately preceding this transaction) of available credit.
The terms and conditions of the new credit facilities are substantially the
same as the previous facility except that the terms were extended and the
available credit was increased.
Also on September 30,1998, the Company entered into a Senior Subordinated
Note, Preferred Stock and Warrant Purchase Agreement with Bank of America
Capital Investors ("B of A") and certain members of Company management
pursuant to which the Company issued $4.0 million of senior subordinated
notes ("Notes") and 52,500 shares of preferred stock, 8% Series A ("Preferred
Stock") which has a liquidation and redemption value of $5.25 million and is
mandatorily redeemable on September 30, 2006. The Preferred Stock is also
redeemable at the option of the Company and if redeemed prior to September
30, 2003, the redemption value would increase between 1% to 5%. In
connection with the issuance of the Notes and Preferred Stock, the Company
issued warrants representing the right to purchase up to 37% of the Company's
common stock or up to 161,880 shares of common stock and 1,036,034 shares of
common stock, respectively at an exercise price of $3.79 per share, the
approximate market price of the common stock at the transaction date. The
carrying values of the Notes and Preferred Stock have been reduced to reflect
the estimated fair value of the warrants, $0.084 per share, which has been
included in additional paid in capital. The valuation of the warrants, for
financial statement purposes, has not been finalized, and upon final
determination the value assigned to the warrants could change. Additionally,
Preferred Stock issuance costs of $202,168 were netted against the proceeds
received upon issuance and the subordinated debt issuance costs of $154,032
are included in other assets. The Notes and Preferred Stock will be accreted
from their current carrying values to their redemption values over the life
of the instruments.
On September 30, 1998 the Company repaid its existing $10.0 million
subordinated loan maturing in 2001 and paid the $1.0 million dividend
payable. As part of the Refinancing Transaction described above, debt
issuance costs associated with the retired borrowings were written off as an
extraordinary item. These costs were formerly being amortized over the life
of the subordinated and senior loans.
SEASONALITY
The Company's sales exhibit limited seasonality, with sales in the first
quarter generally being the lowest of the
7
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four calendar quarters. First quarter sales tend to be relatively lower
because of weather constraints which may restrict customers' construction
activities and may reduce their sign purchases.
NEW ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement No. 133 ("SFAS No. 133"), "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and hedging
activities. SFAS No. 133 is effective for the Company's first quarter
financial statements in fiscal 2000. The Company is currently not involved in
derivative instruments or hedging activities and, therefore, will measure the
impact of this statement as it becomes applicable.
Statement of Position ("SOP") 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use," was issued in March 1998
and is effective for fiscal years beginning after December 15, 1998. The SOP
requires that certain costs related to the development or purchase of
internal-use software be capitalized and amortized over the estimated useful
life of the software. The SOP also requires that costs related to the
preliminary project stage and post-implementation operations stage of the
development of internal-use computer software be expensed as incurred. The
Company does not expect the adoption of the SOP to have a material impact on
the Company's financial position or results of operations.
YEAR 2000 CONSIDERATIONS
Many existing computer programs use only two digits to identify a year in the
date field. These programs, if not corrected could fail or create erroneous
results by or at the Year 2000. This "Year 2000" issue is believed to affect
virtually all companies and organizations, including the Company. The Company
has undertaken an assessment of the effect of the Year 2000 issue on the
Company's operations. In connection therewith, the Company has sought, and
continues to seek, identify and evaluate Year 2000-related compliance issues,
develop proposed solutions, and estimate the costs of the implementation of
such solutions. The Company does not believe that the Year 2000 issues
(including the costs of the Company's compliance program) will have a
material adverse effect on the Company's financial position or results of
operations, though no assurance can be given in this regard.
At this time, the Company expects to spend less than $100,000 to become fully
Year 2000 compliant, and estimates completion of its compliance program by
June 30, 1999. The Company's computer systems are P.C. based and therefore
the cost and time to become compliant is comparatively less expensive and
involved. Currently, the largest component of the Company's compliance
program is the analysis of Year 2000 compliance of its customers and
suppliers. At this time, with regard to this analysis, the Company expects no
significant issues which would have a materially adverse effect on the
Company.
FORWARD-LOOKING INFORMATION
This report and other reports and statements filed by the Company from time
to time with the Securities and Exchange Commission (collectively, "SEC
Filings") contain or may contain certain forward-looking statements and
information that are based upon beliefs of, and information currently
available to the Company's management. When used in SEC Filings, the words
"anticipate", "believe", "estimate", "future", "intend", "plan", and similar
expressions with prospective connotations as they relate to the Company and
its business identify forward-looking statements. All forward-looking
statements reflect the current views of the Company with respect to future
events and are subject to various risks, uncertainties and assumptions
relating to the Company
8
<PAGE>
and its operating environment which may cause the actual results to vary
significantly from those anticipated. Specific factors that may cause the
Company's actual results to differ from those anticipated in forward-looking
statements are discussed in the Company's most recently filed Form 10-K.
9
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(b) In connection with the Securities Purchase Agreement on September 30,
1998, the Company created three series of Preferred Stock (Series A,
Series B and Series C), all of which rank senior to the Company's
Common Stock with respect to dividend rights and rights upon
liquidation, winding up and dissolution. As described in the
following paragraphs, the holders of Common Stock may no longer
collectively elect all of the members of the Company's board of
directors.
The holders of Series A Preferred Stock are entitled to designate two
directors to serve on the board of directors of the Company at all
times, with such directors to be elected by holders of a majority of
the Series A Preferred Stock. In addition, the Company and certain
shareholders, including all of the holders of Series A Preferred
Stock, entered into a Stockholders Agreement dated as of September 30,
1998, pursuant to which the shareholders agreed to vote their shares
so that the following individuals would be elected to the board of
directors: (i) two representatives designated by the Bank of America
shareholders (in lieu of and only to the extent that the holders of
Series A Preferred Stock have failed to designate two representatives
or the Bank of America shareholders do not hold a majority of the
Series A Preferred Stock); (ii) two members of the Company's
management designated by the officers party to the Stockholders
Agreement; and (iii) an outside director designated by the officers
party to the Stockholders Agreement and acceptable to the Bank of
America shareholders.
Upon the occurrence of an Event of Noncompliance as defined in the
Certificate of Designation of Preferred Stock, Series A, which
includes an event of default under the Securities Purchase Agreement,
the parties to the Stockholders Agreement have agreed to cause the
removal from the board of directors of one of the representatives
designated pursuant to (ii), above, and to elect to the board of
directors a replacement representative designated by the Bank of
America shareholders.
(c) On September 30, 1998, the Company entered into the Securities
Purchase Agreement, pursuant to which it sold to a banking institution
and members of Company management 52,500 shares of Series A Preferred
Stock, 12% Senior Subordinated Notes in the aggregate amount of $4
million and Stock Purchase Warrants initially exercisable for
1,197,194 shares of Common Stock (of which warrants exercisable to
purchase 343,655 shares of common stock will be cancelled upon the
completion of the pending capital stock transaction as described in
Note 3 of the financial statements) in exchange for aggregate
consideration of $9.25 million. The sale was a private transaction
exempt from registration under section 4(2) of the Securities Act of
1933.
Each Stock Purchase Warrant grants the right to purchase shares of
Common Stock at the exercise price of $3.79 per share and is
exercisable in whole or in part at the holders's option at
10
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any time during the period after the date of issuance to and
including the later of (i) September 30, 2008, and (ii) the 90th day
following the redemption in full of all outstanding Series A
Preferred Stock, whether by prepayment, at maturity or otherwise.
Item 6. Exhibits and Reports on Form 8-K:
(a) See Exhibit Index on page 12.
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on November 9, 1998.
ZIMMERMAN SIGN COMPANY
REGISTRANT
/s/JEFFREY P. JOHNSON
----------------------------------------------------
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
(AUTHORIZED OFFICER AND PRINCIPAL FINANCIAL OFFICER)
11
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EXHIBIT INDEX
All of the following exhibits are being or have heretofore been filed with the
Commission and are incorporated herein by reference:
<TABLE>
<CAPTION>
EXHIBIT NO.
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<S> <C>
3.1 Amended and Restated Articles of Incorporation of Zimmerman Sign
Company.
3.2 Amended and Restated Bylaws of Zimmerman Sign Company, amended and
restated as of September 29, 1998.
4.1 Distribution Agreement, dated as of November 26, 1996, by and
between Zimmerman Sign and Independence Holding Company.*
4.2 Registration Agreement, dated as of September 30, 1998, by and
between Zimmerman Sign Company, Continental Illinois Venture
Corporation, MIG Partners VIII and certain shareholders.
4.3 Stockholders Agreement, dated as of September 30, 1998, by and
between Zimmerman Sign Company and certain shareholders.
10.1 Second Amended and Restated Revolving Credit and Term Loan
Agreement, dated as of September 30, 1998, by and between Zimmerman
Sign Company and Comerica Bank - Texas.
10.2 Senior Subordinated Note, Preferred Stock and Warrant Purchase
Agreement, dated as of September 30, 1998, by and between Zimmerman
Sign Company, Continental Illinois Venture Corporation, MIG
Partners VIII and certain management purchasers.
10.3 Stock Option Plan of Zimmerman Sign Company, dated as of December
1, 1996.*
10.4 Form of Amended & Restated Employment Agreement, dated December 1,
1996, by and between Zimmerman Sign Company and David E. Anderson.*
10.5 Form of Amended and Restated Employment Agreement, dated December
1, 1996, by and between Zimmerman Sign Company and Tom E. Boner.*
10.6 Form of Amended and Restated Employment Agreement, dated December
1, 1996, by and between Zimmerman Sign Company and Michael W.
Coppinger.*
10.7 Form of Amended and Restated Employment Agreement, dated December
1, 1996, by and between Zimmerman Sign Company and Jeffrey P.
Johnson.*
10.8 Form of Amended and Restated Employment Agreement, dated December
1, 1996, by and between Zimmerman Sign Company and John T. Griggs.*
10.9 Share Option Purchase Agreement, dated as of September 30, 1998, by
and between Zimmerman Sign Company and certain shareholders.
10.10 Purchase Agreement, dated as of September 30, 1998, by and between
Zimmerman Sign Company and David E. Anderson.
10.11 Letter Agreement, dated as of September 30, 1998, by and between
Zimmerman Sign Company and certain shareholders.
10.12 Form of 12% Senior Subordinated Note issued by Zimmerman Sign
Company in connection with the Senior Subordinated Note, Preferred
Stock and Warrant Purchase Agreement, dated as of September 30,
1998
10.13 Form of Stock Purchase Warrants issued by Zimmerman Sign Company in
connection with the Senior Subordinated Note, Preferred Stock and
Warrant Purchase Agreement, dated as of September 30, 1998.
12
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27.1 Financial Data Schedule.
99.1 Registration Statement on Form 10/A-2 filed by Zimmerman Sign
Company with the Securities and Exchange Commission and declared
effective on December 16, 1996.**
</TABLE>
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* Previously filed as an exhibit to the Company's Registration Statement on
Form 10 (No. 000-21737) and incorporated herein by reference.
** Previously filed (No. 000-21737).
13
<PAGE>
Exhibit 3.1
ZIMMERMAN SIGN COMPANY
CERTIFICATE OF DESIGNATION OF
PREFERRED STOCK, SERIES A
Zimmerman Sign Company, a Texas corporation (the "CORPORATION")
certifies that pursuant to Article IV of its Amended and Restated Certificate of
Incorporation (the "CERTIFICATE") and in accordance with the provisions of
Section 2.13 of the Texas Business Corporation Act its Board of Directors
adopted the following resolution on September 29, 1998 creating a series of
preferred shares.
RESOLVED, that a series of authorized preferred shares of the
Corporation is hereby created, having the designation, par value, voting,
participation and other rights and restrictions set out below. All capitalized
terms used herein and not defined shall have the meanings ascribed to them in
the Certificate.
1. DESIGNATION AND NUMBER. The shares of such class shall be
designated "Preferred Stock, Series A" (the "SERIES A PREFERRED STOCK"). The
number of shares initially constituting the Series A Preferred Stock shall be
52,500 which number may be decreased (but not increased) by the Board of
Directors without a vote of stockholders; PROVIDED that such number may not be
decreased below the number of then outstanding shares of Series A Preferred
Stock.
2. DIVIDENDS.
(a) GENERAL OBLIGATION. When and as declared by the Corporation's
Board of Directors and to the extent permitted under the Texas Business
Corporation Act and other applicable law, the Corporation shall pay preferential
dividends in cash to the holders of the Series A Preferred Stock as provided in
this SECTION 2. Dividends on each share of the Series A Preferred Stock (a
"SERIES A PREFERRED SHARE") shall accrue on a daily basis at the rate of 8.0%
per annum of the sum of $100.00 (the "LIQUIDATION VALUE") plus all accumulated
and unpaid dividends thereon from and including the date of issuance of such
Series A Preferred Share to and including the first to occur of (i) the date on
which the Liquidation Value of such Series A Preferred Share (plus all accrued
and unpaid dividends thereon) is paid to the holder thereof in connection with
the liquidation of the Corporation or the redemption of such Series A Preferred
Share by the Corporation or (ii) the date on which such share is otherwise
acquired by the Corporation. Such dividends shall accrue whether or not they
have been declared and whether or not there are profits, surplus or other funds
of the Corporation legally available for the payment of dividends (other than
dividends on capital stock of the Corporation paid with shares of stock of the
same class), and such dividends shall be cumulative such that all accrued and
unpaid dividends shall be fully paid or declared with funds irrevocably set
apart for payment before any dividends, distributions, redemptions or other
payments may be made with respect to the Common Stock, the Series B Preferred
Stock, the Series C
<PAGE>
Preferred or any capital stock or other equity securities of the Corporation
(collectively, the "JUNIOR SECURITIES"). The date on which the Corporation
initially issues any Series A Preferred Share shall be deemed to be its "date of
issuance" regardless of the number of times transfer of such Series A Preferred
Share is made on the stock records maintained by or for the Corporation and
regardless of the number of certificates which may be issued to evidence such
Series A Preferred Share.
(b) DIVIDEND REFERENCE DATES. To the extent not paid on March 15,
June 15, September 15, and December 15 of each year, beginning December 31,
1998 (the "DIVIDEND REFERENCE DATES"), all dividends which have accrued on
each Series A Preferred Share outstanding during the three-month period (or
other period in the case of the initial Dividend Reference Date) ending upon
each such Dividend Reference Date shall be accumulated and shall remain
accumulated dividends with respect to such Series A Preferred Share until
paid to the holder thereof.
(c) DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except as
otherwise provided herein, if at any time the Corporation pays less than the
total amount of dividends then accrued with respect to the Series A Preferred
Stock, such payment shall be distributed pro rata among the holders thereof
based upon the aggregate accrued but unpaid dividends on the Series A
Preferred Shares held by each such holder.
3. LIQUIDATION. Upon any liquidation, dissolution or winding up
of the Corporation (whether voluntary or involuntary), each holder of Series
A Preferred Stock shall be entitled to be paid, before any distribution or
payment is made upon any Junior Securities, an amount in cash equal to the
aggregate Liquidation Value of all Series A Preferred Shares held by such
holder (plus all accrued and unpaid dividends thereon), and the holders of
Series A Preferred Stock shall not be entitled to any further payment. If
upon any such liquidation, dissolution or winding up of the Corporation the
Corporation's assets to be distributed among the holders of the Series A
Preferred Stock are insufficient to permit payment to such holders of the
aggregate amount which they are entitled to be paid under this SECTION 3,
then the entire assets available to be distributed to the Corporation's
stockholders shall be distributed pro rata among such holders based upon the
aggregate Liquidation Value (plus all accrued and unpaid dividends) of the
Series A Preferred Stock held by each such holder. Prior to the liquidation,
dissolution or winding up of the Corporation, the Corporation shall declare
for payment all accrued and unpaid dividends with respect to the Series A
Preferred Stock, but only to the extent of funds of the Corporation legally
available for the payment of dividends. Not more than 60 nor less than 30
days prior to the payment date stated therein, the Corporation shall mail
written notice of any such liquidation, dissolution or winding up to each
record holder of Series A Preferred Stock, setting forth in reasonable detail
the amount of proceeds to be paid with respect to each share of capital stock
of the Corporation, including each Series A Preferred Share, each share of
Series B Preferred Stock, each share of Series C Preferred Stock and each
share of Common Stock in connection with such liquidation, dissolution or
winding up.
4. PRIORITY ON DIVIDENDS AND REDEMPTIONS. So long as any Series A
Preferred Stock remains outstanding, without the prior written consent of the
holders of a majority of the
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outstanding shares of Series A Preferred Stock, the Corporation shall not,
nor shall it permit any Subsidiary to, redeem, purchase or otherwise acquire
directly or indirectly any Junior Securities, nor shall the Corporation
directly or indirectly pay or declare any dividend or make any distribution
upon any Junior Securities, other than (i) repurchases of Common Stock from
any employee of the Corporation provided that (A) no Default or Event of
Default (as defined in the Senior Subordinated Note, Preferred Stock and
Warrant Purchase Agreement, dated as of September 30, 1998, by and among the
Corporation, and certain investors (the "PURCHASE AGREEMENT")) is in
existence immediately prior to or immediately after such repurchase or
payment, (B) the purchase price paid in such repurchase or the amount of such
payment does not exceed the fair market value of the stock repurchased or is
in an amount calculated pursuant to the terms of a repurchase or employment
agreement between the Corporation and such employee entered into in
connection with the commencement of such employee's employment, (C) such
purchase occurs after September 30, 1999 and (D) the aggregate amount paid or
payable in any fiscal year in respect of all such purchases from employees
does not exceed $250,000, (ii) dividends paid in accordance with the terms of
the Series B Preferred and the terms of the Series C Preferred: provided that
no Default or Event of Default (as defined in the Purchase Agreement) or an
Event of Noncompliance is in existence immediately prior to or immediately
after such dividend and (iii) dividends on capital stock of the Corporation
paid with shares of stock of the same class.
5. REDEMPTIONS. To the extent permitted under the Texas Business
Corporation Act and other applicable law:
(a) SCHEDULED REDEMPTION. On the earlier of (i) September 30,
2006 and (ii) 90 days following the payment in full of the obligations under
the Notes (the "SCHEDULED REDEMPTION DATE"). the Corporation shall redeem all
outstanding shares of Series A Preferred Stock at a price per Series A
Preferred Share equal to the Liquidation Value thereof (plus accrued and
unpaid dividends thereon).
(b) OPTIONAL REDEMPTIONS. The Corporation may at any time and
from time to time redeem all or any portion of the shares of Series A
Preferred Stock then outstanding. Upon any such redemption, the Corporation
shall pay a price per Series A Preferred Share equal to the Liquidation Value
thereof (plus all accrued and unpaid dividends thereon), PLUS an amount equal
to the Redemption Premium Amount calculated with respect thereto (if any).
The term "REDEMPTION PREMIUM AMOUNT" means:
(i) with respect to any redemption of shares of Series A Preferred
made on or prior to the first anniversary of the Closing Date (as defined in the
Purchase Agreement), 5.0% multiplied by the aggregate Liquidation Value of the
Series A Preferred Shares so redeemed;
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(ii) with respect to any redemption of shares of Series A Preferred
made after the first anniversary of the Closing Date and on or prior to the
second anniversary of the Closing Date; 4.0% multiplied by the aggregate
Liquidation Value of the Series A Preferred Shares so redeemed;
(iii) with respect to any redemption of shares of Series A Preferred
made after the second first anniversary of the Closing Date and on or prior
to the third anniversary of the Closing Date; 3.0% multiplied by the
aggregate Liquidation Value of the Series A Preferred Shares so redeemed;
(iv) with respect to any redemption of shares of Series A Preferred
made after the third anniversary of the Closing Date and on or prior to the
fourth anniversary of the Closing Date; 2.0% multiplied by the aggregate
Liquidation Value of the Series A Preferred Shares so redeemed;
(v) with respect to any redemption of shares of Series A Preferred
made after the fourth first anniversary of the Closing Date and on or prior to
the fifth anniversary of the Closing Date; 1.0% multiplied by the aggregate
Liquidation Value of the Series A Preferred Shares so redeemed; and
(vi) with respect to any redemption of the Series A Preferred
Shares made after the fifth anniversary of the Closing Date; zero;
NOTWITHSTANDING THE FOREGOING, if, and to the extent, any such
redemption is funded with net proceeds from a Public Offering (after
deduction of all discounts, underwriters' commissions and other reasonable
expenses), the Redemption Premium Amount payable in connection therewith
shall be 50% of the amount otherwise calculated pursuant to clauses (i)
through (vi) above.
(c) MANDATORY REDEMPTIONS.
i. REDEMPTION AFTER PUBLIC OFFERING. At any time after the
fifth anniversary of the Closing Date (as defined in the Purchase Agreement),
the Corporation shall apply the net cash proceeds from any Public Offering
remaining after deduction of all discounts, underwriters' commissions and
other reasonable expenses to redeem shares of Series A Preferred Stock at a
price per Series A Preferred Share equal to the Liquidation Value thereof
(plus all accrued and unpaid dividends thereon). Such redemption shall take
place on a date fixed by the Corporation, which date shall be not more than
five days after the Corporation's receipt of such proceeds.
The term "PUBLIC OFFERING" means any offering by the
Corporation of any securities to the public pursuant to an effective
registration statement under the Securities Act of 1933, as then in effect,
or any comparable statement under any similar federal statute then in force.
ii. REDEMPTION UPON CHANGE IN OWNERSHIP. If a Change in
Ownership has occurred or the Corporation obtains knowledge that a Change in
Ownership is proposed to occur, the Corporation shall give prompt written
notice of such Change in Ownership describing in reasonable detail the
material terms and date of consummation thereof to each holder of Series A
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<PAGE>
Preferred Stock, but in any event such notice shall not be given later than
five days after the occurrence of such Change in Ownership, and the
Corporation shall give each holder of Series A Preferred Stock prompt written
notice of any material change in the terms or timing of such transaction. The
holder or holders of a majority of the Series A Preferred Stock then
outstanding may require the Corporation to redeem all or any portion of the
Series A Preferred Stock owned by such holders at a price per Series A
Preferred Share equal to the Liquidation Value thereof (plus all accrued and
unpaid dividends thereon), PLUS an amount equal to the Redemption Premium
Amount calculated with respect thereto (if any), by giving written notice to
the Corporation of such election prior to the later of (a) 21 days after
receipt of the Corporation's notice and (b) five days prior to the
consummation of the change in Ownership (the "EXPIRATION DATE"). The
Corporation shall give prompt written notice of any such election to all
other holders of Series A Preferred Stock within five days after the receipt
thereof, and each such holder shall have until the later of (a) the
Expiration Date or (b) ten days after receipt of such second notice to
request redemption hereunder (by giving written notice to the Corporation) of
all or any portion of the Series A Preferred Stock owned by such holder.
Upon receipt of such election(s), the Corporation shall be
obligated to redeem the aggregate number of Series A Preferred Shares
specified therein on the later of (a) the occurrence of the Change in
Ownership or (b) five days after the Corporation's receipt of such
election(s). If any proposed Change in Ownership does not occur, all requests
for redemption in connection therewith shall be automatically rescinded. Any
holder of Series A Preferred Stock may rescind such holder's request for
redemption by delivering written notice thereof to the Corporation prior to
the consummation of the transaction.
The term "CHANGE IN OWNERSHIP" means an event which results in
any Management Purchaser (as defined in the Purchase Agreement) ceasing to
hold, beneficially and of record, at least 85% of the issued and issuable
capital stock of the Corporation that such Management Purchaser holds at
Closing (as adjusted for any subsequent stock splits, stock dividends,
combinations of shares or similar recapitalizations), other than Tom Boner in
respect of sales of capital stock to David Anderson.
iii. REDEMPTION UPON FUNDAMENTAL CHANGE. If a Fundamental
Change is proposed to occur, the Corporation shall give written notice of
such Fundamental Change describing in reasonable detail the material terms
and date of consummation thereof to each holder of Series A Preferred Stock
not more than 45 days nor less than 20 days prior to the consummation of such
Fundamental Change, and the Corporation shall give each holder of Series A
Preferred Stock prompt written notice of any material change in the terms or
timing of such transaction. The holder or holders of a majority of the Series
A Preferred Shares then outstanding, may require the Corporation to redeem
all or any portion of the Series A Preferred Stock owned by such holders at a
price per Series A Preferred Share equal to the Liquidation Value thereof
(plus all accrued and unpaid dividends thereon), plus an amount equal to the
Redemption Premium Amount calculated with respect thereto (if any), by giving
written notice to the Corporation of such election prior to the later of (a)
ten days prior to the consummation of the Fundamental Change or (b) ten days
after receipt
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<PAGE>
of notice from the Corporation. The Corporation shall give prompt written notice
of such election to all other holders of Series A Preferred Stock (but in any
event within five days prior to the consummation of the Fundamental Change), and
each such holder shall have until five business days after the receipt of such
notice to request redemption (by written notice given to the Corporation) of all
or any portion of the Series A Preferred Stock owned by such holder.
Upon receipt of such election(s), the Corporation shall be
obligated to redeem the aggregate number of Series A Preferred Shares
specified therein upon the consummation of such Fundamental Change. If any
proposed Fundamental Change does not occur, all requests for redemption in
connection therewith shall be automatically rescinded, or if there has been a
material change in the terms or the timing of the transaction, any holder of
Series A Preferred Stock may rescind such holder's request for redemption by
delivering written notice thereof to the Corporation prior to the
consummation of the transaction.
The term "FUNDAMENTAL CHANGE" means (a) any sale or transfer
of more than 50% of the assets of the Corporation and its Subsidiaries on a
consolidated basis (measured either by book value in accordance with
generally accepted accounting principles consistently applied or by fair
market value determined in the reasonable good faith judgment of the
Corporation's Board of Directors) in any transaction or series of
transactions (other than sales in the ordinary course of business) and (b)
any merger or consolidation to which the Corporation is a party, except for a
merger in which the Corporation is the surviving corporation or the holders
of the Corporation's voting common stock immediately prior to such merger or
consolidation shall represent at least 80% of the combined voting power of
the voting securities after such merger or consolidation, the terms of the
Series A Preferred Stock are not changed in any material respect or are
assumed and the Series A Preferred Stock is not exchanged for cash,
securities or other property, and after giving effect to such merger, the
holders of the Corporation's outstanding capital stock possessing a majority
of the voting power (under ordinary circumstances) to elect a majority of the
Corporation's Board of Directors immediately prior to the merger shall
continue to own the Corporation's outstanding capital stock possessing the
voting power (under ordinary circumstances) to elect a majority of the
Corporation's Board of Directors.
(d) REDEMPTION PAYMENTS. For each Series A Preferred Share
which is to be redeemed hereunder, the Corporation shall be obligated on the
Redemption Date to pay to the holder thereof (upon surrender by such holder
at the Corporation's principal office of the certificate representing such
Series A Preferred Share) an amount in immediately available funds equal to
the Liquidation Value of such Series A Preferred Share (plus all accrued and
unpaid dividends thereon), PLUS the Redemption Premium Amount calculated
with respect thereto (if any). If the funds of the Corporation legally
available for redemption of Series A Preferred Shares on any Redemption Date
are insufficient to redeem the total number of Series A Preferred Shares to be
redeemed on such date, those funds which are legally available shall be used
to redeem the maximum possible number of Series A Preferred Shares pro rata
among the holders of the Series A Preferred Shares to be redeemed based upon
the aggregate Liquidation Value of such Series A Preferred Shares held by
each such holder (plus all accrued and unpaid dividends thereon). The Series
A Preferred Shares not
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<PAGE>
redeemed shall remain outstanding and entitled to all of the rights and
preferences hereunder. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of Series A Preferred
Shares, such funds shall immediately be used to redeem the balance of the Series
A Preferred Shares which the Corporation has become obligated to redeem on any
Redemption Date but which it has not redeemed.
The term "REDEMPTION DATE," as to any Series A Preferred Share, means
the Scheduled Redemption Date or the date specified in the notice of any
redemption at the Corporation's option or at the holder's option or the
applicable date specified herein in the case of any other redemption.
(e) NOTICE OF REDEMPTION. Except as otherwise provided herein, the
Corporation shall mail written notice of each redemption of any Series A
Preferred Stock to each record holder thereof not more than 60 nor less than
30 days prior to the date on which such redemption is to be made. In case
fewer than the total number of Series A Preferred Shares represented by any
certificate are redeemed, a new certificate representing the number of
unredeemed Series A Preferred Shares shall be issued to the holder thereof
without cost to such holder within five business days after surrender of the
certificate representing the redeemed Series A Preferred Shares.
(f) DETERMINATION OF THE NUMBER OF EACH HOLDER'S SERIES A
PREFERRED SHARES TO BE REDEEMED. The number of Series A Preferred Shares to
be redeemed from each holder thereof in redemptions hereunder shall be the
number of Series A Preferred Shares determined by multiplying the total
number of Series A Preferred Shares to be redeemed times a fraction, the
numerator of which shall be the total number of Series A Preferred Shares
then held by such holder and the denominator of which shall be the total
number of Series A Preferred Shares then outstanding.
(g) DIVIDENDS AFTER REDEMPTION DATE. No Series A Preferred Share
shall be entitled to any dividends accruing after the Redemption Date of such
Series A Preferred Share if the Liquidation Value (plus all accrued and
unpaid dividends thereon) is paid to the holder of such Series A Preferred
Share on the Redemption Date. On such date, all rights of the holder of such
Series A Preferred Share shall cease, and such Series A Preferred Share shall
no longer be deemed to be issued and outstanding.
(h) REDEEMED OR OTHERWISE ACQUIRED SERIES A PREFERRED SHARES. Any
Series A Preferred Shares which are redeemed or otherwise acquired by the
Corporation shall be canceled and retired to authorized but unissued shares
and shall not be reissued, sold or transferred.
(i) OTHER REDEMPTIONS OR ACQUISITIONS. The Corporation shall not,
nor shall it permit any Subsidiary to, redeem or otherwise acquire any shares
of Series A Preferred Stock, except as expressly authorized herein.
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<PAGE>
6. VOTING RIGHTS. Subject to the following sentence, except as
otherwise provided herein, in the Purchase Agreement or otherwise required by
applicable law, the holders of Series A Preferred Stock shall have no
voting rights; provided that each holder of Series A Preferred Stock shall be
entitled to notice of all stockholders meetings at the same time and in the
same manner as notice is given to all stockholders entitled to vote at such
meetings. The foregoing notwithstanding, the holders of the Series A
Preferred shall be entitled to designate two directors to serve on the board
of directors of the Corporation at all times, such directors to be elected by
a holders of a majority the Series A Preferred.
7. EVENTS OF NONCOMPLIANCE.
(a) DEFINITION. An Event of Noncompliance shall be deemed to have
occurred if:
i. the Corporation fails to pay on any Dividend Reference Date the
full amount of dividends then accrued on the Series A Preferred Stock, whether
or not such payment is legally permissible or is prohibited by any agreement to
which the Corporation is subject;
ii. the Corporation fails to make any redemption payment with respect
to the Series A Preferred Stock which it is obligated to make hereunder, whether
or not such payment is legally permissible or is prohibited by any agreement to
which the Corporation is subject;
iii. upon the occurrence a Default or Event of Default as defined
in the Purchase Agreement;
iv. any representation or warranty contained in the Purchase
Agreement or required to be furnished to any holder of Series A Preferred
Stock pursuant to the Purchase Agreement, or any information contained in
writing required to be furnished by the Corporation or any Subsidiary to any
holder of Series A Preferred Stock, is false or misleading in any material
respect on the date made or furnished; or
v. the Corporation or any Subsidiary makes an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any Subsidiary bankrupt or insolvent; or any
order for relief with respect to the Corporation or any Subsidiary is entered
under the Federal Bankruptcy Code; or the Corporation or any Subsidiary
petitions or applies to any tribunal for the appointment of a custodian,
trustee, receiver or liquidator of the Corporation or any Subsidiary or of
any substantial part of the assets of the Corporation or any Subsidiary, or
commences any proceeding (other than a proceeding for the voluntary
liquidation and dissolution of a Subsidiary) relating to the Corporation or
any Subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction; or
any such petition or application is filed, or any such proceeding is
commenced, against the Corporation or any Subsidiary and either (a) the
Corporation or any such Subsidiary by any act indicates its approval
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<PAGE>
thereof, consent thereto or acquiescence therein or (b) such petition,
application or proceeding is not dismissed within 60 days.
(b) CONSEQUENCES OF CERTAIN EVENTS OF NONCOMPLIANCE.
i. If an Event of Noncompliance has occurred, the dividend rate
per annum on the Series A Preferred Stock shall increase immediately by an
increment of 3.0 percentage points i.e. the dividend rate will increase from
8.0% to 11.0% per annum. If such Event of Noncompliance remains uncured for a
period of 180 days, the dividend rate per annum on the Series A Preferred
Stock shall increase at the end of such 180 day period from 11.0% to 13.0%.
Any increase of the dividend rate resulting from the operation of this
paragraph shall terminate as of the close of business on the date on which no
Event of Noncompliance exists, subject to subsequent increases pursuant to
this paragraph.
ii. If an Event of Noncompliance has occurred, the holder or holders
of a majority of the Series A Preferred Stock then outstanding may demand (by
written notice delivered to the Corporation) immediate redemption of all or any
portion of the Series A Preferred Stock owned by such holder or holders at a
price per Series A Preferred Share equal to the Liquidation Value thereof (plus
all accrued and unpaid dividends thereon). The Corporation shall give prompt
written notice of such election to the other holders of Series A Preferred Stock
(but in any event within five days after receipt of the initial demand for
redemption), and each such other holder may demand immediate redemption of all
or any portion of such holder's Series A Preferred Stock by giving written
notice thereof to the Corporation within seven days after receipt of the
Corporation's notice. The Corporation shall redeem all Series A Preferred Stock
as to which rights under this paragraph have been exercised within 15 days after
receipt of the initial demand for redemption.
iii. If any Event of Noncompliance has occurred each Series A Director
shall automatically be entitled to cast two votes with respect to any matter
submitted to a vote of the board of directors. Each Series A Director may
exercise its right to cast two votes in accordance with the preceding sentence
with respect to any matter, including any matter at any annual or other special
meeting of directors, and to the extent and in the manner permitted by
applicable law, pursuant to a written consent in lieu of a meeting of the board
of directors. Such special right shall continue until such time as there is no
longer any Event of Noncompliance in existence, at which time such special right
shall terminate subject to revesting upon the occurrence and continuation of any
Event of Noncompliance which gives rise to such special right hereunder.
iv. If any Event of Noncompliance exists, each holder of Series A
Preferred Stock shall also have any other rights which such holder is entitled
to under any contract or agreement at any time and any other rights which such
holder may have pursuant to applicable law.
8. REGISTRATION OF TRANSFER. The Corporation shall keep at its
principal office a register for the registration of Series A Preferred Stock.
Upon the surrender of any certificate
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representing Series A Preferred Stock at such place, the Corporation shall, at
the request of the record holder of such certificate, execute and deliver (at
the Corporation's expense) a new certificate or certificates in exchange
therefor representing in the aggregate the number of Series A Preferred Shares
represented by the surrendered certificate. Each such new certificate shall be
registered in such name and shall represent such number of Series A Preferred
Shares as is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Series A Preferred Stock represented by such new certificate
from the date to which dividends have been fully paid on such Series A Preferred
Stock represented by the surrendered certificate.
9. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Series A Preferred Stock, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor or a Purchaser as defined in the Purchase Agreement, its
own agreement shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation shall (at its expense)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of Series A Preferred Shares of such class represented
by such lost, stolen, destroyed or mutilated certificate and dated the date of
such lost, stolen, destroyed or mutilated certificate, and dividends shall
accrue on the Series A Preferred Stock represented by such new certificate from
the date to which dividends have been fully paid on such lost, stolen, destroyed
or mutilated certificate.
10. AMENDMENT AND WAIVER. No amendment, modification or waiver shall
be binding or effective with respect to any provision hereof, without the prior
written consent of the holders of a majority of the Series A Preferred Stock
outstanding at the time such action is taken.
11. NOTICES. Except as otherwise expressly provided hereunder, all
notices referred to herein shall be in writing and shall be delivered by
registered or certified mail, return receipt requested and postage prepaid, or
by reputable overnight courier service, charges prepaid, and shall be deemed to
have been given when so mailed or sent (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
* * * * * * * * * *
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed this 30th day of September, 1998.
ZIMMERMAN SIGN COMPANY
/s/ Jeffrey Johnson V.P.
-----------------------------
By: Jeffrey Johnson
Its: VP, CFO
<PAGE>
ZIMMERMAN SIGN COMPANY
CERTIFICATE OF DESIGNATION OF
PREFERRED STOCK, SERIES B
Zimmerman Sign Company, a Texas corporation (the "CORPORATION")
certifies that pursuant to Article IV of its Amended and Restated Certificate
of Incorporation (the "CERTIFICATE") and in accordance with the provisions of
Section 2.13 of the Texas Business Corporation Act its Board of Directors
adopted the following resolution on September 29, 1998 creating a series of
preferred shares.
RESOLVED, that a series of authorized preferred shares of the
Corporation is hereby created, having the designation, par value, voting,
participation and other rights and restrictions set out below. All capitalized
terms used herein and not defined shall have the meanings ascribed to them in
the Certificate.
1. DESIGNATION AND NUMBER. The shares of such class shall be
designated "Preferred Stock, Series B" (the "SERIES B PREFERRED STOCK"). The
number of shares initially constituting the Series B Preferred Stock shall be
7,000, which number may be decreased (but not increased) by the Board of
Directors without a vote of shareholders; PROVIDED that such number may not be
decreased below the number of then outstanding shares of Series B Preferred
Stock.
2. RANKING. The Series B Preferred Stock shall, with respect to
dividend rights and right upon liquidation, winding up and dissolution, rank
(a) junior to the Corporation Preferred Stock, Series A (the "SERIES A
PREFERRED STOCK") and all other classes and series of stock of the
Corporation now or hereinafter authorized, issued or outstanding, including
any classes or series of preferred stock which by their terms expressly
provide that they are senior to the Series B Preferred Stock (collectively,
the "SENIOR STOCK"), (b) senior to all classes of Common Stock of the
Corporation now or hereinafter authorized, issued or outstanding, and senior
to any classes or series of preferred stock which by their terms expressly
provide that they are junior to the Series B Preferred Stock (collectively,
the "JUNIOR STOCK") and (c) PARI PASSU to the Corporation's Preferred Stock,
Series C (the "SERIES B PREFERRED STOCK") and all other classes and series of
stock of the Corporation now or hereinafter authorized, issued or
outstanding, including any classes or series of preferred stock, which by
their terms expressly provide that they rank on a parity with respect to
priority on distribution, in each case upon a liquidation, dissolution or
winding up of the Corporation with the Series B Preferred Stock (the "PARITY
STOCK").
3. DIVIDENDS.
<PAGE>
(a) GENERAL OBLIGATION. When and as declared by the Corporation's
Board of Directors and to the extent permitted under the Texas Business
Corporation Act and other applicable law and not prohibited by the terms of
the Series A Preferred Stock, the Corporation shall pay preferential
dividends in cash to the holders of the Series B Preferred Stock as provided
in this SECTION 2. Dividends on each share of the Series B Preferred Stock (a
"SERIES B PREFERRED SHARE") shall accrue on a daily basis at the rate of 6%
per annum of the sum of $100.00 (the "LIQUIDATION VALUE") plus all
accumulated and unpaid dividends thereon from and including the date of
issuance of such Series B Preferred Share to and including the first to occur
of (i) the date on which the Liquidation Value of such Series B Preferred
Share (plus all accrued and unpaid dividends thereon) is paid to the holder
thereof in connection with the liquidation of the Corporation or the
redemption of such Series B Preferred Share by the Corporation or (ii) the
date on which such share is otherwise acquired by the Corporation; PROVIDED,
HOWEVER, the Corporation shall not pay dividends to the holders of Series B
Preferred Stock so long as a Default or Event of Default (as defined in the
Senior Subordinated Note, Preferred Stock and Warrant Purchase Agreement,
dated as of September 30, 1998, by and among the Corporation, and certain
investors (the "PURCHASE AGREEMENT")) or an Event of Noncompliance (as
defined in the Certificate of Designation, Series A) is in existence
immediately prior to or would be in existence immediately after such dividend
payment. Such dividends shall accrue whether or not they have been declared
and whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends (other than
dividends on capital stock of the Corporation paid with shares of stock of
the same class), and such dividends shall be cumulative such that all accrued
and unpaid dividends shall be fully paid or declared with funds irrevocably
set apart for payment before any dividends, distributions, redemptions or
other payments may be made with respect to the Junior Stock. The date on
which the Corporation initially issues any Series B Preferred Share shall be
deemed to be its "date of issuance" regardless of the number of times
transfer of such Series B Preferred Share is made on the stock records
maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such Series B Preferred Share.
The Series B Preferred Stock shall not be entitled to receive any dividends
declared by the Corporation except as provided in this SECTION 3(a).
(b) DIVIDEND REFERENCE DATES. To the extent not paid on June 15
and December 15 of each year, beginning December 31, 1998 (the "DIVIDEND
REFERENCE DATES"), all dividends which have accrued on each Series B
Preferred Share outstanding during the sixth-month period (or other period in
the case of the initial Dividend Reference Date) ending upon each such
Dividend Reference Date shall be accumulated and shall remain accumulated
dividends with respect to such Series B Preferred Share until paid to the
holder thereof.
(c) DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except as otherwise
provided herein, if at any time the Corporation pays less than the total
amount of dividends then accrued with respect to the Series B Preferred
Stock, such payment shall be distributed pro rata among the holders thereof
based upon the aggregate accrued but unpaid dividends on the Series B
Preferred Shares held by each such holder.
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<PAGE>
(d) PAYMENT OF DIVIDENDS WITH SHARES. Notwithstanding any other
provision of this SECTION 3, in the sole discretion of the Corporation, any
dividends accruing on the Series B Preferred Stock may be paid in lieu of
cash dividends by the issuance of additional Series B Preferred Shares
(including fractional Series B Preferred Shares) having an aggregate
Liquidation Value at the time of such payment equal to the amount of the
dividend to be paid; provided that if the Corporation pays less than the
total amount of dividends then accrued on the Series B Preferred in the form
of additional Series B Preferred Shares, such payment in Series B Preferred
Shares shall be made pro rata among the holders of Series B Preferred Stock
based upon the aggregate accrued but unpaid dividends on the Series B
Preferred Shares held by each such holder. If and when any Series B Preferred
Shares are issued under this SECTION 1(d) for the payment of accrued
dividends, such Series B Preferred Shares shall be deemed to be validly issued
and outstanding and fully paid and nonassessable.
4. LIQUIDATION.
(a) Upon any liquidation, dissolution or winding up of the
Corporation (whether voluntary or involuntary), each holder of Series B
Preferred Stock shall be entitled to be paid, before any distribution or
payment is made upon any Junior Stock, an amount in cash equal to the
aggregate Liquidation Value of all Series B Preferred Shares held by such
holder (plus all accrued and unpaid dividends thereon), and the holders of
Series B Preferred Stock shall not be entitled to any further payment. If upon
any such liquidation, dissolution or winding up of the Corporation the
Corporation's assets to be distributed among the holders of the Series B
Preferred Stock are insufficient to permit payment to such holders of the
aggregate amount which they are entitled to be paid under this SECTION 3, then
the entire assets available to be distributed to the Corporation's
shareholders shall be distributed pro rata among such holders based upon the
aggregate Liquidation Value (plus all accrued and unpaid dividends) of the
Series B Preferred Stock held by each such holder. Prior to the liquidation,
dissolution or winding up of the Corporation, the Corporation shall declare
for payment all accrued and unpaid dividends with respect to the Series B
Preferred Stock, but only to the extent of funds of the Corporation legally
available for the payment of dividends. Not more than 60 days nor less than 30
days prior to the payment date stated therein, the Corporation shall mail
written notice of any such liquidation, dissolution or winding up to each
record holder of Series B Preferred Stock, setting forth in reasonable detail
the amount of proceeds to be paid with respect to each share of capital stock
of the Company, including the Series B Preferred Stock, and each share of
Common Stock in connection with such liquidation, dissolution or winding up.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, payment shall be made to the holders of the Series B Preferred
Stock, in the amounts herein fixed, before any payment shall be made or assets
distributed to the holders of the Junior Stock.
-3-
<PAGE>
5. REDEMPTIONS. To the extent permitted under the Texas Business
Corporation Act and other applicable law:
(a) SCHEDULED REDEMPTION. On September 30, 2008 (the "SCHEDULED
REDEMPTION DATE"), the Corporation shall redeem all outstanding shares of Series
B Preferred Stock at a price per Series B Preferred Share equal to the
Liquidation Value thereof (plus accrued and unpaid dividends thereon).
(b) OPTIONAL REDEMPTIONS. The Corporation may at any time and from
time to time redeem all or any portion of the shares of Series B Preferred Stock
then outstanding. Upon any such redemption, the Corporation shall pay a price
per Series B Preferred Share equal to the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon).
(c) REDEMPTION PAYMENTS. For each Series B Preferred Share which is
to be redeemed hereunder, the Corporation shall be obligated on the Redemption
Date to pay to the holder thereof (upon surrender by such holder at the
Corporation's principal office of the certificate representing such Series B
Preferred Share) an amount in immediately available funds equal to the
Liquidation Value of such Series B Preferred Share (plus all accrued and unpaid
dividends thereon). If the funds of the Corporation legally available for
redemption of Series B Preferred Shares on any Redemption Date are insufficient
to redeem the total number of Series B Preferred Shares to be redeemed on such
date, those funds which are legally available shall be used to redeem the
maximum possible number of Series B Preferred Shares pro rata among the holders
of the Series B Preferred Shares to be redeemed based upon the aggregate
Liquidation Value of such Series B Preferred Shares held by each such holder
(plus all accrued and unpaid dividends thereon). The Series B Preferred Shares
not redeemed shall remain outstanding and entitled to all of the rights and
preferences hereunder. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of Series B Preferred
Shares, such funds shall immediately be used to redeem the balance of the Series
B Preferred Shares which the Corporation has become obligated to redeem on any
Redemption Date but which it has not redeemed.
The term "REDEMPTION DATE," as to any Series B Preferred Share, means
the Scheduled Redemption Date or such other date specified in the notice of any
redemption at the Corporation's option or at the holder's option or the
applicable date specified herein in the case of any other redemption.
(d) NOTICE OF REDEMPTION. Except as otherwise provided herein, the
Corporation shall mail written notice of each redemption of any Series B
Preferred Stock to each record holder thereof not more than 60 nor less than 30
days prior to the date on which such redemption is to be made. In case fewer
than the total number of Series B Preferred Shares represented by any
certificate are redeemed, a new certificate representing the number of
unredeemed Series B Preferred Shares shall be issued to the holder thereof
without cost to such holder within fifteen business days after surrender of the
certificate representing the redeemed Series B Preferred Shares.
-4-
<PAGE>
(e) DETERMINATION OF THE NUMBER OF EACH HOLDER'S SERIES B
PREFERRED SHARES TO BE REDEEMED. The number of Series B Preferred Shares to
be redeemed from each holder thereof in redemptions hereunder shall be the
number of Series B Preferred Shares determined by multiplying the total
number of Series B Preferred Shares to be redeemed times a fraction, the
numerator of which shall be the total number of Series B Preferred Shares
then held by such holder and the denominator of which shall be the total
number of Series B Preferred Shares then outstanding.
(f) DIVIDENDS AFTER REDEMPTION DATE. No Series B Preferred Share
shall be entitled to any dividends accruing after the Redemption Date of such
Series B Preferred Share if the Liquidation Value (plus all accrued and
unpaid dividends thereon) is paid to the holder of such Series B Preferred
Share on the Redemption Date. On such date, all rights of the holder of such
Series B Preferred Share shall cease, and such Series B Preferred Share shall
no longer be deemed to be issued and outstanding.
(g) REDEEMED OR OTHERWISE ACQUIRED SERIES B PREFERRED SHARES. Any
Series B Preferred Shares which are redeemed or otherwise acquired by the
Corporation shall be canceled and retired to authorized but unissued shares and
shall not be reissued, sold or transferred.
(h) OTHER REDEMPTIONS OR ACQUISITIONS. The Corporation shall not, nor
shall it permit any Subsidiary to, redeem or otherwise acquire any shares of
Series B Preferred Stock, except as expressly authorized herein.
(i) REDEMPTION PROHIBITED. Notwithstanding anything contained
herein to the contrary, the Corporation shall not redeem any shares of Series
B Preferred Stock so long as any shares of Series A Preferred are outstanding.
6. VOTING RIGHTS. Except as otherwise provided herein and as
otherwise required by applicable law, the Series B Preferred Stock shall have no
voting rights; provided that each holder of Series B Preferred Stock shall be
entitled to notice of all shareholders meetings at the same time and in the same
manner as notice is given to all shareholders entitled to vote at such meetings.
7. REGISTRATION OF TRANSFER. The Corporation shall keep at its
principal office a register for the registration of Series B Preferred Stock.
Upon the surrender of any certificate representing Series B Preferred Stock
at such place, the Corporation shall, at the request of the record holder of
such certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the
aggregate the number of Series B Preferred Shares represented by the
surrendered certificate. Each such new certificate shall be registered in
such name and shall represent such number of Series B Preferred Shares as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Series B Preferred Stock represented by such new
certificate from the date to which dividends have been fully paid on such
Series B Preferred Stock represented by the surrendered certificate.
-5-
<PAGE>
8. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Series B Preferred Stock, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor or a Purchaser as defined in the Purchase Agreement, its
own agreement shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation shall (at its expense)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of Series B Preferred Shares of such class represented
by such lost, stolen, destroyed or mutilated certificate and dated the date of
such lost, stolen, destroyed or mutilated certificate, and dividends shall
accrue on the Series B Preferred Stock represented by such new certificate from
the date to which dividends have been fully paid on such lost, stolen, destroyed
or mutilated certificate.
9. AMENDMENT AND WAIVER. No amendment, modification or waiver shall
be binding or effective with respect to any provision hereof, without the prior
written consent of the holders of a majority of the Series B Preferred Stock
outstanding at the time such action is taken.
10. NOTICES. Except as otherwise expressly provided hereunder, all
notices referred to herein shall be in writing and shall be delivered by
registered or certified mail, return receipt requested and postage prepaid, or
by reputable overnight courier service, charges prepaid, and shall be deemed to
have been given when so mailed or sent (i) to the Corporation, at its principal
executive offices and (ii) to any shareholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
* * * * * * * * * *
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed this 30th day of September, 1998.
ZIMMERMAN SIGN COMPANY
/s/ Jeffrey Johnson V.P.
----------------------------
By: Jeffrey Johnson
Its: VP, CFO
<PAGE>
ZIMMERMAN SIGN COMPANY
CERTIFICATE OF DESIGNATION OF
PREFERRED STOCK SERIES C
Zimmerman Sign Company, a Texas corporation (the "CORPORATION")
certifies that pursuant to Article IV of its Amended and Restated Certificate of
Incorporation (the "CERTIFICATE") and in accordance with the provisions of
Section 2.13 of the Texas Business Corporation Act its Board of Directors
adopted the following resolution on September 29, 1998 creating a series of
preferred shares.
RESOLVED, that a series of authorized preferred shares of the
Corporation is hereby created, having the designation, par value, voting,
participation and other rights and restrictions set out below. All capitalized
terms used herein and not defined shall have the meanings ascribed to them in
the Certificate.
1. DESIGNATION AND NUMBER. The shares of such class shall be
designated "Preferred Stock, Series C" (the "SERIES C PREFERRED STOCK"). The
number of shares initially constituting the Series C Preferred Stock shall be
6,250, which number may be decreased (but not increased) by the Board of
Directors without a vote of shareholders; PROVIDED that such number may not
be decreased below the number of then outstanding shares of Series C Preferred
Stock.
2. RANKING. The Series C Preferred Stock shall, with respect to
dividend rights and right upon liquidation, winding up and dissolution, rank
(a) junior to the Corporation's Preferred Stock, Series A (the "SERIES A
PREFERRED STOCK") and all other classes and series of stock of the
Corporation now or hereinafter authorized, issued or outstanding, including
any classes or series of preferred stock which by their terms expressly
provide that they are senior to the Series C Preferred Stock (collectively,
the "SENIOR STOCK"), (b) senior to all classes of Common Stock of the
Corporation now or hereinafter authorized, issued or outstanding, and senior
to any classes or series of preferred stock which by their terms expressly
provide that they are junior to the Series C Preferred Stock (collectively,
the "JUNIOR STOCK"), and (c) PARI PASSU to the Corporation's Preferred Stock,
Series B (the "SERIES B PREFERRED STOCK") and all other classes and series of
stock of the Corporation now or hereinafter authorized, issued or
outstanding, including any classes or series of preferred stock, which by
their terms expressly provide that they rank on a parity with respect to
priority on distribution, in each case upon a liquidation, dissolution or
winding up of the Corporation with the Series C Preferred Stock (the "PARITY
STOCK").
3. DIVIDENDS.
(a) GENERAL OBLIGATION. When and as declared by the Corporation's
Board of Directors and to the extent permitted under the Texas Business
Corporation Act and other applicable
<PAGE>
law and not prohibited by the terms of the Series C Preferred Stock, the
Corporation shall pay preferential dividends in cash to the holders of the
Series A Preferred Stock as provided in this SECTION 2. Dividends on each
share of the Series C Preferred Stock (a "SERIES C PREFERRED SHARE") shall
accrue on a daily basis at the rate of 6% per annum of the sum of $100.00
(the "LIQUIDATION VALUE") plus all accumulated and unpaid dividends thereon
from and including the date of issuance of such Series C Preferred Share to
and including the first to occur of (i) the date on which the Liquidation
Value of such Series C Preferred Share (plus all accrued and unpaid
dividends thereon) is paid to the holder thereof in connection with the
liquidation of the Corporation or the redemption of such Series C Preferred
Share by the Corporation or (ii) the date on which such share is otherwise
acquired by the Corporation; PROVIDED, HOWEVER, the Corporation shall not pay
dividends to the holders of Series C Preferred Stock so long as a Default or
Event of Default (as defined in the Senior Subordinated Note, Preferred Stock
and Warrant Purchase Agreement, dated as of September 30, 1998, by and among
the Corporation and certain investors (the "PURCHASE AGREEMENT")) or an
Event of Noncompliance (as defined in the Certificate of Designation, Series
A) is in existence immediately prior to or would be in existence immediately
after such dividend payment. Such dividends shall accrue whether or not they
have been declared and whether or not there are profits, surplus or other
funds of the Corporation legally available for the payment of dividends
(other than dividends on capital stock of the Corporation paid with shares of
stock of the same class), and such dividends shall be cumulative such that
all accrued and unpaid dividends shall be fully paid or declared with funds
irrevocably set apart for payment before any dividends, distributions,
redemptions or other payments may be made with respect to the Junior Stock.
The date on which the Corporation initially issues any Series C Preferred
Share shall be deemed to be its "date of issuance" regardless of the number
of times transfer of such Series C Preferred Share is made on the stock
records maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such Series C Preferred Share.
The Series C Preferred Stock shall not be entitled to receive any dividends
declared by the Corporation except as provided in this SECTION 3(a).
(b) DIVIDEND REFERENCE DATES. To the extent not paid on June 15 and
December 15 of each year, beginning December 31, 1998 (the "DIVIDEND REFERENCE
DATES"), all dividends which have accrued on each Series C Preferred Share
outstanding during the sixth-month period (or other period in the case of the
initial Dividend Reference Date) ending upon each such Dividend Reference Date
shall be accumulated and shall remain accumulated dividends with respect to such
Series C Preferred Share until paid to the holder thereof.
(c) DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except as otherwise
provided therein, if at any time the Corporation pays less than the total
amount of dividends then accrued with respect to the Series C Preferred
Stock, such payment shall be distributed pro rata among the holders thereof
based upon the aggregate accrued but unpaid dividends on the Series C
Preferred Shares held by each such holder.
(d) PAYMENT OF DIVIDENDS WITH SHARES. Notwithstanding any other
provision of this SECTION 3, in the sole discretion of the Corporation, any
dividends accruing on the Series C
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<PAGE>
Preferred Stock may be paid in lieu of cash dividends by the issuance of
additional Series C Preferred Shares (including fractional Series C Preferred
Shares) having an aggregate Liquidation Value at the time of such payment
equal to the amount of the dividend to be paid; provided that if the
Corporation pays less than the total amount of dividends then accrued on the
Series C Preferred in the form of additional Series C Preferred Shares, such
payment in Series C Preferred Shares shall be made pro rata among the holders of
Series C Preferred Stock based upon the aggregate accrued but unpaid dividends
on the Series C Preferred Shares held by each such holder. If and when any
Series C Preferred Shares are issued under this SECTION 1(d) for the payment of
accrued dividends, such Series C Preferred Shares shall be deemed to be validly
issued and outstanding and fully paid and nonassessable.
4. LIQUIDATION.
(a) Upon any liquidation, dissolution or winding up of the
Corporation (whether voluntary or involuntary), each holder of Series C
Preferred Stock shall be entitled to be paid, before any distribution or
payment is made upon any Junior Stock, an amount in cash equal to the
aggregate Liquidation Value of all Series C Preferred Shares held by such
holder (plus all accrued and unpaid dividends thereon), and the holders of
Series C Preferred Stock shall not be entitled to any further payment. If
upon any such liquidation, dissolution or winding up of the Corporation the
Corporation's assets to be distributed among the holders of the Series C
Preferred Stock are insufficient to permit payment to such holders of the
aggregate amount which they are entitled to be paid under this SECTION 3,
then the entire assets available to be distributed to the Corporation's
shareholders shall be distributed pro rata among such holders based upon the
aggregate Liquidation Value (plus all accrued and unpaid dividends) of the
Series C Preferred Stock held by each such holder. Prior to the liquidation,
dissolution or winding up of the Corporation, the Corporation shall declare
for payment all accrued and unpaid dividends with respect to the Series C
Preferred Stock, but only to the extent of funds of the Corporation legally
available for the payment of dividends. Not more than 60 days nor less than 30
days prior to the payment date stated therein, the Corporation shall mail
written notice of any such liquidation, dissolution or winding up to each
record holder of Series C Preferred Stock, setting forth in reasonable detail
the amount of proceeds to be paid with respect to each share of capital stock
of the Company, including the Series C Preferred Stock, and each share of
Common Stock in connection with such liquidation, dissolution or winding up.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, payment shall be made to the holders of the Series C Preferred
Stock, in the amounts herein fixed, before any payment shall be made or assets
distributed to the holders of the Junior Stock.
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<PAGE>
5. REDEMPTIONS. To the extent permitted under the Texas Business
Corporation Act and other applicable law:
(a) SCHEDULED REDEMPTION. On the earlier of (i) September 30, 2008
and (ii) the sixth-month anniversary of the redemption in full of all Series A
Preferred Stock (the "SCHEDULED REDEMPTION DATE"), the Corporation shall redeem
all outstanding shares of Series C Preferred Stock at a price per Series C
Preferred Share equal to the Liquidation Value thereof (plus accrued and unpaid
dividends thereon).
(b) OPTIONAL REDEMPTIONS. The Corporation may at any time and from
time to time redeem all or any portion of the shares of Series C Preferred Stock
then outstanding. Upon any such redemption, the Corporation shall pay a price
per Series C Preferred Share equal to the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon).
(c) REDEMPTION PAYMENTS. For each Series C Preferred Share which
is to be redeemed hereunder, the Corporation shall be obligated on the
Redemption Date to pay to the holder thereof (upon surrender by such holder
at the Corporation's principal office of the certificate representing such
Series C Preferred Share) an amount in immediately available funds equal to
the Liquidation Value of such Series C Preferred Share (plus all accrued and
unpaid dividends thereon). If the funds of the Corporation legally available
for redemption of Series C Preferred Shares on any Redemption Date are
insufficient to redeem the total number of Series C Preferred Shares to be
redeemed on such date, those funds which are legally available shall be used
to redeem the maximum possible number of Series C Preferred Shares pro rata
among the holders of the Series C Preferred Shares to be redeemed based upon
the aggregate Liquidation Value of such Series C Preferred Shares held by
each such holder (plus all accrued and unpaid dividends thereon). The Series
C Preferred Shares not redeemed shall remain outstanding and entitled to all
of the rights and preferences hereunder. At any time thereafter when
additional funds of the Corporation are legally available for the redemption
of Series C Preferred Shares, such funds shall immediately be used to redeem
the balance of the Series C Preferred Shares which the Corporation has become
obligated to redeem on any Redemption Date but which it has not redeemed.
The term "REDEMPTION DATE," as to any Series C Preferred Share, means
the Scheduled Redemption Date or such other date specified in the notice of any
redemption at the Corporation's option or at the holder's option or the
applicable date specified herein in the case of any other redemption.
(d) NOTICE OF REDEMPTION. Except as otherwise provided herein, the
Corporation shall mail written notice of each redemption of any Series C
Preferred Stock to each record holder thereof not more than 60 nor less than 30
days prior to the date on which such redemption is to be made. In case fewer
than the total number of Series C Preferred Shares represented by any
certificate are redeemed, a new certificate representing the number of
unredeemed Series C Preferred Shares
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<PAGE>
shall be issued to the holder thereof without cost to such holder within
fifteen business days after surrender of the certificate representing the
redeemed Series C Preferred Shares.
(e) DETERMINATION OF THE NUMBER OF EACH HOLDER'S SERIES C PREFERRED
SHARES TO BE REDEEMED. The number of Series C Preferred Shares to be redeemed
from each holder thereof in redemptions hereunder shall be the number of Series
C Preferred Shares determined by multiplying the total number of Series C
Preferred Shares to be redeemed times a fraction, the numerator of which shall
be the total number of Series C Preferred Shares then held by such holder and
the denominator of which shall be the total number of Series C Preferred Shares
then outstanding.
(f) DIVIDENDS AFTER REDEMPTION DATE. No Series C Preferred Share
shall be entitled to any dividends accruing after the Redemption Date of such
Series C Preferred Share if the Liquidation Value (plus all accrued and unpaid
dividends thereon) is paid to the holder of such Series C Preferred Share on the
Redemption Date. On such date, all rights of the holder of such Series C
Preferred Share shall cease, and such Series C Preferred Share shall no longer
be deemed to be issued and outstanding.
(g) REDEEMED OR OTHERWISE ACQUIRED SERIES C PREFERRED SHARES. Any
Series C Preferred Shares which are redeemed or otherwise acquired by the
Corporation shall be canceled and retired to authorized but unissued shares and
shall not be reissued, sold or transferred.
(h) OTHER REDEMPTIONS OR ACQUISITIONS. The Corporation shall not, nor
shall it permit any Subsidiary to, redeem or otherwise acquire any shares of
Series B Preferred Stock, except as expressly authorized herein.
(i) REDEMPTION PROHIBITED. Notwithstanding anything contained herein
to the contrary, the Corporation shall not redeem any shares of Series C
Preferred Stock so long as any shares of Series A Preferred are outstanding.
6. VOTING RIGHTS. Except as otherwise provided herein and as
otherwise required by applicable law, the Series C Preferred Stock shall have
no voting rights; provided that each holder of Series C Preferred Stock shall
be entitled to notice of all shareholders meetings at the same time and in
the same manner as notice is given to all shareholders entitled to vote at
such meetings.
7. REGISTRATION OF TRANSFER. The Corporation shall keep at its
principal office a register for the registration of Series C Preferred Stock.
Upon the surrender of any certificate representing Series C Preferred Stock
at such place, the Corporation shall, at the request of the record holder of
such certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the
aggregate the number of Series C Preferred Shares represented by the
surrendered certificate. Each such new certificate shall be registered in
such name and shall represent such number of Series C Preferred Shares as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered
-5-
<PAGE>
certificate, and dividends shall accrue on the Series C Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such Series C Preferred Stock represented by the surrendered
certificate.
8. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Series C Preferred Stock, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor or a Purchaser as defined in the Purchase Agreement, its
own agreement shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation shall (at its expense)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of Series C Preferred Shares of such class represented
by such lost, stolen, destroyed or mutilated certificate and dated the date of
such lost, stolen, destroyed or mutilated certificate, and dividends shall
accrue on the Series C Preferred Stock represented by such new certificate from
the date to which dividends have been fully paid on such lost, stolen, destroyed
or mutilated certificate.
9. AMENDMENT AND WAIVER. No amendment, modification or waiver shall
be binding or effective with respect to any provision hereof, without the prior
written consent of the holders of a majority of the Series B Preferred Stock
outstanding at the time such action is taken.
10. NOTICES. Except as otherwise expressly provided hereunder, all
notices referred to herein shall be in writing and shall be delivered by
registered or certified mail, return receipt requested and postage prepaid, or
by reputable overnight courier service, charges prepaid, and shall be deemed to
have been given when so mailed or sent (i) to the Corporation, at its principal
executive offices and (ii) to any shareholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
* * * * * * * * * *
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed this 30th day of September, 1998.
ZIMMERMAN SIGN COMPANY
/s/ Jeffrey Johnson V.P.
--------------------------
By: Jeffrey Johnson
Its: VP, CFO
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
ZIMMERMAN SIGN COMPANY
Adopted as of September 29, 1998
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE . . . . . . . . . . . . . . . . . 1
Section 2. OTHER OFFICES . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
SHAREHOLDERS
Section 1. PLACE OF MEETINGS . . . . . . . . . . . . . . . . . 1
Section 2. ANNUAL MEETING. . . . . . . . . . . . . . . . . . . 1
Section 3. LIST OF SHAREHOLDERS. . . . . . . . . . . . . . . . 1
Section 4. SPECIAL MEETINGS. . . . . . . . . . . . . . . . . . 2
Section 5. NOTICE. . . . . . . . . . . . . . . . . . . . . . . 2
Section 6. QUORUM. . . . . . . . . . . . . . . . . . . . . . . 2
Section 7. VOTING. . . . . . . . . . . . . . . . . . . . . . . 2
Section 8. METHOD OF VOTING. . . . . . . . . . . . . . . . . . 2
Section 9. RECORD DATE; CLOSING TRANSFER BOOKS . . . . . . . . 3
ARTICLE III
BOARD OF DIRECTORS
Section 1. MANAGEMENT. . . . . . . . . . . . . . . . . . . . . 3
Section 2. QUALIFICATION; ELECTION; TERM . . . . . . . . . . . 3
Section 3. NUMBER. . . . . . . . . . . . . . . . . . . . . . . 3
Section 4. REMOVAL . . . . . . . . . . . . . . . . . . . . . . 4
Section 5. VACANCIES . . . . . . . . . . . . . . . . . . . . . 4
Section 6. PLACE OF MEETINGS . . . . . . . . . . . . . . . . . 4
Section 7. ANNUAL MEETING. . . . . . . . . . . . . . . . . . . 4
Section 8. REGULAR MEETINGS. . . . . . . . . . . . . . . . . . 4
Section 9. SPECIAL MEETINGS. . . . . . . . . . . . . . . . . . 4
Section 10. QUORUM. . . . . . . . . . . . . . . . . . . . . . . 4
Section 11. INTERESTED DIRECTORS. . . . . . . . . . . . . . . . 5
Section 12. COMMITTEES. . . . . . . . . . . . . . . . . . . . . 5
Section 13. ACTION BY CONSENT . . . . . . . . . . . . . . . . . 5
Section 14. COMPENSATION OF DIRECTORS . . . . . . . . . . . . . 5
ARTICLE IV
NOTICE
Section 1. FORM OF NOTICE. . . . . . . . . . . . . . . . . . . 5
Section 2. WAIVER. . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V
OFFICERS AND AGENTS
Section 1. IN GENERAL. . . . . . . . . . . . . . . . . . . . . 6
i
<PAGE>
Section 2. ELECTION. . . . . . . . . . . . . . . . . . . . . . 6
Section 3. OTHER OFFICERS AND AGENTS . . . . . . . . . . . . . 6
Section 4. COMPENSATION. . . . . . . . . . . . . . . . . . . . 6
Section 5. TERM OF OFFICE AND REMOVAL. . . . . . . . . . . . . 6
Section 6. EMPLOYMENT AND OTHER CONTRACTS. . . . . . . . . . . 7
Section 7. CHAIRMAN. . . . . . . . . . . . . . . . . . . . . . 7
Section 8. PRESIDENT . . . . . . . . . . . . . . . . . . . . . 7
Section 9. VICE PRESIDENTS . . . . . . . . . . . . . . . . . . 7
Section 10. SECRETARY . . . . . . . . . . . . . . . . . . . . . 7
Section 11. ASSISTANT SECRETARIES . . . . . . . . . . . . . . . 8
Section 12. TREASURER . . . . . . . . . . . . . . . . . . . . . 8
Section 13. ASSISTANT TREASURERS. . . . . . . . . . . . . . . . 8
Section 14. BONDING . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. FORM OF CERTIFICATES. . . . . . . . . . . . . . . . 8
Section 2. LOST CERTIFICATES . . . . . . . . . . . . . . . . . 9
Section 3. TRANSFER OF SHARES. . . . . . . . . . . . . . . . . 9
Section 4. REGISTERED SHAREHOLDERS . . . . . . . . . . . . . . 9
ARTICLE VII
GENERAL PROVISIONS
Section 1. DIVIDENDS . . . . . . . . . . . . . . . . . . . . . 10
Section 2. RESERVES. . . . . . . . . . . . . . . . . . . . . . 10
Section 3. TELEPHONE AND SIMILAR MEETINGS. . . . . . . . . . . 10
Section 4. BOOKS AND RECORDS . . . . . . . . . . . . . . . . . 10
Section 5. FISCAL YEAR.. . . . . . . . . . . . . . . . . . . . 10
Section 6. SEAL. . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7. INDEMNIFICATION . . . . . . . . . . . . . . . . . . 11
Section 8. INSURANCE . . . . . . . . . . . . . . . . . . . . . 11
Section 9. RESIGNATION . . . . . . . . . . . . . . . . . . . . 11
Section 10. AMENDMENT OF BYLAWS . . . . . . . . . . . . . . . . 11
Section 11. INVALID PROVISIONS. . . . . . . . . . . . . . . . . 11
Section 12. RELATION TO ARTICLES OF INCORPORATION . . . . . . . 11
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
ZIMMERMAN SIGN COMPANY
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office and registered
agent of Zimmerman Sign Company (the "Corporation") will be as from time to
time set forth in the Corporation's Articles of Incorporation.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at
such other places, both within and without the State of Texas, as the Board
of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the shareholders for
the election of Directors will be held at such place, within or without the
State of Texas, as may be fixed from time to time by the Board of Directors.
Meetings of shareholders for any other purpose may be held at such time and
place, within or without the State of Texas, as may be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
SECTION 2. ANNUAL MEETING. An annual meeting of the shareholders
will be held at such time as may be determined by the Board of Directors, at
which meeting the shareholders will elect a Board of Directors and transact
such other business as may properly be brought before the meeting.
SECTION 3. LIST OF SHAREHOLDERS. At least ten days before each
meeting of shareholders, a complete list of the shareholders entitled to vote
at such meeting, arranged in alphabetical order, with the address of and the
number of voting shares registered in the name of each, will be prepared by
the officer or agent having charge of the stock transfer books. Such list
will be kept on file at the registered office of the Corporation for a period
of ten days prior to such meeting and will be subject to inspection by any
shareholder at any time during usual business hours. Such list will be
produced and kept open at the time and place of the meeting during the whole
time thereof, and will be subject to the inspection of any shareholder who
may be present.
SECTION 4. SPECIAL MEETINGS. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by law, the Articles
of Incorporation or these Bylaws, may be called by the President or the Board
of Directors, or will be called by the President or Secretary at
<PAGE>
the request in writing of the holders of not less than 10% of all the shares
issued, outstanding and entitled to vote (unless a different percentage is
specified in the Articles of Incorporation). Such request will state the
purpose or purposes of the proposed meeting. Business transacted at all
special meetings will be confined to the purposes stated in the notice of the
meeting unless all shareholders entitled to vote are present and consent.
SECTION 5. NOTICE. Written or printed notice stating the place, day
and hour of any meeting of the shareholders and, in case of a special
meeting, the purpose or purposes for which the meeting is called, will be
delivered not less than ten nor more than sixty days before the date of the
meeting, either personally or by mail, by or at the direction of the
President, the Secretary, or the officer or person calling the meeting, to
each shareholder of record entitled to vote at the meeting. If mailed, such
notice will be deemed to be delivered when deposited in the United States
mail, addressed to the shareholder at his/her address as it appears on the
stock transfer books of the Corporation, with postage thereon prepaid.
SECTION 6. QUORUM. With respect to any matter, the presence in
person or by proxy of the holders of a majority of the shares entitled to
vote on that matter will be necessary and sufficient to constitute a quorum
for the transaction of business except as otherwise provided by law, the
Articles of Incorporation or these Bylaws. If, however, such quorum is not
present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, will
have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum is present or represented.
If the adjournment is for more than 30 days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting will be given to each shareholder of record entitled to vote at the
meeting. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted
at the meeting as originally notified.
SECTION 7. VOTING. When a quorum is present at any meeting of the
Corporation's shareholders, the vote of the holders of a majority of the
shares entitled to vote that are actually voted on any question brought
before the meeting will be sufficient to decide such question; provided that
if the question is one upon which, by express provision of law, the Articles
of Incorporation or these Bylaws, a different vote is required, such express
provision shall govern and control the decision of such question.
SECTION 8. METHOD OF VOTING. Each outstanding share of the
Corporation's capital stock, regardless of class or series, will be entitled
to one vote on each matter submitted to a vote at a meeting of shareholders,
except to the extent that the voting rights of the shares of any class or
series are limited or denied by the Articles of Incorporation, as amended
from time to time. At any meeting of the shareholders, every shareholder
having the right to vote will be entitled to vote in person or by proxy
executed in writing by such shareholder and bearing a date not more than 11
months prior to such meeting, unless such instrument provides for a longer
period. A telegram, telex, cablegram or similar transmission by the
shareholder, or a photographic, photostatic, facsimile or similar
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<PAGE>
reproduction of a writing executed by the shareholder, shall be treated as an
execution in writing for purposes of the preceding sentence. Each proxy will
be revocable unless expressly provided therein to be irrevocable and if, and
only so long as, it is coupled with an interest sufficient in law to support
an irrevocable power. Such proxy will be filed with the Secretary of the
Corporation prior to or at the time of the meeting. Voting for directors will
be in accordance with Article III of these Bylaws. Voting on any question or
in any election may be by voice vote or show of hands unless the presiding
officer orders or any shareholder demands that voting be by written ballot.
SECTION 9. RECORD DATE; CLOSING TRANSFER BOOKS. The Board of
Directors may fix in advance a record date for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders,
such record date to be not less than ten nor more than sixty days prior to
such meeting, or the Board of Directors may close the stock transfer books
for such purpose for a period of not less than ten nor more than sixty days
prior to such meeting. In the absence of any action by the Board of
Directors, the date upon which the notice of the meeting is mailed will be
the record date.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. MANAGEMENT. The business and affairs of the Corporation
will be managed by or under the direction of the Board of Directors, who may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law, the Articles of Incorporation or these Bylaws
directed or required to be exercised or done by the shareholders.
SECTION 2. QUALIFICATION; ELECTION; TERM. None of the Directors
need be a shareholder of the Corporation or a resident of the State of Texas.
The Directors will be elected by plurality vote at the annual meeting of the
shareholders, except as hereinafter provided, and each Director elected will
hold office until whichever of the following occurs first: his/her successor
is elected and qualified, his/her resignation, his/her removal from office by
the shareholders or his/her death.
SECTION 3. NUMBER. The number of Directors of the Corporation will
be at least one and not more than seven. The number of Directors authorized
will be fixed as the Board of Directors may from time to time designate, or
if no such designation has been made, the number of Directors will be the
same as the number of members of the initial Board of Directors as set forth
in the Articles of Incorporation. No decrease in the number of Directors
will have the effect of shortening the term of any incumbent Director.
SECTION 4. REMOVAL. Any Director may be removed either for or
without cause at any special meeting of shareholders by the affirmative vote
of at least a majority in number of shares of the shareholders present in
person or represented by proxy at such meeting and entitled to vote for the
election of such Director; provided, that notice of intention to act upon
such matter has been
-3-
<PAGE>
given in the notice calling such meeting.
SECTION 5. VACANCIES. Any vacancy occurring in the Board of
Directors by death, resignation, removal or otherwise may be filled by an
affirmative vote of at least a majority of the remaining Directors though
less than a quorum of the Board of Directors. A Director elected to fill a
vacancy will be elected for the unexpired term of his/her predecessor in
office. A directorship to be filled by reason of an increase in the number
of Directors may be filled by the Board of Directors for a term of office
only until the next election of one or more Directors by the shareholders.
SECTION 6. PLACE OF MEETINGS. Meetings of the Board of Directors,
regular or special, may be held at such place within or without the State of
Texas as may be fixed from time to time by the Board of Directors.
SECTION 7. ANNUAL MEETING. The first meeting of each newly elected
Board of Directors will be held without further notice immediately following
the annual meeting of shareholders and at the same place, unless by unanimous
consent, the Directors then elected and serving shall change such time or
place.
SECTION 8. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held upon seventy-two hours notice at such time and place as
is from time to time determined by resolution of the Board of Directors.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the President upon twenty-four hours oral or
written notice to each Director, given either personally, by telephone, by
telegram or by mail; special meetings will be called by the President or the
Secretary in like manner and on like notice on the written request of at
least two Directors. Except as may be otherwise expressly provided by law,
the Articles of Incorporation or these Bylaws, neither the business to be
transacted at, nor the purpose of, any special meeting need be specified in a
notice or waiver of notice.
SECTION 10. QUORUM. At all meetings of the Board of Directors, the
presence of a majority of the number of Directors then in office will be
necessary and sufficient to constitute a quorum for the transaction of
business, and the affirmative vote of at least a majority of the Directors
present at any meeting at which there is a quorum will be the act of the
Board of Directors, except as may be otherwise specifically provided by law,
the Articles of Incorporation or these Bylaws. If a quorum is not present at
any meeting of the Board of Directors, the Directors present thereat may
adjourn the meeting from time to time without notice other than announcement
at the meeting, until a quorum is present.
SECTION 11. INTERESTED DIRECTORS. No contract or transaction between
the Corporation and one or more of its Directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of the Corporation's Directors
-4-
<PAGE>
or officers are Directors or officers or have a financial interest, will be
void or voidable solely for this reason, solely because the Director or
officer is present at or participates in the meeting of the Board of
Directors or committee thereof that authorizes the contract or transaction,
or solely because his/her or their votes are counted for such purpose, if:
(i) the material facts as to his/her relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors
or the committee, and the Board of Directors or committee in good faith
authorizes the contract or transaction by the affirmative vote of a majority
of the disinterested Directors, even though the disinterested Directors be
less than a quorum, (ii) the material facts as to his/her relationship or
interest and as to the contract or transaction are disclosed or are known to
the shareholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the shareholders or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified by the Board of Directors, a committee
thereof or the shareholders. Common or interested directors may be counted
in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee that authorizes the contract or transaction.
SECTION 12. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the entire Board, designate committees, each
committee to consist of two or more Directors of the Corporation, which
committees will have such power and authority and will perform such functions
as may be provided in such resolution. Such committee or committees will
have such name or names as may be designated by the Board and will keep
regular minutes of their proceedings and report the same to the Board of
Directors when required.
SECTION 13. ACTION BY CONSENT. Any action required or permitted to
be taken at any meeting of the Board of Directors or any committee of the
Board of Directors may be taken without such a meeting if a consent or
consents in writing, setting forth the action so taken, is signed by all the
members of the Board of Directors or such committee, as the case may be.
SECTION 14. COMPENSATION OF DIRECTORS. Directors will receive such
compensation for their services and reimbursement for their expenses as the
Board of Directors, by resolution, may establish; provided that nothing
herein contained will be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
NOTICE
SECTION 1. FORM OF NOTICE. Whenever by law, the Articles of
Incorporation or these Bylaws, notice is to be given to any Director or
shareholder, and no provision is made as to how such notice is to be given,
such notice may be given: (i) in writing, by mail, postage prepaid,
addressed to such director or shareholder at such address as appears on the
books of the Corporation or (ii) in any other method permitted by law. Any
notice required or permitted to be given by mail will be deemed to be given
at the time the same is deposited in the United States mail.
-5-
<PAGE>
SECTION 2. WAIVER. Whenever any notice is required to be given to
any shareholder or Director of the Corporation as required by law, the
Articles of Incorporation or these Bylaws, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated in such notice, will be equivalent to the giving of such notice.
Attendance of a shareholder or Director at a meeting will constitute a waiver
of notice of such meeting, except where such shareholder or Director attends
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting has not been
lawfully called or convened.
ARTICLE V
OFFICERS AND AGENTS
SECTION 1. IN GENERAL. The officers of the Corporation will be
elected by the Board of Directors and will be a President and a Secretary.
The Board of Directors may also elect a Chairman, a Vice Chairman, Vice
Presidents, Assistant Vice Presidents, a Treasurer, and Assistant Secretaries
and Assistant Treasurers. Any two or more offices may be held by the same
person.
SECTION 2. ELECTION. The Board of Directors, at its first meeting
after each annual meeting of shareholders, will elect the officers, none of
whom need be a member of the Board of Directors.
SECTION 3. OTHER OFFICERS AND AGENTS. The Board of Directors may
also elect and appoint such other officers and agents as it deems necessary,
who will be elected and appointed for such terms and will exercise such
powers and perform such duties as may be determined from time to time by the
Board.
SECTION 4. COMPENSATION. The compensation of all officers and
agents of the Corporation will be fixed by the Board of Directors or any
committee of the Board, if so authorized by the Board.
SECTION 5. TERM OF OFFICE AND REMOVAL. Each officer of the
Corporation will hold office until his/her death, his/her resignation or
removal from office, or the election and qualification of his/her successor,
whichever occurs first. Any officer or agent elected or appointed by the
Board of Directors may be removed at any time, for or without cause, by the
affirmative vote of a majority of the entire Board of Directors, but such
removal will not prejudice the contract rights, if any, of the person so
removed. If the office of any officer becomes vacant for any reason, the
vacancy may be filled by the Board of Directors.
SECTION 6. EMPLOYMENT AND OTHER CONTRACTS. The Board of Directors
may authorize any officer or officers or agent or agents to enter into any
contract or execute and deliver any instrument in the name or on behalf of
the Corporation, and such authority may be general or confined to
-6-
<PAGE>
specific instances. The Board of Directors may, when it believes the
interest of the Corporation will best be served thereby, authorize executive
employment contracts that will have terms no longer than ten years and
contain such other terms and conditions as the Board of Directors deems
appropriate. Nothing herein will limit the authority of the Board of
Directors to authorize employment contracts for shorter terms.
SECTION 7. CHAIRMAN. If the Board of Directors has elected a
Chairman, he will preside at all meetings of the shareholders and the Board
of Directors. The Chairman will be the chief executive officer of the
Corporation and, subject to the control of the Board of Directors, will
supervise and control all of the business and affairs of the Corporation.
Except where by law the signature of the President is required, the Chairman
will have the same power as the President to sign all certificates, contracts
and other instruments of the Corporation. During the absence or disability
of the President, the Chairman will exercise the powers and perform the
duties of the President.
SECTION 8. PRESIDENT. The President will, in the absence of a
Chairman, be the chief executive officer of the Corporation and, subject to
the control of the Board of Directors, will supervise and control all of the
business and affairs of the Corporation. He will, in the absence of the
Chairman, preside at all meetings of the shareholders and the Board of
Directors. The President will have all powers and perform all duties
incident to the office of President and will have such other powers and
perform such other duties as the Board of Directors may from time to time
prescribe.
SECTION 9. VICE PRESIDENTS. Each Vice President will have the usual
and customary powers and perform the usual and customary duties incident to
the office of Vice President, and will have such other powers and perform
such other duties as the Board of Directors or any committee thereof may from
time to time prescribe or as the President may from time to time delegate to
him. In the absence or disability of the President and the Chairman, a Vice
President designated by the Board of Directors, or in the absence of such
designation the Vice Presidents in the order of their seniority in office,
will exercise the powers and perform the duties of the President.
SECTION 10. SECRETARY. The Secretary will attend all meetings of the
shareholders and record all votes and the minutes of all proceedings in a
book to be kept for that purpose. The Secretary will perform like duties for
the Board of Directors and committees thereof when required. The Secretary
will give, or cause to be given, notice of all meetings of the shareholders
and special meetings of the Board of Directors. The Secretary will keep in
safe custody the seal of the Corporation. The Secretary will be under the
supervision of the President. The Secretary will have such other powers and
perform such other duties as the Board of Directors may from time to time
prescribe or as the President may from time to time delegate to him.
SECTION 11. ASSISTANT SECRETARIES. The Assistant Secretaries in the
order of their seniority in office, unless otherwise determined by the Board
of Directors, will, in the absence or disability of the Secretary, exercise
the powers and perform the duties of the Secretary. They will have such
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<PAGE>
other powers and perform such other duties as the Board of Directors may from
time to time prescribe or as the President may from time to time delegate to
them.
SECTION 12. TREASURER. The Treasurer will have responsibility for
the receipt and disbursement of all corporate funds and securities, will keep
full and accurate accounts of such receipts and disbursements, and will
deposit or cause to be deposited all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors. The Treasurer will render to the
Directors whenever they may require it an account of the operating results
and financial condition of the Corporation, and will have such other powers
and perform such other duties as the Board of Directors may from time to time
prescribe or as the President may from time to time delegate to him.
SECTION 13. ASSISTANT TREASURERS. The Assistant Treasurers in the
order of their seniority in office, unless otherwise determined by the Board
of Directors, will, in the absence or disability of the Treasurer, exercise
the powers and perform the duties of the Treasurer. They will have such
other powers and perform such other duties as the Board of Directors may from
time to time prescribe or as the President may from time to time delegate to
them.
SECTION 14. BONDING. The Corporation may secure a bond to protect
the Corporation from loss in the event of defalcation by any of the officers,
which bond may be in such form and amount and with such surety as the Board
of Directors may deem appropriate.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
SECTION 1. FORM OF CERTIFICATES. Certificates, in such form as may
be determined by the Board of Directors, representing shares to which
shareholders are entitled, will be delivered to each shareholder. Such
certificates will be consecutively numbered and entered in the stock book of
the Corporation as they are issued. Each certificate will state on the face
thereof the holder's name, the number, class of shares, and the par value of
such shares or a statement that such shares are without par value. They will
be signed by the Chairman, President or a Vice President and the Secretary or
an Assistant Secretary, and may be sealed with the seal of the Corporation or
a facsimile thereof. If a certificate is countersigned by a transfer agent,
or an assistant transfer agent or registered by a registrar, either of which
is other than the Corporation or an employee of the Corporation, the
signatures of the Corporation's officers may be facsimiles. In case any
officer or officers who have signed, or whose facsimile signature or
signatures have been used on such certificate or certificates, ceases to be
such officer or officers of the Corporation, whether because of death,
resignation or otherwise, before such certificate or certificates have been
delivered by the Corporation or its agents, such certificate or certificates
may nevertheless be adopted by the Corporation and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures have been used thereon had not ceased
to be such officer or officers
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of the Corporation.
SECTION 2. LOST CERTIFICATES. The Board of Directors may direct
that a new certificate be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate to
be lost or destroyed. When authorizing such issue of a new certificate, the
Board of Directors, in its discretion and as a condition precedent to the
issuance thereof, may require the owner of such lost or destroyed
certificate, or his/her legal representative, to advertise the same in such
manner as it may require and/or to give the Corporation a bond, in such form,
in such sum, and with such surety or sureties as it may direct as indemnity
against any claim that may be made against the Corporation with respect to
the certificate alleged to have been lost or destroyed. When a certificate
has been lost, apparently destroyed or wrongfully taken, and the holder of
record fails to notify the Corporation within a reasonable time after such
holder has notice of it, and the Corporation registers a transfer of the
shares represented by the certificate before receiving such notification, the
holder of record is precluded from making any claim against the Corporation
for the transfer of a new certificate.
SECTION 3. TRANSFER OF SHARES. Shares of stock will be transferable
only on the books of the Corporation by the holder thereof in person or by
such holder's duly authorized attorney. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate representing shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it will be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
SECTION 4. REGISTERED SHAREHOLDERS. The Corporation will be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and, accordingly, will not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it has express or other notice thereof,
except as otherwise provided by law.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the Articles of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting. Dividends may be declared and paid in cash, in property, or in
shares of the Corporation, subject to the provisions of the Texas Business
Corporation Act and the Articles of Incorporation. The Board of Directors
may fix in advance a record date for the purpose of determining shareholders
entitled to receive payment of any dividend, such record date to be not more
than sixty days prior to the payment date of such dividend, or the Board of
Directors may close
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the stock transfer books for such purpose for a period of not more than sixty
days prior to the payment date of such dividend. In the absence of any
action by the Board of Directors, the date upon which the Board of Directors
adopts the resolution declaring such dividend will be the record date.
SECTION 2. RESERVES. There may be created by resolution of the
Board of Directors out of the surplus of the Corporation such reserve or
reserves as the directors from time to time, in their discretion, deem proper
to provide for contingencies, or to equalize dividends, or to repair or
maintain any property of the Corporation, or for such other purpose as the
Directors may deem beneficial to the Corporation, and the directors may
modify or abolish any such reserve in the manner in which it was created.
Surplus of the Corporation to the extent so reserved will not be available
for the payment of dividends or other distributions by the Corporation.
SECTION 3. TELEPHONE AND SIMILAR MEETINGS. Shareholders, directors
and committee members may participate in and hold meetings by means of
conference telephone or similar communications equipment by which all persons
participating in the meeting can hear each other. Participation in such a
meeting will constitute presence in person at the meeting, except where a
person participates in the meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business on the
ground that the meeting had not been lawfully called or convened.
SECTION 4. BOOKS AND RECORDS. The Corporation will keep correct and
complete books and records of account and minutes of the proceedings of its
shareholders and Board of Directors, and will keep at its registered office
or principal place of business, or at the office of its transfer agent or
registrar, a record of its shareholders, giving the names and addresses of
all shareholders and the number and CLASS of the shares held by each.
SECTION 5. FISCAL YEAR. The fiscal year of the Corporation will be
fixed by resolution of the Board of Directors.
SECTION 6. SEAL. The Corporation may have a seal, and such seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. Any officer of the Corporation will have authority
to affix the seal to any document requiring it.
SECTION 7. INDEMNIFICATION. The Corporation will indemnify its
directors to the fullest extent permitted by the Texas Business Corporation
Act and may, if and to the extent authorized by the Board of Directors, so
indemnify its officers and any other person whom it has the power to
indemnify against liability, reasonable expense or other matter whatsoever.
SECTION 8. INSURANCE. The Corporation may at the discretion of the
Board of Directors purchase and maintain insurance on behalf of the
Corporation and any person whom it has the power to indemnify pursuant to
law, the Articles of Incorporation, these Bylaws or otherwise.
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SECTION 9. RESIGNATION. Any director, officer or agent may resign
by giving written notice to the President or the Secretary. Such resignation
will take effect at the time specified therein or immediately if no time is
specified therein. Unless otherwise specified therein, the acceptance of
such resignation will not be necessary to make it effective.
SECTION 10. AMENDMENT OF BYLAWS. These Bylaws may be altered,
amended or repealed at any meeting of the Board of Directors at which a
quorum is present, by the affirmative vote of a majority of the Directors
present at such meeting.
SECTION 11. INVALID PROVISIONS. If any part of these Bylaws is held
invalid or inoperative for any reason, the remaining parts, so far as
possible and reasonable, will be valid and operative.
SECTION 12. RELATION TO ARTICLES OF INCORPORATION. These Bylaws are
subject to, and governed by, the Articles of Incorporation.
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Exhibit 4.2
ZIMMERMAN SIGN COMPANY
REGISTRATION AGREEMENT
THIS AGREEMENT is made as of September 30, 1998, between
Zimmerman Sign Company, a Texas corporation (the "COMPANY"), Continental
Illinois Venture Corporation, a Delaware corporation ("CIVC"), MIG Partners
VIII, a Delaware partnership ("MIG"), and each of the other persons
identified on the signature pages hereto (collectively, the "OTHER
STOCKHOLDERS" and each, an "OTHER STOCKHOLDER"). CIVC and MIG are referred
to herein collectively as the "INVESTORS" and each is referred to herein
individually as an "INVESTOR." The Investors and the Other Stockholders are
referred to herein collectively as the "STOCKHOLDERS" and individually as a
"STOCKHOLDER".
The Company, the Investors and certain of the Other
Stockholders are parties to a Senior Subordinated Note, Preferred Stock and
Warrant Purchase Agreement of even date herewith (the "PURCHASE AGREEMENT").
In order to induce the Investors to enter into the Purchase Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to
the Closing under the Purchase Agreement. Unless otherwise provided in this
Agreement, capitalized terms used herein shall have the meanings set forth in
SECTION 9 hereof.
The parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time after the date
hereof the holders of a majority of the Investor Registrable Securities (the
"MAJORITY INVESTOR HOLDERS") may request registration under the Securities
Act of 1933, as amended (the "SECURITIES ACT") of all or any portion of their
Registrable Securities on Form S-1 or any similar long-form registration
("LONG-FORM REGISTRATIONS") or on Form S-2 or S-3 or any similar short-form
registration ("SHORT-FORM REGISTRATIONS") if available. All registrations
requested pursuant to this paragraph 1(a) are referred to herein as "DEMAND
REGISTRATIONS." Each request for a Demand Registration shall specify the
approximate number of Registrable Securities requested to be registered, the
anticipated per share price range for such offering and the intended method
of disposition. Within ten (10) days after receipt of any such request, the
Company shall give written notice of such requested registration to all other
holders of Registrable Securities and shall include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 15 days after the receipt of the
Company's notice.
<PAGE>
(b) LONG-FORM REGISTRATIONS. The Majority Investor Holders
shall be entitled to request two (2) Long-Form Registrations in which the
Company shall pay all Registration Expenses (as defined in SECTION 6(a))
associated with the public offering of the Company's equity securities
Investor Holders. A registration shall not count as one of the permitted
Long-Form Registrations until it has become effective and neither the last
nor any subsequent Long-Form Registration shall count as one of the permitted
Long-Form Registrations unless the holders of Registrable Securities are able
to register and sell all of the Registrable Securities requested to be
included in such registration; provided that in any event the Company shall
pay all Registration Expenses in connection with any registration initiated
as a Long-Form Registration whether or not it has become effective and
whether or not such registration has counted as one of the Long-Form
Registrations.
(c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registrations provided pursuant to SECTION 1(b), the Majority Investor
Holders shall be entitled to request five (5) Short-Form Registrations in
which the Company shall pay all Registration Expenses; provided that in each
such Short-Form Registration the holders of Registrable Securities shall
request to include in such registration at least 25% of the Registrable
Securities held by them in the aggregate as of the date hereof (or such
lesser amount if less than 25% are unregistered as of such demand). Demand
Registrations shall be Short-Form Registrations whenever the Company is
permitted to use any applicable short form.
(d) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company shall
not be obligated to effect any Demand Registration within 180 days after the
effective date of a previous Demand Registration or a previous registration
in which the holders of Registrable Securities were given piggyback rights
pursuant to SECTION 2 and in which there was no reduction in the number of
Registrable Securities requested to be included. The Company may postpone
for up to 180 days (from the date of the request) the filing or the
effectiveness of a registration statement for a Demand Registration if the
Company's board of directors determines in its reasonable good faith judgment
that such Demand Registration would reasonably be expected to have a material
adverse effect on any proposal or plan by the Company or any of its
Subsidiaries to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer,
reorganization or similar transaction; provided that in such event, the
holders of Registrable Securities initially requesting such Demand
Registration shall be entitled to withdraw such request and, if such request
is withdrawn, such Demand Registration shall not count as one of the
permitted Demand Registrations hereunder and the Company shall pay all
Registration Expenses in connection with such registration. The Company may
delay a Demand Registration hereunder only once in any twelve-month period.
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(e) SELECTION OF UNDERWRITERS. In any Demand Registration,
the Company shall have the right to select the investment banker(s) and
manager(s) to administer the offering, provided that the investment banker(s)
and manager(s) so selected are reasonably satisfactory to the Majority
Investor Holders.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant
to (i) a Demand Registration or (ii) pursuant to a registration on Form S-4
or S-8 or any successor or similar forms) and the registration form to be
used may be used for the registration of Registrable Securities (a "PIGGYBACK
REGISTRATION"), the Company shall give prompt written notice (in any event
within ten (10) days after its receipt of notice of any exercise of demand
registration rights other than under this Agreement) to all holders of
Registrable Securities of its intention to effect such a registration and
shall include in such registration all Registrable Securities with respect to
which the Company has received written requests for inclusion therein within
15 days after the receipt of the Company's notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities shall be paid by the Company in all
Piggyback Registrations.
(c) PRIORITY ON PIGGYBACK REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the
Company, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company shall
include in such registration (i) FIRST, the securities the Company proposes
to sell, and (ii) SECOND, the Registrable Securities requested to be included
in such registration pro rata among the holders thereof on the basis of the
number of shares of Registrable Securities owned by each such holder, and
(iii) THIRD, other securities requested to be included in such registration
pro rata among the holders of such securities and any other securities held
by others requested to be included in such registration, pro rata among the
holders thereof on the basis of the number of shares requested to be included
in such registration.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders
of the Company's securities (other than the parties hereto) who have been
granted contractual demand registration rights, and the managing underwriters
advise the company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering without adversely affecting the marketability
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of the offering, the Company will include in such registration (i) FIRST, the
securities requested to be included therein by the holders requesting such
registration, pro rata among the holders of such securities on the basis of
the number of shares owned by each such holder, (ii) SECOND, the Registrable
Securities requested to be included in such registration, pro rata among the
holders thereof on the basis of the number of shares of Registrable
Securities owned by each such holder, and (iii) THIRD, other securities
requested to be included in such registration pro rata among the holders of
such securities.
(e) SELECTION OF UNDERWRITERS. In any Piggyback
Registration, the Company shall have the right to select the investment
banker(s) and manager(s) to administer the offering.
3. HOLDBACK AGREEMENTS.
(a) The Company shall not effect any public sale or other
distribution (including sales pursuant to Rule 144) of its equity securities,
or any securities convertible into or exchangeable or exercisable for such
securities, during the seven (7) days prior to and during the 180-day period
beginning on the effective date of any underwritten Demand Registration or
any underwritten Piggyback Registration (except as part of such underwritten
registration or pursuant to registrations on Form S-8 or any successor form),
unless the underwriters managing the registered public offering otherwise
agree.
(b) Each holder of Registrable Securities shall not effect
any public sale or other distribution (including sales pursuant to Rule 144)
of equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities during the seven days prior
to and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
in which Registrable Securities are eligible for inclusion (except as part of
such underwritten registration or pursuant to registrations on Form S-8 or
any successor form), unless the underwriters managing the registered public
offering otherwise agree.
4. REGISTRATION PROCEDURES. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company shall use its best efforts
to effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof (including the
registration of the Warrants held by a holder of Registrable Securities
requesting registration as to which the Company has received reasonable
assurances that only Common Stock shall be distributed to the public), and
pursuant thereto the Company shall as expeditiously as possible:
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(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective (provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company shall
furnish to the counsel selected by the holders of a majority of the
Registrable Securities covered by such registration statement copies of all
such documents proposed to be filed, which documents shall be subject to the
review and comment of such counsel);
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than 180 days and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof
set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such
number of requested copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such
seller may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(d) use its reasonable best efforts to register or qualify
such Registrable Securities under such other securities or blue sky laws of
such jurisdictions as any seller reasonably requests and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company shall prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus
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shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading; provided that
upon such notification by the Company, each seller of such Registrable
Securities will not offer or sell such Registrable Securities until the
Company has notified such seller that it has prepared a supplement or
amendment to such prospectus and delivered copies of such supplement or
amendment to such seller;
(f) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company
are then listed and, if not so listed, to be listed on the NASD automated
quotation system and, if listed on the NASD automated quotation system, use
its best efforts to secure designation of all such Registrable Securities
covered by such registration statement as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 of the Securities and Exchange
Commission or, failing that, to secure NASDAQ authorization for such
Registrable Securities and, without limiting the generality of the foregoing,
to arrange for at least two market makers to register as such with respect to
such Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities (including effecting a stock
split or a combination of shares);
(i) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such seller or underwriter (in each case after
reasonable prior notice), all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply, on a
confidential basis, all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission,
and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months beginning with the first day of the Company's first full calendar
quarter after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
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(k) permit any holder of Registrable Securities which
holder, in its sole and exclusive judgment, might be deemed to be an
underwriter or a controlling person of the Company, to participate in the
preparation of such registration or comparable statement and to require the
insertion therein of material, furnished to the Company in writing, which in
the reasonable judgment of such holder and its counsel should be included;
(l) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any common stock included in such registration statement for
sale in any jurisdiction, the Company shall use its best efforts promptly to
obtain the withdrawal of such order; and
(m) obtain a comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters as the holders of a majority of the
Registrable Securities being sold reasonably request (provided that such
Registrable Securities constitute at least 10% of the securities covered by
such registration statement).
Each seller of Registrable Securities, upon receipt of any notice from the
Company of the happening of any event of the kind described in subsection (e)
of this Section 4, will forthwith discontinue disposition of the Registrable
Securities until receipt by the seller of Registrable Securities of the
copies of the supplemented or amended prospectus contemplated by subsection
(e) of this Section 4 or until it is advised in writing (the "Advice") by the
Company that the use of the prospectus may be resumed and has received
copies of any additional or supplemental filings which are incorporated by
reference in the prospectus, and if so directed by the Company, such seller
of Registrable Securities will, or will request the managing underwriter or
underwriters, if any, to deliver to the Company (at the Company's expense)
all copies (other than permanent file copies) then in the possession of such
seller of Registrable Securities and of any underwriter or underwriters, of
he prospectus covering such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such notice,
the time periods mentioned in subsection (b) of this Section 4 shall be
extended by the number of days during the period from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
subsection (e) of this Section 4 hereof or the Advice.
5. COOPERATION BY HOLDERS OF REGISTRABLE SECURITIES
(a) Each seller of Registrable Securities will furnish to
the Company in
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writing such information as the Company may reasonably require from time to
time from such seller, and otherwise reasonably cooperate with the Company in
connection with any registration with respect to such holder's Registrable
Securities.
(b) The failure of any prospective seller of Registrable
Securities to furnish any information or documents in accordance with any
provision contained in this Agreement shall not affect the obligations of the
Company hereunder to any remaining sellers who furnish such information and
documents unless, in the reasonable opinion of counsel to the Company or the
underwriters, such failure impairs or may impair the viability of the or the
legality of any registration statement in connection therewith.
(c) At the end of any period during which the Company is
obligated to keep any registration statement current and effective as
provided in SECTION 4, the holders of Registrable Securities included in such
registration statement shall discontinue sales of shares pursuant to such
registration statement upon receipt of notice from the Company of its
intention to remove from registration the shares covered by such registration
statement which remain unsold and such holders shall notify the Company of
the number of shares registered which remain unsold promptly after receipt of
such notice from the Company.
6. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters
(excluding discounts, commissions, and undocumented expense allowances) and
other Persons (as defined in the Purchase Agreement) retained by the Company
(all such expenses being herein called "REGISTRATION EXPENSES"), shall be
borne as provided in this Agreement, except that the Company shall, in any
event, pay its internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit or quarterly review, the expense of
any liability insurance and the expenses and fees for listing the securities
to be registered on each securities exchange on which similar securities
issued by the Company are then listed or on the NASD automated quotation
system.
(b) In connection with each Demand Registration and each
Piggyback Registration, the Company shall reimburse the holders of Investor
Registrable Securities included in such registration for the reasonable fees
and disbursements of one counsel chosen by the holders of a majority of the
Investor Registrable Securities initially requesting such registration. The
Company shall not be required to pay or obtain reimbursement for excessive
discounted fees and commissions attributable to a
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sale of the Company and fees and/or expenses of other experts retained by the
holders of Registrable Securities.
(c) To the extent Registration Expenses are not required to
be paid by the Company, each holder of securities included in any
registration hereunder shall pay those Registration Expenses allocable to the
registration of such holder's securities so included, and any Registration
Expenses not so allocable shall be borne by all sellers of securities
included in such registration in proportion to the aggregate selling price of
the securities to be so registered.
(d) The Company will not bear the cost of or pay for any
stock transfer tax imposed in respect of the transfer of any Registrable
Securities to any purchaser thereof by any holder of Registrable Securities
in connection with any registration of Registrable Securities pursuant to
this Agreement.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted
by law, each holder of Registrable Securities (requesting or joining in a
registration hereunder), its officers and directors and each Person who
controls (within the meaning of the Securities Act) such holder against all
losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for
use therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering the Company shall
indemnify such underwriters, their officers and directors and each Person who
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the
holders of Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, shall indemnify
the Company, its directors and officers and each Person who controls (within
the meaning of the Securities Act) the Company against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact contained in the registration statement,
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prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
but only to the extent that such untrue statement or omission is contained in
any information or affidavit so furnished in writing by such holder; provided
that the obligation to indemnify shall be limited to the net amount of
proceeds received by such holder from the sale of Registrable Securities
pursuant to such registration statement. In connection with an underwritten
offering in which a holder of Registrable Securities is participating, each
such holder shall indemnify such underwriters, their officers and directors
and each Person who controls such underwriters (within the meaning of the
Securities Act) to the same extent as provided above with respect to the
indemnification of the Company.
(c) Any Person entitled to indemnification hereunder shall
(i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification (provided that the failure to give
prompt notice shall not impair any Person's right to indemnification
hereunder to the extent such failure has not prejudiced the indemnifying
party) and (ii) unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party shall
not be subject to any liability for any settlement made by the indemnified
party without its consent (but such consent shall not be unreasonably
withheld). An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim.
(d) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by
or on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of
securities. The parties hereto also agree to make such provisions, as are
reasonably requested by any indemnified party, for contribution to such party
in the event such party's indemnification is unavailable for any reason.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person
may participate in any registration hereunder which is underwritten unless
such Person (i) agrees to sell such Person's securities on the basis provided
in any underwriting arrangements approved by the Person or Persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements;
provided that no holder of Registrable Securities
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<PAGE>
included in any underwritten registration shall be required to make any
representations or warranties to the Company or the underwriters (other than
representations and warranties regarding such holder and such holder's
intended method of distribution) or to undertake any indemnification
obligations to the Company or the underwriters with respect thereto, except
as otherwise provided in SECTION 7 hereof.
9. DEFINITIONS.
(a) "INVESTOR REGISTRABLE SECURITIES" means (i) any Common
Stock issued to CIVC or MIG, (ii) any Common Stock issued or issuable upon
the exercise or otherwise in respect of the Warrants issued pursuant to the
Purchase Agreement, (iii) any Common Stock issued or issuable with respect to
the securities referred to in clauses (i) and (ii) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, and (iv) any
other shares of Common Stock held by the Investors holding securities
described in clauses (i), (ii) and (iii), inclusive, above. As to any
particular Investor Registrable Securities, such securities shall cease to be
Investor Registrable Securities when they have been distributed to the public
pursuant to a offering registered under the Securities Act or sold to the
public through a broker, dealer or market maker in compliance with Rule 144
under the Securities Act (or any similar rule then in force) or repurchased
by the Company or any Subsidiary. For purposes of this Agreement, a Person
shall be deemed to be a holder of Investor Registrable Securities, and the
Registrable Securities shall be deemed to be in existence, whenever such
Person has the right to acquire directly or indirectly such Registrable
Securities (upon conversion or exercise in connection with a transfer of
securities or otherwise, but disregarding any restrictions or limitations
upon the exercise of such night), whether or not such acquisition has
actually been effected, and such Person shall be entitled to exercise the
rights of a holder of Investor Registrable Securities hereunder.
(b) "OTHER REGISTRABLE SECURITIES" means (i) any Common
Stock held by or issued to any Other Stockholder, (ii) any Common Stock
issued or issuable with respect to the securities referred to in clause (i)
above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Other Registrable Securities, such
securities shall cease to be Other Registrable Securities when they have been
distributed to the public pursuant to a offering registered under the
Securities Act or sold to the public through a broker, dealer or market maker
in compliance with Rule 144 under the Securities Act (or any similar rule
then in force) or repurchased by the Company or any Subsidiary. For purposes
of this Agreement, a Person shall be deemed to be a holder of Other
Registrable Securities, and the Other Registrable Securities shall be deemed
to be in existence, whenever such Person has the right to acquire directly or
indirectly such Other Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
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<PAGE>
restrictions or limitations upon the exercise of such Right), whether or not
such acquisition has actually been effected, and such Person shall be
entitled to exercise the rights of a holder of Other Registrable Securities
hereunder.
(c) "REGISTRABLE SECURITIES" means, collectively, the
Investor Registrable Securities and the Other Registrable Securities.
(d) Unless otherwise stated, other capitalized terms
contained herein have the meanings set forth in the Purchase Agreement.
10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of
Registrable Securities in this Agreement.
(b) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon
the prior written consent of the Company and holders of a majority of the
Registrable Securities.
(c) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of any other
provision of this Agreement in such jurisdiction or affect the validity,
legality or enforceability of any provision in any other jurisdiction, but
this Agreement shall be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been
contained herein.
(d) SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not; in addition, whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of Registrable
Securities.
(e) ENTIRE AGREEMENT. Except as otherwise expressly set
forth herein, this Agreement embodies the complete agreement and
understanding among the parties hereto with respect to the subject matter
hereof and supersedes and preempts any prior understandings, agreements or
representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
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<PAGE>
(f) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together shall constitute one
and the same Agreement.
(g) REMEDIES. Any Person having rights under any provision
of this Agreement shall be entitled to enforce such rights specifically to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any party may in
its sole discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive relief in order to enforce or prevent
violation of the provisions of this Agreement.
(h) GOVERNING LAW. The corporate law of the State of Texas
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders and other issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and
the exhibits and schedules hereto without giving effect to any choice of law
or conflict of law rules or provisions.
(i) NOTICES. Any notice provided for in this Agreement
shall be in writing and shall be either personally delivered, sent by
telecopy, mailed first class mail (postage prepaid) or sent by reputable
overnight courier service (charges prepaid) to the Company at the address set
forth below and to any other recipient at the address indicated on the
schedules hereto and to any subsequent holder of Underlying Stock subject to
this Agreement at such address as indicated by the Company's records, or at
such address or to the attention of such other person as the recipient party
has specified by prior written notice to the sending party. Notices shall be
deemed to have been given hereunder upon receipt when delivered personally or
by telecopy, three business days after deposit in the U.S. mail and on the
first business day after deposit with a reputable overnight courier service
(postage provided for and with instructions for overnight delivery). The
Company's address is:
Zimmerman Sign Company
9846 Hwy 31 East
Tyler, Texas 75705
(j) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
ZIMMERMAN SIGN COMPANY
By: /s/ David E. Anderson
----------------------
Name: David E. Anderson
Its: Chairman
INVESTORS:
CONTINENTAL ILLINOIS VENTURE CORPORATION
By: /s/ Robert Perille
------------------
Name: Robert Perille
Its: Managing Director
MIG PARTNERS VIII
By: /s/ Robert Perille
------------------
Name: Robert Perille
Its: General Partner
OTHER STOCKHOLDERS:
/s/ David E. Anderson
---------------------
David E. Anderson
<PAGE>
/s/ Tom Boner
-------------
Tom Boner
SOUTHERN INVESTORS CORP.
By /s/ Steve Lapin
----------------
Its
SOUTHERN MORTGAGE HOLDING
CORPORATION
By /s/ Steve Lapin
---------------
Its
GENEVE SECURITIES PORTFOLIO CORP.
By /s/ Steve Lapin
---------------
Its
GENEVE SECURITIES HOLDING CORP.
By /s/ Steve Lapin
---------------
Its
CHAPARRAL INTERNATIONAL RE.
By /s/ Steve Lapin
---------------
Its
<PAGE>
Exhibit 4.3
ZIMMERMAN SIGN COMPANY
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "AGREEMENT") is made as of
September 30, 1998 between Zimmerman Sign Company, a Texas corporation (the
"COMPANY"), each of the investors listed on the SCHEDULE OF INVESTORS
attached hereto (the "INVESTORS"), each of the executives listed on the
SCHEDULE OF EXECUTIVES attached hereto (the "EXECUTIVES") and each of the
other stockholders listed on the SCHEDULE OF OTHER STOCKHOLDERS attached
hereto (the "OTHER STOCKHOLDERS" and collectively, with the Investors and the
Executives, the "STOCKHOLDERS"; each, a "STOCKHOLDER".) Capitalized terms
used and not otherwise defined herein are defined in Section 9 hereof.
The Investors are entering into a Senior Subordinated Note,
Preferred Stock and Warrant Purchase Agreement, dated as of the date hereof
(the "PURCHASE AGREEMENT"), pursuant to which the Investors are purchasing
12.0% Senior Subordinated Notes (the "NOTES"), shares of Series A Preferred
Stock and the Investor Warrants. As of the date hereof, each of the
Executives and each of the Other Stockholders owns shares of Common Stock in
the amounts set forth opposite such Executive's name and such Other
Stockholder's name, respectively, on the SCHEDULE OF EXECUTIVES and the
SCHEDULE OF OTHER STOCKHOLDERS.
The Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing the composition
of the Company's board of directors (the "BOARD"), (ii) assuring continuity
in the management of the Company and (iii) limiting the manner and terms by
which the Common Stock may be transferred. The execution and delivery of
this Agreement is a condition to the Investors' obligations under the
Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. BOARD OF DIRECTORS.
(a) From and after the Closing (as defined in the Purchase
Agreement) and until the provisions of this Section 1 cease to be effective,
each Stockholder shall vote all of his or its Stockholder Shares which are
voting shares and any other voting securities of the Company over which such
Stockholder has voting control and shall take all other necessary or
desirable actions within his or its control (whether in his or its capacity
as a stockholder, director, member of a Board committee or officer of the
Company or otherwise, and including, without limitation, attendance at
meetings in person or by proxy for purposes of obtaining a quorum and
execution of written consents in lieu of meetings), and the Company shall
take all necessary or desirable actions within its control (including,
without limitation, calling special board and stockholder meetings), so that:
<PAGE>
(i) subject to Section 1(e) below, the authorized number
of directors on the Board shall be established at five (5) directors,
(ii) the following individuals shall be elected to the
Board:
(A) two (2) representatives (the "INVESTOR
DIRECTORS") designated by holders of a majority of the Investor
Shares (the "MAJORITY INVESTOR HOLDERS"); provided that the
designation of the Investor Directors pursuant to this
subparagraph (ii)(A) shall be in lieu of, and operative only to
the extent that, (i) the holders of the Series A Preferred have
failed to designate (or for any reason, have been prevented from
designating) in accordance with Section 6 of the Certificate of
Designation, Series A, two (2) representatives to serve on the
Board, or (ii) the Investors do not hold a majority of the Series
A Preferred;
(B) two (2) members of the Company's management
designated by the Executives, determined by a vote of the
Executives owning a majority of the Stockholder Shares held by all
Executives (the "EXECUTIVE DIRECTORS"), provided that the initial
Executive Directors shall be David E. Anderson and Tom E. Boner;
and
(C) one (1) representative designated by the
Executives (determined on the basis of a vote of a majority of the
Stockholder Shares held by all Executives) and acceptable to the
Majority Investor Holders, provided that the person so designated
is not a member of the Company's management or an employee or
officer of the Company or its subsidiaries of an Affiliate, or
related by blood or marriage to any affiliate, of any of the
Executives or any other member of the Company's management (the
"OUTSIDE DIRECTOR"); provided, further, that the Outside Director
initially shall be Carl A. Goldman;
(iii) the composition of the board of directors of each of
the Company's Subsidiaries, if any (a "SUB BOARD"), shall be the same as
that of the Board;
(iv) the removal from the Board or a Sub Board (with or
without cause) of any representative designated (x) under subparagraph
(ii)(A), shall be at the written request of the Majority Investor
Holders, (y) under subparagraph (ii)(B), shall be at the written request
of the Executives or (z) under subparagraph (ii)(C), shall be at the
written request of the Majority Investor Holders, the Executives or the
Majority Investor Holders and the Executives, collectively, but only upon
such written request and under no other circumstances (in each case,
determined on the basis of a vote of the holders of a majority of the
Stockholder Shares held by such Persons), provided that if any director
elected pursuant to subparagraph (ii)(B) above ceases to be an employee
of the Company and its Subsidiaries, he shall be removed as a director
promptly after his employment ceases and shall have no right to designate
any representative pursuant to this Section 1(a), except
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<PAGE>
that, the foregoing not withstanding, David Anderson shall be permitted
to serve as an Executive Director designated pursuant to Section
1(a)(ii)(B) for so long as he continue to hold not less than 5% of the
aggregate outstanding shares of the Company's Common Stock, whether or
not he is employed by the Company; and
(v) in the event that any representative designated
hereunder by the Majority Investor Holders or by the Executives, or by
the Executives with the approval of the Majority Investor Holders, ceases
to serve as a member of the Board or a Sub Board during his term of
office, the resulting vacancy on the Board or the Sub Board shall be
filled by a representative designated and/or approved by the Majority
Investor Holders or the Executives, or by a representative designated
and/or approved by the Majority Investor Holders or the Executives, as
the case may be, as provided hereunder.
(b) The Company shall pay the reasonable out-of-pocket
expenses incurred by each director in connection with attending the meetings
of the Board, any Sub Board and any committee thereof. So long as any
Investor Director serves on the Board and for 4 years thereafter, the Company
shall, at the request of such Investor Director, maintain directors and
officers indemnity insurance coverage satisfactory to the Investors.
(c) The rights of each Executive under this Section 1 shall
terminate upon such Executive ceasing to be employed by the Company or, if
earlier, at such time as the Executives and their Permitted Transferees (as
defined in Section 4(c) hereof), for any reason, hold in the aggregate less
than 75% of the Stockholder Shares held by the Executives on the date hereof;
provided that, the foregoing not withstanding, David Anderson shall be
permitted to serve as an Executive Director designated pursuant to Section
1(a)(ii)(B) for so long as he continue to hold not less than 5% of the
aggregate outstanding shares of the Company's Common Stock, whether or not he
is employed by the Company.
(d) If any party fails to designate a representative to fill
a directorship pursuant to the terms of this Section 1, the individual
previously holding such directorship shall be elected to such position, or if
such individual fails or declines to serve, the election of an individual to
such directorship shall be accomplished in accordance with the Company's
Bylaws and applicable law; provided that the Stockholders shall vote to
remove such individual if the party which failed to designate such
directorship so directs.
(e) Notwithstanding anything to the contrary contained in
this Section 1, upon the occurrence of an Event of Noncompliance of the type
described in Section 7 of the Certificate of Designation and so long as any
such Event of Noncompliance continues uncured and unwaived, each holder of
Stockholder Shares shall vote all of his or its Stockholder Shares and any
other voting securities of the Company over which it has voting control and
take all other necessary or desirable actions within his or its control, and
the Company shall take all necessary and desirable actions within its
control, in order to cause, at the option of and as directed by Majority
Investor Holders, the removal from the Board of one of the representatives
designated
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<PAGE>
pursuant to paragraph 1(a)(ii)(B) and the election to the Board of a
replacement representative designated by the Majority Investor Holders;
provided that, the foregoing notwithstanding, upon the occurrence of an Event
of Noncompliance, the Stockholders shall not be required to vote their
Stockholder Shares to effect the removal and replacement of a representative
in accordance with this Section 1(e) so long as (i) each of two directors
designated to the Board by holders of the Series A Preferred is entitled, in
accordance with Section 7(b)(iii) of the Certificate of Designation, to cast
with respect to each resolution or other matter presented to the Board for
approval, two times the number of votes that each other director is entitled
to cast in with respect to approval of such resolution or other matter, and
(ii) the Investors hold a majority of the Series A Preferred.
(f) Notwithstanding any other provision of this Section 1,
the holders of Series A Preferred shall not be obligated to vote such shares
to elect any person to the Board other than the Investor Directors.
(g) The provisions set forth in Section 1 shall terminate at
such time when the Investors no longer own at least 20% of the Investor
Shares acquired by the Investors under the Purchase Agreement.
2. REPRESENTATIONS AND WARRANTIES. Each Stockholder
represents and warrants that (i) such Stockholder is the record owner of the
number of Stockholder Shares set forth opposite its name on the schedule
attached hereto, (ii) this Agreement has been duly authorized, executed and
delivered by such Stockholder and constitutes the valid and binding
obligation of such Stockholder, enforceable in accordance with its terms, and
(iii) such Stockholder has not granted and is not a party to any proxy,
voting trust or other agreement other than this Agreement. No holder of
Stockholder Shares shall grant any proxy or become party to any voting trust
or other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement.
3. [Intentionally deleted.]
4. RESTRICTIONS ON TRANSFER OF STOCKHOLDER SHARES.
(a) TRANSFER OF STOCKHOLDER SHARES. No Executive or Other
Stockholder shall sell, transfer, assign, pledge or otherwise dispose of
(whether with or without consideration and whether voluntarily or
involuntarily or by operation of law) any interest in his or its Stockholder
Shares (a "TRANSFER"), except pursuant to the provisions of Section 6, in
connection with a Public Sale, pursuant to the Stock Purchase Option
Agreements (as defined in the Purchase Agreement) or with the prior written
approval of the Majority Investor Holders or, in the case of the Executives,
pursuant to the provisions of this Section 4.
(b) TAG-ALONG RIGHTS. At least thirty 30 days prior to any
Transfer of Stockholder Shares (other than a Public Sale), the Executive
making such Transfer (the
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<PAGE>
"TRANSFERRING STOCKHOLDER") shall deliver a written notice (the "SALE
NOTICE") to the holders of Investor Shares, specifying in reasonable detail
the identity of the prospective transferee(s), the number of shares to be
transferred and the terms and conditions of the contemplated Transfer. Each
holder of Investor Shares may elect to participate in the contemplated
Transfer at the same price per share (whether voting or non-voting stock) and
on the same terms by delivering written notice to the Transferring
Stockholder within 30 days after delivery of the Sale Notice. If any holder
of Investor Shares has elected to participate in such contemplated Transfer,
the Transferring Stockholder and each such electing holder shall be entitled
to sell in the contemplated Transfer, at the same price and on the same
terms, a number of Stockholder Shares equal to the product of (i) the
quotient determined by dividing the percentage of Stockholder Shares owned by
such Person by the aggregate percentage of Stockholder Shares owned by the
Transferring Stockholder and the holders of Investor Shares participating in
such sale and (ii) the number of Stockholder Shares to be sold in the
contemplated Transfer.
Each Executive shall use its best efforts to obtain the
agreement of the prospective transferee(s) to the participation of the
holders of Investor Shares in any contemplated Transfer and to the inclusion
of the Investor Warrants and Series A Preferred in the contemplated Transfer,
and no Executive shall transfer any of its Stockholder Shares to any
prospective transferee if such prospective transferee(s) declines to allow
the participation of the holders of Investor Shares or the inclusion of the
Warrants or Series A Preferred. If any portion of the Investor Warrants is
included in any Transfer of Stockholder Shares under this Section 4(b), the
purchase price for the Investor Warrants shall be equal to the full purchase
price determined hereunder for the Stockholder Shares covered by the portion
of the Investor Warrants to be transferred, reduced by the aggregate exercise
price for such shares.
(c) PERMITTED TRANSFERS. The restrictions set forth in this
Section 4 shall not apply with respect to any Transfer of Stockholder Shares
by any Executive pursuant to applicable laws of descent and distribution or
among such Executive's Family Group (collectively referred to herein as
"PERMITTED TRANSFEREES"); provided that the restrictions contained in this
Section 4 shall continue to be applicable to the Stockholder Shares after any
such Transfer and provided further that such transferees of such Stockholder
Shares shall have agreed in writing to be bound by the provisions of this
Agreement affecting the Stockholder Shares so transferred to the same extent
and in the same manner as the transferor thereof was so bound (e.g., any
transferee of Stockholder Shares in a Transfer from an Executive shall be
subject to the obligations of an Executive hereunder).
(d) TERMINATION OF RESTRICTIONS. The restrictions on the
Transfer of Stockholder Shares set forth in this Section 4 shall continue
with respect to each Stockholder Share until the date on which such
Stockholder Share has been transferred in a Public Sale or a Sale of the
Company in accordance with Section 6.
5. LEGEND. Each certificate evidencing Stockholder Shares
and each certificate issued in exchange for or upon the transfer of any
Stockholder Shares (if such shares
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<PAGE>
remain Stockholder Shares after such transfer) shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The securities represented by this certificate are
subject to a Stockholders Agreement dated as of
September 30, 1998 among the issuer of such
securities (the "Company") and certain of the
Company's stockholders, as amended and modified from
time to time. A copy of such Stockholders Agreement
shall be furnished without charge by the Company to
the holder hereof upon written request."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding as of the date hereof. The legend set forth above shall
be removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with paragraph 9 hereof.
6. DRAG-ALONG RIGHTS.
(a) Simultaneous with or at any time following exercise of
the Investor Warrants, the Majority Investor Holders shall have the right to
seek a Sale of the Company and identify a third party or parties to acquire
(i) all of the issued and outstanding capital stock of the Company (whether
by merger, consolidation or sale or transfer of stock) or (ii) all or
substantially all of the Company's assets on a consolidated basis. The
holder or holders proposing a Sale of the Company (the "PROPOSING
STOCKHOLDERS") shall notify the Company and the other Stockholders (the
"NON-PROPOSING STOCKHOLDERS") prior to initiating contact with any
prospective third party purchaser in connection with such transaction.
(b) ELECTION. The Proposing Stockholders shall deliver
written notice to the Company and the Non-Proposing Stockholders setting
forth in reasonable detail the terms of the proposed Sale of the Company (the
"SALE NOTICE"). Within 20 days following receipt of the Sale Notice (the
"ELECTION PERIOD"), the Non-Proposing Stockholders shall deliver to the
Company and the Proposing Stockholders written notice setting forth such
holders' election (i) to consent to and raise no objections against proposed
Sale of the Company, and if the Sale of the Company is structured as a sale
of stock, to sell their Stockholder Shares on the terms and conditions set
forth in the Sale Notice, or (ii) if such Non-Proposing Stockholders hold
more than 20% of the Stockholder Shares, to deliver a written offer (a
"STOCKHOLDER OFFER"), upon substantially the same terms as described in the
Sale Notice, to acquire the Company (a "STOCKHOLDER TRANSACTION"). If the
Non-Proposing Stockholders have not delivered a Stockholder Offer within such
20-day period, the Proposing Stockholders shall have 180 days after the
expiration of the Election Period to consummate the Sale of the Company, or
during which the Company may enter into an agreement providing for such a
sale, on the terms specified in the Sale Notice. If the Sale of the Company
is not consummated or the Company fails to enter into such an agreement
within such 180-day period, the Proposing Stockholders shall again comply
with the provisions of this Section 6. If the Non-Proposing Stockholders
have delivered a Stockholder
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Offer within the Election Period, the Non-Proposing Stockholders must (A)
obtain an executed definitive and binding agreement to consummate the
Stockholder Transaction and obtain binding commitments regarding the
financing thereof satisfactory in all respects to the Proposing Stockholders
both within 30 days after receipt by the Proposing Stockholders of the
Stockholder Offer and (B) must consummate the Stockholder Transaction within
120 days after receipt by the Proposing Stockholders of the Stockholder
Offer. If any of the conditions set forth in (A) or (B) of the preceding
sentence is not fulfilled, the Other Stockholders must again comply with the
provisions of this Section 6. The consummation of a Sale of the Company or a
Stockholder Transaction pursuant to this Section 6(b) shall be in accordance
with the provisions of the Texas Business Corporation Act.
(c) Upon consummation of the Sale of the Company hereunder,
all holders of Common Stock shall receive the same form and amount of
consideration per share of Common Stock, or if any holders of Common Stock as
such holders are given an option as to the form and consideration to be
received, all holders shall be given the same option.
7. PUT ARRANGEMENTS.
(a) At any time following the fifth anniversary of the date
hereof each holder of Investor Shares shall have the right to require the
Company to repurchase all or any portion of the such holder's Investor Shares
at the Put Price (the "PUT") by delivering a written notice to the Company
and each other holder of Investor Shares specifying the amount thereof to be
purchased (the "PUT NOTICE"). The right to exercise the Put shall inure to
the benefit of all transferees of the Investor Shares (other than transferees
in a Public Sale).
(b) Upon the delivery of the Put Notice, the Company and the
holder or holders of Investor Shares delivering the Put Notice (including
those specified in the last sentence of this Section 7(b), the "REQUESTING
HOLDERS") shall in good faith promptly determine the Put Price as provided
hereunder, and subject to the provisions hereof, within twenty (20) days
after the determination of the Put Price, the Company shall purchase and the
Requesting Holders shall sell the amount of such Requesting Holder's Investor
Shares specified in the Put Notice at a mutually agreeable time and place
(the "PUT CLOSING"). Upon receipt of any Put Notice, any other holder of
Investor Shares may, by written notice delivered to the Company within five
(5) business days after receiving such Put Notice specifying the number of
Investor Shares that such holder elects to include in such Put, elect to
participate in such Put, and upon delivery of such written notice each such
other holder shall be deemed to be a Requesting Holder.
(c) At the Put Closing, the Requesting Holders shall deliver
to the Company certificates and other instruments (if any) representing the
Investor Shares to be repurchased by the Company, and the Company shall
deliver to the Requesting Holders the Put Price by cashier's or certified
check payable to the Requesting Holders or by wire transfer of immediately
available funds to an account designated by the Requesting Holders; provided
that if, as the result of the payment in cash of the Put Price in accordance
with this Section 7(c), there will exist an Event of
-7-
<PAGE>
Default (as defined in each of the Purchase Agreement and the Loan Agreement)
and the Company shall have used its best efforts to obtain financing from an
outside source for payment of the Put Price, then the Company may pay the Put
Price by delivery (i) of cash (as provided above) up to the maximum portion
of the Put Price, the payment of which will not result in the occurrence or
existence of an Event of Default and (ii) a promissory note in a principal
amount equal to that portion of the Put Price not being paid pursuant to the
foregoing clause (i), payable in three successive annual installments, with
the first installment due on the first anniversary of the delivery of the Put
Notice, and otherwise containing terms substantially similar to the terms set
forth in the Company's 12% Senior Subordinated Notes. If the Requesting
Holder deliver to the Company all or any portion of the Investor Warrants in
satisfaction of the sale of the Investor's Stockholder Shares hereunder, the
Put Price shall be reduced by the aggregate exercise price of such portion of
the Warrants.
(d) The "PUT PRICE", as of any date, of any Requesting
Holder's Investor Shares to be repurchased hereunder shall be determined
based on a value of the Company's common stock equal to THE GREATER OF (i)
the product of 6.25, MULTIPLIED BY the Company's EBITDA for the trailing
12-month period (as defined in the Purchase Agreement) for its most recently
completed fiscal year as reflected on the Company's audited consolidated
income statement for such fiscal year, MINUS the Company's aggregate
principal amount of, plus accrued and unpaid interest on, outstanding
indebtedness as of such date MINUS the liquidation value of, plus accrued and
unpaid dividends, if any, on, the then outstanding preferred stock of the
Company, and (ii) the Market Value as of such date. The aggregate Put Price
payable to each Requesting Holder shall be equal to the amount which such
holder would receive with respect to the Investor Shares specified by such
holder in such holder's Put Notice in the event of a Sale of the Company for
an aggregate purchase price equal to the value attributable to the Company in
accordance with the foregoing sentence.
In calculating the Put Price, all accounting determinations
shall be made in accordance with generally accepted accounting principles
consistently applied.
(e) The Investors' right to exercise the Put hereunder shall
terminate upon the first to occur of (i) the 10th anniversary of the date of
this Agreement and (ii) a Sale of the Company.
8. TRANSFER. Prior to transferring any Stockholder Shares
(other than in a Public Sale or a Sale of the Company) to any Person, the
transferring Stockholder shall cause the prospective transferee to be bound
by this Agreement and to execute and deliver to the Company and the other
Stockholders a counterpart of this Agreement.
9. DEFINITIONS.
"CERTIFICATE OF DESIGNATION, SERIES A" means the Certification
of Designation, Series A, as approved by the Company's Board of Directors and
filed with the Secretary of the
-8-
<PAGE>
State of Texas as of September 30, 1998.
"COMMON STOCK" means the Company's Common Stock, par value $.01
per share.
"FAMILY GROUP" means an Executive's spouse and descendants
(whether natural or adopted) and any trust solely for the benefit of the
Executive and/or the Executive's spouse and/or descendants.
"INDEPENDENT THIRD PARTY" means any Person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Common Stock on a fully-diluted basis (a "5% OWNER"), who is not controlling,
controlled by or under common control with any such 5% Owner and who is not
the spouse or descendent (by birth or adoption) of any such 5% Owner or a
trust for the benefit of such 5% Owner and/or such other Persons.
"INVESTOR SHARES" means the Stockholder Shares issued to, or
issuable in respect of securities issued to, Continental Illinois Venture
Corporation or MIG Partners VIII at the Closing or thereafter.
"INVESTOR WARRANTS" means the stock purchase warrants issued to
the Investors under the Purchase Agreement exercisable into shares of Common
Stock.
"LOAN AGREEMENT" means the Second Amended and Restated
Revolving Credit and Loan Agreement, dated as of the date hereof, by and
between the Company and Comerica Bank-Texas, a Texas banking association.
"MARKET VALUE" means the fair market value of the Company's
entire common equity determined on a going concern basis as between a willing
buyer and a willing seller and taking into account all relevant factors
determinative of value. In determining the Market Value as of any date, the
Company and the Investors first shall use their respective reasonable best
efforts to agree on such Market Value. In the event that the Company and the
Investors are unable to agree on the Market Value as of such date within 15
days after delivery of the Put Notice, such Market Value shall be determined
by an investment banking firm selected by the Company and acceptable to the
Majority Investor Holders, which firm shall submit to the Company and the
Majority Investor Holders a written report setting forth such determination.
If the parties are unable to agree on an investment banking firm within 20
days after delivery of a Put Notice, a firm shall be selected by lot, after
the Company and the Majority Investor Holders have each eliminated one such
firm. The expenses of such firm shall be borne by the Company, and the
determination of such firm shall be final and binding upon all parties,
except that after the determination of Market Value following the exercise of
the Put, any Requesting Holder may rescind its exercise of such Put.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or
any department, agency or political subdivision
-9-
<PAGE>
thereof.
"PUBLIC SALE" means any sale of Stockholder Shares to the
public pursuant to an offering registered under the Securities Act or to the
public through a broker, dealer or market maker pursuant to the provisions of
Rule 144 adopted under the Securities Act.
"SALE OF THE COMPANY" means the sale of the Company to an
Independent Third Party or group of Independent Third Parties pursuant to
which such party or parties acquire (i) capital stock of the Company
possessing the voting power under normal circumstances to elect a majority of
the Company's board of directors (whether by merger, consolidation or sale or
transfer of the Company's capital stock) or (ii) all or substantially all of
the Company's assets determined on a consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.
"STOCKHOLDER SHARES" means (i) any Common Stock purchased or
otherwise acquired by any Stockholder, (ii) any Common Stock issued or
issuable directly or indirectly upon exercise of the Investor Warrants,
warrants or options held by any Stockholder, (iii) any Common Stock issued or
issuable with respect to the securities referred to in clauses (i) and (ii)
above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization and (iv) any other shares of any class or series of capital
stock of the Company held by a Stockholder. For purposes of this Agreement,
any Person who holds Investor Warrants shall be deemed to be the holder of
the Stockholder Shares issuable directly or indirectly upon exercise of the
Investor Warrants in connection with the transfer thereof or otherwise and
regardless of any restriction or limitation on the exercise thereof. As to
any particular Stockholder Shares, such shares shall cease to be Stockholder
Shares when they have been (a) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering
them or (b) distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 under the Securities Act (or any similar provision
then in force).
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company, partnership,
association or other business entity, a majority of the limited liability
company, partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
-10-
<PAGE>
gains or losses or shall be or control the managing director or general
partner of such limited liability company, partnership, association or other
business entity.
10. CERTAIN PARTICIPATION RIGHTS. At least 10 days prior to
any repurchase by the Company of any Investor Shares, the Company will
deliver a written notice to the Executives holding Stockholder Shares
specifying in reasonable detail the terms and conditions of the contemplated
repurchase transaction (a "Company Repurchase Notice"). Any Executive may
elect to participate in the contemplated repurchase transaction with respect
to his or her Stockholder Shares by delivering written notice to the Company
within 10 days after delivery of the Company Repurchase Notice. If any
Executive elects to participate in the repurchase transaction, the Company
will repurchase from the holders of the Investor Shares and each electing
Executive, at the same price and on the same terms, a number of Stockholder
Shares equal to the product of (i) the quotient determined by dividing the
number of Stockholders Shares owned by the electing Executive(s) or the
holder of Investor Shares, as the case may be, by the aggregate number of
outstanding Stockholder Shares then owned, collectively, by the Investors and
the Executives, multiplied by (ii) the aggregate number of Stockholder Shares
to be repurchased by the Company in the proposed transaction.
11. TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Stockholder Shares in violation of any provision of
this Agreement shall be void, and the Company shall not record such Transfer
on its books or treat any purported transferee of such Stockholder Shares as
the owner of such shares for any purpose.
12. AMENDMENT AND WAIVER. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this
Agreement shall be effective against the Company or the Stockholders unless
such modification, amendment or waiver is approved in writing by the Company
or the holders of at least a majority of the Stockholder Shares,
respectively. The failure of any party to enforce any of the provisions of
this Agreement shall in no way be construed as a waiver of such provisions
and shall not affect the right of such party thereafter to enforce each and
every provision of this Agreement in accordance with its terms.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of any other
provision of this Agreement in such jurisdiction or affect the validity,
legality or enforceability of any provision in any other jurisdiction, but
this Agreement shall be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been
contained herein.
14. ENTIRE AGREEMENT. Except as otherwise expressly set
forth herein, this Agreement embodies the complete agreement and
understanding among the parties hereto with respect to the subject matter
hereof and supersedes and preempts any prior understandings,
-11-
<PAGE>
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
15. SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the Company and its successors and assigns and the
Stockholders and any subsequent holders of Stockholder Shares and the
respective successors and assigns of each of them, so long as they hold
Stockholder Shares; provided that the rights of the Investors under paragraph
1 hereof may not be assigned without the prior written approval of any
Executive or Other Stockholder.
16. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be an original and all of which
taken together shall constitute one and the same agreement.
17. REMEDIES. The Company and the Stockholders shall be
entitled to enforce their rights under this Agreement specifically, to
recover damages by reason of any breach of any provision of this Agreement
and to exercise all other rights existing in their favor. The parties hereto
agree and acknowledge that money damages would not be an adequate remedy for
any breach of the provisions of this Agreement and that the Company and any
Stockholder may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief
(without posting a bond or other security) in order to enforce or prevent any
violation of the provisions of this Agreement.
18. NOTICES. Any notice provided for in this Agreement
shall be in writing and shall be either personally delivered, or mailed first
class mail (postage prepaid) or sent by reputable overnight courier service
(charges prepaid) to the Company at the address set forth below and to any
other recipient at the address indicated on the schedules hereto and to any
subsequent holder of Stockholder Shares subject to this Agreement at such
address as indicated by the Company's records, or at such address or to the
attention of such other person as the recipient party has specified by prior
written notice to the sending party. Notices shall be deemed to have been
given hereunder when delivered personally, three business days after deposit
in the U.S. mail and one business day after deposit with a reputable
overnight courier service prepaid for next-business day delivery. The
Company's address is:
Zimmerman Sign Company
9846 Hwy 31 East
Tyler, Texas 75705
19. GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF TEXAS
SHALL GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE
COMPANY AND ITS STOCKHOLDERS. ALL OTHER ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEABILITY OF THIS AGREEMENT
AND THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING EFFECT
-12-
<PAGE>
TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE
STATE OF ILLINOIS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION
OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF ILLINOIS.
20. BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the state in which the Company's chief-executive office is
located, the time period shall automatically be extended to the business day
immediately following such Saturday, Sunday or legal holiday.
21. DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
ZIMMERMAN SIGN COMPANY
By /s/ Jeffrey Johnson, V.P.
-------------------------
Its VP, CFO
CONTINENTAL ILLINOIS VENTURE
CORPORATION
By /s/ Robert Perille
------------------
Its Managing Director
MIG PARTNERS VIII
By /s/ Robert Perille
------------------
Its Managing Director
/s/ David E. Anderson
----------------------------------
David E. Anderson
<PAGE>
/s/ Tom E. Boner
------------------------
Tom E. Boner
/s/ Jeffrey P. Johnson
------------------------
Jeffrey P. Johnson
/s/ John T. Griggs, Jr.
------------------------
John T. Griggs, Jr.
/s/ Michael W. Coppinger
------------------------
Michael W. Coppinger
/s/ Michael F. St. Onge
------------------------
Michael F. St. Onge
<PAGE>
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF STOCKHOLDER SHARES
- ---------------- ----------------------------
<S> <C>
Continental Illinois Venture Corporation Warrants for 819,310 shares of
231 South LaSalle Street Common Stock
Chicago, IL 60697
MIG PARTNERS VIII Warrants for 204,827 shares of
231 South LaSalle Street Common Stock
Chicago, IL 60697
</TABLE>
<PAGE>
SCHEDULE OF EXECUTIVES
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF STOCKHOLDER SHARES
- ---------------- ----------------------------
<S> <C>
David E. Andersen 252,243 shares of Common Stock
8350 N. Central Expressway Warrants for 75,113 shares of
Suite 600 Common Stock
Dallas, TX 75206
Tom E. Boner 61,823 shares of Common Stock
9846 Highway 31 East Warrants for 52,864 shares of
Tyler, TX 75705 Common Stock
Option for 48,639 shares of
Common Stock
Michael Coppinger 23,183 shares of Common Stock
9846 Highway 31 East Warrants for 21,800 shares of
Tyler, TX 75705 Common Stock
Option for 22,956 shares of
Common Stock
John Griggs 15,455 shares of Common Stock
9846 Highway 31 East Warrants for 5,396 shares of
Tyler, TX 75705 Common Stock
Option for 23,228 shares of
Common Stock
Jeffrey Johnson 15,455 shares of Common Stock
9846 Highway 31 East Warrants for 5,396 shares of
Tyler, TX 75705 Common Stock
Option for 23,256 shares of
Common Stock
Michael St. Onge Warrants for 13,208 shares of
9846 Highway 31 East Common Stock
Tyler, TX 75705 Option for 10,000 shares of
Common Stock
</TABLE>
<PAGE>
Exhibit 10.1
SECOND AMENDED AND RESTATED REVOLVING
CREDIT AND TERM LOAN AGREEMENT
BY AND BETWEEN
ZIMMERMAN SIGN COMPANY
AND
COMERICA BANK-TEXAS
AS OF
SEPTEMBER 30, 1998
<PAGE>
SECOND AMENDED AND RESTATED REVOLVING
CREDIT AND TERM LOAN AGREEMENT
This SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
(this "AGREEMENT"), dated as of September 30, 1998, is between ZIMMERMAN SIGN
COMPANY, a Texas corporation ("BORROWER"), and COMERICA BANK-TEXAS, a Texas
banking association ("LENDER").
RECITALS:
The Borrower has requested that the Lender modify and increase certain
existing credit facilities so as to extend credit to the Borrower in the form of
(i) revolving credit advances in an aggregate principal amount not to exceed
$17,000,000.00, and (ii) certain term loan advances in an aggregate principal
amount not to exceed $6,500,000.
The Lender has agreed, upon the terms and conditions hereinafter set
forth, to extend such credit to the Borrower, to continue to be secured by,
among other things, a Deed of Trust on the Real Property and a Security
Agreement covering the Collateral (as such terms are hereinafter defined).
Certain security documents have been previously executed and delivered.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the Borrower and the Lender hereby agree as follows:
SECTION 1. DEFINITIONS
1.1. DEFINITIONS. As used in this Agreement, the following terms shall
have the respective meanings indicated below:
"ACCOUNTS" shall have the meaning given such term in the UCC.
"ADJUSTED LIBOR RATE" shall mean, for any LIBOR Advance for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) as reasonably determined by the
Lender to be equal to the LIBOR Rate for such LIBOR Advance for such
Interest Period divided by 1 minus the Reserve Requirement for such LIBOR
Advance for such Interest Period.
"ADVANCE" shall mean a Loan or an advance of funds by the Lender
to the Borrower pursuant to this Agreement.
"ADVANCE REQUEST FORM" shall mean a certificate, in substantially
the form approved by the Lender, properly completed and signed by the
Borrower requesting an Advance.
"AGREEMENT" shall mean this Second Amended and Restated Revolving
Credit
CREDIT AGREEMENT - Page 2
<PAGE>
and Term Loan Agreement, which shall supersede in all respects that
certain First Amended and Restated Revolving Credit and Term Loan
Agreement dated as of October 31, 1996, as amended prior to this date.
"APPLICABLE RATE" shall mean: (a) as it relates to the Revolving
Credit Note, the Applicable Revolving Credit Note Rate; and (b) as it
relates to the Term Notes, the Applicable Term Note Rate for each
respective Term Note.
"APPLICABLE REVOLVING CREDIT NOTE RATE" shall mean: (a) during
the period that an Advance is a Prime Rate Advance, the Prime Rate plus
one-quarter of one percent (0.25%); and (b) during the period that an
Advance is a LIBOR Advance, the Adjusted LIBOR Rate, plus two and three
quarters percent (2.75%).
"APPLICABLE TERM NOTE RATE" shall mean: (a) during the period that
an Advance is a Prime Rate Advance, the Prime Rate, plus one-quarter of
one percent (0.25%); and (b) during the period that an Advance is a LIBOR
Advance, the Adjusted LIBOR Rate plus two and three quarters percent
(2.75%); PROVIDED, HOWEVER, as to Prime Rate Advances under Term Note C,
the rate shall be the Prime Rate plus one and one-half of one percent
(1.50%), and as to LIBOR Advances under Term Note C, the rate shall be
the Adjusted LIBOR Rate plus four percent (4.0%).
"ASSESSMENT RATE" shall mean, at any time, the rate (rounded
upwards, if necessary, to the nearest 1/100 of 1%) then charged by the
Federal Deposit Insurance Corporation (or any successor) to the Lender
for deposit insurance for Dollar time deposits with the Lender at its
principal office in Dallas, Texas as reasonably determined by the Lender.
"AUTHORIZED OFFICER" shall mean each officer of the Borrower who
has been authorized by the Borrower to request Loans hereunder and who
has been furnished by the Borrower with the Security Code. The Borrower
shall provide the Lender with a list of Authorized Officers.
"AVAILABLE CASH FLOW" shall mean as to the Borrower, as of any
date of determination and as determined in accordance with GAAP, the sum
of (i) the consolidated net income attributable to holders of common
stock of the Borrower for the preceding six months, PLUS (ii) the
depreciation and amortization for such period, (iii) plus any deferred
tax credits, or minus any deferred tax debits, realized in determining
net income for such period, MINUS (iv) all regularly scheduled (i.e.,
excluding the Cash Flow Sweep Payment) payments of principal on all Term
Notes for the same six-month period.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code,
as
CREDIT AGREEMENT - Page 3
<PAGE>
amended, or any successor act or code.
"BORROWER" shall mean Zimmerman Sign Company, a Texas corporation.
"BORROWING BASE" shall mean, at any particular time and as
determined on the basis of information furnished in the most recent
Borrowing Base Certificate, an amount equal to the sum of (a) eighty-five
percent (85%) of the aggregate principal balance of the Borrower's
Eligible Accounts, plus (b) the lesser of Nine Million Dollars
($9,000,000.00) or fifty-five percent (55%) of the Borrower's Eligible
Inventory.
"BORROWING BASE CERTIFICATE" shall mean a certificate in a form
reasonably acceptable to the Lender, completed in all material respects
and executed by an authorized officer or other designee of the Borrower
and setting forth Borrower's computation of the Borrowing Base as of the
date of such certificate and such other information as may reasonably be
requested by the Lender from time to time.
"BUSINESS DAY" shall mean each day on which the Lender is open to
carry on its normal commercial lending business.
"CASH FLOW" shall mean, as of any date of determination and as
determined in accordance with GAAP, the sum of (i) the consolidated net
income attributable to holders of common stock of the Borrower for the
preceding twelve month period, PLUS (ii) the consolidated depreciation
and amortization for such period, and (iii) minus any deferred taxes, or
plus any tax refunds, of the Borrower for such period.
"CASH FLOW COVERAGE RATIO" shall mean, as of any date of
determination, the Borrower's Cash Flow for the previous twelve months
divided by regularly scheduled payments (i.e., exclusive of any
prepayments) of principal made on all Senior Indebtedness for the same
period.
"CASH FLOW SWEEP PAYMENT" shall have the meaning given such term
in Section 3.3(c) of this Agreement.
"COLLATERAL" shall mean all of Borrower's Accounts, Chattel Paper,
Documents, Equipment, General Intangibles, Goods, Instruments and
Inventory (including all spare parts and all attachments and accessions
related to any Inventory or Goods), wherever located and whether now
owned or hereafter acquired, together with all replacements thereof,
substitutions therefor and all proceeds and products thereof, the Real
Property, and any securities pledged under any pledge agreement.
"CHATTEL PAPER," "DOCUMENTS," "GENERAL INTANGIBLES," "GOODS" and
"INSTRUMENTS" shall have the meanings given such terms in the UCC.
"COMMITMENTS" shall mean the Term Loan Commitment and the
Revolving Credit Commitment; "COMMITMENT" shall mean any one of the
Commitments.
CREDIT AGREEMENT - Page 4
<PAGE>
"COMMON STOCK" shall mean the common stock, par value $0.01 per
share, of the Borrower.
"COMPLIANCE CERTIFICATE" shall mean a certificate in the form
approved by the Lender, completed and signed by the chairman, president
or a senior financial officer of the Borrower or other officer designated
by Borrower.
"CONTINUE," "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 4.3 of a LIBOR Advance as a LIBOR
Advance from one Interest Period to the next Interest Period.
"CONTRACT RATE" shall mean, as of any date of determination, the
Applicable Revolving Credit Note Rate or Applicable Term Note Rate.
"CONVERT," "CONVERSION" and "CONVERTED" shall refer to a
conversion pursuant to Section 4.3 of one Type of Advance into another
Type of Advance.
"DEBT" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether
matured or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, joint or several, that should be classified as
balance sheet liabilities in accordance with GAAP.
"DEED OF TRUST" shall mean, collectively, the deeds of trust
previously executed and/or to be executed by Borrower in favor of the
Lender covering certain Real Property located in Harrison County, Texas
and Cherokee County, Texas, as modified from time to time.
"DEFAULT" shall mean a condition or event which, with the giving
of notice or the passage of time, or both, would result in an Event of
Default.
"DEFAULT RATE" shall mean the lesser of the Maximum Legal Rate or
the sum of the Contract Rate in effect from day to day plus two percent
(2%).
"EBITDA" shall mean, as of any applicable date of determination
and as determined in accordance with GAAP, net income for the previous
twelve months, plus (i) interest expense, tax expense, depreciation and
amortization expenses for the same period, excluding (ii) any gain or
loss for the same period arising from the sale of capital assets.
"ELIGIBLE ACCOUNTS" shall mean those Accounts of the Borrower for
which each of the warranties set forth in Section 8.17 of this Agreement
shall be true (as of any
CREDIT AGREEMENT - Page 5
<PAGE>
applicable date of determination) and which has been represented to be
an "ELIGIBLE ACCOUNT" on a Borrowing Base Certificate.
"ELIGIBLE INVENTORY" shall mean that inventory of the Borrower for
which each of the warranties set forth in Section 8.15 of this Agreement
shall be true (as of any applicable date of determination) and which has
been represented by the Borrower to be an item of "ELIGIBLE INVENTORY" on
a Borrowing Base Certificate.
"ENVIRONMENTAL LAWS" shall mean any and all federal, state, and
local laws, regulations, and requirements pertaining to the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. 9601 ET SEQ.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 ET SEQ. ("RCRA"), the Occupational Safety and Health Act, as
amended, 29 U.S.C. 651 ET SEQ., the Clean Air Act, 42 U.S.C. 7401 ET
SEQ., the Clean Water Act as amended, 33 U.S.C. 1251 ET SEQ., the Toxic
Substances Control Act, as amended, 15 U.S.C. ET SEQ., and all similar
laws, regulations, and requirements of any governmental authority or
agency having jurisdiction over Borrower or any of its properties or
assets, as such laws, regulations, and requirements may be amended or
supplemented from time to time.
"EQUIPMENT" shall mean all of the Borrower's now owned and
hereafter acquired machinery, equipment, furniture, furnishings, and
other tangible personal property (except fixtures and Inventory),
including, without limitation, data processing hardware and software,
motor vehicles, aircraft, dies, tools, jigs, and office equipment, as
well as all of such types of property leased by the Borrower and all of
the Borrower's rights and interests with respect thereto under such
leases to the extent that any such lease does not prohibit or require a
consent to the creation of a Lien in favor of the Lender (including,
without limitation, options to purchase); together with all present and
future additions and accessions thereto, replacements therefor, component
and auxiliary parts and supplies used or to be used in connection
therewith, and all substitutes for any of the foregoing, and all manuals,
drawings, instructions, warranties and rights with respect thereto
wherever any of the foregoing is located.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor act or code.
"EVENT OF DEFAULT" shall mean any of those conditions or events
listed in Section 11.1 of this Agreement.
"FINANCIAL STATEMENTS" shall mean all those balance sheets,
earnings statements and other financial data which have been furnished or
will be furnished to the Lender for the purpose of, or in connection
with, this Agreement and the transactions contemplated hereby.
CREDIT AGREEMENT - Page 6
<PAGE>
"FINANCING STATEMENTS" shall mean UCC financing statements
describing the Lender as secured party and the Borrower as debtor,
covering the Collateral and otherwise in such form, for filing in such
jurisdictions and with such filing offices as the Lender shall reasonably
deem necessary in order to perfect its security interest.
"FIXED CHARGES" shall mean, as of any date of determination, the
aggregate principal amount of Indebtedness scheduled to be paid by the
Borrower during the immediately preceding twelve months, PLUS capital
expenditures not financed with proceeds of Term Note B, for the same
period, PLUS (without duplication) payments actually paid by the Borrower
on Subordinated Debt during the same period.
"FIXED CHARGE COVERAGE RATIO" shall mean, as of any date of
determination, an amount equal to the ratio resulting as the quotient of
the Borrower's Cash Flow divided by Fixed Charges.
"GAAP" shall mean, as of any applicable date of determination,
generally accepted accounting principles consistently applied, as in
effect on the date hereof except as otherwise agreed by the Borrower and
the Lender.
"HAZARDOUS SUBSTANCE" shall mean any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other
material which is or becomes regulated under any Environmental Law,
including, without limitation, asbestos, petroleum, and polychlorinated
biphenyls.
"INDEBTEDNESS" shall mean (i) all indebtedness for borrowed money
or for the deferred purchase price of property or services (including
without limitation, reimbursement and all other obligations with respect
to surety bonds, letters of credit and bankers' acceptances, whether or
not matured), (ii) all obligations evidenced by notes, bonds, debentures
or similar instruments, (iii) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to
property acquired, (iv) all capitalized leases and (v) the Senior
Indebtedness.
"INTEREST PERIOD" shall mean:
(a) With respect to Prime Rate Advances, each period
commencing on the date such Advances are made or Converted from
LIBOR Advances and ending on the date of payment or Conversion of
such Advances.
(b) With respect to any LIBOR Advances, each period
commencing on the date such Advances are made or Converted from
Prime Rate Advances or, in the case of each subsequent, successive
Interest Period applicable to a LIBOR Advance, the last day of the
next preceding Interest Period with respect to such Advance, and
ending on the numerically
CREDIT AGREEMENT - Page 7
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corresponding day in the first, second, third, fourth, fifth,
sixth, ninth or twelfth calendar month thereafter, as the Borrower
may select as provided in this Agreement hereof, except that each
such Interest Period which commences on the last Business Day of
a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent
calendar month.
Notwithstanding the foregoing: (a) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, in the case of an Interest Period for LIBOR
Advances if such succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); (b) any Interest
Period which would otherwise extend beyond the Termination Date shall end
on the Termination Date; (c) no more than five (5) Interest Periods shall
be in effect at the same time for any Term Loan or for any Revolving
Loan; (d) no Interest Period for any LIBOR Advances shall have a duration
of less than one (1) month; and (e) no Interest Period may extend beyond
a principal repayment date unless, after giving effect thereto, the
aggregate principal amount of the LIBOR Advances having Interest Periods
that end after such principal payment date shall be equal to or less than
the Advances to be outstanding hereunder after such principal repayment
date.
"INVENTORY" shall mean all of the Borrower's now owned and
hereafter acquired inventory, goods, and merchandise, wherever located,
to be furnished under any contract of service or held for sale or lease,
all raw materials, work-in-process, finished goods, returned and
repossessed goods, and materials, and supplies of a nature or description
which are or might be used or consumed in the Borrower's business or used
in connection with the manufacture, packing, shipping, advertising,
selling or finishing of such inventory, goods, merchandise and such other
personal property, and all documents of title or other documents
representing them, and all proceeds thereof (including, but not limited
to, all proceeds of insurance with respect thereto, including the
proceeds of any casualty insurance); and any lists, information and
records prepared or kept in relation to the foregoing. Without
limitation, the term "Inventory" shall include all spare parts and all
attachments and accessions relating to any property or goods which
comprises "Inventory" under this definition.
"INVESTMENT DOCUMENTS" means, collectively, as may be amended,
restated or supplemented from time to time, the Senior Subordinated Note,
Preferred Stock and Warrant Purchase Agreement, dated as of September 30,
1998, by and among the Borrower and Continental Illinois Venture
Corporation, MIG Partners VIII and the other persons identified on the
signature pages thereto (the "PURCHASE AGREEMENT"), and the documents and
agreements delivered in connection therewith, including the Stockholders
Agreement, the Registration Agreement, the Stock Option Purchase
Agreements, the Warrants, the Certificate of Designation, Series A
Preferred, the Certificate of Designation, Series B Preferred and the
Certificate of Designation, Series C Preferred, in each case, as defined
in the Purchase Agreement, together with all schedules and exhibits
CREDIT AGREEMENT - Page 8
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thereto.
"LENDER" shall mean Comerica Bank-Texas, a Texas banking
association.
"LIBOR ADVANCES" shall mean Advances the interest rates on which
are determined on the basis of the rates referred to in the definition of
"Adjusted LIBOR Rate" in this Section 1.1.
"LIBOR RATE" shall mean, for any LIBOR Advance for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) quoted by the Lender at approximately 2:00 P.M.
Dallas time (or as soon thereafter as practicable) on the same day of
such Interest Period for the offering by the Lender to leading banks in
the London interbank market of Dollar deposits in immediately available
funds having a term comparable to such Interest Period and in an amount
comparable to the principal amount of the LIBOR Advance to which such
Interest Period relates.
"LOAN" shall mean a loan or Advance of funds by the Lender
pursuant to this Agreement.
"LOAN DOCUMENTS" shall mean this Agreement and all promissory
notes, security agreements, deeds of trust, assignments, letters of
credit, guaranties and other instruments, documents, and agreements
executed in connection with this Agreement, as such instruments,
documents and agreements may be amended, modified, renewed, extended or
supplemented from time to time. "LOAN DOCUMENT" shall mean any one of
the Loan Documents.
"MAXIMUM LEGAL RATE" shall have the meaning specified in
Section 4.5 of this Agreement.
"NOTES" shall mean the Term Notes and the Revolving Credit Note.
"NOTE" shall mean any one of the Notes.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
Person succeeding to the present powers and functions of the Pension
Benefit Guaranty Corporation.
"PERMITTED LIENS" shall mean:
(a) Liens and encumbrances in favor of the Lender;
(b) Liens for taxes, assessments or other governmental
charges incurred in the ordinary course of business and not yet
past due or being contested in good faith by appropriate
proceedings and for which adequate reserves have been established
as reflected by the balance sheet of the Borrower
CREDIT AGREEMENT - Page 9
<PAGE>
at the time thereof;
(c) Liens of mechanics, materialmen, carriers,
warehousemen or other like statutory or common law liens securing
obligations incurred in good faith in the ordinary course of
business that are not yet due and payable;
(d) Encumbrances consisting of zoning restrictions,
rights-of-way, easements or other restrictions on the use of real
property, none of which materially impairs the use of such
property by the Borrower or any Subsidiary in the operation of the
business for which it is used and none of which is violated in any
material respect by any existing or proposed structure or land
use;
(g) The contracts, agreements, leases, burdens,
encumbrances, and other matters described on or otherwise
disclosed in Exhibit A to the Deed of Trust; and
(h) Existing liens described as a part of Schedule 8.5
attached hereto.
"PERSON" shall mean any individual, corporation, partnership,
joint venture, association, trust, unincorporated association, joint
stock company, government, municipality, political subdivision or agency
or other entity.
"PRIME RATE" shall mean that annual rate of interest reasonably
designated by the Lender as its prime rate and which is changed by the
Lender from time to time. The Prime Rate may not necessarily be the
lowest rate charged by the Lender.
"PRIME RATE ADVANCES" shall mean Advances that bear interest at
rates based upon the Prime Rate.
"REAL PROPERTY" shall mean those parcels of real property,
together with the fixtures thereto, described in the Deed of Trust.
"REGULATION D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as the same may be amended or supplemented
from time to time.
"REGULATORY CHANGE" shall mean, with respect to the Lender, any
change after the date of this Agreement in United States federal or
state, or foreign laws or regulations (including Regulation D) or the
adoption or making after such date of any interpretations, directives, or
requests applying to a class of banks including the Lender of or under
any United States federal or state, or any foreign, laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the
CREDIT AGREEMENT - Page 10
<PAGE>
interpretation or administration thereof.
"RESERVE REQUIREMENT" shall mean, for any LIBOR Advance for any
Interest Period therefor, the average maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are required
to be maintained during such Interest Period under Regulation D by member
banks of the Federal Reserve System in New York City with deposits
exceeding one billion Dollars against "Eurocurrency Liabilities" as such
term is used in Regulation D. Without limiting the effect of the
foregoing, the Reserve Requirement shall include any other reserves
required to be maintained by such member banks by reason of any
Regulatory Change against (a) any category of liabilities which includes
deposits by reference to which the Adjusted LIBOR Rate is to be
determined or (b) any category of extensions of credit or other assets
which include LIBOR Advances.
"REVOLVING CREDIT COMMITMENT" shall mean the obligation of the
Lender to make Revolving Credit Loans to the Borrower in an aggregate
principal amount at any time outstanding up to but not to exceed the
lesser of (a) Seventeen Million Dollars ($17,000,000), or (b) the
Borrowing Base.
"REVOLVING CREDIT LOAN" shall mean any Advance of funds made by
the Lender to the Borrower pursuant to Section 2.
"REVOLVING CREDIT NOTE" shall mean the promissory note of the
Borrower payable to the order of the Lender, in substantially the form of
Exhibit "A" hereto, and all extensions, renewals and modifications
thereof and substitutions therefor.
"SECURITY AGREEMENT" shall mean collectively, security agreements
previously executed in favor of the Lender pursuant to which the Borrower
grants to the Lender a security interest in all of Borrower's Accounts,
Chattel Paper, Documents, General Intangibles, Equipment, Instruments and
Inventory, wherever located and whether now owned or hereafter acquired,
together with all replacements thereof, substitutions therefor and all
proceeds and products thereof.
"SECURITY CODE" shall mean a code furnished by the Lender to the
Borrower, pursuant to Section 4.2 hereof, which an Authorized Officer of
the Borrower must deliver to the Lender upon making a telephonic Loan
request.
"SENIOR INDEBTEDNESS" shall mean all loans, advances and
indebtedness of the Borrower to the Lender under this Agreement, together
with all other indebtedness, obligations and liabilities whatsoever of
the Borrower to the Lender, whether matured or unmatured, liquidated or
unliquidated, direct or indirect, absolute or contingent, joint or
several, due or to become due, now existing or hereafter arising.
"SENIOR INDEBTEDNESS RATIO" shall mean, at any particular time,
the ratio resulting as the quotient of (a) Senior Indebtedness divided by
(b) the Borrower's
CREDIT AGREEMENT - Page 11
<PAGE>
EBITDA for the immediately preceding twelve months.
"SUBORDINATED DEBT" shall mean all debt owed pursuant to the
Investment Documents, the payment of which (and the security, if any,
for) has been subordinated to the Indebtedness.
"SUBSIDIARIES" shall mean any entity of which more than fifty
percent (50%) of the outstanding voting securities shall, as of any
applicable date of determination, be owned directly, or indirectly
through one or more intermediaries, by the Borrower.
"TANGIBLE NET WORTH" shall mean, as of any applicable date of
determination, the excess of (i) the book value of all assets of Borrower
and the Subsidiaries (other than patents, patent rights, trademarks,
trade names, franchises, copyrights, goodwill, and similar intangible
assets) after all appropriate deductions (including, without limitation,
reserves for doubtful receivables, obsolescence, depreciation and
amortization), all as determined on a consolidated basis in accordance
with GAAP, less (ii) all Debt, plus (iii) all Subordinated Debt of the
Borrower and its Subsidiaries which, in accordance with GAAP, would be
required to be presented on their consolidated balance sheet at such
date.
"TERMINATION DATE" shall mean September 30, 2001.
"TERM LOAN" shall mean each Advance of funds made by the Lender to
the Borrower pursuant to Section 3.
"TERM LOAN COMMITMENT" shall mean the obligation of the Lender to
make the Term Loans to the Borrower pursuant to Section 3.
"TERM NOTE A" shall mean the $2,000,000 promissory note of
Borrower payable to the order of the Lender, in the form of EXHIBIT "B"
hereto, and all extensions, renewals and modifications thereof and
substitutions therefor.
"TERM NOTE B" shall mean, collectively, all promissory notes in
the form of EXHIBIT "C" hereto (and all extensions, renewals and
modifications thereof and substitutions therefor) which are executed from
time to time by Borrower, payable to the order of the Lender, and which
in aggregate principal face amount do not exceed $1,000,000.
"TERM NOTE C" shall mean the $3,500,000 promissory note of
Borrower payable to the order of Lender, in the form of EXHIBIT "D"
hereto, and all extensions, renewals and modifications thereof and
substitutions therefor.
CREDIT AGREEMENT - Page 12
<PAGE>
"TERM NOTES" shall mean, collectively, Term Note A, Term Note B
and Term Note C.
"TOTAL COMMITMENT AMOUNT" shall mean, at any particular time, the
amount which is the sum of the Revolving Credit Commitment and the Term
Loan Commitment, each as then in effect.
"TYPE" shall mean any type of Advance (i.e., Prime Rate Advance or
LIBOR Advance).
"UCC" shall mean the Uniform Commercial Code as in effect in the
State of Texas and as amended from time to time.
"UNUSED FACILITY FEE" shall mean on an annualized basis, a fee
equal to one-quarter percent (0.25%) of the difference, if any, between
$17,000,000.00 and the daily outstanding principal balance of the
Revolving Credit Note for each calendar quarter. Such fee shall be
payable within fifteen (15) days after the end of each calendar quarter
occurring after October 1, 1998.
1.2. ACCOUNTING TERMS. All accounting terms not specifically defined
in this Agreement shall be construed in accordance with GAAP. All accounting
terms and calculations herein with respect to the Borrower and the Subsidiaries
shall be made after elimination of all inter-company accounts and transactions
among them.
1.3. SINGULAR AND PLURAL. Where the context herein requires, the
singular number shall be deemed to include the plural, and vice versa.
SECTION 2. REVOLVING CREDIT LOANS
2.1. REVOLVING CREDIT COMMITMENT. Subject to the terms and conditions
of this Agreement, the Lender hereby agrees to make one or more Revolving Credit
Loans to the Borrower from time to time from the date hereof to and including
the Termination Date in an aggregate principal amount at any time outstanding up
to but not exceeding the amount of the Revolving Credit Commitment as then in
effect; PROVIDED, HOWEVER that the Lender shall not be obligated to make any
Revolving Credit Loan which would cause the principal balance of all outstanding
Revolving Credit Loans to exceed the amount which is the lesser of (i) the
Borrowing Base, or (ii) the Revolving Credit Commitment. Subject to the
limitations and the other terms and provisions of this Agreement, the Borrower
may from time to time borrow, repay and reborrow hereunder the amount of the
Revolving Credit Commitment by means of Prime Rate Advances and LIBOR Advances;
PROVIDED THAT the Lender shall not have an obligation to make any Revolving
Credit Loan on a day which is not a Business Day.
2.2. REVOLVING CREDIT NOTE. The obligation of the Borrower to repay
the Revolving Credit Loans and interest thereon shall be evidenced by the
Revolving Credit Note executed by the Borrower, payable to the order of the
Lender in the principal amount of the Revolving Credit
CREDIT AGREEMENT - Page 13
<PAGE>
Commitment as originally in effect and dated of even date herewith. The
Revolving Credit Note shall in any event, subject to prior acceleration, be
payable in full on the Termination Date.
2.3. REPAYMENT OF REVOLVING CREDIT LOANS. The Borrower shall repay the
unpaid principal amount of all Revolving Credit Loans on the Termination Date.
Interest on the Revolving Credit Loans shall be payable in accordance with
Section 4.1.
2.4. USE OF PROCEEDS. Proceeds of the Revolving Credit Loans shall be
used by the Borrower for working capital and general corporate purposes, to
refinance the existing revolving credit facility which has been provided by the
Lender, and to assist in the financing of the Recapitalization.
SECTION 3. TERM LOAN AND DEED OF TRUST LOAN
3.1. TERM COMMITMENT. Subject to the terms and conditions of this
Agreement, the Lender hereby agrees to make the Term Loan to the Borrower on the
date hereof in the principal amount of the Term Loan Commitment. Each component
of the Term Loan Commitment shall terminate as set forth below.
3.2. TERM NOTES. The obligation of the Borrower to repay the Term Loan
and interest thereon shall be evidenced by the Term Notes executed by the
Borrower, payable to the order of the Lender in the principal amount of each
respective Term Note.
3.3. ADVANCES AND REPAYMENT OF TERM LOANS. Unless sooner accelerated
or called pursuant to the terms of any of the Term Notes, the Borrower shall
repay the principal indebtedness evidenced by each of the Term Notes as follows:
(a) TERM NOTE A. Term Note A is already fully funded because
it represents, in part, the present unpaid principal balance of existing
indebtedness owed by the Borrower to Lender as recited in Term Note A.
Unless sooner accelerated or otherwise due as provided herein or in Term
Note A, the unpaid principal balance of Term Note A shall be repaid in
84 monthly installments, the first 83 of which shall be in the amount of
$23,750.00 each, commencing November 1, 1998 and continuing on the same
day of each successive month thereafter until and including September
1,2005; on October 1, 2005, the 84th and final principal payment shall
be due and payable in an amount equal to the greater of $28,750 or
the unpaid principal balance of Term Note A.;
(b) TERM NOTE B. Term Note B Advances may only be used for
the purchase of new machinery or equipment and will only be made
available to the Borrower through the Termination Date. Each requested
Advance must be accompanied by the invoice for the machinery or equipment
to be purchased or financed with the proceeds of such Advance. The
Lender may refuse to advance for taxes, freight or discounts not taken
with regard to such purchases. Each promissory note executed as a Term
Note B note shall be due and payable in 60 equal monthly installments,
commencing on the first day of the month next following the month
of Advance for
CREDIT AGREEMENT - Page 14
<PAGE>
funding that respective note, and continuing on the same day of each
successive month thereafter for 59 additional months;
(c) TERM NOTE C. Term Note C shall be funded by a single
Advance on the date of this Agreement. Unless sooner accelerated or
otherwise due as provided herein or in Term Note C, the unpaid principal
balance of Term Note C shall be repaid in 48 monthly installments, the
first 47 of which shall be in the amount of $73,500 each, commencing
November 1, 1998 and continuing on the same day of each successive month
thereafter up to and including September 1, 2002; on October 1, 2002,
the 48th and final principal payment shall be due and payable in an
amount equal to the greater of $45,500 or the unpaid principal balance of
Term Note C.
Commencing on May 15, 1999 and thereafter on each November 15 and
May 15 (such dates referred to as "SWEEP DATES"), the Borrower shall make
a principal payment under Term Note C (herein referred to as the "CASH
FLOW SWEEP PAYMENT") in an amount equal to the lesser of: (i) 50% of the
Available Cash Flow for the six-month period ending on September 30 (in
the case of the November 15 Sweep Date) and for the six-month period
ending on March 31 (in the case of the May 15 Sweep Date) or (ii) the
remaining unpaid principal balance of Term Note C payments in inverse
order of maturity. No prepayment premium shall be payable with respect
to any of the preceding required prepayments so made by the Borrower.
Notwithstanding any payment provisions above, the entire unpaid principal
balance of all Term Notes shall be due and payable in full at the
earliest to occur of (i) on the date the Revolving Credit Note becomes
due and payable, whether by acceleration or otherwise, (ii) when
accelerated by its terms or by the terms of this Agreement or any other
loan documents, or (iii) on the scheduled last payment date, whichever
occurs first.
Interest on each of the Term Notes shall be computed and paid in
accordance with Section 4. A final installment of all outstanding principal
PLUS accrued interest shall be due and payable at maturity, whether by
acceleration, or otherwise.
3.4. USE OF PROCEEDS. Proceeds of Term Note B shall be used by the
Borrower to purchase new machinery and equipment and proceeds of Term Note C
shall be used by the Borrower to partially refinance existing term indebtedness
to the Lender and to partially refinance certain indebtedness currently owed to
subordinated lenders.
SECTION 4. GENERAL - ALL LOANS
4.1. INTEREST. The unpaid principal amount of the Advances shall bear
interest prior to maturity at a varying rate per annum equal from day to day to
the lesser of (a) the Maximum Rate, or (b) as the case may be, the Applicable
Revolving Credit Note Rate or Applicable Term Note Rate. If at any time the
Applicable Revolving Credit Note Rate or Applicable Term Note
CREDIT AGREEMENT - Page 15
<PAGE>
Rate for any Advance shall exceed the Maximum Legal Rate, thereby causing the
interest accruing on such Advance to be limited to the Maximum Legal Rate,
then any subsequent reduction in the Applicable Revolving Credit Note Rate or
Applicable Term Note Rate for such Advance shall not reduce the rate of
interest on such Advance below the Maximum Legal Rate until the aggregate
amount of interest accrued on such Advance equals the aggregate amount of
interest which would have accrued on such Advance if the Applicable Revolving
Credit Note Rate or Applicable Term Note Rate had at all times been in
effect. Accrued and unpaid interest on the Advances shall be due and payable
as follows:
(a) in the case of all Revolving Credit Note Advances, on the
first day of each month commencing October 1, 1998 and continuing on the
same day of each successive month thereafter up to and including
maturity, whether by acceleration or otherwise (whichever first occurs);
and
(b) for each of the Term Notes, on October 1, 1998 and,
thereafter, on the same dates as payments of principal are due, pursuant
to Section 3.3 hereof, and at maturity whether by acceleration or
otherwise (whichever first occurs).
Notwithstanding the foregoing, any outstanding principal of any Advance and (to
the fullest extent permitted by law) any other amount payable by the Borrower
under this Agreement or any other Loan Document that is not paid in full when
due (whether at stated maturity, by acceleration, or otherwise) shall bear
interest at the Default Rate for the period from and including the due date
thereof to but excluding the date the same is paid in full. Interest payable at
the Default Rate shall be payable from time to time on demand.
4.2. BORROWING PROCEDURE. The Borrower shall give the Lender notice by
means of an Advance Request Form of each requested Advance on the same day of
each LIBOR Advance, and no later than the date of any requested Prime Rate
Advance, in each case specifying: (a) the requested date of such Advance (which
shall be a Business Day), (b) the amount of such Advance, (c) the Type of the
Advance, and (d) in the case of a LIBOR Advance, the duration of the Interest
Period for such Advance. The Lender at its option may accept telephonic Advance
requests by an Authorized Officer. A telephonic request for an Advance by the
Borrower shall be promptly confirmed in writing if so requested by the Lender.
Each LIBOR Advance shall be in a minimum principal amount of $1,000,000.
Subject to the terms and conditions of this Agreement, each Advance shall be
made available to the Borrower by depositing the same, in immediately available
funds, in an account of the Borrower maintained with the Lender at the principal
office designated by the Borrower. All notices under this Section shall be
irrevocable and shall be given not later than 2:00 P.M. Dallas, Texas time on
the day which is not less than the number of Business Days specified above for
such notice.
4.3. CONVERSIONS AND CONTINUATIONS. The Borrower shall have the right
from time to time to Convert all or part of one Type of Advance outstanding
under any Note into another Type of Advance or to Continue all or part of any
LIBOR Advance by giving the Lender telephonic notice (confirmed in writing, if
so requested by the Lender) no later than 2:00 P.M. (Dallas time) on the day of
Conversion or Continuation of a LIBOR Advance, specifying: (a) the Conversion
CREDIT AGREEMENT - Page 16
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or Continuation date, (b) the amount of the Advance to be Converted or
Continued, (c) in the case of Conversions, the Type of Advance to be
Converted into, and (d) in the case of a Continuation of or Conversion into a
LIBOR Advance, the duration of the Interest Period applicable thereto;
provided, that (a) LIBOR Advances may only be Converted on the last day of
the Interest Period, and (b) except for Conversions to Prime Rate Advances,
no Conversions shall be made while an Event of Default has occurred and is
continuing. If the Borrower shall fail to give the Lender the notice as
specified above for Continuation or Conversion of a LIBOR Advance prior to
the end of the Interest Period with respect thereto, such LIBOR Advance shall
automatically be Converted into a Prime Rate Advance on the last day of the
Interest Period for such LIBOR Advance.
4.4. PAYMENT. All payments of principal, interest, and other amounts
to be paid by the Borrower under this Agreement or any other Loan Document shall
be paid to the Lender at the address set forth herein for the delivery of
notices to the Lender, in immediately available funds, without setoff or
counterclaims, at or before 2:00 p.m. Dallas, Texas time on the date on which
such payment shall become due (each such payment made after such time on such
due date to be deemed to have been made on the next succeeding Business Day).
The Borrower shall, at the time of making each such payment, specify to the
Lender the sums payable by the Borrower under this Agreement and the other Loan
Documents to which such payment is to be applied (and in the event the Borrower
fails to so specify, or if an Event of Default has occurred and is continuing,
the Lender may apply such payment to the Senior Indebtedness in such order and
manner as it may elect in its sole discretion). Whenever any payment under this
Agreement or any other Loan Document shall be stated to be due on a day that is
not a Business Day, such payment shall be deemed due on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of the payment of interest.
4.5. MAXIMUM LEGAL RATE. The following provisions shall control this
Agreement and each Note:
(a) No agreements, conditions, provision or stipulations
contained in this Agreement or in any other Loan Document, or the
occurrence of an Event of Default, or the exercise by the Lender of the
right to accelerate the payment or the maturity of principal and interest
on any Note, or to exercise any option whatsoever contained in this
Agreement or any other Loan Document, or the arising of any contingency
whatsoever, shall entitle the Lender to collect, in any event, interest
exceeding the maximum rate of nonusurious interest allowed from time to
time by applicable state or federal laws as now or as may hereinafter be
in effect (the "MAXIMUM LEGAL RATE") and in no event shall the Borrower
be obligated to pay interest exceeding such Maximum Legal Rate, and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel the Borrower
to pay a rate of interest exceeding the Maximum Legal Rate shall be
without binding force or effect, at law or in equity, to the extent only
of the excess of interest over such Maximum Legal Rate. In the event any
interest is charged in excess of the Maximum Legal Rate (the "EXCESS"),
the Borrower acknowledges and stipulates that any such charge shall be
the result of an accidental and bona fide error, and such Excess shall
be, first, applied to reduce the
CREDIT AGREEMENT - Page 17
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principal of any obligations due, and, second, returned to the
Borrower, it being the intention of the parties hereto not to enter
at any time into an usurious or otherwise illegal relationship. The
parties hereto recognize that with fluctuations in the Contract Rate
from time to time announced by the Lender such an unintentional
result could inadvertently occur. By the execution of this
Agreement, the Borrower covenants that (a) the credit or return of
any Excess shall constitute the acceptance by the Borrower of such
Excess, and (b) the Borrower shall not seek or pursue any other
remedy, legal or equitable, against the Lender based, in whole or in
part, upon the charging or receiving of any interest in excess of the
Maximum Legal Rate. For the purpose of determining whether or not
any Excess has been contracted for, charged or received by the
Lender, all interest at any time contracted for, charged or received
by the Lender in connection with the Borrower's obligations shall be
amortized, prorated, allocated and spread during the entire term of
this Agreement. If at any time the rate of interest payable
hereunder shall be computed on the basis of the Maximum Legal Rate,
any subsequent reduction in the Contract Rate shall not reduce such
interest thereafter payable hereunder below the amount computed on
the basis of the Maximum Legal Rate until the aggregate amount of
such interest accrued and payable under this Agreement equals the
total amount of interest which would have accrued if such interest
had been at all times computed solely on the basis of the Contract
Rate.
(b) Unless preempted by federal law, the rate of interest from
time to time in effect hereunder shall not exceed the "applicable weekly
ceiling" from time to time in effect under Chapter 1 of the Texas Credit
Title (Vernon's Texas Civil Statutes), Article 5069-1D.001, as amended.
(c) The provisions of this Section shall be deemed to be
incorporated into every document or communication relating to the
Senior Indebtedness which sets forth or prescribes any account, right
or claims or alleged account, right or claim of the Lender with
respect to the Borrower (or any other obligor in respect of the
Senior Indebtedness), whether or not any provision of this Section is
referred to therein. All such documents and communications and all
figures set forth therein shall, for the sole purpose of computing
the extent of the obligations asserted by the Lender thereunder, be
automatically recomputed by the Borrower or any other obligor, and by
any court considering the same, to give effect to the adjustments or
credits required by this Section.
(d) If the applicable state or federal law is amended in
the future to allow a greater rate of interest to be charged under
this Agreement than is presently allowed by applicable state or
federal law, then the limitation of interest hereunder shall be
increased to the maximum rate of interest allowed by applicable state
or federal law, as amended, which increase shall be effective
hereunder on the effective date of such amendment, and all interest
charges owing to the Lender by reason thereof shall be payable upon
demand.
(e) The provisions of Chapter 346 of the Texas Finance Code
(Vernon's
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<PAGE>
Texas Code Annotated), as amended, are specifically declared by the
parties hereto not to be applicable to this Agreement or any other
Loan Document or to the transactions contemplated hereby or thereby.
4.6. BASIS OF COMPUTATION. Subject to Section 4.5 hereof, the
amount of all interest payable hereunder shall be computed for the actual
number of days elapsed on the basis of a year consisting of 360 days.
4.7. PREPAYMENTS.
4.7.1. MANDATORY PREPAYMENTS. The Borrower shall, within one (1)
day after notice thereof from the Lender, pay to the Lender as a payment
on the Revolving Credit Note the amount, if any, by which the principal
balance of the Revolving Credit Note outstanding from time to time
exceeds the Borrowing Base, together with all interest accrued and unpaid
on the amount of such excess.
4.7.2. OPTIONAL PREPAYMENTS. The Borrower may, at any time,
prepay the Advances in whole at any time or from time to time in part
without premium or penalty but with accrued interest to the date of
prepayment on the amount so prepaid, provided that compensation under
Section 5 hereof shall be due if LIBOR Advances are prepaid prior to the
last day of the Interest Period for such Advances.
4.8. UPON TERMINATION. The Lender, at its sole discretion, may upon
thirty (30) days prior written notice to the Borrower declare any or all of
the Term Notes due and payable in full at any time after the Termination Date
or (without prior notice) at any time upon or after an acceleration of the
Revolving Credit Note.
SECTION 5. YIELD PROTECTION AND ILLEGALITY
5.1. ADDITIONAL COSTS.
(a) The Borrower shall pay to the Lender from time to time
such amounts as the Lender may reasonably determine to be necessary
to compensate it for any costs incurred by the Lender which the
Lender determines are attributable to its making or maintaining of
any LIBOR Advances hereunder or its obligation to make any of such
Advances hereunder, or any reduction in any amount receivable by the
Lender hereunder in respect of any such Advances or such obligation
(such increases in costs and reductions in amounts receivable being
herein called "ADDITIONAL COSTS"), resulting from any generally
applicable Regulatory Change which:
(i) changes the basis of taxation of any amounts
payable to the Lender under this Agreement or the Note in respect
of any of such Advances (other than taxes imposed on the overall
net income of the Lender or its lending office for any of such
Advances by the jurisdiction in which the Lender has its principal
office or such lending office);
CREDIT AGREEMENT - Page 19
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(ii) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio, or similar requirement relating to
any extensions of credit or other assets of, or any deposits with
or other liabilities or commitments of, the Lender (including any
of such Advances or any deposits referred to in the definition of
"LIBOR Rate" in Section 1.1 hereof); or
(iii) imposes any other condition affecting this Agreement
or such Advances or any of such extensions of credit or
liabilities or commitments.
The Lender will notify the Borrower of any event occurring after the date
of this Agreement which will entitle the Lender to compensation pursuant
to this Section as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation. The Lender will
furnish the Borrower with a certificate setting forth the basis and the
amount of each request of the Lender for compensation under this Section.
If the Lender requests compensation from the Borrower under this Section,
the Borrower may, by notice to the Lender suspend the obligation of the
Lender to make or Continue making, or Convert Advances into, Advances of
the Type with respect to which such compensation is requested until the
Regulatory Change giving rise to such request ceases to be in effect (in
which case the provisions of Section 5 hereof shall be applicable).
(b) Without limiting the effect of the foregoing provisions
of this Section, in the event that, by reason of any generally
applicable Regulatory Change, the Lender either (a) incurs Additional
Costs based on or measured by the excess above a specified level of
the amount of a category of deposits or other liabilities of the
Lender which includes deposits by reference to which the interest
rate on LIBOR Advances is determined as provided in this Agreement or
a category of extensions of credit or other assets of the Lender
which includes LIBOR Advances, or (b) becomes subject to restrictions
on the amount of such a category of liabilities or assets which it
may hold, then, if the Lender so elects by notice to the Borrower the
obligation of the Lender to make or Continue making, or Convert
Advances into, Advances of such Type hereunder shall be suspended
until such Regulatory Change ceases to be in effect (in which case
the provisions of Section 5 hereof shall be applicable).
(c) Determinations and allocations by the Lender for
purposes of this Section of the effect of any generally applicable
Regulatory Change on its costs of maintaining its obligations to make
Advances or of making or maintaining Advances or on amounts
receivable by it in respect of Advances, and of the additional
amounts required to compensate the Lender in respect of any
Additional Costs, shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
(d) The Lender will not seek the benefits of this Section
5.1 unless it is, at the time of any attempts to collect amounts
under this Section 5.1 from the Borrower, applying similar
reimbursement standards to other borrowers of the Lender who have
CREDIT AGREEMENT - Page 20
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loans with similar pricing options.
5.2. LIMITATION ON TYPES OF ADVANCES. Anything herein to
the contrary notwithstanding, if with respect to any LIBOR Advances
for any Interest Period therefor:
(a) The Lender reasonably determines (which determination
shall be conclusive) that quotations of interest rates for the relevant
deposits referred to in the definition of "LIBOR Rate" in Section 1.1
hereof are not being provided in the relative amounts or for the relative
maturities for purposes of determining the rate of interest for such
Advances as provided in this Agreement; or
(b) The Lender determines (which determination shall be
conclusive) that the relevant rates of interest referred to in the
definition of "LIBOR Rate" in Section 1.1 hereof on the basis of which
the rate of interest for such Advances for such Interest Period is to
be determined do not accurately reflect the cost to the Lender of making
or maintaining such Advances for such Interest Period;
then the Lender shall give the Borrower prompt notice thereof specifying the
relevant Type of Advances and the relevant amounts or periods, and so long as
such condition remains in effect, the Lender shall be under no obligation to
make additional Advances of such Type or to Convert Advances of any other
Type into Advances of such Type and the Borrower shall, on the last day(s) of
the then current Interest Period(s) for the outstanding Advances of the
affected Type, either prepay such Advances or Convert such Advances into
another Type of Advance in accordance with the terms of this Agreement.
5.3. ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Lender to (a) honor
its obligation to make LIBOR Advances hereunder or (b) maintain LIBOR
Advances hereunder, then the Lender shall promptly notify the Borrower
thereof and the Lender's obligation to make or maintain LIBOR Advances and to
Convert other types of Advances into LIBOR Advances hereunder shall be
suspended until such time as the Lender may again make and maintain LIBOR
Advances (in which case the provisions of Section 5.4 hereof shall be
applicable).
5.4. SUBSTITUTE PRIME RATE ADVANCES. If the obligation of the
Lender to make a LIBOR Advance shall be suspended pursuant to Section 5.1,
5.2 or 5.3 hereof (Advances of such Type being herein called "AFFECTED
ADVANCES" and such Type being herein called the "AFFECTED TYPE"), all
Advances which would be otherwise made by the Lender as Advances of the
Affected Type shall be made instead as Prime Rate Advances and all Advances
which would otherwise be Converted into Advances of the Affected Type shall
be converted instead into (or shall remain as) Prime Rate Advances (and, if
an event referred to in Section 5.1, 5.2 or 5.3 hereof has occurred and the
Lender so requests by notice to the Borrower, all Affected Advances of the
Lender then outstanding shall be automatically Converted into Prime Rate
Advances on the date specified by the Lender in such notice) and, to the
extent that Affected Advances are so made as (or Converted into) Prime Rate
Advances, all payments and prepayments of principal which would otherwise be
applied to the Lender's Affected Advances shall be applied instead to its
CREDIT AGREEMENT - Page 21
<PAGE>
Prime Rate Advances.
5.5. COMPENSATION. The Borrower shall pay to the Lender, upon the
request of the Lender, such amount or amounts as shall be sufficient (in the
reasonable opinion of the Lender) to compensate it for any loss, cost, or
expense incurred by it as a result of:
(a) Any payment, prepayment or conversion of a LIBOR Advance
for any reason (including, without limitation, the acceleration of
outstanding Advances pursuant to this Agreement) on a date other than
the last day of an Interest Period for such Advance; or
(b) Any failure by the Borrower for any reason (including,
without limitation, the failure of any conditions precedent specified in
this Agreement to be satisfied) to borrow, Convert, or prepay a LIBOR
Advance on the date for such borrowing, Conversion, or prepayment,
specified in the relevant notice of borrowing, prepayment, or Conversion
under this Agreement.
Without limiting the effect of the preceding sentence, such compensation
shall include an amount equal to the excess, if any, of (i) the amount of
interest which otherwise would have accrued on the principal amount so paid
or Converted or not borrowed for the period from the date of such payment,
Conversion, or failure to borrow to the last day of the Interest Period for
such Advance (or, in the case of a failure to borrow, the Interest Period for
such Advance which would have commenced on the date specified for such
borrowing) at the applicable rate of interest for such Advance provided for
herein, less the applicable margin, over (ii) the interest component of the
amount the Lender would have bid in the London interbank market (if such
Advance is a LIBOR Advance) for Dollar deposits of leading banks and amounts
comparable to such principal amount and with maturities comparable to such
period.
SECTION 6. SECURITY
6.1. COLLATERAL. To secure the full and timely performance of the
Borrower's covenants set out in this Agreement and the other Loan Documents
and to secure the repayment of each of the Notes and all other Senior
Indebtedness whatsoever of the Borrower to the Lender, the Borrower agrees to
grant and assign a lien upon and security interest in the Collateral pursuant
to the Security Agreement, the Financing Statements and other instruments and
agreements required by and satisfactory to the Lender.
6.2. SETOFF. If an Event of Default shall have occurred and be
continuing, the Lender shall have the right to set off and apply against any
Senior Indebtedness then due in such manner as the Lender may determine, at
any time and without notice to the Borrower, any and all deposits (general or
special, time or demand, provisional or final) or other sums at any time
credited by or owing from the Lender to the Borrower. As further security
for the Senior Indebtedness, the Borrower hereby grants to the Lender a
security interest in all money, instruments, and other property of the
Borrower now or hereafter held by the Lender, including, without limitation,
property held in safekeeping. In addition to the Lender's right of setoff
and as
CREDIT AGREEMENT - Page 22
<PAGE>
further security for the Senior Indebtedness, the Borrower hereby grants to
the Lender a security interest in all deposits (general or special, time or
demand, provisional or final) and other accounts of the Borrower now or
hereafter on deposit with or held by the Lender and all other sums at any
time credited by or owing from the Lender to the Borrower. The rights and
remedies of the Lender hereunder are in addition to other rights and remedies
(including, without limitation, other rights or setoff) which the Lender may
have.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF LENDER
7.1. CONDITIONS TO FIRST LOAN. The obligations of the Lender under
this Agreement are subject to the occurrence, prior to or on the date of the
initial Loan hereunder, of each of the following conditions, any or all of
which may be waived in whole or in part by the Lender in writing:
7.1.1. DOCUMENTS EXECUTED AND FILED. The Borrower shall have
executed (or caused to be executed) and delivered to the Lender and, as
appropriate, there shall have been signed for filing with such filing
offices as the Lender shall deem appropriate, the following:
(a) The Revolving Credit Note;
(b) The Term Notes; and
(c) A Modification to the Deed of Trust in a form
acceptable to the Lender.
7.1.2. CERTIFIED RESOLUTIONS. The Borrower shall have furnished
to the Lender a copy of resolutions of the Board of Directors of the
Borrower authorizing the execution, delivery and performance of this
Agreement, the borrowings hereunder, the Notes and all other Loan
Documents, which shall have been certified by the Secretary or Assistant
Secretary of the Borrower as of the date hereof.
7.1.3. CERTIFICATE OF GOOD STANDING. The Borrower shall have
furnished to the Lender a certificate of good standing of Borrower, which
shall have been certified by the state agency issuing the same as of a
date reasonably near the date hereof.
7.1.4. CERTIFICATE OF INCUMBENCY. The Borrower shall have
furnished to the Lender a certificate of the Secretary or Assistant
Secretary of each of the Borrower, certified as of the date hereof, as to
the incumbency and signatures of such officers signing this Agreement,
the Notes and the other Loan Documents.
7.1.5. PAYMENT OF FEES. Evidence that all costs and expenses
(including reasonable attorneys' fees) incurred by the Lender and known
to date in connection with the preparation of this Agreement and the
other Loan Documents shall have been paid in
CREDIT AGREEMENT - Page 23
<PAGE>
full by the Borrower.
7.1.6. APPROVAL OF LENDER COUNSEL. All actions, proceedings,
instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all other
related legal matters shall have been satisfactory to and approved by
legal counsel for the Lender, and said counsel shall have been furnished
with such certified copies of actions and proceedings and such other
instruments and documents as they shall have reasonably requested.
7.1.7. OTHER INFORMATION AND DOCUMENTATION. The Lender shall have
received such other information, certificates and executed documents as
it shall have reasonably requested.
7.2. CONDITIONS TO ALL LOANS. The obligation of the Lender to make
any Loan (including any initial Advance) is subject to the occurrence, prior
to or on the requested date of each such Loan, of each of the following
conditions, any or all of which may be waived in whole or in part by the
Lender in writing:
7.2.1. LOAN REQUEST. The Lender shall have received a written
Advance Request Form (accompanied by supporting invoices in the case of
Term Note B Advances), executed by the appropriate officer of the
Borrower and timely delivered as required by this Agreement.
7.2.2. NO DEFAULT. As of such date:
(a) No Default or Event of Default shall have then
occurred and be continuing; and
(b) Each warranty or representation referenced in
Section 8.16 of this Agreement shall be true and correct.
7.2.3. INVESTMENT DOCUMENTS FUNDING. The Borrower shall have
received at least $9,250,000 in good funds from consummation of the note
purchase transactions contemplated by the Investment Documents and all
Investment Documents shall have been executed and delivered by all
parties thereto.
SECTION 8. WARRANTIES AND REPRESENTATIONS
The Borrower represents and warrants to the Lender:
8.1. CORPORATE EXISTENCE AND POWER. (a) The Borrower (i) is a
corporation duly organized, validly existing and in good standing under the
laws of its state of organization, (ii) has the corporate power and authority
to own its properties and assets and to carry out its business as now being
conducted and is qualified to do business and in good standing in every
jurisdiction wherein such qualification is necessary except where the failure
to be so qualified
CREDIT AGREEMENT - Page 24
<PAGE>
would not result in a material adverse effect on the business or financial
condition of the Borrower and (iii) has the corporate power and authority to
execute and perform this Agreement, to borrow money in accordance with its
terms, to execute and deliver each of the Notes and the other Loan Documents
to be executed by it and to grant to the Lender liens and security interest
in the Collateral as hereby contemplated and to do any and all other things
required of it hereunder.
8.2. AUTHORIZATION AND APPROVALS. As to the Borrower, the
execution, delivery and performance of this Agreement, the borrowing
hereunder and the execution and delivery of each of the other Loan Documents
contemplated hereby (a) have been duly authorized by all requisite corporate
action, (b) do not require registration with or consent or approval of, or
other action by, any federal, state or other governmental authority or
regulatory body, or, if such registration, consent or approval is required,
the same has been obtained and disclosed in writing to the Lender, (c) will
not violate any provision of law, any order of any court or other agency of
government, the articles of incorporation or bylaws of the Borrower, any
provision of any indenture, agreement or other instrument to which the
Borrower is a party, or by which it or any of its properties or assets are
bound except where such violation would not result in a material adverse
effect on the business or financial condition of the Borrower, (d) will not
be in conflict with, result in a breach of or constitute (with or without
notice or passage of time) a default under any indenture, agreement or other
instrument except where such conflict, breach or default would not result in
a material adverse effect on the business or financial condition of the
Borrower, and (e) will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of its properties or
assets other than in favor of the Lender and as contemplated hereby.
8.3. VALID AND BINDING AGREEMENT. This Agreement is, and each of
the other Loan Documents will be, when delivered, valid and binding
obligations of the Borrower, in each case enforceable in accordance with
their respective terms except as limited by insolvency, bankruptcy or similar
laws and equitable principles affecting the enforcement of creditors' rights
generally.
8.4. ACTIONS, SUITS OR PROCEEDINGS. Except as disclosed on Schedule
8.4 or otherwise disclosed in writing to the Lender, there are no actions,
suits or proceedings, at law or in equity, and no proceedings before any
arbitrator or by or before any governmental commission, board, bureau or
other administrative agency, pending, or, to the best knowledge of the
Borrower, threatened against or affecting the Borrower, or any properties or
rights of the Borrower, which, if adversely determined, would materially
impair the right of the Borrower to carry on business substantially as now
conducted or could have a material adverse effect upon the financial
condition of the Borrower.
8.5. NO LIENS, PLEDGES, MORTGAGES OR SECURITY INTERESTS. Except for
Permitted Liens, none of the Borrower's assets and properties, including the
Collateral and the Real Property, is subject to any mortgage, pledge, lien,
security interest or other encumbrance of any kind or
CREDIT AGREEMENT - Page 25
<PAGE>
character.
8.6. ACCOUNTING PRINCIPLES. The Financial Statements have been
prepared on a consolidated basis in accordance with GAAP and fairly present
the financial condition of the Borrower as of the dates, and the results of
its operations for the periods, for which the same are furnished to the
Lender. To the best of Borrower's knowledge and belief, the Borrower has no
material contingent obligations, liabilities for taxes, long-term leases or
unusual forward or long-term commitments not disclosed by, or reserved
against in, the Financial Statements or otherwise disclosed in writing to the
Lender.
8.7. NO ADVERSE CHANGES. There has been no material adverse change
in the business, properties or condition (financial or otherwise) of the
Borrower since the date of the latest of the Financial Statements or
otherwise disclosed in writing to the Lender.
8.8. CONDITIONS PRECEDENT. As of the date of each Loan hereunder,
all appropriate conditions precedent referred to in this Agreement shall have
been satisfied (or waived in writing by the Lender).
8.9. TAXES. The Borrower has filed (or in the case of any
consolidated, unitary or combined return, the Borrower has been included in a
return filed) by the extended due date therefor all federal, state and local
tax returns and other reports required by law to be filed and which are
material to the conduct of its business, has paid or caused to be paid all
material taxes, assessments and other governmental charges that are shown to
be due and payable by Borrower under such returns, and has made adequate
provision for the payment of such taxes, assessments or other governmental
charges which have accrued but are not yet payable. The Borrower has no
knowledge of any asserted deficiency or assessment in a material amount in
connection with any taxes, assessments or other governmental charges not
adequately disclosed in the Financial Statements or otherwise disclosed in
writing to the Lender.
8.10. COMPLIANCE WITH LAWS. The Borrower has complied with all
applicable laws, to the extent that failure to comply would materially
interfere with the conduct of its respective business.
8.11. INDEBTEDNESS; MATERIAL AGREEMENTS.
(a) Except as disclosed on Schedule 8.11, the Borrower has no
Indebtedness.
(b) To the best knowledge of the Borrower, it has complied
with the provisions of all material contracts or commitments; and to the
best knowledge of Borrower, no party to such agreements is in default
thereunder, nor has there occurred any event which with notice or the
passage of time, or both, would constitute such a default.
8.12. MARGIN STOCK. The Borrower is not engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying
CREDIT AGREEMENT - Page 26
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any "margin stock" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, and no part of the proceeds of any
Loan hereunder will be used, directly or indirectly, to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock or for any other purpose which might violate the
provisions of Regulation G, T, U or X of the said Board of Governors. The
Borrower does not own any margin stock.
8.13. PENSION FUNDING. The Borrower has not incurred any material
accumulated funding deficiency within the meaning of ERISA or any material
liability to the PBGC in connection with any employee benefit plan
established or maintained by the Borrower and no presently existing
reportable event or presently existing prohibited transaction, as defined in
ERISA, has occurred with respect to such plans which would result in a
material adverse effect on the business or financial condition of Borrower.
8.14. MISREPRESENTATION. To the best knowledge of the officer
signing the same, after reasonable inquiry, no warranty or representation by
the Borrower contained herein or in any certificate or other document
furnished by the Borrower contemporaneously herewith contains any untrue
statement of material fact or omits to state a material fact necessary to
make such warranty or representation not misleading in light of the
circumstances under which it was made.
8.15. ELIGIBLE INVENTORY. As to each item of Inventory represented
by the Borrower to be "Eligible Inventory" on a Borrowing Base Certificate,
as of the date of each such Borrowing Base Certificate:
(a) Such item of Inventory is of good and merchantable quality
and is usable or salable by Borrower in the ordinary course of its
business, and is not obsolete (except that as to work in process, such
item need not meet the Standard of "merchantable").
(b) The Borrower has granted to the Lender a perfected security
interest in such item of Inventory (as an item of the Collateral) prior
in right to all other Persons (other than Permitted Liens), and such item
of Inventory has not been sold, transferred or otherwise assigned by the
Borrower, to any Person, other than the Lender and other than sales in
the ordinary course of business occurring after the date of such
Borrowing Base Certificate.
(c) Such item of Inventory is located within the United States
at locations identified in the Security Agreement.
8.16. LOANS AND REPRESENTATIONS. As of the date of each Advance
Request, the Borrower, unless otherwise disclosed to the Lender in writing,
shall be deemed to represent and warrant to the Lender, as an inducement to
having the Lender make the requested Loan, that as of the date of such Loan
request (a) the representations and warranties contained in Sections 8.1,
8.4, 8.7, 8.15 and 8.17 of this Agreement are true and correct in all
material respects, (b) the requirements of Section 7.2.2 have been complied
with and (c) the Lender will have a first
CREDIT AGREEMENT - Page 27
<PAGE>
priority security interest and lien on the Collateral covered by the invoice
or bill of sale (or similar document), if any, to which the Loan request
relates.
8.17. ELIGIBLE ACCOUNTS. As to each Account represented by the
Borrower to be an "Eligible Account" on a Borrowing Base Certificate, as of
the date of each such Borrowing Base Certificate:
(a) Such Account arose in the ordinary course of the
business of the Borrower out of either (i) a bona fide sale of
Inventory by the Borrower, in accordance with the terms of the
Contract under which the Account arose, or (ii) services performed by
the Borrower under an enforceable contract, and in such case such
services have in fact been performed for the appropriate account
debtor in accordance with such contract.
(b) Unless otherwise approved in writing by the Lender on a
case-by-case basis, such Account represents a legally valid and
enforceable claim which is due and owing to the Borrower by such
account debtor in at least such amount as is represented by the
Borrower to the Bank on such Borrowing Base Certificate, such Account
is due and payable not more than thirty (30) days from the delivery
of the related Inventory, or the performance of the related services,
giving rise to such Account and, unless the Bank otherwise allows,
such Account has not been due for more than ninety (90) days (from
the date of invoice).
(c) To Borrower's knowledge, the unpaid balance of such
Account as represented by the Borrower to the Lender on such
Borrowing Base Certificate is not subject to any defense,
counterclaim, set-off, credit, allowance or adjustment by the account
debtor because of returned, inferior or damaged Inventory or
services, or for any other valid reason, except for customary
discounts allowed by Borrower in the ordinary course of business for
prompt payment or as otherwise indicated by credit memos disclosed in
such Borrowing Base Certificate, and there is no agreement between
Borrower, the related account debtor and any other person for any
rebate, discount, concession or release of liability, in whole or in
part.
(d) To Borrower's knowledge, the transactions leading to
the creation of such Account comply with all applicable state and
federal laws and regulations.
(e) The Borrower has granted to the Bank a perfected
security interest in such Account (as an item of the Collateral)
prior in right to all other persons (other than Permitted Liens), and
such Account has not been sold, transferred or otherwise assigned by
the Borrower to any Person, other than the Bank.
(f) Such Account is not represented by any note, trade
acceptance, draft or other negotiable instrument or by any chattel
paper, except any such as constitute an item of Collateral on or
prior to such Account's inclusion on such Borrowing Base
CREDIT AGREEMENT - Page 28
<PAGE>
Certificate.
(g) The Borrower has not received, with respect to such
Account, any actual notice of the death of the related account
debtor, nor of the dissolution, liquidation, termination of
existence, insolvency, business failure, appointment of a receiver
for any part of the property of, assignment for the benefit of
creditors by, or the filing of a petition in bankruptcy or the
commencement of any proceeding under any bankruptcy or insolvency
laws by or against, such account debtor.
(h) The account debtor on such Account is not:
(i) an affiliate of the Borrower,
(ii) the United States of America or any department,
agency or instrumentality thereof (to the extent the same exceeds
$5,000 for any single invoice) unless the grant of a security
interest therein has been made to the Lender in compliance with
applicable federal assignment of claims laws and regulations,
(iii) a citizen or resident of any jurisdiction other than
one of the United States (unless covered by satisfactory letter of
credit, foreign receivable insurance, or otherwise acceptable to
the Lender), or
(iv) an account debtor whom the Bank has, in the
reasonable exercise of such Bank's sole reasonable discretion,
determined to be (based on such factors relating to such account
debtor as the Bank deems appropriate) an ineligible account debtor
and as to which the Bank has notified the Borrower, PROVIDED,
HOWEVER, that any such notice shall not apply retroactively as to
any particular Account if such Account was included on a prior
Borrowing Base Certificate by the Borrower prior to the giving of
such notice by the Bank and which otherwise complied with each and
every other requirement under this Agreement for the denomination
of such Account as an "Eligible Account."
SECTION 9. AFFIRMATIVE COVENANTS
From the date hereof until the Senior Indebtedness is paid in full,
the Borrower covenants and agrees that it will:
9.1. FINANCIAL AND OTHER INFORMATION.
9.1.1. ANNUAL FINANCIAL REPORTS. Furnish to the Lender in form
satisfactory to the Lender not later than ninety (90) days after the
close of each fiscal year of Borrower, beginning with the fiscal year
ending December 31, 1998, on a consolidated and consolidating basis, a
balance sheet as at the close of each such fiscal year, statements of
income and statements of cash flow for each such fiscal year of Borrower
and the
CREDIT AGREEMENT - Page 29
<PAGE>
Subsidiaries, and such other comments and financial details as are
usually included in similar reports. Such consolidated reports shall
be audited in accordance with GAAP by independent certified public
accountants of recognized standing selected by Borrower and reasonably
acceptable to the Lender and shall contain unqualified opinions as to the
fairness of the statements therein contained.
9.1.2. MONTHLY FINANCIAL STATEMENTS. Furnish to the Lender not
later than thirty (30) days after the close of each month, beginning with
reports for the month ending September 30, 1998, financial statements
containing the consolidated and consolidating balance sheet of Borrower
as of the end of each month, consolidated and consolidating statements of
income of Borrower up to the end of each month. These statements shall
be prepared on substantially the same accounting basis as the statements
required in Section 9.1.1 of this Agreement and shall be in such detail
as the Lender may reasonably require, and the accuracy of the statements
(subject to year-end adjustments) shall be certified by the chief
executive or financial officer of Borrower.
9.1.3. BORROWING BASE CERTIFICATE AND OTHER MONTHLY REPORTS.
Furnish to the Lender monthly (i) by the 30th day of each month a
Borrowing Base Certificate for the last day of the prior month, on behalf
of the Borrower, confirming that the outstanding principal balance of the
Revolving Credit Note does not exceed the lesser of the Revolving Credit
Commitment Amount or the Borrowing Base, as then in effect (or, if such
is not the case, accompanied by a mandatory prepayment in accordance with
this Agreement), and (ii) by the 20th day of each month, a detailed
listing of the Borrower's Inventory and Accounts aging (in such detail as
the Lender may require) for the immediately preceding month.
9.1.4. QUARTERLY COMPLIANCE CERTIFICATE. Furnish to the Lender
not later than the 30th day of the month following the end of each
calendar quarter (beginning with the quarter ending September 30, 1998) a
Compliance Certificate dated as of the end of the month immediately prior
to the due date for such Compliance Certificate.
9.1.5. ADVERSE EVENTS. Promptly inform the Lender of the
occurrence of any Event of Default or Default, or of any occurrence which
has or would reasonably be expected to have a materially adverse effect
upon the Borrower's business, properties, financial condition or ability
to comply with their respective obligations hereunder.
9.1.6. PUBLIC FILINGS. Furnish to the Lender, promptly, upon
filing the same, all securities agency filings, both state and federal.
9.1.7. OTHER INFORMATION AS REQUESTED. Promptly furnish to the
Lender such other information regarding the operations, business affairs
and financial condition of the Borrower as the Lender may reasonably
request from time to time and permit the Lender, its employees, attorneys
and agents, to inspect all of the books, records and properties of the
Borrower during normal business hours, except that upon any Event of
Default, the Lender may perform such actions at any reasonable time.
CREDIT AGREEMENT - Page 30
<PAGE>
9.2. INSURANCE. Keep its insurable properties (including, but not
limited to, the Collateral and the Real Property) adequately insured and
maintain (a) insurance against fire and other risks customarily insured
against by companies engaged in the same or a similar business to that of the
Borrower, (b) necessary worker's compensation insurance, (c) public liability
and product liability insurance, and (d) such other insurance as may be
required by law or as may be reasonably required in writing by the Lender,
all of which insurance shall be in such amounts, containing such terms, in
such form, for such purposes and written by such companies as may be
satisfactory to the Lender in the reasonable exercise of its judgment. All
such policies shall contain a provision whereby they may not be canceled
except upon thirty days' prior written notice to the Lender. The Borrower
will deliver to the Lender, at the Lender's request, evidence satisfactory to
the Lender that such insurance has been so procured and, with respect to
casualty insurance covering the Collateral, names the Lender as "mortgagee".
If the Borrower fails to maintain satisfactory insurance as herein provided,
the Lender shall have the option to do so, and the Borrower agrees to repay
the Lender, with interest at three percent (3%) per annum plus the Prime
Rate, all amounts so expended by the Lender.
9.3. TAXES. Pay within the time that they can be paid without
interest or penalty all taxes, assessments and similar imposts and charges of
every kind and nature lawfully levied, assessed or imposed upon it and its
property, except to the extent being contested in good faith and for which
adequate reserves have been established on the balance sheet of the Borrower.
If the Borrower shall fail to pay or contest such taxes and assessments by
their due date, the Lender shall have the option to do so, and the Borrower
agrees to repay the Lender, with interest at three percent (3%) per annum
plus the Prime Rate, all amounts so expended by the Lender.
9.4. MAINTAIN LEGAL EXISTENCE AND BUSINESS. Do or cause to be done
all things necessary to preserve and keep in full force and effect their
legal existence, rights and franchise and comply, in all material respects,
with all applicable laws; continue to conduct and operate its business
substantially as conducted and operated during the present and preceding
calendar year.
9.5. TANGIBLE NET WORTH. Maintain Tangible Net Worth (plus
Subordinated Debt) in an amount not less than the following amounts at the
end of each calendar month during each of the following respective periods:
<TABLE>
<CAPTION>
Periods Amount
------- ------
<S> <C> <C>
(a) From the date of this Agreement $1,000,000
through March 31, 1999
(b) From April 1, 1999 through $1,250,000
September 30, 1999
(c) From October 1, 1999, through $2,000,000
CREDIT AGREEMENT - Page 31
<PAGE>
December 31, 1999
(d) From January 1, 2000, and at $2,000,000, plus 75% of
all times thereafter net income after
January 1, 2000,
as computed in accordance
with GAAP, with no allowances
for net losses
</TABLE>
9.6. SENIOR INDEBTEDNESS RATIO. Maintain as of the end of each
calendar month a Senior Indebtedness Ratio of not more than the following
respective ratios:
<TABLE>
<CAPTION>
Periods Maximum Ratios
------- --------------
<S> <C> <C>
(a) From the date of this Agreement 4.25:1.0
through December 30, 1999
(b) December 31, 1999 through 4.00:1.0
December 30, 2000
(c) At December 31, 2000, and at all 3.5:1.0
times thereafter
</TABLE>
9.7. CASH FLOW COVERAGE RATIO. Maintain as of the end of each
calendar month a Cash Flow Coverage Ratio of not less than the following
respective ratios:
<TABLE>
<CAPTION>
Periods Minimum Ratios
------- --------------
<S> <C> <C>
(a) From the date of this Agreement 1.3:1.0
through March 31, 1999
(b) From April 1, 1999, and at all 1.5:1.0
times thereafter
</TABLE>
9.8. FIXED CHARGE COVERAGE RATIO. Maintain as of the end of each
calendar month a Fixed Charge Coverage Ratio (computed on the basis of the
previous twelve-month period) of not less than 1.0:1.0.
9.9. ERISA. (a) Subject to the exceptions set forth in Section
11.1.7, at all times meet the minimum funding requirements of ERISA with
respect to the Borrower's employee benefit plans subject to such minimum
funding requirements; (b) promptly after the Borrower knows or has reason to
know (i) of the occurrence of any event, which would constitute a reportable
event or prohibited transaction under ERISA that would result in a material
adverse effect on the business or financial condition of the Borrower, or
(ii) that the PBGC or the Borrower has instituted or will institute
proceedings to terminate an employee pension plan,
CREDIT AGREEMENT - Page 32
<PAGE>
deliver to the Lender a certificate of the chief financial officer of the
Borrower setting forth details as to such event or proceedings and the action
which the Borrower proposes to take with respect thereto, together with a
copy of any notice of such event which may be required to be filed with the
PBGC; and (c) a copy of the annual return (including all schedules and
attachments) for each plan covered by ERISA, and filed with the Internal
Revenue Service by the Borrower, not later than ten (10) days after receipt
of a written request from the Lender for such report.
9.10. USE OF LOAN PROCEEDS. Use the proceeds of the Loans hereunder for
the purposes set forth herein.
9.11. UNUSED FACILITY FEE. Pay the Unused Facility Fee when due.
9.12. YEAR 2000 COMPLIANCE. On or prior to June 30, 1999 (the
"COMPLIANCE DATE"), (i) Borrower and its Subsidiaries shall have taken all
actions necessary to ensure that Borrower and any business in which Borrower
holds a substantial interest become Year 2000 Compliant in a timely manner, and
(ii) Borrower and its Subsidiaries shall use reasonable efforts to see that all
customers, suppliers and vendors that are material to Borrower's business,
become Year 2000 Compliant in a timely manner. Such acts shall include, without
limitation, performing a comprehensive review and assessment of all of
Borrower's systems and adopting a detailed plan, with itemized budget, for the
remediation, monitoring and testing of such systems. As used in this paragraph,
"Year 2000 Compliant" shall mean, in regard to any entity, that all software,
hardware, firmware, equipment, fixtures, goods or systems utilized by or
material to the business operations or financial condition of such entity, will
properly perform date sensitive functions before, during and after the year
2000. Borrower shall, immediately upon request, provide to the Lender such
certifications or other evidence of Borrower's compliance with the terms of this
paragraph as Bank may from time to time require.
SECTION 10. NEGATIVE COVENANTS
From the date hereof until the Senior Indebtedness is paid in full (other
than indebtedness for continuing indemnity obligations), and except as to
transactions contemplated by and provided for in the Investment Documents, the
Borrower covenants and agrees it will not:
10.1. DIVIDENDS. Except for distributions to a shareholder made when no
Event of Default exists or would exist giving effect to any such distribution),
declare or pay any dividend (other than dividends payable solely in shares of
its capital stock) on, or make any other distribution with respect to (whether
by reduction of capital or otherwise), any shares of its capital stock.
10.2. STOCK ACQUISITION. Purchase, redeem, retire or otherwise acquire
any of the
CREDIT AGREEMENT - Page 33
<PAGE>
shares of its capital stock, or make any commitment to do so.
10.3. LIENS AND ENCUMBRANCES. Create, incur, assume or suffer to exist
any mortgage, pledge, encumbrance, security interest, lien or charge of any kind
(including any charge upon property purchased or acquired under a conditional
sales or other title-retaining agreement or lease required to be capitalized
under GAAP) upon any of its property or assets, whether now owned or hereafter
acquired, other than Permitted Liens.
10.4. INDEBTEDNESS. Incur, create, assume or permit to exist any
Indebtedness, except for (a) the Senior Indebtedness, (b) indebtedness
subordinated to the prior payment in full of the Senior Indebtedness upon terms
and conditions approved in writing by the Lender, (c) existing indebtedness to
the extent set forth on schedules to this Agreement, (d) indebtedness secured by
Permitted Liens, and (e) capitalized lease obligations in excess of $200,000 in
the aggregate at any time.
10.5. EXTENSION OF CREDIT. Make loans, advances or extensions of credit
to any Person other than loans and advances to employees which in the aggregate
do not exceed $50,000 at any time.
10.6. GUARANTEE OBLIGATIONS. Guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any other
Person, whether by agreement to purchase the indebtedness of any other Person,
agreement for the furnishing of funds to any other Person through the furnishing
of goods, supplies or services, by way of stock purchase, capital contribution,
advance or loan, for the purpose of paying or discharging (or causing the
payment or discharge of) the indebtedness of any other Person, or otherwise,
except for the endorsement of negotiable instruments by the Borrower in the
ordinary course of business for deposit or collection.
10.7. SUBORDINATE INDEBTEDNESS. Subordinate any indebtedness due to it
from a Person to indebtedness of other creditors of such Person.
10.8. PROPERTY TRANSFER, MERGER OR LEASE-BACK. (a) Sell, lease,
transfer or otherwise dispose of all or, except as to the sale of Inventory or
unneeded Equipment in the ordinary course of business, any material part of its
properties and assets (whether in one transaction or in a series of
transactions), (b) change its name, consolidate with or merge into any other
corporation, permit another corporation to merge into it, acquire all or
substantially all the properties or assets of any other Person, enter into any
reorganization or recapitalization or reclassify its capital stock, or (c) enter
into any sale-leaseback transaction, provided that Borrower and its Subsidiaries
may make transfers of assets among themselves so long as the liens and security
interests of the Lender in the Collateral at all times remain perfected and in
full force and effect.
10.9. ACQUIRE SECURITIES. Purchase or hold beneficially any stock or
other securities of, or make any investment or acquire any interest whatsoever
in, any other Person except for investments:
CREDIT AGREEMENT - Page 34
<PAGE>
(a) in commercial paper, maturing within 270 days after
acquisition thereof, which has the highest or second highest credit
rating given by either Standard & Poor's Corporation or Moody's
Investors Service, Inc.;
(b) in obligations, maturing within 12 months after acquisition
thereof, issued or unconditionally guaranteed by the United States of
America or an instrumentality or agency thereof and entitled to the full
faith and credit of the United States of America;
(c) in demand deposits, and time deposits (including
certificates of deposit) maturing within 12 months from the date of
deposit thereof, with any office of the Lender, any of the Lender's
affiliates, or any national or state bank or trust company which is
organized under the laws of the United States of America or any state
therein and which has capital, surplus and undivided profits of at
least $100,000,000; and
(d) in repurchase obligations of any bank or trust company
described in the above subsection (c) which relate to the repurchase
of obligations described in the above subsection (b).
10.10. PENSION PLANS. (a) Allow any fact, condition or event to occur or
exist with respect to an employee pension plan which would constitute grounds
for termination by the PBGC of any such plan or for the appointment by a United
States District Court of a trustee to administer any such plan, or (b) permit
any such plan to be the subject of termination proceedings (whether voluntary or
involuntary) from which termination proceedings there results a liability of the
Borrower to the PBGC which will have a materially adverse effect upon the
operations, business, property, assets, financial condition or credit of the
Borrower.
10.11. MARGIN STOCK. Apply any of the proceeds of the Notes to the
purchase or carrying of any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
10.12. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will not (i) use
(and will use commercially reasonable efforts to prevent any tenant from using)
any of its real property for the handling, processing, storage, transportation,
or disposal of any Hazardous Substance except in all respects in compliance with
Environmental Laws, (ii) generate (as such term is defined in RCRA) any
Hazardous Substance except in all respects in compliance with Environmental
Laws, (iii) conduct any activity which causes a release (as such term is defined
in CERCLA) of any Hazardous Substance in violation of Environmental Law, or
(iv) otherwise conduct any activity or use any of its real property or assets in
any manner that violates any Environmental Law except that, in each of cases
(i)-(iv) above, in such a manner as would not result in a material adverse
effect on the business or financial condition of the Borrower.
10.13. SUBORDINATED CREDIT PAYMENTS. Make any payments of principal to
the
CREDIT AGREEMENT - Page 35
<PAGE>
subordinated lender under the Subordinated Credit Agreement, redeem any
preferred stock, or create any stock-redemption sinking fund until all
principal and interest for Term Note C is paid in full.
SECTION 11. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS
11.1. EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
11.1.1. FAILURE TO PAY MONIES DUE. If any principal of or
interest on any of the Senior Indebtedness shall not be paid within one
Business Day after becoming due.
11.1.2. MISREPRESENTATION. If any warranty or representation
of the Borrower in connection with or contained in this Agreement, or
if any financial data or other information now or hereafter furnished
to the Lender by or on behalf of the Borrower, shall prove to be false
or misleading in any material respect.
11.1.3. NONCOMPLIANCE WITH LENDER AGREEMENT. If the Borrower
shall fail to perform any of its obligations and covenants under, or
shall fail to comply with any of the provisions of, this Agreement or
any other Loan Document or any other agreement with the Lender to which
it may be a party, and such failure is not remedied within thirty (30)
days after the Lender gives written notice thereof to the Borrower.
11.1.4. OTHER DEFAULTS.
(a) If the Borrower shall default in the due payment
of any of its Senior Indebtedness (other than under the Loan
Documents) or in the observance or performance of any term,
covenant or condition in any agreement or instrument evidencing,
securing or relating to such Senior Indebtedness, and such default
shall be continued for a period sufficient to permit acceleration
thereof;
(b) If the Borrower shall default under the Deed of
Trust or in the due payment of any of its Debt (other than the
Senior Indebtedness) or in the observance or performance of any
term, covenant or condition in any agreement or instrument
evidencing, securing or relating to such Debt, and such default
shall be continued for a period sufficient to permit acceleration
of the indebtedness; or
(c) If the Borrower should default under the
Subordinated Credit Agreement or any documents related thereto.
11.1.5. JUDGMENTS. If there shall be rendered against the
Borrower, one or more judgments or decrees involving an aggregate
liability of $100,000 or more, which
CREDIT AGREEMENT - Page 36
<PAGE>
has or have become final and nonappealable and shall remain undischarged,
unsatisfied by insurance and unstayed for more than 30 days; or of a
writ of attachment or garnishment against the property of the Borrower
shall be issued and levied in an action claiming $100,000 or more, and
within the time allowed under applicable law is neither released nor
stayed nor appealed and bonded in a manner satisfactory to the Lender.
11.1.6. BUSINESS SUSPENSION, BANKRUPTCY, ETC. If the
Borrower shall voluntarily suspend transaction of its business for a
period in excess of five (5) Business Days (unless covered by business
interruption insurance); or if the Borrower generally shall not pay its
debts as they become due, subject to applicable grace periods, or shall
make a general assignment for the benefit of creditors; or proceedings in
bankruptcy, or for reorganization or liquidation of the Borrower, under
the Bankruptcy Code or under any other state or federal law for the
relief of debtors shall be commenced by the Borrower or shall be
commenced against the Borrower and shall not be discharged within sixty
(60) days of commencement; or a receiver, trustee or custodian shall be
appointed for the Borrower or for any substantial portion of its
respective properties or assets.
11.1.7. INADEQUATE FUNDING OR TERMINATION OF EMPLOYEE/BENEFIT
PLAN(S). If the Borrower shall fail by $50,000 or more to meets its
minimum funding requirements under ERISA (after giving effect to any
valid waiver of such requirements) with respect to any employee benefit
plan established or maintained by the Borrower, or if any such plan
shall be the subject of termination proceedings (whether voluntary or
involuntary) and there shall result from such termination proceedings a
liability of the Borrower (or any subsidiary) to the PBGC of $50,000
or more.
11.1.8. OCCURRENCE OF CERTAIN REPORTABLE EVENTS. If there
shall occur, with respect to any pension plan maintained by the Borrower,
any reportable event (within the meaning of section 4043(b) of ERISA)
which the Lender shall determine in good faith constitutes a ground for
the termination by the PBGC of any such plan, and if such event continues
for 60 days after the Lender gives written notice to the Borrower,
provided that termination of such plan or appointment of such trustee
would, in the opinion of the Lender, have a materially adverse effect
upon the operations, business, property, assets, financial condition or
credit of the Borrower.
11.2. ACCELERATION OF SENIOR INDEBTEDNESS. Upon the occurrence of any
of the Events of Default described in Section 11.1, all Senior Indebtedness may
be declared due and payable in full forthwith at the option of the Lender
without presentation, demand, protest, notice of dishonor or other notice of any
kind, all of which are hereby expressly waived. Unless all of the Senior
Indebtedness is then fully paid, the Lender shall have and may exercise any one
or more of the rights and remedies for which provision is made for a secured
party under the UCC, under the Security Agreement, the Deed of Trust or under
any other document contemplated hereby, including, without limitation, the right
to take possession and sell, lease or otherwise dispose of any or all of the
Collateral and to setoff against the Senior Indebtedness any amount owing by the
Lender to the Borrower. The Borrower agrees, upon request of the Lender, to
assemble the Collateral and make it available to the Lender at any place
designated by the Lender which is
CREDIT AGREEMENT - Page 37
<PAGE>
reasonably convenient to the Lender and the Borrower.
11.3. APPLICATION OF PROCEEDS. The proceeds of any sale or other
disposition of the Collateral authorized by this Agreement shall be applied by
the Lender, first upon all expenses authorized by the UCC and all reasonable
attorneys' fees and legal expenses incurred by the Lender; the balance of the
proceeds of such sale or other disposition shall be applied in the payment of
the Senior Indebtedness, first to interest, then to principal; and the surplus,
if any, shall be paid over to the Borrower or to such other Person or Persons as
may be entitled thereto under applicable law. The Borrower shall remain liable
for any deficiency, which the Borrower shall pay to the Lender immediately upon
demand.
11.4. CUMULATIVE REMEDIES. The remedies provided for herein are
cumulative to the remedies for collection of the Senior Indebtedness as provided
by law or by any mortgage, security agreement or other document contemplated
hereby. Nothing herein contained is intended, nor should it be construed, to
preclude the Lender from pursuing any other remedy for the recovery of any other
sum to which the Lender may be or become entitled for the breach of this
Agreement by the Borrower.
SECTION 12. MISCELLANEOUS
12.1. INDEPENDENT RIGHTS. No single or partial exercise of any right,
power or privilege hereunder, or any delay in the exercise thereof, shall
preclude other or further exercise of the rights of the parties to this
Agreement.
12.2. COVENANT INDEPENDENCE. Each covenant in this Agreement shall be
deemed to be independent of any other covenant, and an exception in one covenant
shall not create an exception in another covenant.
12.3. WAIVERS AND AMENDMENTS. No forbearance on the part of the Lender
in enforcing any of its rights under this Agreement, nor any renewal, extension
or rearrangement of any payment or covenant to be made or performed by the
Borrower hereunder, shall constitute a waiver of any of the terms of this
Agreement or of any such right. No Default or Event of Default shall be waived
by the Lender except in writing signed and delivered by an officer of the
Lender, and no waiver of any Default or Event of Default shall operate as a
waiver of any other Default or Event of Default or of the same Default or Event
of Default on a future occasion. No other amendment, modification or waiver of,
or consent with respect to, any provision of this Agreement or the Note or other
documents contemplated hereby shall be effective unless the same shall be in
writing and signed and delivered by an officer of the Lender.
12.4. GOVERNING LAW. THIS AGREEMENT, AND EACH AND EVERY TERM AND
PROVISION HEREOF, SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE
STATE OF TEXAS. IF ANY PROVISIONS OF THIS AGREEMENT SHALL FOR ANY REASON BE
HELD INVALID OR
CREDIT AGREEMENT - Page 38
<PAGE>
UNENFORCEABLE, SUCH INVALIDITY OR UNENFORCEABILITY SHALL NOT AFFECT ANY OTHER
PROVISION HEREOF, BUT THIS AGREEMENT SHALL BE CONSTRUED AS IF SUCH INVALID OR
UNENFORCEABLE PROVISION HAD NEVER BEEN CONTAINED HEREIN.
12.5. SURVIVAL OF WARRANTIES, ETC. All of the Borrower's covenants,
agreements, representations and warranties made in connection with this
Agreement and any document contemplated hereby shall survive the making of
Advances and the delivery of the Notes hereunder and shall be deemed to have
been relied upon by the Lender, notwithstanding any investigation heretofore or
hereafter made by the Lender. All statements contained in any certificate or
other document delivered to the Lender at any time by or on behalf of the
Borrower pursuant hereto or in connection with the transactions contemplated
hereby shall constitute representations and warranties by the Borrower in
connection with this Agreement.
12.6. ATTORNEYS' FEES. The Borrower agrees that it will pay all
reasonable costs and expenses of the Lender in connection with the enforcement
of the Lender's rights and remedies under this Agreement and in connection with
the preparation or making of any amendments, modifications, waivers or consents
with respect to this Agreement.
12.7. PAYMENTS ON SATURDAYS, ETC. Whenever any payment to be made
hereunder or under the Notes shall be stated to be due on a Saturday, Sunday or
any other day which is not a Business Day, such payment shall be due on the next
succeeding Business Day, and such extension, if any, shall be included in
computing interest in connection with such payment.
12.8. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and
assigns; provided, however, the Borrower may not assign or transfer any rights
or obligations hereunder without the prior written consent of the Lender.
12.9. MAINTENANCE OF RECORDS. The Borrower will keep all of its
respective records concerning the Collateral and the Equipment at its principal
place of business. The Borrower will give the Lender prompt written notice of
any change in its respective principal place of business, or in the location of
said records.
12.10. NOTICES. All notices and communications provided for herein or in
any document contemplated hereby or required by law to be given shall be
effective when received or, upon sending by registered or certified mail,
postage prepaid, addressed as follows: (a) If to the Borrower, to: Jeffrey P.
Johnson, Chief Financial Officer, 9846 Hwy. 31 East, Tyler, Texas 75705, and
(b) If to the Lender, to: 8828 Stemmons Freeway, Suite 441, Dallas, Texas
75247, Attention: David Terry, or to such other address as a party shall have
designated to the other in writing.
12.11. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures were upon the same
instrument.
12.12. HEADINGS. Article and section headings in this Agreement are
included for the
CREDIT AGREEMENT - Page 39
<PAGE>
convenience of reference only and shall not constitute a part of this
Agreement for any purpose.
12.13. INDEMNIFICATION. THE BORROWER HEREBY COVENANTS AND AGREES TO
INDEMNIFY, DEFEND AND HOLD HARMLESS THE LENDER AND ITS OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS ("INDEMNIFIED PERSONS") FROM AND AGAINST ANY AND ALL
CLAIMS, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION,
THE FEES AND OUT-OF-POCKET EXPENSES OF COUNSEL) WHICH MAY BE INCURRED BY OR
ASSERTED AGAINST THE LENDER OR ANY SUCH OTHER INDIVIDUAL OR ENTITY IN CONNECTION
WITH:
(a) ANY INVESTIGATION, ACTION OR PROCEEDING ARISING OUT OF OR
IN ANY WAY RELATING TO THIS AGREEMENT, THE NOTES, OR ANY OTHER DOCUMENTS
OR AGREEMENTS RELATING TO THE LOANS OR ANY COLLATERAL, OR ANY ACT OR
OMISSION RELATING TO ANY OF THE FOREGOING;
(b) ANY TAXES (OTHER THAN FEDERAL OR STATE INCOME TAXES),
LIABILITIES, CLAIMS OR DAMAGES RELATING TO THE COLLATERAL OR THE LENDER'S
LIENS THEREON; OR
(c) THE CORRECTNESS, VALIDITY OR GENUINENESS OF ANY INSTRUMENTS
OR DOCUMENTS THAT MAY BE RELEASED OR ENDORSED TO BORROWER BY THE LENDER
(WHICH SHALL AUTOMATICALLY BE DEEMED TO BE WITHOUT RECOURSE TO THE LENDER
IN ANY EVENT), OR THE EXISTENCE, CHARACTER, QUANTITY, QUALITY, CONDITION,
VALUE OR DELIVERY OF ANY GOODS PURPORTING TO BE REPRESENTED BY ANY SUCH
DOCUMENTS.
NOTWITHSTANDING THE FOREGOING, THE BORROWER SHALL NOT BE REQUIRED TO INDEMNIFY
ANY SUCH INDEMNIFIED PERSON FROM OR AGAINST ANY PORTION OF SUCH CLAIMS, DAMAGES,
LIABILITIES OR EXPENSES ARISING OUT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNIFIED PERSON.
12.14. NO ORAL AGREEMENTS. THIS AGREEMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS AS WRITTEN, REPRESENT THE FINAL AGREEMENTS BETWEEN THE LENDER AND THE
BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE LENDER AND THE BORROWER.
12.15. GENDER. Throughout this Agreement, the masculine shall include
the feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this
CREDIT AGREEMENT - Page 40
<PAGE>
Agreement indicates otherwise.
12.16. CROSS COLLATERAL. The Borrower hereby agrees that the Collateral
under this Agreement secures the obligations now or hereafter outstanding under
all other agreements between Borrower and the Lender or any of their affiliates
and the collateral pledged under any other agreement with the Lender or any of
its affiliates secures the obligations under this Agreement.
12.17. SEVERABILITY OF PROVISIONS. Any provision of this Agreement, the
Notes or any other documents relating thereto that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, such Notes or such other documents or
affecting the validity or enforceability of such provision in any other
jurisdiction.
12.18. ASSIGNMENT. The Lender shall have the absolute and unrestricted
right to sell, assign, transfer, or grant participation in, all or any portion
of the Loans and any Collateral, guaranties or other security relating thereto
without the consent of the Borrower to any federal or state agency, or to any
bank affiliate of the Bank, or, with the Borrower's consent (which shall not be
unreasonably withheld and shall not be required during the existence of an Event
of Default), to any commercial bank or to any other financial institution or
holding company of any of the foregoing; provided, however, no such action on
the part of the Lender shall have the effect of changing any of the Borrower's
obligations hereunder without the respective written consent or the Borrower.
12.19. WAIVER OF JURY TRIAL. The Borrower and the Lender hereby
irrevocably waive the right to trial by jury with respect to any and all actions
or proceedings at any time in which Borrower and Lender are parties arising out
of this Agreement.
12.20. SURVIVAL OF AGREEMENT. Notwithstanding anything to the contrary
contained in this Agreement, the provisions of this Agreement shall remain in
full force and effect until such time as all Senior Indebtedness is paid in
full.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first written above.
BORROWER:
ZIMMERMAN SIGN COMPANY
By: /s/ Jeffrey P. Johnson
----------------------
Jeffrey P. Johnson
Vice President/CFO
CREDIT AGREEMENT - Page 41
<PAGE>
LENDER:
COMERICA BANK-TEXAS
By: /s/ David Terry
---------------
David Terry
Vice President
CREDIT AGREEMENT - Page 42
<PAGE>
Exhibit 10.2
SENIOR SUBORDINATED NOTE, PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 30, 1998
AMONG
ZIMMERMAN SIGN COMPANY
CONTINENTAL ILLINOIS VENTURE CORPORATION,
MIG PARTNERS VIII
AND
THE MANAGEMENT PURCHASERS LISTED HEREIN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Authorization and Closing. . . . . . . . . . . . . . . . . . . . . . . 1
1A. Authorization of Notes, Warrants and Series A Preferred. . . . . . 1
1B. Purchase and Sale of the Notes, the Warrants and Series A
Preferred. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1C. The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1D. Closing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Conditions of the Purchasers' Obligation at the Closing. . . . . . . . 2
2A. Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2B. Share Purchase Option Transaction. . . . . . . . . . . . . . . . . 2
2C. Stockholders Agreement and Registration Agreement. . . . . . . . . . 3
2D. Representations and Warranties; Covenants. . . . . . . . . . . . . . 3
2E. Certificate of Designation . . . . . . . . . . . . . . . . . . . . . 3
2F. Delivery of Notes, Warrants and Series A Preferred . . . . . . . . . 3
2G. Resignation of Directors . . . . . . . . . . . . . . . . . . . . . . 3
2H. Termination of Registration Rights Agreement . . . . . . . . . . . . 4
2I. Securities Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2J. No Pending Action. . . . . . . . . . . . . . . . . . . . . . . . . . 4
2K. No Materially Adverse Effect . . . . . . . . . . . . . . . . . . . . 4
2L. Indebtedness; No Default.. . . . . . . . . . . . . . . . . . . . . . 4
2M. Environmental Reports. . . . . . . . . . . . . . . . . . . . . . . . 4
2N. Liquidity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2O. Opinion of Counsel.. . . . . . . . . . . . . . . . . . . . . . . . . 4
2P. Closing Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 4
2Q. The Purchasers' Fees and Expenses. . . . . . . . . . . . . . . . . . 6
2R. Total Transaction Fees . . . . . . . . . . . . . . . . . . . . . . . 6
2S. Legal Investment . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2T. Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2U. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 7
3A. Business Maintenance . . . . . . . . . . . . . . . . . . . . . . . . 7
3B. Financial Statements and Other Information . . . . . . . . . . . . . 8
3C. Inspection of Property . . . . . . . . . . . . . . . . . . . . . . . 10
3D. Compliance with Certain Agreements . . . . . . . . . . . . . . . . . 10
3E. Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . 11
3F. Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . 11
3G. ERISA Notices and Requests . . . . . . . . . . . . . . . . . . . . . 11
3H. SBIC Regulatory Provisions . . . . . . . . . . . . . . . . . . . . . 12
3I. Current Public Information . . . . . . . . . . . . . . . . . . . . . 14
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Section 4. Financial Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . 14
4A. Financial Covenants When Notes Outstanding . . . . . . . . . . . . . 14
4B. Financial Covenants When Series A Preferred Outstanding. . . . . . . 16
Section 5. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5A. Acquisition; Consolidation; Reorganization . . . . . . . . . . . . . 18
5B. Sale, Lease or Transfer of Assets. . . . . . . . . . . . . . . . . . 19
5C. Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5D. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5E. Limitations on Indebtedness. . . . . . . . . . . . . . . . . . . . . 20
5F. Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . 20
5G. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5H. Amendment to the Company's Articles of Incorporation and Bylaws;
Stock Splits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5I. Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . 20
5J. Affiliated Transactions. . . . . . . . . . . . . . . . . . . . . . . 21
5K. Restrictive Agreements; Conflicting Agreements . . . . . . . . . . . 21
5L. Public Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . 21
5M. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5N. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5O. Amendment of Indebtedness. . . . . . . . . . . . . . . . . . . . . . 21
5P. Equity Issuances . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5Q. ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6. Representations and Warranties of the Company. . . . . . . . . . . . . 23
6A. Organization and Corporate Power . . . . . . . . . . . . . . . . . . 23
6B. Capital Stock and Related Matters. . . . . . . . . . . . . . . . . . 23
6C. Subsidiaries; Partnerships . . . . . . . . . . . . . . . . . . . . . 24
6D. Authorization; No Breach . . . . . . . . . . . . . . . . . . . . . . 24
6E. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 24
6F. Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . 25
6G. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . 25
6H. Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6I. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . 26
6J. Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . 26
6K. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6L. Contracts and Commitments. . . . . . . . . . . . . . . . . . . . . . 26
6M. Trademarks, Patents. . . . . . . . . . . . . . . . . . . . . . . . . 28
6N. Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6O. No Forfeiture. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6P. Small Business Matters . . . . . . . . . . . . . . . . . . . . . . . 29
6Q. Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6R. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6S. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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<PAGE>
6T. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . 30
6U. Affiliated Transactions. . . . . . . . . . . . . . . . . . . . . . . 30
6V. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6W. Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6X. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6Y. Environmental and Safety Matters . . . . . . . . . . . . . . . . . . 32
6Z. Real Property Holding Corporation Status . . . . . . . . . . . . . . 33
6AA. Certain Government Regulations . . . . . . . . . . . . . . . . . . . 33
6BB. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7. Representations and Warranties of BA Purchasers. . . . . . . . . . . . 33
7A. Due Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 34
7B. Consents and Approvals.. . . . . . . . . . . . . . . . . . . . . . . 34
Section 8. Representations and Warranties and Covenants of all Purchasers.. . . . 34
8A. Investment Intent. . . . . . . . . . . . . . . . . . . . . . . . . . 34
8B. Access: Sophistication: etc... . . . . . . . . . . . . . . . . . . . 34
Section 9. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9A. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9B. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 10. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10A. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 47
10B. Default Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . 50
10C. Remedy if Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . 50
10D. Remedy if Other Event of Default . . . . . . . . . . . . . . . . . . 50
10E. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10F. Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11A. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11B. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11C. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11D. Usury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11E. Consent to Amendments. . . . . . . . . . . . . . . . . . . . . . . . 53
11F. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 53
11G. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
11H. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
11I. Descriptive Headings; Interpretation . . . . . . . . . . . . . . . . 54
11J. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
11K. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
11L. Survival of Agreement; Indemnities . . . . . . . . . . . . . . . . . 55
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<PAGE>
11M. Taxes and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11N. Jurisdiction and Venue . . . . . . . . . . . . . . . . . . . . . . . 56
11O. Waiver of Right to Jury Trial. . . . . . . . . . . . . . . . . . . . 57
11P. Consideration for the Warrants and Warrant Stock . . . . . . . . . . 57
11Q. No Strict Construction . . . . . . . . . . . . . . . . . . . . . . . 57
11R. Complete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 58
11S. Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11T. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . 58
11U. Confidentiality of Information . . . . . . . . . . . . . . . . . . . 58
</TABLE>
Schedules and Exhibits:
List of Exhibits
List of Disclosure Schedules
Schedule of Purchasers
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<PAGE>
SENIOR SUBORDINATED NOTE, PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT
THIS AGREEMENT (the "AGREEMENT") is made as of September 30,
1998 by and among Continental Illinois Venture Corporation, a Delaware
corporation ("CIVC"), MIG Partners VIII, a Delaware partnership ("MIG"),
Zimmerman Sign Company, a Texas corporation (the "COMPANY") and certain
members of the Company's management listed on the signature pages hereto as
the "Management Purchasers" (the "MANAGEMENT PURCHASERS"). CIVC and MIG are
referred to herein collectively as the "BA PURCHASERS" and each is referred
to herein individually as a "BA PURCHASER." The BA Purchasers and the
Management Purchasers are referred to herein collectively as the "PURCHASERS"
and each is referred to herein individually as a "PURCHASER." Except as
otherwise indicated herein, capitalized terms used herein are defined in
SECTION 9 hereof.
The Company is initiating a plan to recapitalize its existing
debt and equity structure through a series of transactions including, but not
limited to, refinancing of funded debt, repurchase of stock from certain
shareholders, issuance of capital stock and restructuring certain rights held
by certain stockholders of the Company (the "RECAPITALIZATION"). The
Purchasers are entering into this Agreement to provide financing for the
Company's Recapitalization.
In connection with the Recapitalization, the Company is
entering into a Second Amended and Restated Revolving Credit and Term
Agreement, dated as of the date hereof (the "LOAN AGREEMENT"), with Comerica
Bank-Texas, a Texas banking association (the "BANK"), pursuant to which the
Bank has agreed to make available to the Company a revolving credit facility
of $17,000,000 (the "REVOLVER") and a term loan facility in the amount of
$2,000,000 (the "TERM A LOAN"), a term loan facility in the amount of
$1,000,000 (the "TERM B LOAN") and a term loan facility in the amount of
$3,500,000 (the "TERM C LOAN"), and together with the Term A Loan and Term B
Loan, the "TERM LOANS").
In consideration of the mutual covenants and promises contained
herein and for the good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Authorization and Closing.
1A. AUTHORIZATION OF NOTES, WARRANTS AND SERIES A PREFERRED.
The Company shall authorize the issuance and sale to the Purchasers of (i)
12.00% Senior Subordinated Notes, in the form attached hereto as EXHIBIT A
(any such note, a "NOTE" and all notes issued hereunder or in respect of any
Note, collectively, the "NOTES"), in the aggregate principal amount of
$4,000,000, (ii) stock purchase warrants, in the form attached hereto as
EXHIBIT B (any such warrant, a "WARRANT" and all warrants issued pursuant to
this CLAUSE (ii), or in respect of any such Warrant, collectively, the
"WARRANTS") initially exercisable to 1,197,194 shares of Common Stock and
(iii) 52,500 shares of the Company's Series A Preferred Stock, par value
$0.01 per share (the
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<PAGE>
"SERIES A PREFERRED"), having the rights and preferences set forth in EXHIBIT
C attached hereto. The Notes, Series A Preferred, the Warrants and Warrant
Stock sometimes are referred to herein collectively as the "SECURITIES."
1B. PURCHASE AND SALE OF THE NOTES, THE WARRANTS AND SERIES
A PREFERRED. At the Closing (as defined in SECTION 1C below) the Company
shall issue to each of the Purchasers and, subject to the terms and
conditions set forth herein, each of the Purchasers shall severally and
independently (and not jointly) purchase from the Company, (i) Notes in the
aggregate principal amount set forth opposite such Purchaser's name on the
attached SCHEDULE OF PURCHASERS, in each case, at a purchase price equal to
the price set forth opposite such Purchaser's name on the attached SCHEDULE
OF PURCHASERS, (ii) Warrants initially exercisable to acquire the aggregate
number of shares of Common Stock set forth opposite such Purchaser's name on
the attached SCHEDULE OF PURCHASERS, in each case, at a purchase price equal
to the price set forth opposite such Purchaser's name on the attached
SCHEDULE OF PURCHASERS, and (iii) the number of shares of Series A Preferred
set forth opposite such Purchaser's name on the attached SCHEDULE OF
PURCHASERS, in each case, at a purchase price equal to the price set forth
opposite such Purchaser's name on the attached SCHEDULE OF PURCHASERS.
1C. THE CLOSING. The sale of the Notes, the Series A
Preferred and the Warrants to each Purchaser hereunder shall constitute
separate sales hereunder. The closing of the purchase and sale of the
Securities (the "CLOSING") shall take place on September 30, 1998 (the
"CLOSING DATE") at the offices of Kirkland & Ellis or at such other place or
on such other date as may be mutually agreeable to the Company and the
Purchasers. At the Closing, the Company shall deliver to each of the
Purchasers instruments and certificates for the Notes, Series A Preferred and
the Warrants to be purchased by such Purchaser, issued to such Purchaser,
registered in such Purchaser's or its nominee's name, upon payment of the
purchase price therefor by wire transfer of immediately available funds, to
accounts designated by the Company in the amount set forth opposite such
Purchaser's name on the attached SCHEDULE OF PURCHASERS.
1D. CLOSING FEES. On the Closing Date, the Company shall
pay to the BA Purchasers for their own account a closing fee (the "CLOSING
FEE") in an aggregate amount of $200,000, by wire transfer of immediately
available funds to accounts specified by the BA Purchasers in the respective
amounts set forth opposite each BA Purchaser's name on the attached SCHEDULE
OF PURCHASERS.
Section 2. CONDITIONS OF THE PURCHASERS' OBLIGATION AT THE
CLOSING. The obligation of each Purchaser to purchase and pay for Securities
issued hereunder at the Closing is subject to the satisfaction as of the
Closing of the following conditions to such Purchaser's satisfaction in its
sole discretion:
2A. LOAN AGREEMENT. The Loan Agreement and all other
documents and agreements contemplated thereby shall be in form and substance
satisfactory to the Purchasers and their counsel, without amendment or
modification thereof, and shall be in full force and effect, all conditions
to the obligations of the Banks to make loans thereunder shall have been
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<PAGE>
satisfied, and the Banks shall have agreed to advance to the Company
immediately following the Closing or simultaneously therewith all amounts
under the Term Loans and up to $17,000,000 under the Revolver (excluding the
aggregate amount of unused availability thereunder).
2B. SHARE PURCHASE OPTION TRANSACTION. (i) Each of the
Company and David Anderson shall have entered into a share purchase option
agreement in the form of EXHIBIT D attached hereto (the "SHARE PURCHASE
OPTION AGREEMENT") with Geneve Securities Holding Corp. ("GSH"), Southern
Investors Corp. ("SIC"), Southern Mortgage Holding Corporation ("SMHC"),
Geneve Securities Portfolio Corp. ("GENEVE") and First International
Reinsurance Company, Inc. ("FIRC") and such Share Purchase Option Agreement
shall not have been amended or modified and shall be in full force and effect
as of the Closing, (ii) the Company and David Anderson shall have entered in
a share purchase agreement in the form of EXHIBIT E attached hereto (the
"ANDERSON PURCHASE AGREEMENT") and such Anderson Purchase Agreement shall not
have been amended or modified and shall be in full force and effect as of the
Closing, and (iii) the Company and Anderson shall have entered into the side
agreement in the form of EXHIBIT F attached hereto (the "ANDERSON SIDE
AGREEMENT") and such Anderson Side Agreement shall not have been amended or
modified and shall be in full force and effect as of the Closing.
2C. STOCKHOLDERS AGREEMENT AND REGISTRATION AGREEMENT. The
Stockholders Agreement in the form of EXHIBIT G hereto and the Registration
Agreement in the form of EXHIBIT H hereto shall have been duly authorized,
executed and delivered by each other party thereto and shall be in full force
and effect as of the Closing.
2D. REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties contained in SECTION 6 hereof shall be true
and correct at and as of the Closing as though then made, the Company shall
have performed prior to the Closing all of the covenants required to be
performed by it hereunder and under the other documents, agreements and
instruments executed in connection herewith that are to be complied with or
performed by the Company prior to the Closing.
2E. CERTIFICATE OF DESIGNATION. The Company shall have duly
adopted, executed and filed with the Secretary of State of Texas a
Certificate of Designation establishing the terms and the relative rights and
preferences of each of (i) the Series A Preferred in the form set forth in
EXHIBIT C attached hereto (the "SERIES A CERTIFICATE OF DESIGNATION"), (ii)
the Series B Preferred in the form set forth on EXHIBIT I attached hereto
(the "SERIES B CERTIFICATE OF DESIGNATION"), and (iii) the Series C Preferred
in the form set forth in EXHIBIT J attached hereto (the "SERIES C CERTIFICATE
OF DESIGNATION," and together with the Series A Certificate of Designation
and the Series B Certificate of Designation, the "CERTIFICATES OF
DESIGNATION"), and the Company shall not have adopted or filed any other
document designating terms, relative rights or preferences of its preferred
stock. The Certificates of Designation shall be in full force and effect as
of the Closing under the laws of Texas and shall not have been amended or
modified.
2F. DELIVERY OF NOTES, WARRANTS AND SERIES A PREFERRED. The
Company shall have simultaneously sold to each Purchaser the Notes, Series A
Preferred and the Warrants to be
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purchased by such Purchaser hereunder at the Closing and shall have received
payment therefor in full.
2G. RESIGNATION OF DIRECTORS. The Company shall have
received resignations effective as of the Closing of Steve Lapin and Roy T.K.
Thung as members of the Company's board of directors (the "BOARD"), and
Robert F. Perille and Andrea P. Joselit shall have been elected to the Board.
2H. TERMINATION OF REGISTRATION RIGHTS AGREEMENT. The
Registration Rights Agreement, dated as of December 1, 1996 (the "RIGHTS
AGREEMENT"), among the Company, GSH, SIC, SMHC, Geneve, and FIRC shall have
been terminated without any liability to the Company.
2I. SECURITIES LAW. The Company shall have made all filings
under any applicable Securities Laws necessary to consummate, in compliance
with such Laws, all issuances of the Notes, Series A Preferred, and the
Warrants and other securities pursuant to this Agreement, the Share Purchase
Option Agreements, or as contemplated hereby or thereby and the issuance of
the Common Stock upon exercise of the Warrants.
2J. NO PENDING ACTION. No action, suit, proceeding or
governmental investigation shall be pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its
stockholders which (a) if adversely determined could have a Materially
Adverse Effect or (b) seeks to or could restrain, prevent or, in the judgment
of the Purchasers, impose any adverse condition upon the financing
contemplated herein.
2K. NO MATERIALLY ADVERSE EFFECT. Since December 31, 1997,
there shall not have occurred a Materially Adverse Effect.
2L. INDEBTEDNESS; NO DEFAULT. The Company shall be free
from all Indebtedness, except for the Senior Indebtedness and the Notes
issued hereby. The consummation of the transactions contemplated by this
Agreement will not result in, nor shall there exist any Event of Default or
event which, with the giving of notice or lapse of time or both, would be an
Event of Default or breach under or with respect to any Indebtedness of the
Company, after giving effect to the transactions contemplated by this
Agreement, the Share Purchase Option Agreements or the Loan Agreement, and
there shall not exist any failure by the Company to observe or perform in any
material respect any covenant, condition or agreement to be observed or
performed pursuant to the terms of any of the foregoing.
2M. ENVIRONMENTAL REPORTS. The environmental reviews and
audits delivered by the Company to the Purchasers shall be in form, scope and
substance satisfactory to the Purchasers with respect to all of the real
estate and businesses of the Company.
2N. LIQUIDITY. After giving effect to the Recapitalization,
the receipt by the Company of proceeds of the issuance of the Securities
hereunder and payment of all estimated legal, investment banking, accounting
and other fees related to the financing contemplated herein, the Company
shall have unused availability under the Loan Agreement of at least
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$1,500,000.
2O. OPINION OF COUNSEL. The Purchasers shall have received
from Jackson Walker L.L.P., counsel for the Company, opinions with respect to
the matters set forth in EXHIBIT K attached hereto, which shall be addressed
to the Purchasers, dated the date of the Closing and in form and substance
reasonably satisfactory to the Purchasers and their counsel.
2P. CLOSING DOCUMENTS. The Company shall have delivered to
the Purchasers all of the following documents:
(a) an Officer's Certificate of the Company, dated the
date of the Closing, stating that (i) the conditions specified in SECTION
2 have been fully satisfied; (ii) since December 31, 1997 there has been
no Materially Adverse Effect or event, development, circumstance or other
matter which may impose any materially adverse condition upon the
consummation of the financing contemplated hereby and (iii) such Person
has delivered to the Purchasers at least one day prior to the Closing all
environmental reviews and audits with respect to all of the real estate
and businesses of such entity;
(b) copies of the resolutions duly adopted by the board
of directors of the Company authorizing the execution, delivery and
performance of this Agreement, the issuance of the Securities, the Share
Purchase Option Agreement, the Anderson Purchase Agreement, the Anderson
Side Letter, the Stockholders Agreement, the Registration Agreement and
each of the other agreements contemplated hereby or thereby to which the
Company is a party, the reservation of 1,197,194 shares of Common Stock
for issuance upon exercise of the Warrants, and the filing of the
Certificates of Designation contemplated by SECTION 2E above accompanied
by an Officer's Certificate of the Company certifying that the same are
in full force and effect without modification or amendment, accompanied
by a certification of the incumbency of each individual executing any
agreement or document contemplated hereby in the name of the Company;
(c) copies of the Articles of Incorporation and bylaws
of the Company as in effect as of the Closing, certified by an officer of
the Company together with a certificate of status or similar evidence
from the State of Texas and each jurisdiction in which the Company is
then qualified to do business as a foreign corporation or in which the
ownership of its assets or the conduct of its business would reasonably
require it to so qualify, in each case dated a recent date prior to the
Closing Date;
(d) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of the
transactions contemplated hereunder (including all environmental
disclosures, blue sky filings and waivers of preemptive rights and rights
of first refusal);
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(e) copies of the Loan Agreement and the Share Purchase
Option Agreements, each as in effect at the Closing, in each case
certified by an officer of the Company;
(f) the Stockholders Agreement and the Registration
Agreement, executed by the Company;
(g) evidence satisfactory to the Purchasers of the
payment in full of all Indebtedness and related obligations owing or owed
by the Company (other than pursuant to the Loan Agreement and the Notes),
the entire amount of which will be paid contemporaneously with the
Closing;
(h) evidence of insurance coverage regarding the Company
reasonably satisfactory in terms, amount and scope and provided by
insurers all reasonably satisfactory to the Purchasers;
(i) the audited consolidated balance sheet of the
Company as of December 31, 1997 and December 31, 1996 and the related
consolidated and consolidating statements of earnings and cash flows as
of and for the Fiscal Years then ended;
(j) for each Purchaser which is an SBIC, duly completed
and executed SBA Forms 480, 652, and 1031 (Part A) together with a
five-year business plan showing the Company's financial projections
(including balance sheets and income and cash flows statements) for
each five-year period and a written statement from the Company regarding
its intended use of the proceeds from the financing;
(k) the STOCKHOLDERS SCHEDULE, which shall include a
list of each of the following after giving effect to the transactions
contemplated by this Agreement: (a) the name of each of the Company's
directors, (b) the name and title of each of the Company's officers,
(c) a list from the Company's transfer agent setting forth the name of
each record holder of the Company's Common Stock and the number of shares
held by such holder as of the record date of the May 23, 1998
shareholders meeting and (d) the name of each of the Company's other
stockholders setting forth the number and class of shares held; and
(l) such other documents relating to the transactions
contemplated by this Agreement as either the BA Purchasers or Kirkland &
Ellis, as special counsel to the Purchasers, may reasonably request.
2Q. THE PURCHASERS' FEES AND EXPENSES. The Company shall
have paid the Closing Fee to the BA Purchasers as contemplated by SECTION 1D
above and shall have reimbursed them for expenses incurred in connection with
the transactions contemplated herein, as contemplated by SECTION 11A below.
2R. TOTAL TRANSACTION FEES. The total amount of transaction
fees and expenses
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payable by the Company in connection with the transactions contemplated
hereby shall in no event exceed the fees set forth on the TRANSACTION FEES
SCHEDULE attached hereto.
2S. LEGAL INVESTMENT. Each Purchaser shall be satisfied
that this Agreement and the Securities shall be in full compliance with all
Laws, and all necessary governmental and third-party approvals will have been
obtained which are applicable to the transactions contemplated hereby. The
issuance by the Company and the purchase by the Purchasers, of the Securities
shall not be prohibited by any applicable Laws and shall not adversely impact
or subject the Company or any BA Purchaser to any penalty or liability
pursuant to any applicable Laws.
2T. PROCEEDINGS. All corporate and other proceedings taken
or required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be satisfactory in form and substance to the
Purchasers and Kirkland & Ellis, as special counsel to the BA Purchasers.
2U. WAIVER. Any condition specified in this SECTION 2 may
be waived by the Purchasers if consented to by the Purchasers; PROVIDED that
no such waiver shall be effective against the Purchasers unless it is set
forth in a writing executed by each Purchaser.
Section 3. AFFIRMATIVE COVENANTS. For so long as any Notes or
Series A Preferred are outstanding, unless otherwise indicated in this
SECTION 3, the Company will comply at all times with the following
affirmative covenants and will cause each of its Subsidiaries to comply at
all times with the following affirmative covenants:
3A. BUSINESS MAINTENANCE.
(a) at all times cause to be done all things necessary
to maintain, preserve and renew its corporate existence and good standing
in the jurisdiction of its incorporation, to qualify and to remain
qualified as a foreign corporation in each jurisdiction in which such
qualification is required, except where the failure to be so qualified
would not have a Materially Adverse Effect, and use its reasonable
efforts to maintain, preserve and renew all material contracts, licenses,
authorizations and permits necessary to the conduct of its businesses;
(b) maintain and keep its properties that are used in,
or that are useful to and material to, its businesses in good repair,
working order and condition, and from time to time make all such repairs,
renewals and replacements, so that its businesses may be properly and
advantageously conducted in all respects at all times in a manner
consistent with the Company's past practices;
(c) continue in force insurance policies (including
self-insurance retention plans consistent with past practices) with
financially sound and reputable insurance companies covering risks of
such types and covering casualties, risks and
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contingencies of such types and in amounts not less than as are
customary for prudent corporations of similar size engaged in similar
lines of business under similar circumstances;
(d) pay and discharge when payable all Taxes,
assessments and governmental charges imposed upon its properties or upon
the income or profits therefrom (in each case before the same becomes
delinquent and before penalties accrue thereon) and all material claims
for labor, materials or supplies that if unpaid might by law become a
lien upon any of its property, unless and to the extent that the same are
being contested in good faith and by appropriate proceedings and adequate
reserves (as determined in accordance with GAAP) have been established on
its books with respect thereto;
(e) comply with all other obligations that it incurs
pursuant to any material contract or agreement, whether oral or written,
express or implied, as such obligations become due, unless and to the
extent that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with GAAP)
have been established on its books with respect thereto;
(f) comply in all material respects with all applicable
Laws; and
(g) maintain true and proper books of record and account
that fairly present its financial condition and results of operations and
make provisions on its financial statements for all such proper reserves
as in each case are required in accordance with GAAP.
3B. FINANCIAL STATEMENTS AND OTHER INFORMATION. Deliver to
a representative or representatives designated by the Majority Holders (or,
in the absence of any such designation, the BA Purchasers):
(a) as soon as available, but in any event within 30
days after the end of each fiscal month (except for months which end a
fiscal quarter, in which case within 45 days of such quarter end and
except for months which end the fiscal year, in which case within 90 days
of such year end), (i) a copy of the unaudited consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of
the end of such month and the related consolidated and consolidating
statements of earnings, retained earnings and cash flows for such month
and for the portion of the Fiscal Year ending as of the end of such
month, all in reasonable detail and prepared in accordance with GAAP
(subject to normal year-end adjustments and the exclusion of such
footnotes as may be required in accordance with GAAP) accompanied in each
case by comparisons to the corresponding periods in the preceding Fiscal
Year (other than for the Fiscal Year ending December 31, 1998) and (ii)
so long as any Notes or Series A Preferred are outstanding, an Officer's
Certificate executed by the Chief Financial Officer of the Company
certifying
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that to such officer's knowledge no Default or Event of Default, or
default or event of default with respect to the Loan Agreement or any
other material Contract to which the Company or any of its Subsidiaries
is subject has occurred during the period in question or is continuing
or, if a Default or Event of Default or any such default or event of
default under the Loan Agreement has so occurred or is continuing, a
statement as to the nature thereof and any action which has been taken
or is proposed to be taken with respect thereto;
(b) as soon as available, but in any event within 90
days after the close of each Fiscal Year, a copy of the audited
consolidated and consolidating financial statements of the Company and
its Subsidiaries, consisting of an audited consolidated and consolidating
balance sheet as at the end of such Fiscal Year and audited consolidated
and consolidating statements of earnings, retained earnings and cash
flows for such Fiscal Year, setting forth in comparative form in each
case the audited consolidated and consolidating figures for the previous
Fiscal Year, which financial statements shall be prepared in accordance
with GAAP, certified without qualification by a nationally recognized
firm of independent certified public accountants;
(c) simultaneously with the delivery of the financial
statements referred to in SECTION 3B(a) prepared with respect to or as of
the end of any month included in any Fiscal Year, an Officer's
Certificate executed by the Chief Financial Officer of the Company (a)
setting forth in reasonable detail, and certifying to such officer's
knowledge the accuracy of, computations demonstrating compliance with the
covenants set forth in SECTION 4 or SECTION 5E, and (b) certifying that
all such financial statements are complete and correct in all material
respects and present fairly in accordance with GAAP (subject to normal
year-end adjustments and the exclusion of such footnotes as may be
required in accordance with GAAP) the consolidated and consolidating
financial position, the consolidated and consolidating results of
operations and cash flows and changes in stockholders' equity of the
Company and its Subsidiaries as of the end of such period and for the
period then ended;
(d) as soon as practicable, but in any event within (a)
two Business Days after the Company becomes aware of the existence of any
Event of Default or any Default, or default or event of default under the
Loan Agreement, or any development (including litigation) or other
information which could reasonably be expected to have a Materially
Adverse Effect or (b) two Business Days after the Company receives notice
of the existence of any default or event of default with respect to any
other material agreement to which the Company or any of its Subsidiaries
is subject, telephonic notice specifying the nature of such condition,
event, development or information, including the anticipated effect
thereof, which notice shall be promptly confirmed in writing within two
days, which writing shall set forth the details of such condition, event,
development or information and the action which is proposed to be taken
by the Company and its Subsidiaries with respect thereto;
(e) promptly upon receipt thereof, copies of any reports
submitted to
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the Company or any of its Subsidiaries by its independent auditor in
connection with the examination of the financial statements of the
Company or any of its Subsidiaries made by such auditor, including
reports arising out of any separate audit or other accounting or
financial review of the Company or any Subsidiary of the Company;
(f) promptly after the commencement thereof, notice of
all actions, suits, and proceedings before any Government Entity
affecting the Company or any of its Subsidiaries which the Company
believes, if adversely determined, could have a Materially Adverse
Effect;
(g) promptly after the commencement thereof or promptly
after the Company or any Subsidiary of the Company becomes aware of the
commencement or threat thereof, notice of any Forfeiture Proceeding;
(h) promptly after the sending or filing thereof, copies
of all proxy statements, financial statements and reports which the
Company sends to its stockholders, and copies of all regular, periodic or
special reports, and all registration statements, which the Company files
with the Securities and Exchange Commission or any other securities
exchange or securities market;
(i) promptly after the furnishing thereof, copies of any
statement or report furnished to any holder of Senior Indebtedness
pursuant to the terms of the Loan Agreement (or any refining of or
substitution thereof), and not otherwise required to be furnished to the
Majority Holders pursuant to any other paragraph of this SECTION 3B;
(j) promptly after the receipt thereof, a copy of any
notice, summons, or citation concerning any liabilities or investigatory,
remedial or corrective obligations arising under Environmental and Safety
Requirements and any subsequent material correspondence or other document
relating thereto which could have a Materially Adverse Effect; and
(k) such other information respecting the Company's or
its Subsidiaries' business or financial condition as any Majority Holder
may, from time to time, request in writing.
Each of the financial statements referred to in SECTIONS 3B(a) or 3B(b)
(including the notes thereto, if any) shall be accurate and complete in all
material respects, consistent with the books and records of the Company and
its Subsidiaries (which, in turn, are accurate and complete in all material
respects), present fairly the consolidated financial position, results of
operations and cash flows of the Company and its Subsidiaries, and prepared
in accordance with GAAP, consistently applied, as of the dates and for the
periods set forth therein, subject in the case of the unaudited financial
statements to the lack of footnote disclosure and changes resulting from
normal year-end audit adjustments (none of which would, alone or in the
aggregate, have a Materially Adverse Effect), and except as disclosed on the
FINANCIAL STATEMENTS SCHEDULE, such financial statements shall be complete
and correct in all material respects and shall be prepared
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on a basis consistent with the basis on which the financial statements
referenced in SECTION 6E were prepared.
3C. INSPECTION OF PROPERTY. Permit any Majority Holder or
any of their representatives, upon reasonable prior notice, during normal
business hours and at such party's expense to (i) visit and inspect any of
the properties of the Company and any of its Subsidiaries, and (ii) examine
the corporate and financial records of the Company and any of its
Subsidiaries and make copies thereof or extracts therefrom.
3D. COMPLIANCE WITH CERTAIN AGREEMENTS. (i) Perform and
observe all of its obligations to each Securityholder and each holder of
Registrable Securities (as defined in the Registration Agreement) pursuant to
this Agreement, the Notes, the Warrants, the Registration Agreement, the
Stockholders Agreement, the Company's Articles of Incorporation and each
other agreement or document executed and delivered to the Purchasers or any
Securityholder pursuant hereto and (ii) subject to the terms and conditions
set forth therein, perform and observe all of its rights and obligations
under the Share Option Purchase Agreement, including without limitation, the
exercise of each of the options to purchase the shares pursuant to the terms
thereof, and perform and observe all of its rights and obligations under the
Anderson Purchase Agreement.
3E. PROPRIETARY RIGHTS. Possess and maintain all material
Proprietary Rights necessary to the conduct of its business and own all
right, title and interest in and to, or have a valid license for, all
material Proprietary Rights used by the Company and/or its Subsidiaries, in
the conduct of their respective businesses. None of the Company or any of
its Subsidiaries shall take any action, or fail to take any action, which
would result in the invalidity, abuse, misuse or unenforceability of any of
such material Proprietary Rights.
3F. ENVIRONMENTAL MATTERS. Comply in all material respects
with all Environmental and Safety Requirements and all material permits,
licenses or other authorizations issued thereunder; respond immediately to
any Release or threatened Release of any Hazardous Material at any of the
properties of the Company or any of its Subsidiaries or related to the
operations of the Company or any of its Subsidiaries in a manner which
complies in all material respects with all Environmental and Safety
Requirements and reasonably mitigates any risk to human health or the
environment; and provide such documents or information relating to matters
arising under the Environmental and Safety Requirements as any Purchaser may
reasonably request.
3G. ERISA NOTICES AND REQUESTS.
(a) Provide written notice to the Securityholders as
soon as practicable, and in any event within five Business Days, in the
event that (i) the Company or any of its ERISA Affiliates discovers that
any of them fails to comply in all material respects with any applicable
Laws with respect to any Plan which could reasonably be expected to
result in liability to the Company or any of its ERISA Affiliates in
excess of
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$250,000, (ii) the Company or any member of its Controlled Group
receives notice from the IRS or the DOL that the Company or any ERISA
Affiliate failed to meet the minimum funding requirements of any Plan,
and include therewith a copy of such notice, (iii) the Company or any
member of its Controlled Group gives or is required to give notice to
the PBGC of any "reportable event" (as defined in Title IV of ERISA) in
respect of any Plan or Multiemployer Plan which might constitute grounds
for a partial or complete termination of such Plan or Multiemployer Plan
under Title IV of ERISA, or knows that the plan administrator of any Plan
or Multiemployer Plan has given or is required to give notice of any such
reportable event, (iv) a notice of intent to terminate any Plan is filed
with the PBGC, (v) proceedings are instituted by the PBGC under Section
4042 of ERISA to terminate or to appoint a trustee to administer any Plan
or the Company or any member of its Controlled Group receives a notice
from a Multiemployer Plan that such action has been taken by the PBGC
with respect to such Multiemployer Plan, (vi) the Company or any member
of its Controlled Group withdraws in a complete or partial withdrawal
from any Multiemployer Plan or any Plan which is a "multiple employer
plan" within the meaning of Section 4063 of ERISA, or incurs any
withdrawal liability under Section 4204 of ERISA, (vii) any prohibited
transaction occurs to the knowledge of the Company after due inquiry
involving the assets of any Plan for which the Company could reasonably
be expected to incur liability in excess of $250,000, (viii) the Company
or any member of its Controlled Group receives a notice from a
Multiemployer Plan that such Plan is in reorganization or insolvent
pursuant to Sections 4241 or 4245 of ERISA or that such Plan intends to
terminate or has terminated under Section 4041A of ERISA, (ix) the
Company or any member of its Controlled Group receives a notice from a
Multiemployer Plan of the institution of a proceeding by a fiduciary of a
Multiemployer Plan against the Company or any member of its Controlled
Group to enforce Section 515 of ERISA, (x) the adoption of an amendment
to any Plan of the Company or any member of its Controlled Group that
could result in the termination of such Plan pursuant to Section 4041(e)
of ERISA or require the Company or any member of its Controlled Group to
provide security to such Plan pursuant to Section 401(a)(29) of the IRC
or Section 307 of ERISA, (xi) the Company or any member of its Controlled
Group fails to make a required installment or other payment to any Plan
if such failure would result in the imposition of a Lien upon the
property of the Company pursuant to Section 412(n) of the IRC, or (xii)
the incurrence of any increase in the contingent liability of the Company
or a member of its Controlled Group with respect to any Plan determined
in accordance with GAAP.
(b) Deliver to each Securityholder copies of any request
for a waiver of the funding standards or any extension of the
amortization periods required by Sections 303 and 304 of ERISA or
Section 412 of the IRC with respect to any Plan as soon as practicable
but in any event within five Business Days after the submission of such
request with the DOL and/or IRS in the case of a Plan of the Company and
within five Business Days after the Company knows or has reason to know
that such request has been submitted to the DOL and/or IRS in the case of
a Plan of the Company's ERISA Affiliates.
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3H. SBIC REGULATORY PROVISIONS.
(a) NUMBER OF STOCKHOLDERS. As long as an SBIC Holder holds
in excess of 5% of the outstanding shares of Common Stock on a fully-diluted
basis, the Company shall notify each SBIC Holder (i) at least 15 days prior
to taking any action after which members of the Company's management would
cease to own at least 25% of the outstanding voting securities of the Company
and (ii) of any other action or occurrence after which members of the
Company's management would cease to own at least 25% of the outstanding
voting securities of the Company, as soon as practicable after the Company
becomes aware that such other action or occurrence has occurred or is
proposed to occur.
(b) USE OF PROCEEDS. At such time as any SBIC Holder
reasonably requests, the Company shall deliver to each SBIC Holder a written
statement certified by the Company's president or Chief Financial Officer
describing in reasonable detail the use of the proceeds of the Financing
hereunder by the Company and its Subsidiaries. In addition to any other
rights granted hereunder, the Company shall grant each SBIC Holder and the
SBA access to the Company's books and records upon reasonable notice during
normal business hours for the purposes of (i) verifying the use of such
proceeds from the Financing, (ii) verifying the certifications made by the
Company in SBA Forms 480 and 652 delivered pursuant to SECTION 2O(j) herein
and (iii) determining whether the Company has become "ineligible by reason of
a change in its business activity" as set forth in Section 107.760(b)(i) of
the SBIC Regulations.
(c) REGULATORY VIOLATION.
(1) Upon the occurrence of a Regulatory Violation (as
defined below), in addition to any other rights and remedies to which it
may be entitled (whether under this Agreement or any other agreement, the
Articles of Incorporation or otherwise), such SBIC Holder shall have the
right, to the extent required under Section 107.760(b) of the SBIC
Regulations, to demand the immediate repurchase of all of the outstanding
Securities owned by such SBIC Holder at a price equal to, with respect to
the Notes, the aggregate unpaid principal amount (plus all accrued and
unpaid interest thereon), with respect to the Series A Preferred, the
aggregate liquidation preference thereon (plus all accrued and unpaid
dividends thereon, whether or not declared) and with respect to the
Warrants and the Warrant Stock, the purchase price paid by such SBIC
Holder for such Warrants and Warrant Stock, by delivering written notice
of such demand to the Company. The Company shall pay the purchase price
for such Securities by a cashier's or certified check or by wire transfer
of immediately available funds to such SBIC Holder within 30 days after
the Company's receipt of the demand notice, and, upon such payment, such
SBIC Holder shall deliver the certificates evidencing the Securities
being repurchased duly endorsed for transfer or accompanied by duly
executed forms of assignment.
(2) In addition to the foregoing, upon the occurrence of
a Regulatory Violation of the type described in clause (iii) of the
definition thereof, the SBIC Holder shall have the right to transfer all
(or any portion of) the outstanding Equity Interests
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owned by such SBIC Holder to a transferee without regard to any
restriction on transfer set forth in this Agreement or any other
agreement executed pursuant to this Agreement or in the Stockholders
Agreement or any other agreements delivered pursuant hereto or thereto
(provided that the transferee agrees to become a party to this Agreement,
the Stockholders Agreement and the Registration Agreement), and the
Company shall take all such actions as are reasonably requested by the
SBIC Holder in order to (i) effectuate and facilitate any transfer by the
SBIC Holder of any Equity Interests then held by the SBIC Holder to any
Person designated by the SBIC Holder, (ii) permit the SBIC Holder (or any
of its Affiliates) to exchange all or any portion of any Equity Interests
that are voting securities then held by it on a share-for-share basis
for shares of a nonvoting security of the Company, which nonvoting
security shall be identical in all respects to the voting security
exchanged for it, except that it shall be nonvoting and shall be
convertible into a voting security on such terms as are requested by the
SBIC Holder in light of regulatory considerations then prevailing,
(iii) continue and preserve the respective allocations of the voting
interests with respect to the Company arising out of the SBIC's
ownership of voting securities and provided in the Stockholders
Agreement before the transfers and amendments referred to above
(including entering into such additional agreements as are requested by
the SBIC Holder to permit any Person(s) designated by the SBIC Holder to
exercise any voting power which is relinquished by the SBIC Holder) and
(iv) amend this Agreement, the Articles of Incorporation, the Bylaws and
related agreements and instruments to effectuate and reflect the
foregoing. The Company will obtain the written agreement of each of its
stockholders to vote their shares of Company voting stock in favor of
such amendments and actions.
(3) For purposes of this Agreement, "REGULATORY
VIOLATION" means (i) a diversion of the proceeds of such Financing from
the reported use thereof on the use of proceeds statement delivered by
the Company, (ii) a change in the "business activity" of the Company and
its Subsidiaries as described in Section 107.760(b) of the SBIC
Regulations, such that the Company and its Subsidiaries become
"ineligible for financing" as such term is used in Section 107.720 of the
SBIC Regulations, if such change occurs within one year after the date of
the initial Financing hereunder, or (iii) any set of facts or
circumstances wherein it has been asserted by any governmental regulatory
agency that the SBIC Holder is not entitled to hold, or exercise any
significant right with respect to, the Notes, the Warrants, Series A
Preferred or the Warrant Stock; and "FINANCING" shall have the meaning
set forth in Section 107.50 of the SBIC Regulations.
(d) ECONOMIC IMPACT INFORMATION. At such time as any SBIC
Holder reasonably requests, the Company shall deliver to each SBIC Holder a
written assessment of the economic impact of such SBIC Holder's investment in
the Company, specifying the full-time equivalent jobs created or retained in
connection with the investment, the impact of such SBIC Holder's Financing on
the revenues and profits of the Company and its Subsidiaries and on taxes
paid by the Company and its employees.
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<PAGE>
3I. CURRENT PUBLIC INFORMATION. The Company shall file all
reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the Securities and Exchange
Commission thereunder and shall take such further action as any holder or
holders of Common Stock may reasonably request, all to the extent required to
enable such holders to sell Common Stock pursuant to (i) Rule 144 or Rule
144A adopted by the Securities and Exchange Commission under the Securities
Act (as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission or
(ii) a registration statement on Form S-2 or S-3 or any similar registration
form hereafter adopted by the Securities and Exchange Commission. Upon
request, the Company shall deliver to any holder of Common Stock a written
statement as to whether it has complied with such requirements.
Section 4. FINANCIAL COVENANTS.
4A. FINANCIAL COVENANTS WHEN NOTES OUTSTANDING. So long as
any Notes are outstanding, or any Obligations with respect to the Notes have
not been indefeasibly paid in full in cash, the Company will comply with all
of the provisions of this SECTION 4A:
(a) MAXIMUM CAPITAL EXPENDITURES AND LEASES. The
Company shall ensure that neither the Company nor any of its Subsidiaries
shall make or commit to make any Capital Expenditure, or commit to any
obligation under any Operating Lease, with respect to any Fiscal Year if
the sum (without duplication) of (i) the aggregate amount of all Capital
Expenditures for such Fiscal Year, plus (ii) the aggregate value (as
evidenced by an invoice or other evidence satisfactory to the Purchasers)
of any assets delivered to, or made available for use by, any of the
Company and its Subsidiaries under any Operating Leases with respect to
such Fiscal Year (such sum of (i) and (ii), the "Expended Amount"), shall
exceed the amount set forth below for such period:
<TABLE>
<CAPTION>
Fiscal Year Ending Maximum Permissible Amount
------------------ --------------------------
<S> <C>
December 31, 1998 $1,000,000
December 31, 1999 $1,800,000
December 31, 2000 $2,400,000
December 31, 2001 and thereafter $1,200,000
</TABLE>
PROVIDED, HOWEVER, that if the Expended Amount for any Fiscal Year is less
than the amount set forth above as permitted pursuant to this SECTION 4A for
such Fiscal Year (the "SCHEDULED AMOUNT"), then in addition to the amounts
authorized for the next Fiscal Year, the Company may make Capital
Expenditures or commit to obligations under Operating Leases during the first
six months of the next Fiscal Year, to the extent the Scheduled Amount for
such prior Fiscal Year exceeded the Expended Amount in such prior Fiscal
Year.
(b) INTEREST COVERAGE RATIO. The Company's Interest
Coverage Ratio, calculated as of the last day of any fiscal quarter, for
the Measurement Period ending on that date, shall not be less than:
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<PAGE>
(i) 1.75 to 1.0 for the Measurement Period ending on
December 31, 1998 or any date thereafter through September
30, 1999;
(ii) 2.00 to 1.0 for the Measurement Period ending on
December 31, 1999 or any date thereafter through September
30, 2000;
(iii) 2.25 to 1.0 for the Measurement Period ending on
December 31, 2000 or any date thereafter through September
30, 2001;
(iv) 2.50 to 1.0 for the Measurement Period ending on
December 31, 2001 or any date thereafter through September
30, 2002; and
(v) 2.75 to 1.0 for the Measurement Period ending on
December 31, 2002 and thereafter.
(c) MAXIMUM CASH FLOW LEVERAGE RATIO. The Company's
Cash Flow Leverage Ratio as of the end of each fiscal quarter for the
Measurement Period ending on that date will not be greater than:
(i) 5.50 to 1.0 for the Measurement Period ending on
December 31, 1998;
(ii) 5.0 to 1.0 for the Measurement Period ending on
March 31, 1999 or any date thereafter through September 30,
1999;
(iii) 4.50 to 1.0 for the Measurement Period ending on
December 31, 1999 or any date thereafter through September
30, 2000;
(iv) 4.00 to 1.0 for the Measurement Period ending on
December 31, 2000 or any date thereafter through September
30, 2001;
(v) 3.25 to 1.0 for the Measurement Period ending on
December 31, 2001 or any date thereafter through September
30, 2002;
(vi) 2.75 to 1.0 for the Measurement Period ending on
December 31, 2002 and thereafter.
(d) NET WORTH. The Company shall maintain a Net Worth
not less than:
(i) negative $5,000,000 during the fiscal quarter ending
on December 31, 1998 and on each date thereafter through
September 30, 1999;
(ii) negative $4,500,000 during the fiscal quarter ending
on December 31, 1999 and on each date thereafter through
September 30, 2000;
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<PAGE>
(iii) negative $2,000,000 during the fiscal quarter ending
on December 31, 2000 and on each date thereafter through
September 30, 2001;
(iv) $1,000,000 during the fiscal quarter ending on
December 31, 2001 and on each date thereafter through
September 30, 2002;
(v) $4,000,000 during the fiscal quarter ending on
December 31, 2002; and
(vi) on each date after December 31, 2002, $4,000,000
plus 50% of the cumulative amount of the Company's
consolidated net income computed in accordance with GAAP,
determined without taking into account any net losses for
any period.
4B. FINANCIAL COVENANTS WHEN SERIES A PREFERRED OUTSTANDING.
So long as any Series A Preferred is outstanding, or any Obligations with
respect to the Series A Preferred have not been indefeasibly paid in full in
cash, the Company will comply with all of the provisions of this SECTION 4B.
(a) MAXIMUM CAPITAL EXPENDITURES AND LEASES. The
Company shall ensure that neither the Company nor any of its Subsidiaries
shall make or commit to make any Capital Expenditure, or commit to any
obligation under any Operating Lease, with respect to any Fiscal Year if
the sum (without duplication) of (i) the aggregate amount of all Capital
Expenditures for such Fiscal Year, plus (ii) the aggregate value (as
evidenced by an invoice or other evidence satisfactory to the Purchasers)
of any assets delivered to, or made available for use by, any of the
Company and its Subsidiaries under any Operating Leases with respect to
such Fiscal Year (such sum of (i) and (ii), the "Expended Amount"), shall
exceed the amount set forth below for such period:
<TABLE>
<CAPTION>
Fiscal Year Ending Maximum Permissible Amount
------------------ --------------------------
<S> <C>
December 31, 1998 (partial) $1,200,000
December 31, 1999 $2,000,000
December 31, 2000 $2,700,000
December 31, 2001 and thereafter $1,400,000
</TABLE>
PROVIDED, HOWEVER, that if the Expended Amount for any Fiscal Year is less
than the amount set forth above as permitted pursuant to this SECTION 4B for
such Fiscal Year (the "SCHEDULED AMOUNT"), then in addition to the amounts
authorized for the next Fiscal Year, the Company may make Capital
Expenditures or commit to obligations under Operating Leases during the first
six months of the next Fiscal Year, to the extent the Scheduled Amount for
such prior Fiscal Year exceeded the Expended Amount in such prior Fiscal
Year.
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<PAGE>
(b) INTEREST COVERAGE RATIO. The Company's Interest
Coverage Ratio, calculated as of the last day of any fiscal quarter, for
the Measurement Period ending on that date, shall not be less than:
(i) 1.50 to 1.0 for the Measurement Period ending on
December 31, 1998 or any date thereafter through September
30, 1999;
(ii) 1.75 to 1.0 for the Measurement Period ending on
December 31, 1999 or any date thereafter through September
30, 2000;
(iii) 2.00 to 1.0 for the Measurement Period ending on
December 31, 2000 or any date thereafter through September
30, 2001;
(iv) 2.25 to 1.0 for the Measurement Period ending on
December 31, 2001 or any date thereafter through September
30, 2002; and
(v) 2.50 to 1.0 for the Measurement Period ending on
December 31, 2002 and thereafter.
(c) MAXIMUM CASH FLOW LEVERAGE RATIO. The Company's
Cash Flow Leverage Ratio as of the end of each fiscal quarter for the
Measurement Period ending on that date will not be greater than:
(i) 6.50 to 1.0 for the Measurement Period ending on
December 31, 1998;
(ii) 6.0 to 1.0 for the Measurement Period ending on
March 31, 1999 or any date thereafter through September 30,
1999;
(iii) 5.50 to 1.0 for the Measurement Period ending on
December 31, 1999 or any date thereafter through September
30, 2000;
(iv) 4.50 to 1.0 for the Measurement Period ending on
December 31, 2000 or any date thereafter through September
30, 2001;
(v) 3.75 to 1.0 for the Measurement Period ending on
December 31, 2001 or any date thereafter through September
30, 2002;
(vi) 3.25 to 1.0 for the Measurement Period ending on
December 31, 2002 and thereafter.
(d) NET WORTH. The Company shall maintain a Net Worth
not less than:
(i) negative $7,000,000 during the fiscal quarter ending
on December
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<PAGE>
31, 1998 and on each date thereafter through September 30,
1999;
(ii) negative $6,500,000 during the fiscal quarter ending
on December 31, 1999 and on each date thereafter through
September 30, 2000;
(iii) negative $4,000,000 during the fiscal quarter ending
on December 31, 2000 and on each date thereafter through
September 30, 2001;
(iv) negative $1,000,000 during the fiscal quarter ending
on December 31, 2001 and on each date thereafter through
September 30, 2002;
(v) $2,000,000 during the fiscal quarter ending on
December 31, 2002; and
(vi) on each date after December 31, 2002, $2,000,000
plus 50% of the cumulative consolidated net income computed
in accordance with GAAP, determined without taking into
account any net loss for any period.
Section 5. NEGATIVE COVENANTS. Until such time as all
Obligations with respect to the Notes and the Series A Preferred have been
indefeasibly paid in full in cash without the prior consent of the Majority
Holders the Company shall not, and shall ensure that each of its Subsidiaries
shall not:
5A. ACQUISITION; CONSOLIDATION; REORGANIZATION. (i) Merge
or consolidate with any Person (except for the merger of any Wholly-Owned
Subsidiary of the Company with the Company, with the Company surviving, or
with another Wholly-Owned Subsidiary of the Company, so long as after giving
effect to such merger or consolidation, no Default or Event of Default would
exist), (ii) subject to the proviso following clause (iv) of this SECTION 5A,
acquire, directly or indirectly, in any transaction or series of
transactions, all or substantially all of the stock, equity interests, or
(other than as permitted pursuant to SECTIONS 4A and 4B) assets or business
of any Person; (iii) subject to the proviso following clause (iv) of this
SECTION 5A, except as permitted pursuant to SECTIONS 4A and 4B, acquire,
directly or indirectly through Subsidiaries, assets (other than current
assets in the ordinary course of business); or (iv) liquidate, dissolve or
effect a reorganization in any form of transaction (including, without
limitation, any reorganization into partnership form), except for a
liquidation of a Wholly-Owned Subsidiary of the Company; PROVIDED HOWEVER,
that subject to the limitations set forth in SECTION 4, the Company may
acquire assets and may make Investments so long as the aggregate purchase
price amount thereof does not exceed $250,000 in cash in any twelve-month
period or $500,000 in cash in total from and after the Closing.
5B. SALE, LEASE OR TRANSFER OF ASSETS. Sell, lease,
transfer or otherwise dispose of any of its properties or assets, except (i)
sales of inventory and accounts receivable in the ordinary course of business
consistent with past practice, (ii) sales of other assets so long as (a)
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<PAGE>
the proceeds from such sales by any of the Company and its Subsidiaries of
the assets sold in each period of 12 consecutive months is less than
$200,000, and (b) within 90 days of the receipt of the proceeds of such
sales, (x) it has used or entered into a binding commitment to use such
proceeds to purchase replacement assets or (y) such proceeds are used to
repay Senior Indebtedness or (iii) any transactions contemplated by the Net
Lease between the Company and Penn Silver Fund related to the Kodak Road
property; PROVIDED, FURTHER, that, if any such proceeds are not used to
purchase replacement assets, then if and to the extent that the Senior
Indebtedness has been paid in full, the Company shall offer to apply such
proceeds to repay the Obligations with respect to the Notes and, unless the
Majority Note Holders shall decline such repayment by written notice, shall
pay such proceeds to holders of the Notes pro rata according to the principal
amount of Notes held.
5C. DISTRIBUTIONS. Directly or indirectly pay, make or set
apart any Restricted Payment; PROVIDED THAT, notwithstanding the foregoing,
the Company may (i) repurchase Common Stock from any employee of the Company
and/or any of its Subsidiaries; PROVIDED THAT (a) no Default or Event of
Default is in existence immediately prior to or immediately after such
repurchase or payment, (b) the purchase price paid in such repurchase or the
amount of such payment does not exceed the fair market value of the stock
repurchased or is in an amount calculated pursuant to the terms of a
repurchase or employment agreement between the Company and such employee
entered into in connection with the commencement of such employee's
employment, (c) such purchase occurs after the first anniversary of the
Closing and (d) the aggregate amount paid or payable in any Fiscal Year in
respect of all such purchases from employees does not exceed $250,000 in cash
and (ii) after all Obligations with respect to the Notes and the Series A
Preferred have been indefeasibly paid in full in cash, pay cash dividends pro
rata to the holders of Common Stock of the Company; and provided that
Subsidiaries may make distributions to the Company.
5D. INVESTMENTS. Make or hold any loans or advances to,
Guarantees for the benefit of, or any other Investment in, any Person, except
as provided in SECTION 5A and except for (a) extensions of trade credit made
in the ordinary course of business consistent with past custom and practice,
(b) Investments having a stated maturity no greater than one year in (i)
readily marketable direct obligations of the United States government or any
agency thereof or obligations guaranteed by the United States government,
(ii) certificates of deposit of U.S. commercial banks having combined capital
and surplus of at least $100,000,000 (iii) commercial paper with a rating
from a nationally recognized credit rating agency in such agency's highest
rating category, (iv) repurchase agreements relating to securities issued or
guaranteed as to principal and interest by the United States of America or
(v) other readily marketable investments in debt securities which are
satisfactory to the Majority Holders, and (c) travel and other expense
advances to management personnel and employees in the ordinary course of
business.
5E. LIMITATIONS ON INDEBTEDNESS. Create, incur, issue,
assume, suffer to exist, become liable with respect to or extend the maturity
of any Indebtedness, except:
(a) the Senior Indebtedness;
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<PAGE>
(b) the Obligations with respect to the Notes;
(c) Capitalized Lease Obligations; provided that the
principal amount of such Capitalized Lease Obligations of the Company and
its Subsidiaries does not exceed $200,000 in the aggregate outstanding at
any time;
(d) deferred Taxes; and
(e) other Indebtedness of the Company or its
Subsidiaries with principal amount not in excess of $500,000 in the
aggregate outstanding at any time.
5F. CONTINGENT LIABILITIES. Become liable for any
Guarantees, except for (a) the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business, (b) Guarantees existing as of the date hereof and described on the
attached GUARANTEES SCHEDULE, and (c) Guarantees of Indebtedness which is
permitted under SECTION 5E hereof.
5G. LIENS. Create, incur, assume or suffer to exist any
Liens (except Permitted Liens) upon or with respect to any of its property or
assets, whether now owned or hereafter acquired, or on any income or profits
thereof, or assign or otherwise convey any right to receive income or other
property.
5H. AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION AND
BYLAWS; STOCK SPLITS. Make any amendment to the terms of the Company's
Articles of Incorporation or By-laws in any manner which adversely affects
the rights, powers or relative priorities of the holders of Series A
Preferred or Warrant Stock.
5I. CONDUCT OF BUSINESS. Enter into the ownership, active
management or operation of any business other than the business conducted by
the Company on the Closing Date, including without limitation the
manufacturing of outdoor corporate identification products and reasonable
extensions thereto, or engage in any activity which could result in a
Forfeiture Proceeding.
5J. AFFILIATED TRANSACTIONS. Except as set forth on the
AFFILIATED TRANSACTIONS SCHEDULE, enter into any agreement or transaction,
including the purchase, sale or exchange of property or the rendering of any
service, with any of its, or any Subsidiary's, officers, directors or
Affiliates or any individual related by blood or marriage to any such Person,
or any entity in which any such Person or individual owns a material
beneficial interest, except for transactions entered into after the Closing
Date upon fair and reasonable terms no less favorable to the Company or its
Subsidiaries than the terms the Company or its Subsidiaries would obtain in a
comparable arm's-length transaction with a Person not an Affiliate and
approved in advance by the board of directors of the Company.
5K. RESTRICTIVE AGREEMENTS; CONFLICTING AGREEMENTS. Either (a)
create, permit
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<PAGE>
or otherwise cause or suffer to exist (except pursuant to the Senior
Indebtedness and any refinancing of the Senior Indebtedness) any encumbrance
or restriction on the ability of any Subsidiary of the Company (i) (A) to
make loans or advances to the Company or any other Subsidiary of the Company
or (B) to transfer any of its properties or assets to the Company, or (ii) to
pay dividends or make any other distributions in respect of any of its Stock
or any other interest or participation in, or measured by, its profits, or
pay any Indebtedness owed to, the Company or any other Subsidiary of the
Company, in each case other than encumbrances or restrictions existing under
the Notes or the Loan Agreement and any refinancing thereof, or (b) enter
into any agreement, or propose or commit to take any action or engage in any
omission which would constitute a violation of any covenant or agreement in
any of this Agreement, the Notes, the Warrants, the Registration Agreement,
the Stockholders Agreement or the Company's Articles of Incorporation or
bylaws and any of the agreements contemplated hereby or thereby.
5L. PUBLIC DISCLOSURES. Subject to the Company's
obligations under the federal securities laws, disclose any Purchaser's name
or identity as an investor in the Company in any press release or other
public announcement or in any document or material filed with any Government
Entity, without prior written notice to such Purchaser describing in
reasonable detail the proposed content of such disclosure and permitting such
Purchaser to review and comment upon the form and substance of such
disclosure and make reasonable changes thereto.
5M. USE OF PROCEEDS. Use any proceeds from the sale of any
Securities hereunder, or permit any of its Subsidiaries to use any of such
proceeds, directly or indirectly, (a) for the purposes of purchasing or
carrying any "margin securities" within the meaning of Regulation T, U or X
promulgated by the Board of Governors of the Federal Reserve Board, (b) for
the purpose of arranging for the extension of credit secured, directly or
indirectly, in whole or in part by collateral that includes any "margin
securities" or (c) for any other purpose other than to effect the
Recapitalization.
5N. FISCAL YEAR. Change its fiscal year from the year
ending on December 31.
5O. AMENDMENT OF INDEBTEDNESS. Directly or indirectly amend,
supplement, extend, terminate, or permit to be amended, supplemented or
terminated, or waive any of the following terms which are applicable to any
Senior Indebtedness: (i) the amount or the date of any scheduled or mandatory
payment of principal or interest thereunder, except that (A) the Company may
borrow and reborrow from time to time under the Revolver and the Term B Loan
and the Revolver may be renewed from time to time providing for a new
maturity date, provided that in connection with any such renewal the Loan
Agreement shall be amended in a manner so as not to be on terms more
restrictive in any manner than the terms being renewed; provided further that
such new maturity date shall not, in the case of the Term B Loan, be after
the original maturity date of the Term B Loan, (B) any scheduled or mandatory
principal payment under the Term A Loan or the Term C Loan may be extended so
long as the weighted average life to maturity of the Term A Loan and the Term
C Loan, measured from the date of Closing and taking into account all
repayments of principal previously made in respect thereof as of the time of
such determination, if any, is not increased by more than six months from
that in effect at the Closing, and (C) such amendment may increase the
principal amount of Senior
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<PAGE>
Indebtedness so long as the aggregate of all such increases pursuant to this
clause (C) from and after the date of the Closing shall not exceed $2,000,000
in the aggregate, (ii) the rate or rates at which interest accrues or the
methods of calculation thereof (including without limitation by amending any
provisions (including definitions) used in calculating such interest rates
such that a higher rate or margin may apply), (iii) any fees, indemnities,
expense reimbursements or other charges payable to the lenders thereunder, or
(iv) any representation, covenant or default or any other term or provision
in a manner which is more onerous or more restrictive on the holders of the
Notes or the Company or change any of the restrictions in the Loan Agreement
or other agreements delivered in connection therewith or relating to
performance by the Company of the Note Obligations (including restrictions
which prohibit or limit the payment or prepayment of any amount with respect
to the Notes or the Note Obligations).
5P. EQUITY ISSUANCES. Except as expressly contemplated by
this Agreement, authorize, issue or enter into any agreement providing for
the issuance (contingent or otherwise) of, (a) any capital stock or other
equity securities (or any securities convertible into or exchangeable for any
capital stock or other equity securities) or (b) any notes or debt securities
containing equity features (including, without limitation, any notes or debt
securities convertible into or exchangeable for capital stock or other equity
securities, issued in connection with the issuance of capital stock or other
equity securities or containing profit participation features); provided that
this SECTION 5P shall not limit the ability of the Board (or Compensation
Committee) to authorize the issuance of incentive based equity under the
Company's 1996 Stock Option Agreement, in effect as of the date hereof.
5Q. ERISA COMPLIANCE. Either (a) incur, or permit any ERISA
Affiliate to incur, any liability to the IRS, the DOL or PBGC (other than for
premiums due PBGC which will be paid when due) with respect to any Plan which
equals or exceeds $250,000 (b) withdraw (either partially or completely) from
any Multiemployer Plan, if the liabilities exceed the assets under such Plan,
or upon the complete or partial withdrawal from such Multiemployer Plan,
would equal or exceed $250,000, (c) provide, or permit any ERISA Affiliate to
provide, medical or life insurance benefits to former employees of the
Company or its Subsidiaries (other than in accordance with Section 601 of
ERISA or 4980B of the IRC or as may hereafter be required by law) or (d) with
respect to any Pension Plan, incur, or permit any ERISA Affiliate to incur, a
reporting obligation for any Reportable Event which could constitute grounds
for partial termination of any Pension Plan or termination by the PBGC of any
Pension Plan or for the appointment by the appropriate United States District
Court of a trustee to administer any Pension Plan.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. To
induce the Purchasers to purchase the Securities as herein provided, the
Company represents and warrants to the Purchasers that each and all of the
following statements are true, correct and complete as of the date of
execution and delivery of this Agreement and will be true, correct and
complete as of the Closing after giving effect to the transactions
contemplated hereby to occur on or prior to the Closing Date:
6A. ORGANIZATION AND CORPORATE POWER. The Company is a
corporation duly
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<PAGE>
organized, validly existing and in good standing under the Laws of the state
of Texas, is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify except
where failure to so qualify would not have a Materially Adverse Effect; and
has the requisite corporate power and authority and the legal right to own,
pledge, mortgage or otherwise encumber and operate its properties, to lease
the property it operates under lease, and to conduct its business as now,
heretofore and proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The Company possesses all material licenses,
permits, consents and authorizations necessary to own and operate its
properties, to carry on its businesses as now conducted and presently
proposed to be conducted. The stock certificate books and the stock record
books of the Company are correct and complete in all material respects. The
Company is in compliance with its Articles of Incorporation and bylaws, each
as amended, and the copies of the Company's Articles of Incorporation and
bylaws of the Company which have been furnished to Kirkland & Ellis, as
special counsel to the Purchasers, reflect all amendments made thereto at any
time prior to the date of this Agreement and are correct and complete and in
compliance with all applicable provisions of law.
6B. CAPITAL STOCK AND RELATED MATTERS.
(a) As of the Closing, the authorized capital stock of
the Company shall consist of (i) 15,000,000 shares of Common Stock, of
which 1,854,692 shares shall be issued and outstanding, and 1,197,914
shares shall be reserved for issuance upon exercise of the Warrants, (ii)
52,500 shares of Series A Preferred, all of which shall be issued and
outstanding, (iii) 7,000 shares of Series B Junior Preferred, all of
which shall be reserved for issuance to David Anderson pursuant to the
Anderson Purchase Agreement, and (iv) 6,250 shares of Series C Preferred,
all of which shall be reserved for issuance to GHI, SIC, SMHC, Geneve,
and FIRC pursuant to the Share Option Purchase Agreement. As of the
Closing, all of the outstanding shares of the Company's Common Stock
shall be validly issued, fully paid and nonassessable, and upon payment
for the Series A Preferred and the Closing hereunder, all of the
outstanding shares of the Series A Preferred shall be validly issued,
fully paid and nonassessable.
(b) As of the Closing, and except as set forth on the
attached CAPITALIZATION SCHEDULE, the Company shall not have outstanding
any Stock or any stock appreciation or phantom stock rights or plans and
shall not be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its Stock, except
pursuant to the Stockholders Agreement and the Warrants.
(c) There are no statutory or contractual stockholders'
preemptive rights or rights of first offer or refusal with respect to the
issuance of the Notes, Series A Preferred and the Warrants hereunder, the
issuance of Common Stock upon exercise of the Warrants or with respect to
any other issuance of Stock of the Company or, except as provided in the
Stockholder Agreement. The Company has not violated any applicable
Securities Laws in connection with the offer, sale or issuance of any of
its Stock; and the offer, sale and issuance of the Notes, Series A
Preferred and the Warrants hereunder, and the offer, sale and issuance of
the Common Stock upon exercise of the Warrants do not
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and will not require registration under any applicable Securities Laws.
There are no proxies or agreements among the stockholders of the Company
with respect to the voting or transfer of the Stock or with respect to
any other aspect of Company's affairs, except this Agreement, the
Stockholders Agreement and the Registration Agreement.
6C. SUBSIDIARIES; PARTNERSHIPS. Except as described on the
attached SUBSIDIARIES SCHEDULE, the Company has no Subsidiaries, is not a
partner in any partnership and holds no Stock in any other Person.
6D. AUTHORIZATION; NO BREACH. The Company has duly
authorized the execution, delivery and performance of this Agreement, the
Notes, the Warrants, the Share Purchase Option Agreements, the Anderson
Purchase Agreement, the Anderson Side Letter, the Stockholders Agreement and
the Registration Agreement, and each other agreement, contemplated hereby or
thereby to which it is a party. This Agreement, the Notes, the Warrants, the
Share Purchase Option Agreements, the Anderson Purchase Agreement, the
Anderson Side Letter, the Stockholders Agreement, the Registration Agreement,
the Company's Articles of Incorporation and each other agreement contemplated
hereby and thereby to which the Company is a party constitutes a valid and
binding obligation of the Company enforceable against it in accordance with
its terms. Except as set forth on the attached RESTRICTIONS SCHEDULE, the
execution and delivery by the Company of this Agreement, the Notes, the
Warrants, Share Option Purchase Agreement, the Anderson Purchase Agreement,
the Anderson Side Letter, the Stockholders Agreement, the Registration
Agreement and all other agreements contemplated hereby and thereby to which
it is a party, the offering, sale and issuance of the Notes, Warrants and
Series A Preferred hereunder, the issuance of the Common Stock upon exercise
of the Warrants and the fulfillment of and compliance with the respective
terms hereof and thereof by the Company does not and will not (a) conflict
with or result in a breach of the terms, conditions or provisions of, (b)
constitute a default under, (c) result in the creation of any Lien upon the
stock or assets of the Company pursuant to, (d) give any third party the
right to modify, terminate or accelerate any obligation under, (e) result in
a violation of, or (f) require any authorization, consent, approval,
exemption or other action by or notice to any Government Entity pursuant to,
the Articles of Incorporation or bylaws of the Company, or any Law, statute,
rule or regulation to which the Company is subject, or any material
agreement, instrument, order, judgment or decree to which the Company is
subject.
6E. FINANCIAL STATEMENTS.
(a) Attached hereto as the FINANCIAL STATEMENTS SCHEDULE
are (i) the unaudited balance sheet of the Company as at August 30, 1998
and the related statement of income for the eight-month period then ended
(such balance sheet, the "LATEST BALANCE SHEET"); (ii) the audited
consolidated balance sheets of the Company as of December 31, 1995,
December 31, 1996 and December 31, 1997 (the balance sheet for December
31, 1997 being referred to as the "LATEST AUDITED STATEMENT") and the
related audited consolidated statement of earnings and cash flows for
each of the Fiscal Years then
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ended, and (iii) the estimated pro forma balance sheet of the Company
as of the Closing Date, reflecting the assets, liabilities and
stockholders' equity of the Company as of the Closing Date, adjusted
to reflect, as applicable, the effect of the Senior Indebtedness
incurred on the Closing Date, the issuance of the Notes and Series A
Preferred, and the costs and expenses related to the foregoing.
(b) Except as set forth on the attached FINANCIAL
STATEMENTS SCHEDULE, each of the foregoing financial statements
(including the notes thereto, if any), presents fairly the consolidated
financial position, results of operations and cash flows of the Company,
and is prepared in accordance with GAAP, consistently applied, as of the
dates and for the periods set forth therein, subject in the case of the
unaudited financial statements to the lack of footnote disclosure and
changes resulting from normal year-end adjustments.
6F. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth
on the attached LIABILITIES SCHEDULE, the Company has no obligation or
liability (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due and regardless of when asserted) arising out of
transactions entered into at or prior to the Closing, or any action or
inaction at or prior to the Closing, or any state of facts existing at or
prior to the Closing other than: (a) liabilities fully disclosed and
adequately provided for in the Latest Balance Sheet, and (b) current
liabilities which have arisen, and obligations under agreements entered into,
after the date of the Latest Balance Sheet in the ordinary course of business
(none of which is a liability resulting from breach of contract, breach of
warranty, tort, infringement, claim or lawsuit).
6G. NO MATERIAL ADVERSE CHANGE. There has been no material
adverse change in the business, assets, operations, financial condition,
operating results, earnings, customer and supplier relations or employee and
sales representative relations of the Company since the date of the Latest
Audited Statement.
6H. ASSETS. Except as set forth on the attached ASSETS
SCHEDULE, the Company has good and indefeasible title to, or a valid
leasehold interest in, the properties and assets it uses, the properties and
assets shown on the Latest Balance Sheet or acquired thereafter and all
assets necessary for the conduct of its businesses as presently conducted and
as presently proposed to be conducted, free and clear of all Liens, except
for properties and assets disposed of in the ordinary course of business
since the date of the Latest Balance Sheet and except for Liens disclosed on
the Latest Balance Sheet (including any notes thereto). Except as described
on the attached ASSETS SCHEDULE, buildings, equipment and other tangible
assets of the Company are in good operating condition other than ordinary
wear and tear and are fit for use in the ordinary course of business.
6I. INVESTMENT COMPANY ACT. Neither the Company nor the
Company is an "investment company" or an "Affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended.
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6J. MARGIN REGULATIONS. The Company does not own any
"margin security" as such term is defined in Regulation U of the Board of
Governors of the Federal Reserve System (the "FEDERAL RESERVE BOARD"), and
none of the proceeds of the Notes or Warrants will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security,
for the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose
which might cause any of the securities purchased under this Agreement to be
considered "purpose credit" within the meaning of Regulations T, U or X of
the Federal Reserve Board. The Company has not taken or permitted, and will
not permit any agent acting on its behalf to take, any action which might
cause this Agreement or any document or instrument delivered hereunder to
violate such Regulation T, U or X, any other regulation of the Federal
Reserve Board, or Section 8 of the Exchange Act or any rule or regulation
thereunder. No proceeds of the issuance of Restricted Securities will be
used to acquire any security in any transaction which is subject to Section
13 or 14 of the Exchange Act, including Sections 13(d) and 14(d) thereof.
The purchase of the Notes will not constitute a violation of such Regulations
T, U or X.
6K. TAX MATTERS. Except as set forth on the TAX SCHEDULE
attached hereto, the Company has filed all Tax returns and other reports
which it is required to file under applicable Laws and regulations; all such
returns and reports are complete and correct in all material respects; the
Company has paid all Taxes due and owing by it and has withheld and paid over
all Taxes which it is obligated to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third party, and has not waived any
statute of limitations with respect to Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency; no foreign, federal,
state, provincial or local Tax audits are pending or being conducted with
respect to the Company, no information related to Tax matters has been
requested by any foreign, federal, state, provincial or local Tax authority
and no notice indicating an intent to open an audit or other review has been
received by the Company from any foreign, federal, state, provincial or local
Tax authority; and there are no unresolved questions or claims concerning Tax
liability of the Company. Except as set forth on the TAX SCHEDULE, The
Company has not made an election under Section 341(f) of the IRC, is not a
party to any Tax sharing or allocation agreement, and has no liability for
the Taxes of any Person under Section 1.1502-6 of the Treasury Regulations
(or any similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise. The accrual for current Taxes on the
Latest Balance Sheet would be adequate to pay all of the current Tax
liabilities of the Company, if the current Tax year were treated as having
ended on the date of the Latest Balance Sheet consistent with past practices.
6L. CONTRACTS AND COMMITMENTS. Except as expressly
contemplated by this Agreement or as set forth on the attached CONTRACTS
SCHEDULE, the Company is not a party (including after giving effect to the
Company) to any written or oral:
(a) pension, profit sharing, stock option, employee
stock purchase or other plan or arrangement providing for deferred or
other compensation to employees or any other employee benefit plan or
arrangement, or any contract with any labor union, or any severance
agreements;
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(b) contract for the employment of any officer,
individual employee or other Person on a full-time, part-time, consulting
or other basis providing annual compensation in excess of $25,000 or
contract relating to loans to officers, directors or affiliates;
(c) contract under which the Company has advanced or
loaned any other Persons amounts in the aggregate exceeding $25,000;
(d) agreement or indenture relating to the borrowing of
money or the mortgaging, pledging or otherwise placing a Lien on any
material asset or group of assets of the Company;
(e) Guarantee of any obligation (other than by the
Company of a wholly-owned Subsidiary's debts or a guarantee by a
Subsidiary of the Company's debts or another Subsidiary's debts);
(f) lease or agreement under which the Company or any
Subsidiary is lessee of or holds or operates any property, real or
personal, owned by any other party, except for any lease of real or
personal property under which the aggregate annual rental payments do not
exceed $25,000;
(g) lease or agreement under which the Company or any
Subsidiary is lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the Company or any
Subsidiary;
(h) contract or group of related contracts with the same
party or group of affiliated parties the performance of which involves
aggregate annual consideration in excess of $25,000 except purchase
orders from existing customers or to existing vendors, in either case in
the ordinary course of business;
(i) assignment, license, indemnification or agreement
with respect to any intangible property (including, without limitation,
any patent, trademark, trade name, copyright, know-how, trade secret or
confidential information);
(j) warranty agreement with respect to its services
rendered or its products sold or leased;
(k) agreement under which it has granted any Person any
registration rights (including piggyback rights);
(l) contract, agreement or other arrangement with any
officer, director, employee or Affiliate, or any Affiliate of any
officer, director or employee;
(m) contract or agreement prohibiting it from freely
engaging in any
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business or competing anywhere in the world; or
(n) any other agreement which is material to its
operations and business prospects or which involves a consideration in
excess of $25,000 annually.
Except as set forth on the CONTRACTS SCHEDULE, all of the
contracts, agreements and instruments required to be listed thereon are
valid, binding and enforceable in accordance with their respective terms.
Except as set forth on the CONTRACTS SCHEDULE, the Company and its
Subsidiaries are not in default or breach under any such contract,
agreement or instrument; no event has occurred which with the passage of
time or the giving of notice or both would result in a default, breach or
event of noncompliance under any such contract, agreement or instrument
listed on the CONTRACTS SCHEDULE; none of the Company and its
Subsidiaries has any present expectation or intention of not fully
performing all such obligations; none of the Company and its Subsidiaries
has any knowledge of any breach or anticipated breach by the other
parties to any such contract or commitment; and none of the Company and
its Subsidiaries is a party to any contract or commitment the performance
of which would have a Materially Adverse Effect.
6M. TRADEMARKS, PATENTS. Except as set forth on the
INTELLECTUAL PROPERTY SCHEDULE attached hereto the Company possesses or has
the right to use all of the patents, trademarks, trade names, service marks
and copyrights, and applications therefor, and all technology, know-how,
processes, methods and designs used in or necessary for the conduct of its
business, without known conflict with the rights of others; there have been
no written claims made upon the Company against the Company asserting the
invalidity, misuse or unenforceability of any Proprietary Right, and there
are no grounds for the same; the Company has not received a notice of
conflict with the asserted rights of others within the last five years; and
to the knowledge of the Company the conduct of the business of the Company
has not infringed or misappropriated nor infringes or misappropriates any
Proprietary Right of other Persons, nor would any future conduct as presently
contemplated infringe any Proprietary Right of other Persons and, to the
Company's knowledge, the Proprietary Rights owned by the Company have not
been infringed or misappropriated by other Persons.
6N. LITIGATION, ETC. Except as set forth on the attached
LITIGATION SCHEDULE, (i) there are no actions, suits, proceedings, orders,
investigations or claims pending or, to the Company's knowledge, threatened
against or affecting the Company or pending or threatened against or
affecting any of the officers, directors or employees of the Company with
respect to any of the Company's businesses or proposed business activities,
at law or in equity, or before or by any Government Entity which if adversely
determined, could have a Materially Adverse Effect, including any Litigation
with respect to the transactions contemplated by the Recapitalization, the
Loan Agreement or this Agreement; (ii) the Company is not subject to any
arbitration proceedings under collective bargaining agreements or otherwise
or, to the Company's knowledge, any governmental investigations or inquiries;
and (iii) to the best of the Company's knowledge, there is no reasonable
basis for any of the foregoing. The Company is not subject to
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any judgment, order or decree of any court or other governmental agency, and
the Company has not received any opinion or memorandum or legal advice from
legal counsel to the effect that it is exposed, from a legal standpoint, to
any liability or disadvantage which in any of such cases may have a
Materially Adverse Effect (including after giving effect to the
Recapitalization.
6O. NO FORFEITURE. The Company is not engaged in or
proposes to be engaged in the conduct of any business or activity which could
result in a Forfeiture Proceeding, and no Forfeiture Proceeding against any
of them is pending or, to the knowledge of the Company, is threatened.
6P. SMALL BUSINESS MATTERS. The Company, together with its
"affiliates" (as that term is defined in Section 121.401 of the SBIC
Regulations), is a "small business concern" within the meaning of the SBIC
Act and SBIC Regulations, including Section 121.802 of the SBIC Regulations.
The information regarding the Company and its affiliates set forth in the
Small Business Administration Form 480, Form 652 and Part A of Form 1031
delivered at the Closing is accurate and complete. Copies of such forms
shall have been completed and executed by the Company and delivered to each
Purchaser that is an SBIC at the Closing together with a written statement of
the Company regarding its planned use of the proceeds from the sale of the
Notes, the Series A Preferred and the Warrants. Neither the Company nor any
Subsidiary presently engages in, and it shall not hereafter engage in, any
activities, nor shall the Company or any Subsidiary use directly or
indirectly the proceeds from the sale of the Notes, the Series A Preferred
and the Warrants hereunder for any purpose, for which a SBIC is prohibited
from providing funds by the SBIC Act and the SBIC Regulations (including
Section 107.804 and Section 107.901 of the SBIC Regulations).
6Q. BROKERAGE. Except as set forth on the BROKERAGE
SCHEDULE attached hereto, there are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by the Recapitalization, the Loan Agreement or this Agreement
based on any arrangement or agreement binding upon the Company. The Company
shall pay, and hold the Purchasers harmless against, any and all liability,
loss or expense (including, without limitation, reasonable attorneys' fees
and out-of-pocket expenses) arising in connection with any such claims.
6R. INSURANCE. The Company is not in default with respect
to its obligations under any insurance policy maintained by it. The
insurance coverage of the Company is of customary type and covers casualties,
risks and contingencies of such types and in amounts not less than as are
customary for prudent corporations of similar size engaged in similar lines
of business under similar circumstances.
6S. EMPLOYEES. Except as set forth on the attached
EMPLOYEES SCHEDULE, (i) the Company is not aware that any executive or key
employee of the Company or any group of employees of the Company has any
plans to terminate employment with the Company; (ii) the Company has complied
and is compliance in all material respects with all Laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of any Taxes, and
the Company does not have any labor relations problems (including, without
limitation, any union organization activities, threatened or
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actual strikes or work stoppages or material grievances); and (iii) the
Company is not, and none of the employees of the Company is, subject to any
noncompete, nondisclosure, confidentiality, employment, consulting or similar
agreement relating to, affecting or in conflict with, the present or proposed
business activities of the Company.
6T. COMPLIANCE WITH LAWS. The Company has not violated any
Laws which violation has had or would reasonably be expected to have a
Materially Adverse Effect, and the Company has not received notice of any
such violation. No payments for political contributions or bribes, kickback
payments or other illegal payments have been made by the Company at any time.
6U. AFFILIATED TRANSACTIONS. Except as set forth on the
attached AFFILIATED TRANSACTIONS SCHEDULE, no Affiliate of the Company or any
officer, director, stockholder or employee of any such Affiliate (other than
any such as are also officers, directors or employees of the Company), any
individual related by blood or marriage to any such Person, or any entity in
which any such Person, directly or indirectly, owns any beneficial interest,
is a party to any agreement, contract, commitment, transaction or proposed
transaction with the Company or has any interest in any property used by the
Company.
6V. INDEBTEDNESS. The attached INDEBTEDNESS SCHEDULE sets
forth all outstanding Indebtedness of the Company owing to any Person or
group of affiliated Persons, or issued in any one transaction or series of
related transactions. The Company has no outstanding Indebtedness or is a
guarantor or otherwise contingently liable for any Indebtedness except as
disclosed on the attached INDEBTEDNESS SCHEDULE. There exists no default
under the provisions of any instrument evidencing such Indebtedness or of any
agreement relating thereto.
6W. LOAN AGREEMENT. No "default" or "event of default"
under the Loan Agreement is in existence or will result from the transactions
contemplated by this Agreement.
6X. ERISA. Except as set forth on the EMPLOYEE BENEFITS
SCHEDULE:
(a) MULTIEMPLOYER PLANS. The Company has no obligation
to contribute to (or any other liability, including current or potential
Withdrawal Liability, with respect to) any Multiemployer Plan. To the
extent that any Multiemployer Plan is set forth on the Employee Benefits
Schedule, the Company has no current or potential withdrawal liability
under such Multiemployer Plan.
(b) RETIREE WELFARE PLANS. The Company does not
maintain or have any obligation to contribute to (or any other liability
with respect to) any plan or arrangement whether or not terminated, which
provides medical, health, life insurance or other welfare-type benefits
for current or future retired or terminated employees, their spouses or
dependents (except for continued medical benefit coverage required to be
provided under Section 4980B of the IRC or as required under applicable
state Laws).
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(c) DEFINED BENEFIT PLANS. The Company does not
maintain, contribute to or have any liability under (or with respect to)
any employee plan which is a "defined benefit plan" (as defined in
Section 3(35) of ERISA), whether or not terminated.
(d) DEFINED CONTRIBUTION PLANS. The Company does not
maintain, contribute to or have any liability under (or with respect to)
any employee plan which is a "defined contribution plan" (as defined in
Section 3(34) of ERISA), whether or not terminated.
(e) OTHER PLANS. The Company does not maintain,
contribute to or have any liability under (or with respect to) any plan
or arrangement providing benefits to current or former employees,
including, without limitation, any bonus plan, plan for deferred
compensation, severance, employee health or other welfare benefit plan or
other arrangement, whether or not terminated and whether or not subject
to ERISA including, but not limited to "employee welfare benefit plans"
as defined in Section 3(1) of ERISA.
(f) THE COMPANY. For purposes of this SECTION 6X (other
than subsection (e) or (h), the terms "the Company" includes all
organizations under common control with the Company pursuant to Section
414 of the IRC. For purposes of liability under Title IV of ERISA, the
terms "the Company" shall include any member of its Controlled Group.
(g) UNFUNDED LIABILITY. No plan maintained by the
Company or to which the Company has an obligation to contribute, or with
respect to which the Company has any other liability, has unfunded
benefit obligations or any unfunded liability. All contributions,
premiums or payments under or with respect to a each plan which is set
forth on the attached Employee Benefits Schedule which are due on or
before the Closing Date have been paid.
(h) PLAN QUALIFICATION AND COMPLIANCE. Each employee
benefit plan set forth on the attached EMPLOYEE BENEFITS SCHEDULE that is
or has been maintained for the benefit of employees of the Company that
is intended to be qualified under Section 401(a) of the IRC has received
a favorable determination letter from the IRS as to the qualification of
such plan and, to the best knowledge of the Company after due inquiry,
nothing has occurred since the date of such determination letter that
could reasonably be expected to adversely affect the qualification of
such plan. Each employee benefit plan set forth on the attached EMPLOYEE
BENEFITS SCHEDULE that is or has been maintained for the benefit of
employees of the Company and all related trusts, insurance contracts and
funds have been maintained, funded and administered in compliance in all
material respects with their respective terms and with all applicable
Laws.
(i) The Company has not incurred and has no reason to
expect that it will incur, any liability to the Pension Benefit Guaranty
Corporation (other than premium payments) or otherwise under Title IV of
ERISA (including any withdrawal liability) or
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under the Code with respect to any employee pension benefit plan that
the Company or any ERISA Affiliate maintains or ever has maintained or
to which any of them contributes, ever has contributed, or ever has been
required to contribute.
6Y. ENVIRONMENTAL AND SAFETY MATTERS.
(a) Except as set forth in Section (i) of the
ENVIRONMENTAL SCHEDULE, the Company has complied with and is currently in
compliance in all material respects with all Environmental and Safety
Requirements the non-compliance with which will or threatens to impose a
material liability on the Company, and the Company has not received any
oral or written notice, report or information regarding any liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise) or any
corrective, investigatory or remedial obligations arising under
Environmental and Safety Requirements which relate to the Company or any
of its properties or facilities.
(b) Except as set forth in Section (ii) of the
ENVIRONMENTAL SCHEDULE, without limiting the generality of the foregoing,
the Company has obtained and complied with, and is currently in
compliance in all material respects with, all material permits, licenses
and other authorizations that are required pursuant to any Environmental
and Safety Requirements for the occupancy of its properties or facilities
or the operation of its businesses.
(c) Except as set forth in Section (iii) of the
ENVIRONMENTAL SCHEDULE, neither this Agreement nor the consummation of
the transactions contemplated by this Agreement shall impose any
obligations on the Company for site investigation or cleanup, or
notification to or consent of any government agencies or third parties
under any Environmental and Safety Requirements (including, without
limitation, any so called "transaction-triggered" or "responsible
property transfer" laws and regulations).
(d) Except as set forth in Section (iv) of the
ENVIRONMENTAL SCHEDULE, none of the following exists at any property or
facility owned, occupied or operated by the Company:
(1) underground storage tanks or surface
impoundments;
(2) asbestos-containing materials friable; or
(3) materials or equipment containing friable
polychlorinated biphenyls.
(e) Except as set forth in Section (v) of the
ENVIRONMENTAL SCHEDULE, the Company has not treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled or
Released any Hazardous Materials, or owned, occupied or operated any
facility or property, so as to give rise to liabilities of the Company
for response costs, natural resource damages or attorneys fees pursuant
to CERCLA or any
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other Environmental and Safety Requirements.
(f) Without limiting the generality of the foregoing, to
the knowledge of the Company, no facts, events or conditions relating to
the past or present properties, facilities or operations of the Company
shall prevent, hinder or limit in any material respect continued
compliance with Environmental and Safety Requirements, give rise to any
corrective, investigatory or remedial obligations pursuant to
Environmental and Safety Requirements or give rise to any other
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental and Safety Requirements (including,
without limitation, those liabilities relating to onsite or offsite
Releases or threatened Releases of Hazardous Materials, substances or
wastes, personal injury, property damage or natural resources damage).
(g) Except as set forth in Section (vii) of the
ENVIRONMENTAL SCHEDULE, the Company has not, either expressly or by
operation of law, assumed or undertaken any liability or corrective,
investigatory or remedial obligation of any other Person relating to any
Environmental and Safety Requirements.
(h) No Environmental Lien has attached to any property
owned, leased or operated by the Company.
6Z. REAL PROPERTY HOLDING CORPORATION STATUS. Since its
date of incorporation, the Company has not been, and as of the date of the
Closing shall not be, a "United States Real Property Holding Corporation," as
defined in Section 897(c)(2) of the IRC and in Section 1.897-2(b) of the
Treasury Regulations issued thereunder. The Company has no current plans or
intentions which would cause it to become a "United States Real Property
Holding Company," and the Company has filed with the IRS all statements, if
any, with its United States income Tax returns which are required under
Section 1.897-2(h) of the Treasury Regulations.
6AA. CERTAIN GOVERNMENT REGULATIONS. The Company is not
subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, or any other Law which regulates the incurring of
Indebtedness by any of them, including Laws relating to common contract
carriers or the sale of electricity, gas, steam, water or other public
utility services.
6BB. CLOSING DATE. The representations and warranties of the
Company contained in this SECTION 6 and elsewhere in this Agreement and all
information contained in any exhibit, schedule or attachment hereto or in any
certificate or other writing delivered by, or on behalf of, the Company to
any of the Purchasers shall be correct and complete on the date of the
Closing as though made after giving effect to the transactions contemplated
hereby to occur on the Closing Date.
Section 7. REPRESENTATIONS AND WARRANTIES OF BA PURCHASERS.
Each BA
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Purchaser hereby represents and warrants severally, as to itself, to the
Company that each and all of the following statements are true and correct
and complete as of the date of execution and delivery of this Agreement and
will be true, correct and complete as of the Closing after giving effect to
the transactions contemplated hereby to occur on or prior to the Closing Date.
7A. DUE AUTHORIZATION. Such BA Purchaser has all requisite
power and authority to enter into this Agreement and the agreements
contemplated hereby and to consummate the transaction contemplated hereby and
thereby. The execution and delivery hereof and of each of the agreements
contemplated hereby, the performance by such BA Purchaser of its obligations
hereunder and thereunder and the consummation by such BA Purchaser of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action on the part of such BA Purchaser. No
other proceeding on the part of such BA Purchaser is necessary to authorize
the execution and delivery of this Agreement and the other agreements
contemplated hereby by such BA Purchaser or the performance by such BA
Purchaser of its obligations hereunder or thereunder or the consummation by
such BA Purchaser of the transactions contemplated hereby and thereby. Each
of this Agreement and the agreements contemplated hereby constitute, or when
executed and delivered will constitute, a valid and legally binding
obligation of such BA Purchaser enforceable against such BA Purchaser in
accordance with its terms.
7B. CONSENTS AND APPROVALS. Each BA Purchaser has obtained
all consents, approvals or authorizations from each Governmental Entity or
other Persons prescribed by any Law, contract or agreement which may be
required for the execution, delivery and performance of this Agreement and
the other agreements contemplated hereby by each BA Purchaser or the
consummation by each BA Purchaser of the transactions contemplated hereby and
thereby.
Section 8. REPRESENTATIONS AND WARRANTIES AND COVENANTS OF ALL
PURCHASERS. Each of the Purchasers represents and warrants severally, as to
itself, to the Company that each and all of the following statements are
true, correct and complete as of the date of execution and delivery of this
Agreement and will be true, correct and complete as of the Closing after
giving effect to the transactions contemplated hereby to occur on or prior to
the Closing Date.
8A. INVESTMENT INTENT. Such Purchaser represents and
warrants that acquiring the Securities purchased hereunder or acquired
pursuant hereto for its own account with the present intention of holding
such securities for purposes of investment and without a view of making a
distribution thereof within the meaning if the Securities Act of 1933, as
amended (the "SECURITIES ACT"), and that such Purchaser has no intention of
selling such Securities in violation of applicable Securities Laws; PROVIDED
that (i) the disposition of any Securities held by such Purchaser shall at
all times be within such Purchaser's control and (ii) nothing contained
herein shall prevent such Purchaser and subsequent holders of Securities from
transferring such securities in compliance with the provisions hereof. Each
of the Purchasers hereby agrees that none of such Securities, or any shares
of Common Stock issued upon the exercise of the Warrants shall be sold or
transferred by such Purchaser in violation in the Securities Laws. Each of
the Purchasers is aware that none of the Securities have been registered
under the Securities Act or any other Securities Laws and that the Company is
not obligated to register such
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Securities except in accordance with the provisions of the Registration
Agreement, and that such Securities must be held indefinitely unless
subsequently registered or an exemption from such registration is available.
8B. ACCESS: SOPHISTICATION: ETC.. Such Purchaser is an
"accredited investor" as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act. Each Purchaser and its agents and
representatives have such knowledge and experience in financial and business
matters as to enable them to utilize the information made available to them
in connection with the purchases contemplated hereby, to evaluate the merits
and risks of an investment in the Company and to make an informed decision
with respect thereto and such an evaluation and informed decision has been
made. Such Purchaser represents that it has had an opportunity to ask
questions and receive answers from the Company, and examine such documents,
agreements and instruments, regarding the terms and conditions of the
offering of the Securities and the shares of Common Stock issuable upon
exercise of the Warrants, the Company's business plan and results of
operation, this Agreement, and the Agreements contemplated hereby, all
certificates delivered in connection therewith, and the business, properties,
prospects and financial condition of the Company. Such Purchaser represents
that each Purchaser is experienced in evaluating and investing in private
placement transactions of securities of companies in stages of development
similar to that of the Company, and that it has not been formed for the
purpose of acquiring the Securities. Such Purchaser acknowledges that it can
bear the economic risk of loss of all of its investment in the Company.
Notwithstanding the provision of this SECTION 8B, however, such Purchaser is
relying upon the representations and warranties of the Company contained in
this Agreement in connection with the decision of such Purchaser to enter
into this Agreement and consummate the transactions contemplated hereby.
Section 9. DEFINITIONS.
9A. DEFINED TERMS. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"AFFILIATE" shall mean, with respect to any Person, (i) each
Person that, directly or indirectly, owns or controls, whether beneficially,
or as a trustee, guardian or other fiduciary, 10% or more of the Stock having
ordinary voting power in the election of directors of, or 10% or more of the
common equity of, such Person, (ii) each Person that controls, is controlled
by or is under common control with, such Person or any Affiliate of such
Person, and (iii) each of such Person's officers, directors, joint venturers
and partners. For the purpose of this definition, "control" of a Person
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
"AGENT" has the meaning set forth in the Recitals.
"AGREEMENT" has the meaning set forth in the Recitals.
"ARTICLES OF INCORPORATION" of any Person means the articles or
certificate of
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incorporation of such Person, as applicable, as in effect at the Closing or
as amended thereafter as permitted under this Agreement.
"BA PURCHASERS" has the meaning set forth in the Recitals.
"BANK" has the meaning set forth in the Recitals.
"BUSINESS DAY" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted by Law or other
action by a Government Entity to be closed in the State of Illinois.
"CAPITAL EXPENDITURES" means for any period, the sum of all
amounts that would, in accordance with GAAP, be included as additions to
property, plant and equipment on a consolidated statement of cash flows for
the Company during such period, in respect of (a) the acquisition,
construction, improvement, replacement or betterment of land, buildings,
machinery, equipment or of any other fixed assets or leaseholds, (b) to the
extent related to and not included in (a) above, materials, contract labor
(excluding expenditures properly chargeable to repairs or maintenance in
accordance with GAAP), and (c) other capital expenditures (including without
limitation Capitalized Leases) and other uses recorded as capital
expenditures or similar terms having substantially the same effect (including
expenditures for nonrecurrent tangible assets such as software).
"CAPITALIZED LEASE" means a lease of (or other agreement
conveying the right to use) real or personal property with respect to which
at least a portion of the rent or other amounts thereon constitute
Capitalized Lease Obligations.
"CAPITALIZED LEASE OBLIGATIONS" of a Person shall mean all
monetary obligations of such Person or any Subsidiary of such Person under a
lease or similar arrangement, which obligations would be classified and
accounted for as capital obligations on a consolidated balance sheet of such
Person under GAAP taken at the amount thereof accounted for as indebtedness
(net of interest expense) in accordance with such principles.
"CASH FLOW LEVERAGE RATIO" means, for any period of
determination, the ratio of (a) Interest-bearing Indebtedness of the Company
and its Subsidiaries (including but not limited to the aggregate principal
amount of all outstanding Capitalized Lease Obligations of the Company and
its Subsidiaries), all determined as of the last day of that period, to (b)
EBITDA for that period, in each case determined in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CERTIFICATES OF DESIGNATION" has the meaning set forth in
SECTION 2E hereof.
"CHANGE OF OWNERSHIP" means any Management Purchaser ceases to
hold, beneficially and of record, at least 85% of the issued and issuable
capital stock of the Corporation
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that such Management Purchaser holds at Closing (as adjusted for any
subsequent stock splits, stock dividends, combinations of shares or similar
recapitalizations), other than Tom Boner in respect of sales of capital stock
to David Anderson.
"CHIEF FINANCIAL OFFICER" of any entity means the highest
ranking officer of such entity who is then in charge of the financial matters
of such entity.
"CIVC" has the meaning set forth in the Recitals.
"CLOSING" has the meaning set forth in SECTION 1C hereof.
"CLOSING DATE" has the meaning set forth in SECTION 1C hereof.
"CLOSING FEE" has the meaning set forth in SECTION 1D hereof.
"COMMON STOCK" means, collectively, the Company's common stock,
and any shares of any class of the Company's capital stock hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution
or winding up of the Company.
"COMPANY" means Zimmerman Sign Company, a Texas corporation.
"CONTROLLED GROUP" of any Person means all members of a
controlled group of corporations and all members of a controlled group of
trades or businesses (whether or not incorporated) which at the relevant time
are under common control which, together with such Person, as the case may
be, are treated as a single employer under Section 414(b), (c), (m) or (o) of
the IRC or Section 4001 of ERISA.
"DEFAULT" means an event or condition the occurrence of which
is, or with the lapse of time or the giving of notice or both would be, an
Event of Default.
"DOL" shall mean the United States Department of Labor, or any
successor thereof.
"EBITDA" means, for any period of determination, an amount
equal to the consolidated net income of the Company before deductions for
income taxes, Interest Expense, depreciation and amortization.
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" means all federal,
state or local Laws, all contractual obligations and all common law, in each
case concerning public health and safety, pollution or protection of the
environment (including, without limitation, all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
Release, threatened Release, control or
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cleanup of any Hazardous Materials, noise or radiation).
"ENVIRONMENTAL LIEN" means any Lien, whether recorded or
unrecorded, in favor of any Government Entity, relating to any liability of
the Company or any of its Subsidiaries arising under any Environmental and
Safety Requirements.
"EQUITY INTERESTS" means, collectively, the Series A Preferred,
the Warrants and Warrant Stock purchased hereunder and any securities issued
or issuable in respect thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974 (or any successor legislation thereto), as amended from time to time and
any regulations promulgated thereunder.
"ERISA AFFILIATE" means, with respect to any Person, any trade
or business (whether or not incorporated) which at the relevant time is under
common control with such Person and which, together with such Person, are
treated as a single employer within the meaning of Section 414(b), (c), (m)
or (o) of the IRC.
"ERISA EVENT" means, with respect to any Person or any member
of its Controlled Group (except with respect to clause (vi) of this paragraph
which shall be with respect to such Person or any of its ERISA Affiliates)
(i) a Reportable Event with respect to a Title IV Plan or a Multiemployer
Plan, (ii) the withdrawal of such Person, any of its Subsidiaries or any
Controlled Group member from a Title IV Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA, (iii) the complete or partial withdrawal of such
Person, any of its Subsidiaries or any Controlled Group member from any
Multiemployer Plan, (iv) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA, (v) the institution of proceedings to terminate a
Title IV Plan or Multiemployer Plan by the PBGC, (vi) the failure to make
required contributions to a Title IV Plan or (vii) any other event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Title IV Plan or Multiemployer Plan or the imposition of
any liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 10
hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.
"EXPENDED AMOUNT" has the meaning set forth in SECTION 4A
hereof.
"FEDERAL RESERVE BOARD" has the meaning set forth in SECTION 6J
hereof.
"FINANCING" has the meaning set forth in SECTION 3H hereof.
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"FIRC" has the meaning set forth in SECTION 2B hereof.
"FISCAL YEAR" means the fiscal year of the Company ending on
December 31.
"FORFEITURE PROCEEDING" means any action or proceeding
affecting the Company or any of its Subsidiaries before any Government Entity
which may result in the forced disposition (by the exercise of the power of
eminent domain, expropriation or otherwise), seizure, expropriation or
forfeiture of any property necessary for use in its business, or payment of a
penalty, or revocation, termination or suspension of a license or approval
necessary for use in its business which action or proceeding, if determined
adversely to the Company or its Subsidiaries, would reasonably be expected to
have a Materially Adverse Effect.
"GAAP" means generally accepted accounting principles in the
United States as in effect from time to time.
"GENEVE" has the meaning set forth in SECTION 2B hereof.
"GOVERNMENT ENTITY" means the United States of America or any
other nation, any state, province or other political subdivision thereof, or
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of government, including any Tribunal.
"GSH" has the meaning set forth in SECTION 2B hereof.
"GUARANTEE" by a Person shall include any guarantee of the
payment or performance of any Indebtedness or other obligation and any other
arrangement whereby credit is extended to one obligor on the basis of any
promise of such Person, whether that promise is expressed in terms of an
obligation to pay the Indebtedness of such obligor, to provide reimbursement,
or to purchase an obligation owed by such obligor, or to purchase goods and
services from such obligor pursuant to a take-or-pay contract, or to maintain
the capital, working capital, solvency or general financial condition of such
obligor, whether or not any such arrangement is listed in the balance sheet
of such Person, or referred to in a footnote thereto, but shall not include
endorsements of items for collection in the ordinary course of business.
"HAZARDOUS MATERIALS" means anything that is a "hazardous
substance" pursuant to CERCLA, anything that is a "hazardous waste" or "solid
waste" pursuant to RCRA, and any other pollutant, contaminant, toxic
chemical, petroleum product or by-product, asbestos or polychlorinated
biphenyl.
"INDEBTEDNESS" with respect to any Person shall mean, without
duplication, (a) all indebtedness of such Person or any Subsidiary of such
Person in respect of money borrowed (including, without limitation,
indebtedness which represents the unpaid amount of the purchase price of any
property) and not constituting an account payable or expense accrual incurred
or
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assumed in the ordinary course of business of such Person or any of its
Subsidiaries, (b) all indebtedness of such Person or any Subsidiary of such
Person evidenced by a promissory note, bond or similar written obligation to
pay money, (c) all obligations of such Person upon which interest charges are
customarily paid or accrued, other than trade debt, (d) all such indebtedness
guaranteed by such Person or any Subsidiary of such Person (including
pursuant to any Guarantee) or for which such Person or any Subsidiary of such
Person is otherwise contingently liable, including, without limitation,
Guarantees in the form of an agreement to repurchase or reimburse, and any
commitment by which such Person or any Subsidiary of such Person assures a
creditor against loss, including contingent reimbursement obligations with
respect to letters of credit, (e) all obligations secured by a Lien on
property of such Person or any of its Subsidiaries (but shall not include
operating leases), (f) Capitalized Lease Obligations, (g) all obligations of
such Person in respect of interest rate protection agreements, (h) all
obligations of such Person, actual or contingent, as an account party in
respect of letters of credit or bankers' acceptances, (i) all obligations of
any partnership or joint venture as to which such Person is or may become
personally liable, and (j) all Contingent Obligations of such Person.
"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION
11C hereof.
"INDEMNITEE" has the meaning set forth in SECTION 11C hereof.
"INTEREST-BEARING INDEBTEDNESS" means Indebtedness with respect
to which the Company or any of its subsidiaries is obliged to make interest
payments from time to time, irrespective of whether such payments are paid,
accrued or waived from time to time (including without limitation Capitalized
Lease Obligations).
"INTEREST COVERAGE RATIO" means, for any period of
determination, the ratio of (a) EBITDA to (b) Interest Expense, in each case
determined for said period in accordance with GAAP.
"INTEREST EXPENSE" means, for any period of determination, that
aggregate amount, without duplication, of interest paid, accrued or scheduled
to be paid in respect of any Indebtedness of the Company or any of its
Subsidiaries for such period, including (a) all but the principal component
of payments in respect of conditional sale contracts, Capitalized Leases and
other title retention agreements, (b) commissions, discounts and other fees
and charges with respect to letters of credit and bankers' acceptance
financings and (c) dividends and distributions paid in respect of the Series
A Preferred, the Series B Preferred and the Series C Preferred, in each case
determined in accordance with GAAP.
"INVESTMENT" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes,
obligations, instruments, Stock, securities or ownership interest (including
partnership interests, limited liability company interests and joint venture
interests) of, or any loan by such Person to, any other Person and (ii) any
capital contribution by such Person to any other Person.
"IRC" means the Internal Revenue Code of 1986, as amended.
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"IRS" shall mean the Internal Revenue Service.
"LATEST AUDITED STATEMENT" has the meaning set forth in
SECTION 6E(A) hereof.
"LATEST BALANCE SHEET" has the meaning set forth in
SECTION 6E(A) hereof.
"LAWS" means all statutes, laws, ordinances, regulations,
rules, orders, judgments, writs, injunctions, acts or decrees of any
Government Entity (including Environmental and Safety Requirements).
"LIEN" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof and including any lien or charge arising by statute or other Laws,
which secures the payment of a debt (including, without limitation, any Tax)
or the performance of an obligation.
"LITIGATION" means any action, proceeding, claim, order,
lawsuit and/or investigation conducted by or before any Government Entity.
"LOAN AGREEMENT" has the meaning set forth in the Recitals.
"MANAGEMENT PURCHASERS" has the meaning set forth in the
Recitals.
"MAJORITY HOLDERS" at any time means the Majority Note Holders
or, at such time as the Notes are no longer outstanding, the Majority Equity
Holders.
"MAJORITY NOTE HOLDERS" at any time means the holders of Notes
representing a majority of the aggregate principal amount of all Notes then
outstanding.
"MAJORITY EQUITY HOLDERS" at any time means the holders of a
majority of the Equity Interests in existence at such time.
"MAJORITY WARRANT HOLDERS" at any time means holders of a
majority of the Warrant Stock in existence at such time.
"MATERIALLY ADVERSE EFFECT" means an effect, resulting, or
which could result, from any occurrence or omission of whatever nature
(including any adverse determination in any litigation, arbitration or
governmental investigation or proceeding), materially adverse to the
business, condition (financial or otherwise) or operations of the Company and
its Subsidiaries taken as a whole.
"MEASUREMENT PERIOD" means, as of the last day of any fiscal
quarter, the four fiscal quarters ending on such date.
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"MIG" has the meaning set forth in the Recitals.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA, and to which any Person or any member
of such Person's Controlled Group is making, is obligated to make, has made
or been obligated to make, contributions on behalf of participants who are or
were employed by any of them.
"NET WORTH" means as of any date of determination, the sum of
the amounts set forth on the balance sheet of the Company and its
Subsidiaries, prepared in accordance with GAAP, for common stock, preferred
stock, additional paid-in capital and retained earnings of the Company and
its Subsidiaries (excluding treasury stock)
"NOTEHOLDER" at any time means the record holder of any Note,
as reflected on the records of the Company in accordance with the Notes.
"NOTES" has the meaning set forth in SECTION 1A hereof.
"OBLIGATION" means any obligation of the Company or its
Subsidiaries with respect to the repayment or performance of any obligation
(monetary or otherwise) of such party arising under or in connection with
this Agreement, the Notes, the Series A Preferred, the Warrants, the Warrant
Stock or any other document delivered in connection herewith, and
"OBLIGATIONS" means all of such Obligations collectively.
"OFFICER'S CERTIFICATE" of any Person means a certificate
signed on behalf of such Person by the chief executive officer, chief
operating officer or Chief Financial Officer (without any personal liability)
of such Person stating that (i) the officer signing such certificate has made
or has caused to be made such investigations as are reasonably necessary in
order to permit such officer to verify the accuracy of the information set
forth in such certificate, and (ii) to the best of such officer's knowledge,
such certificate does not misstate any material fact and does not omit to
state any fact necessary to make the certificate not misleading.
"OPERATING LEASE" means any lease of personal property other
than a Capitalized Lease.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"PENSION PLAN" means a "pension plan," as such term is defined
in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which
the Company or any corporation, trade or business that is, along with the
Company, a member of its respective Controlled Group, may have liability,
including any liability by reason of having been a substantial employer
within the meaning of Section 4063 of ERISA at any time during the preceding
five years, or by reason of
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being deemed to be a contributing sponsor under Section 4069 of ERISA.
"PERMITTED LIENS" means (i) the security interests held by the
holders of the Senior Indebtedness under the Loan Agreement to secure the
repayment of Senior Indebtedness, (ii) Liens for Taxes or assessments and
similar charges, which either are (A) not delinquent or (B) being contested
diligently and in good faith by appropriate proceedings, and as to which the
Company has set aside reserves on its books in accordance with GAAP, (iii)
carriers', warehousemen's, mechanics', materialmen's or contractors' Liens or
any similar Liens for amounts not yet due and payable, (iv) Permitted
Purchase Money Liens, (v) Liens to secure the obligations of the Company
under the Rate Protection Agreements (as defined in the Note), (vi) Liens
existing on the date of this Agreement and disclosed on the LIEN SCHEDULE
attached hereto, (vii) deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or other social
security obligations, in the ordinary course of business of the Company and
its Subsidiaries, (viii) Liens incurred or deposits or pledges made or given
in connection with, or to secure payment of, indemnity, performance or other
similar bonds in the ordinary course of business, and (ix) Liens arising
solely by virtue of any statutory or common law provision relating to
bankers' liens, rights of set-off or similar rights and remedies as to
deposit accounts or other funds maintained with a creditor depository
institution, provided that (A) such deposit account is not a dedicated cash
collateral account and is not subject to restriction against access by the
Company in excess of those set forth by regulations promulgated by the Board
of Governors of the Federal Reserve System, and (B) such deposit account is
not intended by the Company to provide collateral to the depository
institution.
"PERMITTED PURCHASE MONEY LIENS" means any purchase money Lien
on real property or equipment or other goods acquired (including any
acquisition pursuant to a Capitalized Lease) by the Company or any of its
Subsidiaries (a "PURCHASE MONEY LIEN") in the ordinary course of its business
so long as: (i) the transaction in which such Purchase Money Lien is proposed
to be created is not prohibited by this Agreement; (ii) such Purchase Money
Lien attaches only to the asset acquired (and to the extent applicable, any
insurance thereon) in such transaction and does not extend to or cover any
other assets of the Company or any of its Subsidiaries; (iii) the
Indebtedness secured or covered by such Purchase Money Lien does not exceed
100% of the cost to the Company and its Subsidiaries of the asset acquired;
and (iv) such Indebtedness is either (x) incurred on the date of acquisition
of the asset acquired or (y) incurred for the purpose of refinancing or
refunding any Indebtedness secured by a Permitted Purchase Money Lien, so
long as the unpaid balance thereof following such refinancing does not exceed
the amount thereof prior to such refinancing.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a Government Entity or any
department, agency or political subdivision thereof.
"PLAN" means, with respect to any Person or either any member
of its Controlled Group or any ERISA Affiliate, as required by the context at
any time, an employee benefit plan, as defined in Section 3(3) of ERISA,
which any Person or any of its Subsidiaries maintains, contributes to or has
an obligation to contribute to on behalf of participants who are or were
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employed by any of them.
"PROPRIETARY RIGHTS" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service
marks, trade dress, trade names and corporate names and registrations and
applications for registration thereof, (iii) copyrights and registrations and
applications for registration thereof, (iv) mask works and registrations and
applications for registration thereof, (v) computer software, data and
documentation, (vi) trade secrets and other confidential information
(including, without limitation, ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and
customer and supplier lists and information), (vii) other intellectual
property rights and (viii) copies and tangible embodiments of any of the
foregoing (in whatever form or medium).
"PURCHASER" has the meaning set forth in the Recitals.
"QUALIFIED PLAN" means an employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is intended to be tax-qualified under
Section 401(a) of the IRC, and which the Company, any of its Subsidiaries or
any ERISA Affiliate maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any of
them.
"RCRA" means the federal Resource Conservation and Recovery
Act, as amended.
"RECAPITALIZATION" has the meaning set forth in the Recitals.
"REGISTRATION AGREEMENT" means the Registration Agreement,
dated as of the date hereof, among the Company and the Purchasers.
"REGULATORY VIOLATION" has the meaning set forth in SECTION 3H
hereof.
"RELEASE" has the meaning set forth in CERCLA.
"REPORTABLE EVENT" means any of the events listed in Section
4043 of ERISA.
"RESTRICTED PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of or with respect to any Stock
of the Company or any of its Subsidiaries (other than dividends and
distributions on the Series A Preferred, Series B Preferred or Series C
Preferred), (ii) loans, advances or other payments in respect of or in any
way related to any such Stock, including, without limitation, any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition
for value, direct or indirect, of all or any portion of any such Stock, and
(iii) any prepayment of principal, optional redemption, purchase, retirement
prior
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to stated maturity, defeasance, or similar optional payment with respect to
any Indebtedness of the Company or any of its Subsidiaries (other than
payments in respect of Senior Indebtedness or the Notes).
"RESTRICTED SECURITIES" means (i) the Notes issued hereunder,
(ii) the Series A Preferred issued hereunder, (iii) the Warrants issued
hereunder, (iv) the Common Stock issued or issuable upon exercise of the
Warrants and (v) any securities issued with respect to the securities
referred to in clauses (i) through (v) inclusive, above by way of a stock
dividend or stock split or in connection with a combination of stock,
recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities shall cease to be
Restricted Securities when they have (a) been effectively registered under
the Securities Act and disposed of in accordance with the registration
statement covering them, (b) become eligible for sale pursuant to Rule 144(k)
(or any similar provision then in force) under the Securities Act or (c) been
otherwise transferred and new certificates for them not bearing a Securities
Act legend have been delivered by the Company. Whenever any particular
securities cease to be Restricted Securities, the holder thereof shall be
entitled to receive from the Company, without expense, new securities of like
tenor not bearing a Securities Act legend.
"REVOLVER" has the meaning given such term in the Recitals.
"SBA" means the United States Small Business Administration,
and any successor agency performing the functions thereof.
"SBIC" means a Small Business Investment Company licensed by an
SBA under the SBIC Act.
"SBIC ACT" means the Small Business Investment Act of 1958, as
amended.
"SBIC HOLDER" means any SBIC holding any securities of the
Company.
"SBIC REGULATIONS" means the SBIC Act and the regulations
issued by the SBA thereunder, codified at Title 13 of the Code of Federal
Regulations ("13 CFR"), Parts 107 and 121.
"SCHEDULED AMOUNT" has the meaning set forth in SECTION 4A
hereof.
"SECURITIES" has the meaning set forth in SECTION 1A hereof.
"SECURITIES ACT" means the United States Securities Act of
1933, as amended.
"SECURITIES LAWS" at any time means the Securities Act,
Exchange Act and any similar securities laws of the United States or any
state thereof which are then in force.
"SECURITYHOLDER" means any holder of a Security.
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"SENIOR INDEBTEDNESS" has the meaning given to such term in the
Notes.
"SERIES A PREFERRED" has the meaning set forth in SECTION 1A
hereof.
"SERIES B PREFERRED" means the Company's Series B Preferred
Stock, par value $0.01 per share.
"SERIES C PREFERRED" means the Company's Series C Preferred
Stock, par value $0.01 per share.
"SHARE PURCHASE OPTION AGREEMENTS" has the meaning set forth in
SECTION 2B hereof.
"SIC" has the meaning set forth in SECTION 2B hereof.
"SMHC" has the meaning set forth in SECTION 2B hereof.
"STOCK" of any Person means any stock, equity or profits
interests, participations or other equivalents (however designated) of stock,
whether voting or nonvoting, including any notes or securities with profit
participation features, and any rights, warrants, options or other securities
directly or indirectly convertible into or exercisable or exchangeable for
any such stock, equity or profits interests, participations or other
equivalents, or such other securities, (or any equivalent ownership
interests, in the case of a Person which is not a corporation).
"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, association or other business entity of which (i)
if a corporation, a majority of the total voting power of stock entitled
(irrespective of whether, at the time, shares of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof or (ii) if a partnership, association or
other business entity, a majority of the partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be
deemed to have a majority ownership interest in a partnership, association or
other business entity if such Person or Persons shall be allocated a majority
of partnership, association or other business entity gains or losses or shall
be or control the managing director or general partner of such partnership,
association or other business entity.
"TAX" means any federal, state, local, provincial, or foreign
income, gross receipts, license, payroll, employment, excise, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, unemployment, real property,
personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, or other tax, fee, assessment or charge of any
kind whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
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"TERM LOANS" has the meaning given such term in the Recitals.
"TITLE IV PLAN" means a Pension Plan, other than a
Multiemployer Plan, which is covered by Title IV of ERISA.
"TREASURY REGULATIONS" means the United States Treasury
Regulations promulgated under the IRC, and any reference to any particular
Treasury Regulation section shall be interpreted to include any final or
temporary revision of or successor to that section regardless of how numbered
or classified.
"TRIBUNAL" means any government, arbitration panel, court or
governmental department, commission, board, bureau, agency or instrumentality
of the United States of America, Canada or any state, province, commonwealth,
nation, territory, possession, county, parish, town, township, village,
municipality or other governmental entity, whether now or hereafter
constituted and/or existing.
"WARRANTS" has the meaning given such term in SECTION 1A hereof.
"WARRANT STOCK" means (i) the Common Stock issued or issuable
upon exercise of or with respect to the Warrants, (ii) any shares of Stock
issued or issuable with respect to the securities referred to in clause (i)
above by way of stock dividend or stock split or in connection with a
combination of stock, recapitalization, merger, consolidation or other
reorganization or otherwise pursuant to the Warrants. Any Person who holds
Warrants shall be deemed to be the holder of the Warrant Stock obtainable
upon exercise of the Warrants in connection with the transfer thereof or
otherwise regardless of any restriction or limitation on the exercise of the
Warrants.
"WITHDRAWAL LIABILITY" means, at any time, the aggregate amount
of the liabilities, if any, pursuant to Section 4021 of ERISA, and any
increase in contributions pursuant to Section 4243 of ERISA with respect to
all Multiemployer Plans.
"WHOLLY-OWNED SUBSIDIARY" of any Person means any corporation,
partnership, association or other business entity of which (i) if a
corporation, 100% of the stock and of the total voting power of stock
entitled (irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, limited liability
company, association or other business entity, 100% of the partnership or
other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more Subsidiaries of that
Person or a combination thereof.
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9B. ACCOUNTING TERMS. Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the
meaning customarily given such term in accordance with GAAP, and all
financial computations hereunder shall be computed, unless otherwise
specifically provided herein, in accordance with GAAP consistently applied.
That certain terms or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the foregoing.
Financial statements and other information furnished pursuant to this
Agreement shall be prepared in accordance with GAAP as in effect at the time
of such preparation. To the extent any change in GAAP affects any
computation or determination required to be made pursuant to this Agreement,
such computation or determination shall be made as if such change in GAAP had
not occurred unless the Company and the Majority Holders agree in writing on
an adjustment to such computation or determination to account for such
change in GAAP.
Section 10. EVENTS OF DEFAULT.
10A. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" shall
mean any of the following events:
(a) NON-PAYMENT OF PRINCIPAL OR INTEREST. The Company
shall (i) fail to pay when due any interest on any Note or any monetary
Obligation with respect to the Notes other than payment of unpaid
principal and the same shall continue unremedied for a period of 2 days,
or (ii) fail to pay when due all or any portion of the unpaid principal
on any Note.
(b) BREACH OF WARRANTY. Any representation or warranty
of the Company or any Subsidiary of the Company hereunder or under any
Security, certificate, report, financial statement or other writing
furnished by or on behalf of the Company or any Subsidiary of the Company
to any of the Purchasers or any other Securityholder for the purposes of
or in connection with this Agreement or any such other document is or
shall be incorrect in any material respect when made or deemed made;
PROVIDED, that for purposes of this SECTION 8A(b) each such
representation or warranty shall be deemed to have been amended to delete
each materiality standard included therein (including without limitation
to delete the words "material" and all references to "Materially Adverse
Effect").
(c) NON-PERFORMANCE OF OTHER OBLIGATIONS.
(1) The Company or any of its Subsidiaries shall
default in the due performance and observance of or otherwise
neglect or fail to perform, keep or observe any agreement
contained in any of the financial covenants contained in SECTION 4
or any of the negative covenants of SECTION 5 hereof.
(2) The Company or any of its Subsidiaries shall
default in the due performance or observance of or otherwise
neglect or fail to perform, keep or observe any other agreement
contained herein or in any of the Notes, the
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Warrants, the Stockholders Agreement and the Registration
Agreement, and the same shall continue unremedied for a period of
20 days (5 days in the case of SECTION 3B(d)) after a senior
officer of the Company shall have first become aware thereof.
(d) ACCELERATION OF OTHER INDEBTEDNESS. A default shall
occur in the performance or observance of any obligation or condition
relating to any Indebtedness in an aggregate amount exceeding $250,000
(whether under any mortgage, indenture or instrument or agreement
securing or relating to any such indentures or otherwise) of the Company
or any of its Subsidiaries and the effect of such default is to
accelerate the maturity or require the prepayment, redemption, repurchase
or defeasance of any such Indebtedness or to cause an offer to repay,
redeem, purchase or defease such Indebtedness to be required to be made,
or to require the making of any deposits in respect of any such
Indebtedness, prior to its expressed maturity, or a holder of such
Indebtedness otherwise applies or sets off assets of the Company or any
of its Subsidiaries held in such holder's possession, or exercises any
right to deposit and retain in an account, amounts to satisfy contingent
or unmatured obligations of the Company or any of its Subsidiaries to
such holder.
(e) BANKRUPTCY, INSOLVENCY, ETC. Any of the Company or
its Subsidiaries shall:
(1) become insolvent or generally fail to pay, or
admit in writing its inability to pay, debts as they become due;
(2) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, administrator, or other
custodian for the Company or any of its Subsidiaries or any
property thereof or make a general assignment for the benefit of
creditors;
(3) in the absence of such application, consent
or acquiescence, permit, or suffer to exist the appointment of a
trustee, receiver, administrator, liquidator, assignee, custodian,
or other similar official for the Company or any of its
Subsidiaries or property of any thereof for a period of 60 days;
(4) permit or suffer to exist the commencement of
any bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency Laws or any other
Laws for the benefit of the debtors, or any dissolution, winding
up or liquidation proceeding, in respect of the Company or any of
its Subsidiaries and, if such case or proceeding is not commenced
by the Company or any such Subsidiary, such case or proceeding
shall be consented to or acquiesced in by the Company or any such
Subsidiary or shall result in the entry of an order for relief or
shall remain for 60 days undismissed;
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(5) have concealed, removed or permitted to be
concealed or removed, any part of its property, with intent to
hinder, delay or defraud its creditors or any of them or made or
suffered a transfer of any of its property or the incurring of an
obligation which may be fraudulent under any bankruptcy,
fraudulent conveyance or other similar Laws; or
(6) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
(f) DISSOLUTION. Entry, rendering or filing of any
order, final judgment or decree decreeing the dissolution or split up of
the Company or any of its Subsidiaries, if such order remains in effect
for a period of more than 45 days without being vacated, discharged,
satisfied or stayed or bonded pending appeal.
(g) JUDGMENTS. A judgment or order, the uninsured
portion of which is in excess of $250,000, shall be rendered against the
Company or any of its Subsidiaries and, within 30 days after entry
thereof, such judgment or order shall not have been discharged or
execution thereof stayed pending appeal, or, within 30 days after the
expiration of any such stay, such judgment or order shall not have been
discharged in full.
(h) PENSION PLANS. The institution of any steps by the
Company or any member of its Controlled Group or any other Person to
terminate a Pension Plan if, as a result of such termination, the Company
or any such member of its Controlled Group could be required to make a
contribution to such Pension Plan, or could reasonably expect to incur a
liability or obligation to such Pension Plan in excess of $250,000.
(i) ERISA. (i) With respect to any Plan, a prohibited
transaction within the meaning of Section 4975 of the IRC or Section 406
of ERISA occurs which in the reasonable determination of the Majority
Noteholders could result in liability in excess of $50,000 to the Company
or any of its Subsidiaries; (ii) with respect to any Title IV Plan, the
filing of a notice to voluntarily terminate any such plan in a distress
termination; (iii) with respect to any Multiemployer Plan, the Company or
any of its Subsidiaries or any ERISA Affiliate shall incur any Withdrawal
Liability and, in the opinion of the Majority Noteholders, such
Withdrawal Liability would reasonably be expected to have a Materially
Adverse Effect; (iv) with respect to any Qualified Plan, the Company or
any of its Subsidiaries or any ERISA Affiliate shall incur an accumulated
funding deficiency or request a funding waiver from the IRS; or (v) with
respect to any Title IV Plan or Multiemployer Plan which has an ERISA
Event not described in (ii) - (iv) hereof, in the reasonable
determination of the Majority Note Holders there is a reasonable
likelihood for termination of any such plan by the PBGC; PROVIDED,
HOWEVER, that the events listed in clauses (i) - (v) hereof shall
constitute Events of Default only if the liability, deficiency or waiver
request of the Company or any of its Subsidiaries or any ERISA Affiliate,
whether or not assessed, exceeds $250,000 in any case set forth in (i) -
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(v) above, or exceeds $250,000 in the aggregate for all such cases.
(j) FORFEITURE PROCEEDING. The commencement of any
Forfeiture Proceeding, if such Forfeiture Proceeding continues for a
period of more than 30 days without being vacated, discharged, satisfied
or stayed or bonded pending appeal or there is an adverse decision in
such proceeding.
(k) VALIDITY OF AGREEMENTS. Any material provision of
this Agreement, the Notes, the Warrants, the Stockholders Agreement and
the Registration Agreement shall, for any reason, cease to be valid and
binding on the Company or the Company shall so claim in writing to any
Securityholder.
(l) CHANGE OF OWNERSHIP. If prior to repayment in full
of the Notes, a Change of Ownership shall occur.
10B. DEFAULT INTEREST RATE. Upon any Event of Default, the
interest rate per annum on the Notes shall increase immediately by an
increment of three percentage points (3%) to the extent permitted by law.
Any increase of the interest rate resulting from the operation of this
section shall terminate as of the close of business on the date on which no
Event of Default exists (subject to subsequent increases pursuant to this
section).
10C. REMEDY IF BANKRUPTCY. If any Event of Default described
in any of clause(s) (1) through (6) of SECTION 10A(e) shall occur, the
outstanding principal amount of all outstanding Notes and all other
Obligations to Noteholders or with respect to the Notes shall automatically
be and become immediately due and payable, without declaration, notice or
demand.
10D. REMEDY IF OTHER EVENT OF DEFAULT. If any Event of
Default (other than any Event of Default described in any of clauses (1)
through (6) of SECTION 10A(e)) shall occur for any reason, whether voluntary
or involuntary, and be continuing, the Majority Note Holders may, upon notice
or demand, declare all or any portion of the outstanding principal amount of
the Notes to be due and payable and any or all other Obligations with respect
to the Notes to be due and payable, whereupon the full unpaid amount of such
Notes and any and all other Obligations with respect to the Notes which shall
be so declared due and payable shall be and become immediately due and
payable, without further notice, demand, protest or presentment (all of which
are expressly waived by the Company).
10E. WAIVERS. Except as otherwise provided for in this
Agreement and applicable law, the Company waives (a) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate
and notice of acceleration, (b) all rights to notice and a hearing prior to
any Noteholder's taking possession or control of, or to Noteholder's replevy,
attachment or levy upon, any bond or security which might be required by any
court prior to allowing any Noteholder to exercise any of its remedies and
(c) the benefit of all valuation, appraisal and exemption laws. The Company
acknowledges that it has been advised by counsel of its choice with respect
to this Agreement, the other documents contemplated
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hereby and the transactions evidenced by this Agreement and the other
documents contemplated hereby.
10F. RIGHT OF SETOFF.
(a) In the case that an Event of Default shall occur and
be continuing or shall exist, each Purchaser shall have the right, in
addition to all other rights and remedies available to them, upon 3
business days prior written notice to the Company, to Setoff against and
to appropriate and apply to the unpaid balance of the Notes, all accrued
interest thereon and all other obligations of the Company under and with
respect to the Notes, any debt owing to, and any other funds held in any
manner for the account of the Company or any of its Subsidiaries by such
Purchaser, including, without limitation, all funds in all deposit
accounts (general or special) now or hereafter maintained by the Company
or any of its Subsidiaries for their own accounts with such Purchaser.
(b) Such right shall exist whether or not such Purchaser
shall have made any demand under this Agreement, the Notes or the
Warrants and whether or not the Notes, the Warrants and such other
obligations are matured or unmatured, and shall be in addition to any
other rights and remedies which the Noteholder possess.
(c) The Company hereby confirms each Purchaser's (and
such other holder's) right of banker's lien and setoff and nothing in
this Agreement shall be deemed to be any waiver or prohibition of such
Purchaser's right of banker's lien and setoff.
Section 11. MISCELLANEOUS.
11A. EXPENSES. The Company shall pay, and hold the BA
Purchasers and each Noteholder or holder of any Securities harmless against
liability for the payment of (a) the reasonable fees and expenses of Kirkland
& Ellis arising in connection with the negotiation and execution of this
Agreement, any Securities, the Registration Agreement, each of the agreements
contemplated hereby or thereby and the consummation of the transactions
contemplated by this Agreement, in the amount set forth in an invoice
delivered to the Company by Kirkland & Ellis (which amounts shall be payable
at the Closing), (b) the fees and expenses reasonably incurred with respect
to any amendments or waivers (whether or not the same become effective) under
or in respect of any of this Agreement, the Stockholders Agreement, the
Registration Agreement, the Warrants, the Notes and the other agreements
contemplated hereby or thereby and the Company's Articles of Incorporation
(including in connection with any proposed merger, consolidation, sale or
recapitalization of the Company), and (c) the fees and expenses incurred with
respect to the enforcement of the rights granted under any of this Agreement,
the Notes, the Warrants, the Stockholders Agreement, the Registration
Agreement, the Company's Articles of Incorporation and the other agreements
contemplated hereby or thereby.
11B. REMEDIES. Each Noteholder, each holder of Series A
Preferred and each holder of Warrants and Warrant Stock shall have all rights
and remedies of Noteholders, holders of Series A Preferred and holders of
Warrants and Warrant Stock, respectively, set forth in this
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Agreement (including, without limitation, SECTIONS 10B and 10C above), the
Notes, the Warrants, the Stockholders Agreement, the Company's Articles of
Incorporation and all rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the
rights which such holders have under any Laws. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by Laws. All such rights and remedies shall
be cumulative and non-exclusive, and may be exercised singularly or
concurrently. One or more successive actions may be brought against the
Company, either in the same action or in separate actions, as often as any of
the Securityholders deems advisable, until all of the Obligations are paid
and performed in full.
11C. INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by the Purchasers, the Company will indemnify,
exonerate and hold harmless each of the Purchasers and each other Noteholder,
holder of Series A Preferred or holder of Warrant Stock, and each of their
respective officers, directors, employees, partners and agents (collectively,
the "INDEMNITEES") from and against any and all actions, causes of action,
suits, losses, costs, liabilities and damages and expenses incurred in
connection therewith (irrespective of whether such Indemnitee is a party to
the action for which indemnification hereunder is sought), including
reasonable attorney's fees and disbursements including, without limitation,
any arising under or relating to Environmental and Safety Requirements or
relating to Hazardous Materials (collectively, the "INDEMNIFIED LIABILITIES")
incurred by any Indemnitee as a result of such Indemnitee's purchase of the
Notes, Warrants or Series A Preferred hereunder, arising out of or relating
to the operations of the Company's or any of its Subsidiaries' businesses
(other than on account of or relating to such Indemnitee's service as an
employee of the Company or any of its Subsidiaries) or the entering into and
performance of this Agreement, any of the Notes, any of the Warrants, the
Stockholders Agreement or the Registration Agreement. Notwithstanding the
foregoing, "Indemnified Liabilities" will not include as to any Indemnitee
any liabilities to the extent arising by reason of such Indemnitee's gross
negligence or willful misconduct. Further, if and to the extent that the
covenant included in this SECTION 11C may be unenforceable for any reason,
the Company hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible
under applicable Laws.; provided that no Indemnitee shall be entitled to
indemnification under this SECTION 11C with respect to any Indemnified
Liability arising solely with respect breaches of the representations and
warranties of the Company set forth in SECTION 6 (other than SECTIONS 6A, 6B,
6D and 6Q) of this Agreement, unless such Indemnified Liability, together
will all other such Indemnified Liabilities, exceeds $250,0000, in which case
such Indemnitee shall be entitled to indemnification only for the amount of
such excess; it being understood, however, that the foregoing limitation
applies only to Indemnified Liabilities arising out of breaches of
representations and warranties contained in SECTION 6 (other than SECTIONS
6A, 6B, 6D and 6Q) and no other Liability for which indemnification may be
sought hereunder.
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11D. USURY. Anything herein, in the Notes or in any
agreement, certificate, instrument or other documents contemplated by this
Agreement to the contrary notwithstanding, the obligations of the Company
under this Agreement and the Notes will be subject to the limitation that
payments of interest will not be required to the extent that receipt thereof
would be contrary to provisions of law applicable to the Noteholder in
question limiting rates of interest which may be charged or collected by such
Noteholder.
11E. CONSENT TO AMENDMENTS. Except as otherwise expressly
provided herein, commencing on and after the Closing the provisions of this
Agreement may be amended or waived, and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed
by it, only if such Person has obtained the written consent of the Majority
Holders; provided that (x) any provision of the Notes (other than SECTION 2
of the Notes, the Redemption Premium Amount (as defined in the Notes), rate
of interest, maturity or principal amount, which may be amended with respect
to any Note only upon the written consent of the holders of such Note) may be
amended if and only if the Company has obtained the written consent of the
Majority Note Holders and only if the provisions of all outstanding Notes are
amended in the same manner; (y) any provisions of the Warrants (other than
SECTION 7 or 8 of the Warrants, the number of shares obtainable upon exercise
thereof and the exercise price thereof or the term thereof, which may be
amended with respect to any Warrant only with the prior written consent of
the holders of such Warrant) may be amended if and only if the Company has
obtained the written consent of the Majority Warrant Holders and only if the
provisions of all Warrants are amended in the same manner and (z) any
provision of this Agreement which would continue to apply after the Notes and
Series A Preferred are paid in full may be amended if and only if the Company
has obtained the written consent of the Majority Warrant Holders. No other
course of dealing between the Company and any Securityholder or any delay in
exercising any rights hereunder, under any of the Securities, under any other
agreement contemplated hereby or the Company's Articles of Incorporation
shall operate as a waiver of any rights of any such holders. For purposes of
this Agreement, the Notes and Warrant Stock held by the Company or any of its
Subsidiaries shall not be deemed to be outstanding or in existence. If the
Company directly or indirectly pays any consideration to any Securityholder
for such holder's consent to any amendment, modification or waiver hereunder,
the Company shall also pay each other holder of the same type of Securities
granting its consent hereunder equivalent consideration computed on a pro
rata basis.
11F. SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by
or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not. In addition, and whether or not any express assignment has
been made, the provisions of this Agreement which are for the benefit of the
Purchasers as purchasers or Securityholders are also for the benefit of, and
enforceable by, any subsequent Securityholder.
11G. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable Laws, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable Laws, such
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provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.
11H. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the
same Agreement.
11I. DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a substantive part of this Agreement. Whenever the term "including"
is used in this Agreement, (whether or not that term is followed by the phrase
"without limitation" or words of similar effect) it will be interpreted to be
illustrative only and will not be interpreted as a limitation on, or an
exclusive listing. The "knowledge" or "awareness" of a Person means the actual
knowledge of such Person (which includes the actual knowledge of all officers,
directors and executive employees of such Person after reasonable inquiry).
11J. GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF TEXAS
SHALL GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE RELATIVE RIGHTS AND
OBLIGATIONS OF THE COMPANY AND ITS STOCKHOLDERS. ALL OTHER ISSUES AND QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF
THE STATE OF ILLINOIS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF ILLINOIS.
11K. NOTICES. All notices, demands and other communications
given or delivered under this Agreement shall be in writing and shall be deemed
to have been given upon receipt when delivered personally or by telecopy, one
Business Day after being deposited with a reputable overnight courier service or
three Business Days after being deposited in the U.S. Mail. Notices, demands
and communications to the Purchasers and the Company, unless another address is
specified in writing, shall be sent to the address or telecopy number indicated
below and to the attention of such other persons indicated below or to such
other address or to the attention of such other person as the recipient party
has specified by prior written notice to the sending party:
IF TO THE PURCHASERS:
Bank of America National Trust and
Savings Association
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Robert Perille
Andrea P. Joselit
Telecopier: 312/828-6298
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with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: John A. Weissenbach
Wendy L. Chronister
Telecopier: 312/861-2200
IF TO THE COMPANY:
Zimmerman Sign Company
9846 Hwy 31 East
Tyler, Texas 75705
Attn: Chief Executive Officer
Telecopier: 903/535-7420
with a copy to:
Jackson Walker L.L.P.
901 Main Street
Suite 6000
Dallas, Texas 75705
Attn: Bryan C. Birkeland
Telecopier: 214/953-5822
11L. SURVIVAL OF AGREEMENT; INDEMNITIES. All covenants,
agreements, representations and warranties made in this Agreement and in the
certificates delivered pursuant hereto shall survive the Closing hereunder and
the execution and delivery to the Purchasers of this Agreement, the Notes, the
Warrants, the Registration Agreement, the Stockholders Agreement and all other
documents delivered hereunder or contemplated hereby regardless of any
investigation made by any of the Purchasers or on behalf of any of the
Purchasers and, except as otherwise expressly provided herein, shall continue in
full force and effect so long as any of the Securities or other Obligations
remain outstanding, unperformed or unpaid, except that the representations and
warranties made herein shall continue only until the first anniversary of the
Closing Date. Notwithstanding anything to the contrary contained herein, the
Company and their Subsidiaries to indemnify the Purchasers (and the Indemnitees)
with respect to the expenses, damages, losses, costs and liabilities described
in SECTIONS 11A and 11D shall survive until all applicable statute of
limitations periods with respect to actions which may be brought against the
Purchasers (or Indemnitee) have run.
11M. TAXES AND FEES. Should any recording or filing fees, stamp
Taxes or comparable filings or fees become payable in respect of any of this
Agreement, the Notes, the
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Warrants, or any other document delivered hereunder, or any amendment,
modification or supplement thereof requested by the Company, the Company
agrees to pay the same on demand, together with any interest or penalties
thereon attributable to any delay by the Company in meeting the Purchaser's
demand, and agrees to hold the Purchasers harmless with respect thereto.
11N. JURISDICTION AND VENUE. ALL JUDICIAL PROCEEDINGS BROUGHT
AGAINST THE COMPANY OR ANY OF ITS SUBSIDIARIES WITH RESPECT TO THIS AGREEMENT,
ANY NOTE, ANY NOTE WARRANT, ANY SERIES A WARRANT, THE WARRANT STOCK, THE
STOCKHOLDERS AGREEMENT, THE REGISTRATION AGREEMENT OR ANY OTHER AGREEMENT
CONTEMPLATED HEREBY OR THEREBY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN COOK COUNTY ILLINOIS, AND BY EXECUTION AND DELIVERY OF
THIS AGREEMENT AND THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION
OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. THE COMPANY HEREBY WAIVES
ANY CLAIM THAT COOK COUNTY ILLINOIS IS AN INCONVENIENT FORUM OR AN IMPROPER
FORUM BASED ON LACK OF VENUE. THE COMPANY DESIGNATES AND APPOINTS CT
CORPORATION SYSTEM, INC. (AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY
THE COMPANY WITH THE CONSENT OF THE MAJORITY HOLDERS) TO RECEIVE ON ITS BEHALF,
SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE
BEING HEREBY ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED
MAIL TO THE COMPANY AT ITS ADDRESS PROVIDED HEREIN, EXCEPT THAT UNLESS OTHERWISE
PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE
VALIDITY OF SERVICE OF PROCESS. TO THE EXTENT PERMITTED BY LAW, IF ANY AGENT
APPOINTED BY THE COMPANY REFUSES TO ACCEPT SERVICE, THE COMPANY HEREBY AGREES
THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT OF ANY OF THE PURCHASERS OR NOTEHOLDERS OR HOLDERS OF
WARRANT STOCK TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY
OTHER JURISDICTION. To the extent provided by law, should the Company, after
being so served, fail to appear or answer to any summons, complaint, process or
papers so served within the number of days prescribed by law after the mailing
thereof, the Company shall be deemed in default and an order and/or judgment may
be entered by the court against the Company as demanded or prayed for in such
summons, complaint, process or papers. The exclusive choice of forum for the
Company set forth in this SECTION 11N shall not be deemed to preclude the
enforcement by the Purchasers of any judgment obtained in any other forum or the
taking by the Purchasers of any action to enforce the same in any other
appropriate jurisdiction, and the Company each hereby waives the right to
collaterally attack any such judgment or action.
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<PAGE>
11O. WAIVER OF RIGHT TO JURY TRIAL. THE COMPANY AND ITS
SUBSIDIARIES EACH ON BEHALF OF ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY in any
litigation in any court with respect to, in connection with, or arising out of
this Agreement, any Note, any Warrant, the Warrant Stock, the Stockholders
Agreement, the Registration Agreement, the Company's Articles of Incorporation
or any other agreement contemplated hereby or thereby or the validity,
protection, interpretation, collection or enforcement thereof. Notwithstanding
anything contained in this Agreement to the contrary, no claim may be made by
the Company against the Purchasers for any lost profits or any special, indirect
or consequential damages in respect of any breach or wrongful conduct (other
than willful misconduct constituting actual fraud) in connection with, arising
out of or in any way related this Agreement, to the transactions contemplated
hereunder, the Notes, the Warrants, the Warrant Stock, the Stockholders
Agreement, the Registration Agreement, the Company's Articles of Incorporation
or any act, omission or event occurring in connection therewith; and the Company
and its Subsidiaries each hereby waives, releases and agrees not to sue upon any
such claim for any such damages. THE COMPANY AND ITS SUBSIDIARIES EACH AGREES
THAT THIS SECTION 11O IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND
ACKNOWLEDGES THAT THE PURCHASER WOULD NOT PURCHASE THE NOTES OR WARRANTS
HEREUNDER IF THIS SECTION 11O WERE NOT PART OF THIS AGREEMENT.
11P. CONSIDERATION FOR THE WARRANTS AND WARRANT STOCK. Each of
the Company and the Purchasers acknowledge and agree that the fair market value
of the Notes, Warrants, and Series A Preferred issued hereunder shall be as set
forth on the SCHEDULE OF PURCHASERS attached hereto, and that, for all purposes
(including tax and accounting), the consideration for the issuance of the
Warrants shall be allocated as set forth on the SCHEDULE OF PURCHASERS attached
hereto. Each of the Company and the Purchasers agree that all fees payable to
the Purchasers, as provided in SECTION 11A hereof, shall be reported for all tax
purposes as a reduction in the issue price of the debt issued to the Purchasers,
pro rata according to the principal treated by the parties as original issue
discount and reported as interest income and interest expense in accordance with
the applicable provisions of the Internal Revenue Code and the regulations
promulgated thereunder. The Company, its Subsidiaries and the Purchasers shall
file their respective federal, state and local tax returns in a manner which is
consistent with such valuation and allocation and shall not take any action or
position (whether in preparation of tax returns, financial statements or
otherwise) which is inconsistent with any of the above.
11Q. NO STRICT CONSTRUCTION. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
11R. COMPLETE AGREEMENT. This Agreement, those documents
expressly
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<PAGE>
referred to herein and other documents of even date herewith, embody the
complete agreement and understanding among the parties and supersede any
prior agreements or representations by or among the parties, written or oral,
which may have related to the subject matter hereof in any way.
11S. TIME OF ESSENCE. Time is of the essence for the
performance by the Company and the Company of the obligations set forth in this
Agreement, the Notes, the Warrant, the Registration Agreement, the Stockholders
Agreement, the Company's Articles of Incorporation or any document delivered
hereunder.
11T. NO THIRD PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the parties hereto and
their respective successors and assigns, as specified herein and to the extent
explicitly set forth herein, the holders of Senior Indebtedness.
11U. CONFIDENTIALITY OF INFORMATION. Each of the Purchasers
shall use reasonable efforts, consistent with such Purchaser's customary
practices, to assure that information about the Company and its operations,
affairs and financial condition not generally disclosed to the public or to
trade and other creditors, which is furnished to such Purchaser pursuant to the
provisions hereof is used only for the purposes of this Agreement and shall not
be divulged to any Person other than their Affiliates and their respective
officers, directors, employees and agents, except: (a) to their attorneys and
accountants, (b) in connection with the enforcement of the rights of such
Purchaser hereunder and under the Notes, the Warrants, the Stockholders
Agreement or the Registration Agreement or otherwise in connection with
applicable litigation, (c) in connection with the sale of securities so long as
the prospective purchasers thereof have agreed to be bound by the provisions of
this SECTION 11U as if they were a "Purchaser"), (d) as may otherwise be
required or requested by any regulatory authority having jurisdiction over such
Purchaser or by any applicable law, rule, regulation or judicial process,
reasonably believed by such Purchaser to be binding on the Purchaser.
* * * * *
-65-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
ZIMMERMAN SIGN COMPANY
By: /s/ David E. Anderson
---------------------
Name: David E. Anderson
Its: Chairman
CONTINENTAL ILLINOIS
VENTURE CORPORATION
By: /s/ Robert Perille
------------------
Name: Robert Perille
Its: Managing Director
MIG PARTNERS VIII
By: /s/ Robert Perille
------------------
Name: Robert Perille
Its: General Partner
MANAGEMENT PURCHASERS:
/s/ David Anderson
------------------
David Anderson
/s/ Tom Boner
-------------
Tom Boner
/s/ Michael Coppinger
---------------------
Michael Coppinger
/s/ Michael St. Onge
--------------------
Michael St. Onge
/s/ Jeff Johnson
----------------
Jeff Johnson
/s/ John Griggs
---------------
John Griggs
-66-
<PAGE>
Exhibit 10.9
SHARE OPTION PURCHASE AGREEMENT
THIS SHARE OPTION PURCHASE AGREEMENT (this "AGREEMENT") is made
as of September 30, 1998, among Geneve Securities Holding Corp., Geneve
Securities Portfolio Corp., Chaparral International Re., Southern Mortgage
Holding Corporation and Southern Investors Corp. (collectively, "GHI"),
Zimmerman Sign Company, a Texas corporation (the "COMPANY"), and David
Anderson ("ANDERSON," and together with the Company, the "OPTIONEES").
Except as otherwise indicated herein, capitalized terms used and not
otherwise defined herein have the meanings ascribed to such terms in the
Senior Subordinated Note, Preferred Stock and Warrant Purchase Agreement,
dated as of the date hereof (the "PURCHASE AGREEMENT"), among the Company and
certain investors listed therein.
GHI desires to grant to each Optionee and each Optionee desires
to acquire an option (each an "OPTION" and collectively the "Options") to
purchase the number of shares of the Company's Common Stock indicated on
Schedule I hereto which aggregate 785,143 shares (the "OPTION SHARES") at the
exercise prices and on the terms and subject to the conditions set forth
herein.
As of the date hereof, the Company has entered into a Senior
Subordinated Note, Preferred Stock and Warrant Purchase Agreement (the
"RECAPITALIZATION AGREEMENT") pursuant to which the Company is initiating a
plan to recapitalize its existing debt and equity structure through a series
of transactions which include the issuance to certain investors of capital
stock and subordinate notes thereunder. Execution and delivery of this Share
Option Purchase Agreement is a condition to the obligations of such Investors
thereunder.
In consideration of the mutual covenants and promises contained
herein and for the good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. OPTION.
1A. COMPANY OPTION. GHI hereby grants to the Company an
Option for the purchase of up to 357,143 Option Shares at a price per share
equal to $1.50 per share in cash and the delivery of .0175 shares of Series C
Preferred Stock, par value $0.01 per share (the "SERIES C PREFERRED STOCK"),
payable upon exercise as set forth in SECTION 2. The Option granted pursuant
to this SECTION 1A may be exercised only during the period (the "EXERCISE
PERIOD") commencing with the open of business on January 4, 1999 through the
close of business on January 8, 1999.
1B. ANDERSON OPTION. GHI hereby grants to Anderson an
Option (the "ANDERSON OPTION") for the purchase of up to 428,000 Option
Shares at a price per share equal to $3.25 per share, payable in cash only
upon exercise as set forth in SECTION 2. The Anderson Option may be
exercised only during the Exercise Period.
<PAGE>
1C. CONSIDERATION. The consideration for an Option being
granted hereunder is $.25 per Option Share. As of the date hereof, the
Company and Anderson shall deliver $89,285.75 and $107,000.00, respectively,
to GHI, by cashier's check or wire transfer of immediately available funds.
Section 2. EXERCISE OF THE OPTION. Each Optionee may
exercise its Option, in whole or in part, upon payment of the product of (i)
the exercise price set forth in SECTION 1A or 1B, as the case may be,
multiplied by (ii) the number of Option Shares to be acquired. Payment of
the applicable option price by Anderson shall be made in cash, by wire
transfer of immediately available funds to an account designated by GHI.
Payment of the applicable option price by the Company shall be made by
delivery of the applicable option price in cash, by wire transfer of
immediately and available funds, and by delivery of stock certificates
representing Series C Preferred Stock. Upon payment of the option price by
an Optionee, GHI shall deliver to such Optionee the stock certificates
evidencing the Option Shares to be acquired by such Optionee duly endorsed in
blank or accompanied by duly executed stock powers.
Section 3. REPRESENTATIONS AND WARRANTIES.
(a) GHI hereby represents and warrants to the
Optionees as follows:
(i) GHI is the record and beneficial owner of
the Option Shares free and clear of all Liens
and no other third party has any right or
interest in the Option Shares, and at the
time of the exercise of the Option by either
Optionee, such Optionee will acquire good and
marketable title to the Option Shares so
acquired free and clear of any Liens;
(ii) the Option Shares are not subject to any
statutory or contractual stockholders'
preemptive rights or rights of first offer or
refusal with respect to the transfers of the
Option Shares contemplated hereby;
(iii) Geneve Securities Portfolio Corp. is a
corporation duly organized, validly existing
and in good standing under the laws of the
State of Delaware and has the requisite
corporate power and authority to enter into
this Agreement and consummate the
transactions contemplated hereby;
(iv) Chaparral International Re. is a corporation
duly organized, validly existing and in good
standing under the laws of the jurisdiction
of its organization and has the requisite
corporate power and authority to enter into
this Agreement and consummate the
transactions contemplated hereby;
-2-
<PAGE>
(v) Geneve Securities Holding Corp. is a
corporation duly organized, validly existing
and in good standing under the laws of the
State of Delaware and has the requisite
corporate power and authority to enter into
this Agreement and consummate the
transactions contemplated hereby;
(vi) Southern Investors Corp. is a corporation
duly organized, validly existing and in good
standing under the laws of the State of
Delaware and has the requisite corporate
power and authority to enter into this
Agreement and consummate the transactions
contemplated hereby; and
(vii) Southern Mortgage Holding Corp. is a
corporation duly organized, validly existing
and in good standing under the laws of the
State of Delaware and has the requisite
corporate power and authority to enter into
this Agreement and consummate the
transactions contemplated hereby.
(b) Each of the Company and Anderson hereby represent
and warrant to GHI that such person has the requisite power and authority
to enter into this Agreement and consummate the transactions contemplated
thereby and that if the Options are exercised each is acquiring the
Option Shares for investment purposes and not with any present intention
to resell or distribute such shares except for the contemplated sale by
Anderson of a portion of the Option Shares to the Company.
Section 4. CERTAIN COVENANTS. Until exercise of the Options
contemplated hereby, GHI shall not and shall not permit any of its
representatives to take any action (whether as a shareholder, director,
officer, employee or otherwise) which would reasonably be anticipated to have
an adverse effect on the Company or the transactions contemplated hereby or
in the Recapitalization Agreement or the other agreements contemplated
hereby. Without limiting the foregoing in any way, prior to exercise of the
Options hereunder, GHI shall not, directly or indirectly, enter into any
contract, agreement or understanding with respect to the transfer or voting
of the Option Shares or the placing of a Lien on any of the Option Shares.
Section 5. MISCELLANEOUS.
5A. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made in writing by any
party in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. The
covenants contained herein shall terminate upon the earlier of consummation
of the transactions contemplated hereby or the expiration of the Exercise
Period.
-3-
<PAGE>
5B. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
5C. OTHER AGREEMENTS. Upon exercise of the Anderson Option,
the Option Shares not subsequently conveyed to the Company shall be deemed
Stockholder Shares (as defined in the Stockholders Agreement) and Other
Registrable Securities (as defined in the Registration Agreement).
5D. COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken
together shall constitute one and the same Agreement.
5E. GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF TEXAS
SHALL GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE RELATIVE RIGHTS AND
OBLIGATIONS OF THE COMPANY AND ITS STOCKHOLDERS. ALL OTHER ISSUES AND
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TEXAS, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR
PROVISIONS (WHETHER OF THE STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF TEXAS.
5F. NOTICES. All notices, demands and other communications
given or delivered under this Agreement shall be in writing and shall be
deemed to have been given upon receipt when delivered personally or by
telecopy, one Business Day after being deposited with a reputable overnight
courier service or three Business Days after being deposited in the U.S.
Mail. Notices, demands and communications to the Purchasers and the Company,
unless another address is specified in writing, shall be sent to the address
or telecopy number indicated below and to the attention of such other persons
indicated below or to such other address or to the attention of such other
person as the recipient party has specified by prior written notice to the
sending party:
IF TO GHI:
Geneve Holdings, Inc.
96 Cummings Pt. Rd.
Stamford, Connecticut 06902
Attn: Steve Lapin
Telecopier: (203) 348-3103
-4-
<PAGE>
IF TO THE COMPANY:
Zimmerman Sign Company
9846 Hwy 31 East
Tyler, Texas 75705
Attn: Chief Executive Officer
Telecopier: (903) 535-7401
WITH COPIES TO:
Jackson Walker L.L.P.
901 Main Street
Suite 6000
Dallas, Texas 75705
Attn: Bryan C. Birkeland
Telecopier: 214/953-5822
Bank of America National Trust and
Savings Association
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Robert F. Perille
Andrea P. Joselit
Telecopier: 312/828-6298
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: John A. Weissenbach
Wendy L. Chronister
Telecopier: 312/861-2200
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
5G. SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that the other parties would be damaged irreparably
in the event any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached. Accordingly,
each of the parties hereto agrees that the other parties shall be entitled to
an injunction or injunctions (without the posting of bond or any other
security) to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court in the United States or in any state
having jurisdiction over the parties and the matter in addition to any other
remedy to which it may be
-5-
<PAGE>
entitled pursuant hereto.
* * * * *
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
SOUTHERN INVESTORS CORP.
By /s/ Steve Lapin
----------------
Its
SOUTHERN MORTGAGE HOLDING CORPORATION
By /s/ Steve Lapin
----------------
Its
GENEVE SECURITIES PORTFOLIO CORP.
By /s/ Steve Lapin
----------------
Its
GENEVE SECURITIES HOLDING CORP.
By /s/ Steve Lapin
----------------
Its
CHAPARRAL INTERNATIONAL RE.
By /s/ Steve Lapin
----------------
Its
<PAGE>
ZIMMERMAN SIGN COMPANY
By /s/ Jeffrey Johnson, VP
-----------------------
Its VP, CFO
/s/ David Anderson
------------------
David Anderson
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
SHARES TRANSFERRED
SHARES SUBJECT UPON EXERCISE
SELLER TO OPTIONS OPTION HOLDER OF OPTION
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Geneve Securities Portfolio 173,771 Company 173,771
Corp. Anderson -0-
- -------------------------------------------------------------------------------------------
Geneve Securities Holding Corp. 156,578 Company 156,578
Anderson -0-
- -------------------------------------------------------------------------------------------
Chaparral International Re. 17,500 Company 17,500
Anderson -0-
- -------------------------------------------------------------------------------------------
Southern Mortgage Holding 36,956 Company 9,151
Corp. Anderson 27,805
- -------------------------------------------------------------------------------------------
Southern Investors Corp. 400,338 Company 143
Anderson 400,195
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 10.10
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "AGREEMENT") is made as of
September 30, 1998, between Zimmerman Sign Company, a Texas corporation (the
"COMPANY"), and David E. Anderson ("ANDERSON").
The Company and Anderson have entered into a Share Option
Purchase Agreement, dated as of the date hereof (the "OPTION AGREEMENT"),
with Geneve Securities Holding Corp., Chaparral International Re., Southern
Mortgage Holding Corporation, Southern Investors Corp. and Geneve Securities
Portfolio Corp. (collectively referred to herein as "GHI"), pursuant to which
GHI granted to the Company an option to purchase 357,143 shares of the
Company's Common Stock held by GHI and granted to Anderson has an option to
purchase 428,000 shares of the Company's Common Stock held by GHI
(collectively, the "OPTION SHARES"). Promptly upon consummation of the
transactions contemplated by the Option Agreement, the Company desires to
purchase from Anderson, and Anderson desires to sell to the Company, 228,000
shares of the Company's Common Stock, for the consideration described herein.
The Company has entered into a Senior Subordinated Note,
Preferred Stock and Warrant Purchase Agreement, dated as of the date hereof
(the "PURCHASE AGREEMENT"), pursuant to which the Company is issuing to
certain investors equity securities and subordinated notes. Execution,
delivery and performance of this Agreement is a condition to such investors'
obligations thereunder.
In consideration of the mutual covenants and promises contained
herein and for the good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS. Capitalized terms used and not
defined herein have the meanings assigned such terms in the Purchase
Agreement.
Section 2. PURCHASE AND SALE OF THE SHARES. At the Closing
(as defined below), subject to the terms and conditions set forth herein, the
Company shall purchase from Anderson, and Anderson shall sell to the Company
228,000 shares of Common Stock owned by Anderson (the "SHARES"), free and
clear of any Liens, for the consideration described, and payable in the
manner set forth, in Section 2.
Section 3. THE CLOSING. The closing of the purchase and
sale of the Shares (the "CLOSING") shall take place at 10:00 a.m. on the date
that is one business day following exercise by Anderson of the Anderson
Option (as defined) or on such other date as may be mutually agreeable to the
Company and Anderson. At the Closing,
(a) Anderson shall deliver to the Company the stock
certificates evidencing
<PAGE>
the Shares to be purchased by the Company duly endorsed in blank or
accompanied by duly executed stock powers upon payment of the purchase price
thereof; and
(b) as consideration for the sale of the shares hereunder
the Company shall deliver to Anderson i) $98,000 in cash, and ii) stock
certificates representing 7,000 shares of the Company's Series B Preferred
Stock.
Section 4. REPRESENTATIONS AND WARRANTIES.
(a) Anderson hereby represents and warrants to the Company as
follows:
(i) Immediately prior to the Closing, Anderson will be
the record and beneficial owner of the Shares, free
and clear of all Liens, and at the Closing, the
Company will acquire good and marketable title to
the Shares free and clear of any Liens.
(ii) Except as set forth in the Stockholders Agreement,
Anderson is not subject to any rights of first offer
or refusal with respect to the transfer of the
Shares contemplated hereby and has not violated any
applicable federal or state securities laws in
connection with his ownership or the sale any of the
Shares pursuant hereto. Anderson has not granted
any proxies or entered into and the shares are not
subject to any agreements with respect to the voting
or transfer of the Shares, except this Agreement,
the Stockholders Agreement and the Registration
Agreement.
(iii) Anderson has all requisite power and authority to
execute and deliver this Agreement and consummate
the transactions contemplated hereby.
(iv) Anderson is acquiring the Series B Preferred Stock
acquired hereunder for his own account with the
present intention of holding such securities for
investment purposes and has no intention of selling
the Series B Preferred Stock in a public
distribution in violation of the federal securities
laws or any applicable state securities laws.
(b) The Company hereby represents and warrants to Anderson as
follows:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Texas and has the requisite corporate power
and authority to enter into this Agreement and
consummate the transactions contemplated hereby.
-2-
<PAGE>
Section 5. MISCELLANEOUS.
5A. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made in writing by any
party in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby. All
covenants shall expire upon the Closing.
5B. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
5C. COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken
together shall constitute one and the same Agreement.
5D. GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF TEXAS
SHALL GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE RELATIVE RIGHTS AND
OBLIGATIONS OF THE COMPANY AND ITS STOCKHOLDERS. ALL OTHER ISSUES AND
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TEXAS, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR
PROVISIONS (WHETHER OF THE STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF TEXAS.
5E. NOTICES. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally to the recipient, sent to the recipient by reputable
overnight courier service (charges prepaid) or mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid:
IF TO ANDERSON:
David E. Anderson
3409 Caruth Boulevard
Dallas, Texas 75225
IF TO THE COMPANY:
Zimmerman Sign Company
9846 Hwy 31 East
-3-
<PAGE>
Tyler, Texas 75705
Attn: Chief Executive Officer
Telecopier: (903) 535-7401
WITH COPIES TO:
Jackson Walker L.L.P.
901 Main Street
Suite 6000
Dallas, Texas 75705
Attn: Bryan C. Birkeland
Telecopier: 214/953-5822
Bank of America National Trust and
Savings Association
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Robert Perille
Andrea P. Joselit
Telecopier: 312/828-6298
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: John A. Weissenbach
Wendy L. Chronister
Telecopier: 312/861-2200
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
5F. THIRD PARTY BENEFICIARY. The provisions of this
Agreement are for the benefit of Continental Illinois Venture Corporation and
MIG Partners VIII and may be enforced by such persons against each of the
parties hereunder.
5G. COUNTERPARTS. This Agreement may be executed in
counterparts which together constitute one and the same instrument.
5H. SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that the other parties would be damaged irreparably
in the event any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached. Accordingly,
each of the parties hereto agrees that the other parties shall be entitled to
an
-4-
<PAGE>
injunction or injunctions (without the posting of bond or any other security)
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court in the United States or in any state having
jurisdiction over the parties and the matter in addition to any other remedy
to which it may be entitled pursuant hereto.
5I. FURTHER ASSURANCES. Each of the parties hereto will act
diligently and cooperate with the other parties and take all actions
necessary (including securing any required consents) to consummate the
actions contemplated hereby.
* * * * *
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
ZIMMERMAN SIGN COMPANY
By: /s/ Jeffrey Johnson, V.P.
-------------------------
Its: VP, CFO
/s/ David E. Anderson
---------------------
David E. Anderson
<PAGE>
Exhibit 10.11
September 30, 1998
TO THE PURCHASERS UNDER THE
RECAPITALIZATION AGREEMENT
(as defined below)
Ladies and Gentlemen:
You are entering into a Senior Subordinated Note, Preferred Stock and Warrant
Purchase Agreement, dated as of the date hereof (the "Recapitalization
Agreement"), with Zimmerman Sign Company (the "Company") and certain other
investors identified on the signature pages thereto, pursuant to which the
Company is issuing and you are acquiring the Company's Series A Preferred
Stock, Warrants and 12.0% Senior Subordinated Notes. Capitalized terms used
and not otherwise defined herein have the meanings set forth in the
Recapitalization Agreement.
In connection with the transactions contemplated by the Recapitalization
Agreement, each of Southern Investors Corp., Southern Mortgage Holding
Corporation, Geneve Securities Portfolio Corp., Geneve Securities Holding
Corp. and Chaparral International Re. (collectively, the "Grantors") has
entered into the Share Option Purchase Agreement, dated as of the date hereof
(the "Share Option Purchase Agreement"), with the Company, pursuant to which
the Grantors have granted to (i) the Company an option to purchase shares of
the Company's Common Stock in exchange for cash and the Company's Series C
Preferred Stock and (ii) David E. Anderson ("DEA") an option to purchase
shares of the Company's Common Stock in exchange for cash. In addition, DEA
has entered into a Purchase Agreement, dated as of the date hereof (the
"Purchase Agreement"), with the Company pursuant to which DEA has agreed to
sell a portion of the Company's Common Stock acquired by DEA from the
Grantors under the Share Option Purchase Agreement in exchange for cash and
the Company's Series B Preferred Stock.
Each of the Company and DEA covenant to you to use their respective best
efforts to consummate the transactions contemplated by the Share Option
Purchase Agreement and the Purchase Agreement (together, the "Option
Agreements"), in accordance with the terms set forth therein, as promptly as
possible after January 3, 1999, but in any event no later than the close of
business on January 8, 1999. In that regard, from time to time, until
consummation of the transactions contemplated in the Option Agreements
(collectively, the "Option Transactions"), each of the Company and DEA agree,
from time to time, to take all actions requested by you and to execute and
deliver all such documents or instruments as you may reasonably deem
necessary or advisable to accomplish closing on the Option Transactions.
Upon consummation of all of the Option Transactions (unless otherwise
expressly waived in writing by you), each of you agree to surrender to the
Company a portion of the Warrants issued to you on the Closing and indicated
opposite your respective names on the attached Exhibit I (collectively, the
"Post Closing Warrants"), and such Post Closing Warrants will be deemed
canceled without consideration. In the event that all or a portion of the
Option Transactions fail to be consummated within the time periods prescribed
in Option Agreements, (i) you shall be entitled to retain all or a portion of
the Warrants (including the Post Closing Warrants) issued to you as of the
Closing based on the portion of the Option Transactions consummated and (ii)
you agree that, in consideration of the agreement of the Grantors to
terminate that certain Registration Rights Agreement dated December 1, 1996
by and among the Grantors and the Company, the shares (if any)
<PAGE>
which continue to be held by the Grantors, but which would have been
transferred to the Company or DEA had the Option Transactions been
consummated, shall be treated on a PARI PASSU basis with the Investor
Registrable Securities under the Registration Agreement, dated as of the date
hereof.
THIS LETTER AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.
Please acknowledge your agreement the foregoing by executing this letter in
the appropriate space below. This letter agreement may be executed in any
number of counterparts which, when taken together, constitute one and the
same agreement.
Sincerely,
ZIMMERMAN SIGN COMPANY
/s/ David E. Anderson
--------------------------------------
By David E. Anderson
Its Chairman
SOUTHERN INVESTORS CORP.
/s/ Steve Lapin
--------------------------------------
By
Its
SOUTHERN MORTGAGE HOLDING
CORPORATION
/s/ Steve Lapin
--------------------------------------
By
Its
GENEVE SECURITIES PORTFOLIO CORP.
/s/ Steve Lapin
--------------------------------------
By
Its
GENEVE SECURITIES HOLDING CORP.
/s/ Steve Lapin
--------------------------------------
By
Its
<PAGE>
CHAPARRAL INTERNATIONAL RE.
/s/ Steve Lapin
--------------------------------------
By
Its
/s/ David E. Anderson
--------------------------------------
David E. Anderson
Acknowledged and agreed to this
30th day of September, 1998
CONTINENTAL ILLINOIS VENTURE CORPORATION
By: /s/ Robert F. Perille
-----------------------------------
Name: Robert F. Perille
Its: Managing Director
MIG PARTNERS VIII
By: /s/ Robert F. Perille
-----------------------------------
Name: Robert F. Perille
Its: General Partner
/s/ Tom Bower
- ----------------------------------------
Tom Boner
/s/ Mike Coppinger
- ----------------------------------------
Mike Coppinger
/s/ Mike St. Onge
- ----------------------------------------
Mike St. Onge
/s/ Jeff Johnson
- ----------------------------------------
Jeff Johnson
/s/ John Griggs
- ----------------------------------------
John Griggs
/s/ David E. Anderson
- ----------------------------------------
David E. Anderson
<PAGE>
Exhibit 10.12
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
SEPTEMBER 30, 1998 AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE SENIOR SUBORDINATED NOTE,
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 30, 1998,
AMONG THE ISSUER (THE "COMPANY") AND CERTAIN INVESTORS, AND THE COMPANY RESERVES
THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE
BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH AGREEMENT SHALL BE
FURNISHED BY THE COMPANY TO THE REGISTERED HOLDER HEREOF UPON WRITTEN REQUEST
AND WITHOUT CHARGE.
ZIMMERMAN SIGN COMPANY
12.00% SENIOR SUBORDINATED NOTE
$_____________ Dated: September 30, 1998
FOR VALUE RECEIVED, Zimmerman Sign Company, a Texas corporation (the
"COMPANY"), hereby promises to pay to ______________ (the "PURCHASER"), or its
registered assigns, the principal amount of $____________ together with interest
thereon calculated from the date hereof in accordance with the provisions of
this Note.
This Note was issued pursuant to a Senior Subordinated Note, Preferred
Stock and Warrant Purchase Agreement, dated as of September 30, 1998 (the
"AGREEMENT"), between the Company, Continental Illinois Venture Corporation, MIG
Partners VIII and the other persons identified on the signature pages thereto.
This 12.00% Senior Subordinated Note (this "NOTE") is one of the "NOTES"
referred to in the Agreement. The holder of this Note is entitled to the
benefits of, and is subject to other provisions contained in, the Agreement and
may enforce the agreements of the Company contained therein and exercise the
remedies provided for thereby or otherwise available in respect thereof. Certain
capitalized terms are defined in SECTION 6 hereof. Other capitalized terms used
in this Note but not otherwise defined herein have the meanings set forth for
such terms in the Agreement.
1. PAYMENT OF INTEREST.
(a) Interest shall accrue at the rate of 12.00% per annum on the
unpaid principal amount of this Note outstanding from time to time;
PROVIDED that so long as any Event of Default has occurred and is
continuing, interest shall accrue to the extent permitted by law at the
rate of 15.00% per annum on the unpaid principal amount of this Note
outstanding from time to time for the period beginning on the date on which
such Event of Default occurs and ending on the date on
<PAGE>
which such Event of Default actually ceases to exist. Interest shall be
computed on the basis of the actual number of days elapsed and a 360-day
year.
(b) So long as this Note remains outstanding, on each Quarterly
Payment Date after the Closing Date the Company shall pay in cash to the
holder of this Note all interest which has accrued thereon through such
date. Except to the extent prohibited under applicable law, any accrued
interest which is not paid on the Quarterly Payment Date on which it is
payable shall bear interest at the same rate at which interest is then
accruing on the principal amount of this Note. Any accrued interest which
for any reason has not theretofore been paid shall be due and payable upon
the payment in full of the outstanding principal balance of this Note.
2. PAYMENT OF PRINCIPAL.
(a) SCHEDULED PAYMENTS. On each Quarterly Payment Date following the
occurrence of the Amortization Trigger Date through the Maturity Date, the
Company shall pay one-eighth of the original principal amount of this Note
(or if the principal amount then outstanding on this Note is less than such
amount, the remaining principal amount then outstanding); PROVIDED, THAT,
the Company shall pay the entire principal amount of this Note then
outstanding on the Final Maturity Date. The payments required to be made on
each Quarterly Payment Date and the Maturity Date are referred to herein
collectively as the "SCHEDULED PAYMENTS." Any such payment pursuant to this
SECTION 2(A) shall be accompanied by payment in cash of all interest
accrued to the date of such payment (if any), plus the Redemption Premium
Amount payable as of the date of such repayment (if any).
(b) OPTIONAL PREPAYMENTS. Subject to the terms and conditions of this
SECTION 2(B), the Company may, at its option, prepay at any time and from
time to time, all or any part of the outstanding principal amount due on
the Notes; PROVIDED, HOWEVER, that each such prepayment shall be made
solely in cash and shall be made to all Noteholders, pro rata according to
the principal amounts of their respective Notes, and that the aggregate
amount of any such prepayment shall be in increments of $500,000 (or such
lesser amount equal to the aggregate principal amount of all Notes then
outstanding). Prepayments of principal shall equal the amount so prepaid,
PLUS an amount equal to the amount of all interest accrued on such
principal amount and not yet paid, PLUS an amount equal to the Redemption
Premium Amount calculated with respect thereto. To exercise its option to
make any optional prepayment hereunder, the Company must give the holder
hereof written notice of such prepayment not less than five days and not
more than ten days prior to the date fixed for such prepayment, specifying
the date of proposed prepayment, the aggregate principal amount of all
Notes to be prepaid on such date, the aggregate amount of interest and the
aggregate Redemption Premium Amount, if any, to be paid with such aggregate
prepayment of principal, on such date, the principal amount of this Note to
be prepaid on such date, the Redemption Premium Amount, if any, to be paid
with respect to this Note on such date, and the amount of interest to be
paid with such prepayment of principal on this Note. All optional
prepayments of principal made pursuant to this SECTION 2(B) shall be
applied against principal amounts due in the inverse order of maturity
thereof. Each notice of a prepayment delivered
2
<PAGE>
hereunder shall be irrevocable and the amounts specified in the immediately
preceding sentence shall become due and payable on the date specified
therein for repayment.
(c) INVOLUNTARY PREPAYMENT. Concurrently with any payment of principal
received by the holder of this Note resulting from the exercise by such
holder of any remedy available to such holder subsequent to the occurrence
of an Event of Default and the acceleration of the payment of principal and
interest hereunder, the Company shall pay to such holder in cash the
Redemption Premium Amount with respect thereto, if any.
(d) PAYMENT OF INTEREST WITH PRINCIPAL. Contemporaneously with making
any payment or prepayment of principal on this Note, the Company will also
pay in cash to the holder hereof all interest accrued but unpaid on this
Note through the date of such payment in respect of such principal.
3. METHOD OF PAYMENTS.
(a) HOME OFFICE PAYMENT. So long as the Purchaser or any of its
nominees shall be the holder of this Note, and notwithstanding anything
contained in this or any other Note to the contrary, the Company will pay
all sums for principal, interest, premiums, dividends or otherwise becoming
due on this Note not later than 1:00 p.m., Chicago time, on the date such
payment is due, in immediately available funds, in accordance with the
payment instructions that the holder thereof designates in writing, without
the presentation or surrender of such Note or the making of any notation
thereon. Any payment made after 1:00 p.m., Chicago time, on a Business Day
will be deemed made on the next following Business Day. Prior to any sale
or other disposition of any Note by the Purchaser or its nominee, the
Purchaser will, at its election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has been paid
thereon or surrender such Note(s) to the Company in exchange for a new Note
or Notes, as the case may be, pursuant to SECTION 3(C). The Company will
afford the benefits of this SECTION 3(A) to each Person which is the direct
or indirect transferee of any Note purchased, or deemed to be held, by the
Purchaser under the Agreement and which has made the same agreement
relating to this Note as the Purchaser has made in this SECTION 3(A).
(b) ALLOCATION. In the case of any payment (whether a Scheduled
Payment, an optional prepayment, an involuntary prepayment, a payment of
interest, a payment of principal, a payment of Redemption Premium Amount or
any other payment) with respect to any of the Notes, the amount paid shall
be allocated among all of the Notes at the time outstanding in proportion,
as nearly as practicable, to the respective unpaid amount of principal,
interest and Redemption Premium Amount thereof, with adjustments, to the
extent practicable, to compensate for any prior payments not made exactly
in such proportion. Each such payment shall be applied first to the payment
of Redemption Premium Amount then due and payable, second to the payment of
accrued and unpaid interest and, after payment of the Redemption Premium
Amount and unpaid interest, to payment of principal. In the case of each
payment of principal of the Notes, the principal amount to be paid shall
mature and become due and payable on the date fixed for such payment,
together with interest on such principal amount and Redemption Premium
Amount, if any, accrued to such date. From and
3
<PAGE>
after such date, interest on such principal amount shall cease to accrue,
unless the Company shall fail to pay such principal amount when so due and
payable, together with such accrued interest and Redemption Premium Amount.
Any Note paid in full shall be surrendered to the Company and canceled and
shall not be reissued.
(c) TRANSFER AND EXCHANGE. Upon surrender of any Note for registration
of transfer or for exchange to the Company at its principal office, the
Company at its sole expense will execute and deliver in exchange therefor a
new Note or Notes, as the case may be, as requested by the holder or
transferee, which aggregate the unpaid principal amount of such Note,
registered as such holder or transferee may request, dated so that there
will be no loss of interest on such surrendered Note and otherwise of like
tenor. The issuance of new Notes shall be made without charge to the
holder(s) of the surrendered Note for any issuance tax in respect thereof
or other cost incurred by the Company in connection with such issuance.
(d) REPLACEMENT. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any Note and,
in the case of any such loss, theft or destruction of any Note, upon
receipt of an indemnity reasonably satisfactory to the Company (provided
that, if the Noteholder is a Purchaser, its own unsecured agreement shall
be satisfactory) or, in the case of any such mutilation, upon the surrender
and cancellation of such Note, the Company, at its expense, will execute
and deliver, in lieu thereof, a new Note of like tenor and dated so that
there will be no loss of interest on such lost, stolen, destroyed or
mutilated Note. Any Note in lieu of which any such new Note has been so
executed and delivered by the Company shall not be deemed to be an
outstanding Note for any purpose of the Agreement.
4. SUBORDINATION.
(a) NOTES SUBORDINATED TO SENIOR INDEBTEDNESS. Subject to SECTION 4(D)
below and solely for the benefit of the holders of Senior Indebtedness, the
Noteholder by its acceptance hereof covenants and agrees that all payments
of the principal of (and premium, if any), and interest on, this Note shall
be subordinated in accordance with the provisions of this SECTION 4 to the
prior payment in full of all Senior Indebtedness. For purposes of this
SECTION 4, the term "SENIOR INDEBTEDNESS" shall mean the payment
obligations of the Company under the Loan Agreement as Amended, with
respect to the repayment of principal, the payment of interest, reasonable
and customary fees, and the reimbursement of reasonable expenses incurred;
PROVIDED, HOWEVER, that no such amendment, modification, extension,
supplement or refinancing of the Loan Agreement shall directly or
indirectly (i) increase the amount or extend or accelerate the date of any
scheduled or mandatory payment of principal or interest thereunder, except
that (A) the Company may borrow and reborrow from time to time under the
Revolver and the Term B Loan and the Revolver may be renewed from time to
time providing for a new maturity date, provided that in connection with
any such renewal the Loan Agreement shall be amended in a manner so as not
to be on terms more restrictive in any manner than the terms being renewed;
provided further that such new maturity date shall not, in the case of the
Term B Loan, be after the original maturity date of the Term B Loan, (B)
any scheduled or mandatory principal payment under the Term A Loan or the
Term C Loan may be extended so long as the weighted average life to
maturity of the Term A Loan and the Term C Loan,
4
<PAGE>
measured from the date of Closing and taking into account all repayments of
principal previously made in respect thereof as of the time of such
determination, if any, is not increased by more than six months from that
in effect at the Closing, and (C) such amendment may increase the principal
amount of Senior Indebtedness so long as the aggregate of all such
increases pursuant to this clause (C) from and after the date of the
Closing shall not exceed $2,000,000 in the aggregate, (ii) increase the
rate or rates at which interest accrues or the methods of calculation
thereof (including without limitation by amending any provisions (including
definitions) used in calculating such interest rates such that a higher
rate or margin may apply), (iii) increase any fees, indemnities, expense
reimbursements or other charges payable to the lenders thereunder, or (iv)
amend, modify, add or otherwise impose any representation, covenant or
default or any other term or provision in a manner which is more onerous or
more restrictive on the holders of the Notes or the Company or change any
of the restrictions in the Loan Agreement or other agreements delivered in
connection therewith or relating to performance by the Company of the Note
Obligations (including restrictions which prohibit or limit the payment or
prepayment of any amount with respect to the Notes or the Note
Obligations). The foregoing notwithstanding, in no event will the Notes be
subordinated at any time to an amount of Senior Indebtedness exceeding an
aggregate amount equal to $23,500,000, PLUS the aggregate (not to exceed
$2,000,000) of the principal amounts, if any, by which the aggregate
principal amount of Senior Indebtedness is increased pursuant to an
amendment or amendments thereto permitted by clause (i)(C) of this Section
4(a), MINUS the aggregate amount of permanent reductions in the outstanding
principal of, or commitments to extend credit under the Loan Agreement as
Amended.
(b) PRIORITY AND PAYMENT OVER OF PROCEEDS IN CERTAIN EVENTS.
(i) SUBORDINATION ON DISSOLUTION, LIQUIDATION OR REORGANIZATION
OF THE COMPANY. Upon payment or distribution of assets or securities
of the Company of any kind or character, whether in cash, property or
securities, upon any dissolution or winding up or total or partial
liquidation or reorganization of the Company, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other
proceedings or upon any assignment for the benefit of creditors or any
other marshaling of the assets and liabilities of the Company
(collectively, a "REORGANIZATION"), all Senior Indebtedness shall
first be paid in full, or payment provided for in cash or cash
equivalents in a manner reasonably satisfactory to the holders of
Senior Indebtedness, before any direct or indirect payments or
distributions, including, without limitation, by exercise of set-off,
of any cash, property or securities (except that Noteholders may
receive equity securities or other securities which are subordinated
to the Senior Indebtedness at least to the same extent as set forth
herein ("JUNIOR SECURITIES")), on account of principal of (or premium,
if any) or interest on the Notes and to that end the holders of Senior
Indebtedness shall be entitled to receive (pro rata on the basis of
the respective amounts of Senior Indebtedness held by them) directly,
for application to the payment thereof (to the extent necessary to pay
all Senior Indebtedness in full after giving effect to any
substantially concurrent payment or distribution to or provision for
payment to the holders of such Senior Indebtedness), any payment or
distribution of any kind or character, whether in cash, property or
securities (other than Junior Securities), in respect of
5
<PAGE>
the Notes. Each Noteholder will retain the right to vote all claims in
respect of the Notes in any Reorganization.
(ii) SUBORDINATION ON DEFAULT IN SENIOR INDEBTEDNESS. No direct
or indirect payment by or on behalf of the Company of principal of
(and premium, if any) or interest on, this Note, whether pursuant to
the terms hereof, upon acceleration of this Note or otherwise, shall
be made if at the time of such payment there exists (A) a default in
payment of all or any portion of principal of, interest on, fees or
other amounts owing which constitute Senior Indebtedness (a "PAYMENT
DEFAULT"), or (B) subject to the following sentences, any Nonmonetary
Default (defined below) and the Noteholder has received notice thereof
from the holder(s) of a majority in principal amount of the Senior
Indebtedness (the "MAJORITY SENIOR LENDER"), accompanied by a
certification from the Persons delivering such notice that such
Persons are such holders, and in either case such default shall not
have been cured or waived in writing, PROVIDED, HOWEVER, that if the
holders of Senior Indebtedness have not, within the period specified
in the next sentence with respect to a Nonmonetary Default, declared
the Senior Indebtedness to be immediately due and payable (or have
declared such Senior Indebtedness to be immediately due and payable
and within such period have rescinded such acceleration), then and in
that event, all payments then or previously due with respect to the
Notes or the Agreement shall be paid. With respect to any Nonmonetary
Default, the period referred to in the preceding sentence shall
commence only upon delivery by the Majority Senior Lender of written
notice to the Noteholders (specifying all defaults and events of
default existing at such time under the Loan Agreement as Amended), of
the commencement of such period, accompanied by a certification from
the Persons delivering such notice that such Person or Persons are
such Majority Senior Lender, and shall end on the earlier of (ii) the
179th day after the beginning of such period and (y) the first such
date as of which all defaults described in such notice have been cured
(such period, a "PAYMENT BLOCKAGE PERIOD"). The aggregate number of
days during which any one or more Payment Blockage Periods may be in
effect within any 365 consecutive days shall not exceed 180 days and
no event of default (whether a Payment Default or a Nonmonetary
Default) that previously served as a basis for the commencement of any
such period or that was in existence upon or after the commencement of
any period, or on or after the date of delivery of the notice
described in such clause (B), will be the basis for a future such
notice (it being understood that any breach of a financial covenant
contained in Sections 9.5 through 9.8 of the Loan Agreement, or of any
other financial covenant that may be included in the Loan Agreement as
Amended, measured as of any particular date will be deemed to be cured
if, as of any subsequent date on which compliance with such covenant
is tested, no breach of such covenant exists). Upon termination of any
such period, all amounts previously due and unpaid with respect to the
Notes shall be paid and all amounts which thereafter become due with
respect to the Notes shall be paid when due. For purposes hereof, a
"NONMONETARY DEFAULT" is any event of default, other than a Payment
Default, under the Loan Agreement as Amended, if the aggregate amount
of all Senior Indebtedness then outstanding will become immediately
due and payable either upon occurrence thereof or upon demand by the
holders of such Senior Indebtedness.
6
<PAGE>
(iii) RIGHTS AND OBLIGATIONS OF THE NOTEHOLDER.
(A) In the event that, notwithstanding the foregoing
provision prohibiting such payment or distribution, the
Noteholder shall have received any payment (other than payment of
Junior Securities) on account of this Note at a time when such
payment is prohibited by such provision before the Senior
Indebtedness is paid in full, then and in such event, such
payment or distribution shall be received and held in trust by
the Noteholder apart from its other assets and paid over or
delivered to the holders of the Senior Indebtedness remaining
unpaid to the extent necessary to pay in full such Senior
Indebtedness in accordance with its terms and after giving effect
to any concurrent payment or distribution to the holders of such
Senior Indebtedness.
(B) The Noteholder shall not, without the prior written
consent of the Majority Senior Lender, accelerate the maturity
of, or institute proceedings to enforce, this Note or commence or
join with any other creditor of the Company in commencing any
proceeding against the Company seeking to effect a
Reorganization, notwithstanding any provision to the contrary
contained in this Note or in any agreement or instrument relating
hereto, except on or after the first to occur of a Standstill
Termination Event (defined below) or the 90th day following the
occurrence of an Event of Default except to the extent necessary
to toll any statute of limitations that would extinguish any
remedy of the Noteholder of this Note. For purposes of the
foregoing, a "STANDSTILL TERMINATION EVENT" will be deemed to
occur upon the earlier of (1) commencement of a Reorganization
and (2) the acceleration of the maturity of or set-off against
any Senior Indebtedness, whether directly or indirectly
(including by way of any termination of commitments or reduction
in commitments of more than $250,000 under any Senior
Indebtedness).
(C) Upon any payment or distribution of assets or securities
referred to in this SECTION 4, the Noteholder shall be entitled
to rely upon any order or decree of a court of competent
jurisdiction in which such dissolution, winding up, liquidation
or reorganization proceedings are pending, and upon a certificate
of the receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making any such payment or distribution,
delivered to the Noteholder for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders
of Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to
this SECTION 4.
(c) SUBROGATION. Upon the payment in full of all Senior Indebtedness,
the Noteholder shall be subrogated to the extent of the payments or
distributions made to the holders of, or otherwise applied to payment of,
the Senior Indebtedness pursuant to the provisions of this SECTION 4 and to
the right of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company made on the Senior Indebtedness
until the Notes shall be paid in full, and
7
<PAGE>
for the purposes of such subrogation, no payments or distributions to
holders of Senior Indebtedness of any cash, property or securities to which
the Noteholder would be entitled except for the provisions of this SECTION
4, and no payment over pursuant to the provisions of this SECTION 4 to
holders of Senior Indebtedness by the Noteholder, shall, as between the
Company, its creditors other than holders of Senior Indebtedness and the
Noteholders, be deemed to be payment by the Company to or on account of
Senior Indebtedness, it being understood that the provisions of this
SECTION 4 are solely for the purpose of defining the relative rights of the
holders of Senior Indebtedness, on the one hand, and the Noteholder, on the
other hand.
If any payment or distribution to which the Noteholder would otherwise have
been entitled but for the provisions of this SECTION 4 shall have been applied,
pursuant to the provisions of this SECTION 4, to the payment of Senior
Indebtedness, then and in such case, the Noteholders shall be entitled to
receive from the holders of Senior Indebtedness (pro rata based on the principal
amount of their respective Notes) at the time outstanding any payments or
distributions received by such holders of Senior Indebtedness in excess of the
amount sufficient to pay all Senior Indebtedness in full.
(d) OBLIGATIONS OF THE COMPANY UNCONDITIONAL. The provisions of
SECTION 4(A) through 4(C) above are solely for the purpose of defining the
relative rights of the holders of Senior Indebtedness, on the one hand, and
the holder of this Note, on the other hand. Nothing contained in this
SECTION 4 or elsewhere in this Note or in any other Note is intended to or
shall impair, as between the Company and the Noteholders, the obligations
of the Company, which are absolute and unconditional, to pay to the
Noteholders the principal of (and premium, if any), and interest on, the
Notes as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Noteholders and creditors of the Company, other than the holders of the
Senior Indebtedness, nor shall anything herein or therein, as between the
Company and the Noteholders, prevent the Noteholder from exercising all
remedies otherwise permitted by applicable law upon the occurrence of an
Event of Default under the Agreement. Without limiting the foregoing, the
failure to make a payment on account of principal of, or interest on, or
the Redemption Premium Amount, if any, with respect to, the Notes by reason
of any provision of this SECTION 4 shall not be construed as preventing the
occurrence of a Default or an Event of Default under this Note or the
Agreement or in any way prevent the holder of this Note from exercising any
right hereunder or under the Agreement other than as provided in this
SECTION 4.
(e) NOTICE TO NOTEHOLDERS. The Company shall give prompt written
notice to the Noteholder of any fact known to the Company which would
prohibit the making of any payment on or in respect of the Notes, but
failure to give such notice shall not affect the subordination of this Note
to the Senior Indebtedness provided in this SECTION 4. Notwithstanding the
provisions of this SECTION 4 or any other provision of the Agreement or
this Note, the Noteholder shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or
in respect of this Note, unless and until the Noteholder shall have
received written notice thereof from the Majority Senior Lender in
accordance with SECTION 4(B)(II) and prior to the receipt of any such
written notice, subject to the provisions of this SECTION 4, the
Noteholders shall be entitled in all respects to assume no such facts
exist. Nothing contained in this SECTION 4(E) shall limit the
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rights of the holders of Senior Indebtedness to recover payments as
contemplated by SECTIONS 4(A) and 4(B).
(f) RIGHT OF ANY HOLDER AS HOLDER OF SENIOR INDEBTEDNESS; AMENDMENTS.
Any holder of Senior Indebtedness in its individual capacity shall be
entitled to all the rights set forth in this SECTION 4, subject to the
limitations set forth herein, with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Agreement shall deprive such
holder of any of its rights as such holder, provided that the provisions of
this SECTION 4 may be amended with the consent of the Majority Senior
Lender.
(g) LIMITATION ON SUBORDINATION. The indebtedness evidenced by this
Note shall rank equally with all other Notes and all existing and future
indebtedness of the Company (other than the Senior Indebtedness and any
other indebtedness that is fully and adequately secured) except for such
indebtedness as may be subordinate thereto and as may be required by
bankruptcy or other laws affecting the rights of creditors generally.
(h) REINSTATEMENT. The provisions of this SECTION 4 shall continue to
be effective or be reinstated, and the Senior Indebtedness shall not be
deemed to be paid in full, as the case may be, if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be
returned by the holder thereof upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, all as though such payment had
not been made.
(i) NOTICES. Any notice required by this SECTION 4 to be given to the
Noteholder shall be given in accordance with SECTION 10 below.
5. DEFAULTS REMEDIES. In case an Event of Default shall occur and be
continuing, the unpaid balance of the principal of, and accrued and unpaid
interest and the Redemption Premium Amount on, this Note may become, or be
declared and become, due and payable in the manner and with the effect provided
in the Agreement.
6. DEFINITIONS.
"AMORTIZATION TRIGGER DATE" means the date that is the earlier of (i)
September 30, 2003 and (ii) the 90th day following the date on which the Term
Loan is paid in full).
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago, Illinois for the conduct of substantially all of
their activities.
"FINAL MATURITY DATE" means the date that is the eighth Quarterly Payment
Date following the Amortization Trigger Date.
"LOANS" shall have the meaning set forth in the Loan Agreement.
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"LOAN AGREEMENT" means the Second Amended and Restated Revolving Credit and
Loan Agreement, dated as of the Closing Date by and between the Company and
Comerica Bank - Texas, a Texas banking association, as in effect on such date
and without amendment or waiver of any provision thereof.
"LOAN AGREEMENT AS AMENDED" means the Loan Agreement, as such agreement may
be amended, supplemented, restated or modified from time to time hereafter in
accordance, and not directly or indirectly inconsistent, with the proviso to the
definition of "Senior Indebtedness" in SECTION 4(A) above and with the
Agreement.
"MAJORITY SENIOR LENDER" means holders of a majority in principal amount of
the Senior Indebtedness, provided that the Majority Senior Lender shall be
deemed to be Comerica Bank - Texas until one or more subsequent such holders of
the Senior Indebtedness have delivered to the Noteholders a certification that
such Persons are the Majority Senior Lenders.
"NOTEHOLDER" with respect to this Note, means at any time each Person then
the record owner hereof and "NOTEHOLDERS" means all of such Noteholders
collectively.
"NOTE OBLIGATION" means any obligation of the Company with respect to the
repayment or performance of any monetary obligation of such party arising under
or in connection with the Agreement, the Notes or any other document delivered
in connection therewith or herewith, and "NOTE OBLIGATIONS" means all of such
Note Obligations collectively.
"REDEMPTION PREMIUM AMOUNT" means
(a) with respect to any repayment of principal of this Note made on or
prior to the first anniversary of the Closing Date, 5.0% multiplied by the
aggregate principal amount of this Note so prepaid;
(b) with respect to any repayment of principal of this Note made after
the first anniversary of the Closing Date and on or prior to the second
anniversary of the Closing Date, 4.0% multiplied by the aggregate principal
amount of this Note so prepaid;
(c) with respect to any repayment of principal of this Note made after
the second anniversary of the Closing Date and on or prior to the third
anniversary of the Closing Date, 3.0% multiplied by the aggregate principal
amount of this Note so prepaid;
(d) with respect to any repayment of principal of this Note made after
the third anniversary of this Closing Date and on or prior to the fourth
anniversary of the Closing Date, 2.0% multiplied by the aggregate principal
amount of this Note so prepaid;
(e) with respect to any repayment of principal of this Note made after
the fourth anniversary of this Closing Date and on or prior to the fifth
anniversary of the Closing Date, 1.0% multiplied by the aggregate principal
amount of this Note so prepaid; and
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(f) with respect to any repayment of principal of this Note made after
the fifth anniversary of the Closing Date, zero.
"QUARTERLY PAYMENT DATE" shall mean June 15, September 15, December 15 and
March 15 of each year, or if such day is not a Business Day, the first Business
Day prior to such date.
"SENIOR INDEBTEDNESS" has the meaning given such term in SECTION 4(A)
above.
"TERM LOAN" means, collectively, the loans made to the Company pursuant to
the Term Note A and the Term Note C (each as defined in the Loan Agreement).
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at or as of any date, the number of years (calculated to the nearest 1/100th)
obtained by DIVIDING
(a) the sum, for each of the then remaining installment, sinking fund,
scheduled maturity or other required payments of principal, including
payments at final maturity, in respect of such Indebtedness (each, an
"INSTALLMENT"), of the amounts obtained by MULTIPLYING (i) the amount of
each such Installment, BY (ii) the number of years (calculated to the
nearest 1/100th) from such date to the date on which such payment is
required to be made, BY
(b) the then outstanding aggregate principal amount of such
Indebtedness.
7. NOTE TRANSFERABLE. Subject to the transfer conditions referred to in the
legend endorsed hereon, this Note and all rights hereunder are transferable, in
whole or in part, without charge to the holder.
8. AMENDMENT AND WAIVER. The provisions of this Note may be modified,
amended or waived, and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only in the
manner set forth in the Agreement; PROVIDED, HOWEVER that the provisions of
SECTION 4 may be modified, amended or waived with (and may not be amended
without) the consent of the Majority Senior Lender.
9. CANCELLATION. After all principal, premiums (if any) and accrued
interest at any time owed on this Note have been paid in full, this Note will be
surrendered to the Company for cancellation and will not be reissued.
10. PLACE OF PAYMENT AND NOTICES. Subject to SECTION 3(A) above, payments
of principal and interest are to be delivered to the Noteholder of this Note at
the following address: c/o Continental Illinois Venture Corporation, 231 South
LaSalle Street, Chicago, Illinois 60697, or at such other address as such
Noteholder has specified by prior written notice to the Company. Notices by the
Majority Senior Lender or holders of Senior Indebtedness may be delivered to the
attention of Bank of America, as agent for delivery of notice to the holder of
this Note at the following
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address: 231 South LaSalle Street, Chicago, Illinois 60697, Attn: Robert Perille
or at such other address as such Noteholder has specified by prior written
notice to the Majority Senior Lender. No notice shall be deemed to have been
delivered until the first Business Day following actual receipt thereof at the
foregoing address. A copy of all notices relating to payments of principal and
interest hereunder and all other notices are to be delivered as provided in
SECTION 10 of the Agreement.
11. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF
THE STATE OF ILLINOIS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF ILLINOIS.
12. THIRD PARTY BENEFICIARY. Certain provisions of this Note (including,
without limitation, the subordinated payment provisions) are for the benefit of
the Majority Senior Lender and may be enforced by such person against the
Noteholder of this Note (or its assignee) or any one or more of them in
accordance with the provisions hereof. Section 4 hereof shall be amended only
with the consent of each of the Noteholder, the Company and the Majority Senior
Lender.
13. PAYMENTS HELD IN TRUST. If, notwithstanding the provisions of Section 4
hereof, any Noteholder receives any payment on account of this Note at such time
when payment is prohibited by the provisions of Section 4, unless directed
otherwise by a court of competent jurisdiction, such payment shall be held in
trust by such Noteholder apart from its other assets and paid over and delivered
to the Majority Senior Lender to the extent necessary to pay in full in cash
such Senior Indebtedness in accordance with its terms.
14. NO RESERVE. The Company shall not and the Noteholder shall not require
a sinking fund or similar fund to be established in support of payments on this
Note as provided herein.
* * * * *
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IN WITNESS WHEREOF, the Company has executed and delivered this Note on the
date first written above.
ZIMMERMAN SIGN COMPANY
By:
---------------------------
Its:
---------------------------
<PAGE>
Exhibit 10.13(a)
THE SECURITY REPRESENTED BY THIS CERTIFICATE WAS
ORIGINALLY ISSUED ON SEPTEMBER 30, 1998, AND HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE TRANSFER OF SUCH SECURITY IS
SUBJECT TO THE CONDITIONS SPECIFIED IN THE SENIOR
SUBORDINATED NOTE, PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 30, 1998
AS AMENDED AND MODIFIED FROM TIME TO TIME, BETWEEN
THE ISSUER HEREOF (THE "COMPANY") AND THE INITIAL
HOLDER HEREOF AND THE STOCKHOLDERS AGREEMENT,
DATED SEPTEMBER 30, 1998, AMONG THE COMPANY AND
CERTAIN OF ITS INVESTORS, AND THE COMPANY RESERVES
THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITY
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. UPON WRITTEN REQUEST, A
COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE
COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE.
ZIMMERMAN SIGN COMPANY
STOCK PURCHASE WARRANT
Date of Issuance: September 30, 1998 Certificate No. W-A-__
FOR VALUE RECEIVED, Zimmerman Sign Company, a Texas corporation (the
"COMPANY"), hereby grants to _______________ or his registered assigns (the
"REGISTERED HOLDER") the right to purchase from the Company _________ shares of
Common Stock at a price per share equal to $3.79 (as adjusted from time to
time in accordance herewith, the "EXERCISE PRICE"). This warrant (this
"WARRANT") is one of the warrants referred to in SECTION 1A of, and is being
issued pursuant to the terms of the Senior Subordinated Note, Preferred Stock
and Warrant Purchase Agreement, dated as of September 30, 1998, between the
Company, the Registered Holder, Continental Illinois Venture Corporation, MIG
Partners VIII and certain other management purchasers listed therein (the
"PURCHASE AGREEMENT"). Certain capitalized terms used herein are defined in
SECTION 8 hereof. Capitalized terms used and not defined herein have the
meanings set forth in the Purchase Agreement. The amount and kind of securities
obtainable pursuant to the rights granted hereunder and the purchase price for
such securities are subject to adjustment pursuant to the provisions contained
in this Warrant.
For tax purposes, the value of this Warrant as of the date hereof is
$___________.
<PAGE>
This Warrant is subject to the following provisions:
Section 1. EXERCISE OF WARRANT.
1A. EXERCISE PERIOD. The Registered Holder may exercise, in whole or in
part (but not as to a fractional share of Common Stock), the purchase rights
represented by this Warrant at any time and from time to time during the period
(the "EXERCISE PERIOD") after the Date of Issuance to and including the later of
(i) September 30, 2008 and (ii) the 90th day following the redemption in full of
all outstanding Series A Preferred, whether by prepayment, at maturity or
otherwise. The Company shall give the Registered Holder written notice of the
expiration of the Exercise Period at least 30 days but not more than 90 days
prior to the end of the Exercise Period.
1B. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been exercised when the
Company has received all of the following items (the "EXERCISE TIME"):
(a) a completed Exercise Agreement, as described in SECTION 1C
below, executed by the Person exercising all or part of the purchase
rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of the
Purchaser, an Assignment or Assignments in the form set forth in
EXHIBIT II hereto evidencing the assignment of this Warrant to the
Purchaser, in which case the Registered Holder shall have complied
with the provisions set forth in SECTION 10 hereof; and
(d) either (1) immediately available funds in an amount equal to
THE PRODUCT OF the Exercise Price, MULTIPLIED BY the number of shares
of Common Stock being purchased upon such exercise (the "AGGREGATE
EXERCISE PRICE"), (2) the surrender to the Company of debt or equity
securities of the Company having a Market Price equal to the Aggregate
Exercise Price of the Common Stock being purchased upon such exercise
(provided that for purposes of this subparagraph, the Market Price of
any note or other debt security or any preferred stock of the Company
shall be deemed to be equal to the aggregate outstanding principal
amount or liquidation value thereof plus all accrued and unpaid
interest thereon or accrued or declared and unpaid dividends thereon)
or (3) a written notice to the Company that the Purchaser is
exercising the Warrant (or a portion thereof) by authorizing the
Company to withhold from issuance a number of shares of Common Stock
issuable upon such exercise of the Warrant which when multiplied by
the Market Price of the Common Stock is equal to the Aggregate
Exercise Price (and such withheld shares shall no longer be issuable
under this Warrant).
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(ii) Certificates for shares of Common Stock purchased upon exercise
of this Warrant shall be delivered by the Company to the Purchaser within
fifteen (15) business days after the date of the Exercise Time. Unless this
Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company shall prepare a new Warrant, substantially
identical hereto, representing the rights formerly represented by this
Warrant which have not expired or been exercised and shall, within such
five-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(iii) The Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time,
and the Purchaser shall be deemed for all purposes to have become the
record holder of such Common Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Registered
Holder or the Purchaser for any issuance tax in respect thereof or other
cost incurred by the Company in connection with such exercise and the
related issuance of shares of Common Stock. Each share of Common Stock
issuable upon exercise of this Warrant shall, upon payment of the Exercise
Price therefor, be fully paid and nonassessable and free from all liens and
charges with respect to the issuance thereof.
(v) The Company shall not close its books against the transfer of this
Warrant or of any share of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant.
(vi) The Company shall assist and cooperate with any Registered Holder
or Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant (including, without limitation, making any filings required to be
made by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise of
any portion of this Warrant is to be made in connection with a registered
public offering or the sale of the Company, the exercise of any portion of
this Warrant may, at the election of the holder hereof, be conditioned upon
the consummation of the public offering or sale of the Company in which
case such exercise shall not be deemed to be effective until the
consummation of such transaction.
(viii) The Company shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock solely for the
purpose of issuance upon the exercise of the Warrant, such number of shares
of Common Stock issuable upon the exercise of the Warrant. All shares of
Common Stock which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges. The Company shall take all such actions as may be necessary to
assure that all such shares of Common Stock may be so issued without
violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of
Common Stock may be listed (except for official notice of issuance which
shall be immediately delivered by the Company upon each such issuance).
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The Company shall from time to time take all such action as may be
necessary to assure that the par value of the unissued Common Stock
acquirable upon exercise of this Warrant is at all times equal to or less
than the Exercise Price. The Company shall not take any action which would
cause the number of authorized but unissued shares of Common Stock to be
less than the number of such shares required to be reserved hereunder for
issuance upon exercise of the Warrants.
1C. EXERCISE AGREEMENT. Upon any exercise of this Warrant, the Exercise
Agreement shall be substantially in the form set forth in EXHIBIT I hereto,
except that if the shares of Common Stock are not to be issued in the name of
the Person in whose name this Warrant is registered, the Exercise Agreement
shall also state the name of the Person to whom the certificates for the shares
of Common Stock are to be issued, and if the number of shares of Common Stock to
be issued does not include all the shares of Common Stock purchasable hereunder,
it shall also state the name of the Person to whom a new Warrant for the
unexercised portion of the rights hereunder is to be delivered. Such Exercise
Agreement shall be dated the actual date of execution thereof.
Section 2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. In order to
prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this SECTION 2
and the number of shares of Common Stock obtainable upon exercise of this
Warrant shall be subject to adjustment from time to time as provided in this
SECTION 2.
2A. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON ISSUANCE OF
COMMON STOCK.
(i) If and whenever the Company issues or sells, or in accordance with
SECTION 2B is deemed to have issued or sold, any shares of Common Stock for
a consideration per share less than (a) the Exercise Price in effect
immediately prior to such time or (b) the Market Price of a share of the
Common Stock determined immediately prior to such issuance or sale
(treating any stock split, stock dividend, combination of shares or similar
transaction effected contemporaneously with such issuance or sale as if it
had been effected prior thereto), then immediately upon such issue or sale
the Exercise Price shall be reduced to whichever of the following Exercise
Prices is lower:
(a) the Exercise Price determined by multiplying the Exercise
Price in effect immediately prior to such issue or sale by a fraction,
the numerator of which shall be the sum of (1) the number of shares of
Common Stock Deemed Outstanding immediately prior to such issue or
sale multiplied by the Exercise Price in effect immediately prior to
such issue or sale, plus (2) the consideration, if any, received by
the Company upon such issue or sale, and the denominator of which
shall be the product derived by multiplying the Exercise Price in
effect immediately prior to such issue or sale by the number of shares
of Common Stock Deemed Outstanding immediately after such issue or
sale; or
(b) the Exercise Price determined by multiplying the Exercise
Price in effect immediately prior to such issue or sale by a fraction,
the numerator of which shall be the sum of (1) the number of shares of
Common Stock Deemed Outstanding immediately prior to
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<PAGE>
such issue or sale multiplied by the Market Price of the Common Stock
determined as of the date of such issuance of sale, plus (2) the
consideration, if any, received by the Company upon such issue or
sale, and the denominator of which shall be the product derived by
multiplying the Market Price of the Common Stock by the number of
shares of Common Stock Deemed Outstanding immediately after such issue
or sale.
(ii) Upon each such adjustment of the Exercise Price hereunder, the
number of shares of Warrant Stock acquirable upon exercise of this Warrant
shall be increased to the number of shares determined by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number
of shares of Warrant Stock acquirable upon exercise of this Warrant
immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
(iii) Notwithstanding the foregoing, there shall be no adjustment to
the Exercise Price or the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to the grants of options or the
issuance of Common Stock upon the exercise of options under the Company's
1996 Stock Option Plan.
2B. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of determining
the adjusted Exercise Price under SECTION 2A, the following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner grants
or sells any Options and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange
of any Convertible Securities issuable upon exercise of such Options, is
less than (a) the Exercise Price in effect immediately prior to the time of
the granting or sale of such Options or (b) the Market Price determined as
of such time, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options, or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon
the exercise of such Options, shall be deemed to be outstanding and to have
been issued and sold by the Company at such time for such price per share.
For purposes of this paragraph, the "price per share for which Common Stock
is issuable upon exercise of such Options or upon conversion or exchange of
such Convertible Securities" is determined by dividing (A) the total
amount, if any, received or receivable by the Company as consideration for
the granting or sale of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise of all
such Options, plus in the case of such Options which are exercisable into
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon exercise
of such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further
adjustment of the Exercise Price shall be made upon the actual issuance of
such Common Stock or of such Convertible Securities upon the exercise of
such Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
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(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any manner
issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less
than (a) the Exercise Price in effect immediately prior to the time of such
issue or sale or (b) the Market Price determined as of such time, then the
maximum number of shares of Common Stock issuable upon conversion or
exchange of such Convertible Securities shall be deemed to be outstanding
and to have been issued and sold by the Company for such price per share.
For the purposes of this paragraph, the "price per share for which Common
Stock is issuable upon conversion or exchange thereof" is determined by
dividing (A) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (B) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment of the
Exercise Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and if any such
issue or sale of such Convertible Securities is made upon exercise of any
Options for which adjustments of the Exercise Price had been or are to be
made pursuant to other provisions of this SECTION 2B, no further adjustment
of the Exercise Price shall be made by reason of such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase price
provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Exercise Price in
effect at the time of such change shall be adjusted immediately to the
Exercise Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold and
the number of shares of Common Stock shall be correspondingly adjusted. For
purposes of this SECTION 2B, if the terms of any Option or Convertible
Security which was outstanding as of the date of issuance of this Warrant
are changed in the manner described in the immediately preceding sentence,
then such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to
have been issued as of the date of such change; provided that no such
change shall at any time cause the Exercise Price hereunder to be
increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities issued at any time
after the date of issuance without the exercise of such Option or right,
the Exercise Price then in effect and the number of shares of Common Stock
acquirable hereunder shall be adjusted immediately to the Exercise Price
and the number of shares which would have been in effect at the time of
such expiration or termination had such Option or Convertible Securities,
to the extent outstanding immediately prior to such expiration or
termination, never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the net amount received by the Company therefor.
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In case any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the consideration
other than cash received by the Company shall be the fair value of such
consideration, except where such consideration consists of securities, in
which case the amount of consideration received by the Company shall be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is
the surviving entity the amount of consideration therefor shall be deemed
to be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities shall be determined jointly by
the Company and the Majority Warrant Holders. If such parties are unable to
reach agreement within a reasonable period of time, such fair value shall
be determined by an appraiser jointly selected by the Company and the
Majority Warrant Holders. The determination of such appraiser shall be
final and binding on the Company and the Registered Holders of the
Warrants, and the fees and expenses of such appraiser shall be paid by the
Company.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options shall be deemed to have been issued without consideration.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or
for the account of the Company or any Subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(viii) RECORD DATE. If the Company takes a record of the holders of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
2C. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant shall be proportionately
increased, and if the Company at any time combines (by reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Common Stock obtainable upon exercise of this Warrant shall be proportionately
reduced.
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2D. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company's assets or other transaction, which
in each case is effected in such a way that the holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "ORGANIC CHANGE." Prior to the consummation of any Organic Change,
the Company shall make appropriate provision (in form and substance satisfactory
to the Registered Holders of the Warrants representing a majority of the Warrant
Stock obtainable upon exercise of all Warrants then outstanding) to insure that
each of the Registered Holders of the Warrants shall thereafter have the right
to acquire and receive, in lieu of or addition to (as the case may be) the
shares of Common Stock immediately theretofore acquirable and receivable upon
the exercise of such holder's Warrant, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore acquirable and receivable upon
exercise of such holder's Warrant. In any such case, the Company shall make
appropriate provision (in form and substance satisfactory to the Registered
Holders of the Warrants representing a majority of the Warrant Stock obtainable
upon exercise of all Warrants then outstanding) with respect to such holders'
rights and interests to insure that the provisions of this SECTION 2 and
SECTIONS 3 and 4 hereof shall thereafter be applicable to the Warrants. In the
case of any such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, (a) if the value of the Common
Stock reflected by the terms of such consolidation, merger or sale is less than
the Exercise Price in effect immediately prior to such consolidation, merger or
sale, the Exercise Price shall be immediately reduced to the value for the
Common Stock reflected by the terms of such consolidation, merger or sale, and
(b) if the value of the Common Stock reflected by the terms of such
consolidation, merger or sale is less than the Exercise Price or the Market
Price in effect immediately prior to such consolidation, merger or sale, the
number of shares of Common Stock acquirable upon exercise of this Warrant shall
be immediately adjusted to the number equal to the product of (i) such number of
shares acquirable immediately prior to such consolidation, merger or sale
multiplied by (ii) the ratio equal to the greater of the Exercise Price and the
Fair Market Value of the Common Stock in effect immediately prior to such
consolidation, merger or sale divided by such value of the Common Stock as
reflected in the terms of such consolidation, merger or sale. The Company shall
not effect any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor entity (if other than the Company) resulting
from consolidation or merger or the entity purchasing such assets assumes by
written instrument (in form and substance reasonably satisfactory to the
Majority Warrant Holders) the obligation to deliver to each such holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
2E. CERTAIN EVENTS. If any event occurs of the type contemplated by the
provisions of this SECTION 2 but not expressly provided for by such provisions
or definition (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's board of directors shall make an appropriate adjustment in the number
of shares of Common Stock obtainable upon exercise of this Warrant so as to
protect the rights of the holders of the Warrant; provided that no such
adjustment pursuant to
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the provisions of this SECTION 2 shall decrease the number of shares of Common
Stock obtainable as otherwise determined pursuant to this Warrant.
2F. NOTICES.
(i) Immediately upon any adjustment of the Exercise Price or the
number of shares of Common Stock acquirable upon exercise of this Warrant,
the Company shall give written notice thereof to the Registered Holder,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company shall give written notice to the Registered Holder at
least 20 days prior to the date on which the Company closes its books or
takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to
holders of Common Stock or (C) for determining rights to vote with respect
to any Organic Change, dissolution or liquidation.
(iii) The Company shall give written notice to the Registered Holders
at least 20 days prior to the date on which any Organic Change, dissolution
or liquidation shall take place.
2G. NO AVOIDANCE. In the event that the Company shall enter into any
transaction for the purpose of avoiding the application of the provisions of
this SECTION 2, the benefits provided by such provisions shall nevertheless
apply and be preserved.
Section 3. LIQUIDATING DIVIDENDS. If the Company declares or pays a
dividend upon the Common Stock payable otherwise than in cash out of earnings or
earned surplus (determined in accordance with generally accepted accounting
principles, consistently applied) except for a stock dividend payable in shares
of Common Stock (a "LIQUIDATING DIVIDEND"), then the Company shall pay to the
Registered Holder of this Warrant (or any Person designated by the Registered
Holder) at the time of payment thereof the Liquidating Dividend which would have
been paid to such Registered Holder on the Common Stock had this Warrant been
fully exercised immediately prior to the date on which a record is taken for
such Liquidating Dividend, or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividends are to be determined;
provided that if the Liquidating Dividends consist of voting securities, the
Company shall use commercially reasonable efforts to make available to the
Registered Holder of this Warrant, at such holder's request, Liquidating
Dividends consisting of non-voting securities (except as otherwise required by
law) which are otherwise identical to the Liquidating Dividends consisting of
voting securities and which non-voting securities are convertible into such
voting securities.
Section 4. ADJUSTMENT OF NUMBER OF SHARES OF OUTSTANDING COMMON STOCK
ISSUED PURSUANT TO WARRANTS. In connection with any increase effected pursuant
to SECTION 2 (other than an increase solely pursuant to SECTION 2C) in the
number of shares of Common Stock issuable upon exercise of outstanding Warrants,
the Company shall issue to each holder of Common Stock directly or indirectly
issued with respect to the Warrants (including shares issued in respect of such
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stock in connection with events of the type described in SECTION 2C and shares
issued pursuant to this SECTION 4), the number of shares of Common Stock (in the
same class of common stock in respect of which such additional shares of stock
are issued), which, when added to the number of shares held by such holder would
equal the product of (a) the number of such shares held by such holder
immediately prior to such increase multiplied by (b) the ratio of (i) the number
of shares of Common Stock obtainable upon exercise of the Warrants immediately
after such increase, divided by (ii) the number of shares of Common Stock
obtainable upon exercise of the Warrants immediately prior to such increase.
Section 5. CERTIFICATES, NOTICES AND CONSENTS.
5A. CERTIFICATES. Upon the occurrence of any event requiring adjustments of
the number of shares subject to this Warrant pursuant to SECTION 2, the Company
shall mail to the holders of Underlying Common Stock (by registered or certified
mail, postage prepaid) a certificate signed by the President or a Vice President
and by the Chief Financial Officer of the Company, setting forth in reasonable
detail the events requiring the adjustment and the method by which such proposed
adjustment was calculated, specifying the adjusted number of shares subject to
this Warrant after giving effect to the proposed adjustment and the number of
shares of Common Stock to be issued pursuant to SECTION 4 hereof.
5B. NOTICE. If the Company after the date hereof shall propose to: (i) pay
any dividend payable in stock to the holders of Common Stock generally or to
make any other distribution to the holders of Common Stock or any extraordinary
dividend directly or indirectly attributable to proceeds from the sale or other
disposition of a significant business or asset of the Company; (ii) offer to the
holders of Common Stock rights to subscribe for or purchase any additional
shares of any class of stock or any other rights or options; (iii) effect any
reclassification except the subdivision or combination of shares of outstanding
Common Stock; (iv) effect any Organic Change or sale transaction described in
SECTION 2D or the liquidation, dissolution or winding up of the Company; or (v)
engage in any diluting event not otherwise mentioned in this SECTION 5B, then,
in each such case, the Company shall mail (by registered or certified mail,
postage prepaid) to the holders of Underlying Common Stock notice of such
proposed action, which shall specify the date on which the books of the Company
shall close, or a record date shall be established for determining holders of
Common Stock entitled to receive such stock dividends or other distribution of
such rights or options, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, dissolution or winding up shall take place or commence, as the case
may be, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to receive securities or other property deliverable
upon such action, if any such date is to be fixed. Such notice shall be mailed,
in the case of any action covered by clauses (i), (ii) or (v) above, at least 10
days prior to the record date for determining holders of Common Stock for
purposes of receiving such payment or offer, and, in the case of any action
covered by clause (iii) above, at least 10 days prior to the date upon which
such action takes place, and, in the case of any action covered by clause (iv)
above, at least 30 days prior to the date upon which such action takes place and
at least 20 days prior to the date on which the Company closes its books or
takes a record for determining rights to vote with respect to any event covered
by clause (iv) and 30 days prior to
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any record date to determine holders of Common Stock entitled to receive such
securities or other property. The holder of Underlying Common Stock hereby
agrees to treat as confidential (unless otherwise required by law) all
information concerning proposed actions to be taken by the Company.
5C. FAILURE AND DEFECTS. Failure to file any certificate or notice or to
mail any notice, or any defect in any certificate or notice, pursuant to this
SECTION 5, shall not affect the legality or validity of the adjustment of the
number of shares of Common Stock subject to this Warrant pursuant to SECTION 2
or any proposed action to be taken by the Company.
Section 6. PURCHASE RIGHTS. If at any time the Company grants, issues or
sells any options, convertible securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "PURCHASE RIGHTS"), then the Registered holder of this Warrant
(or any Person designated by the Registered Holder) shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Common Stock acquirable upon complete exercise of this
Warrant immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights; provided that if the Purchase
Rights involve voting securities, the Company shall use commercially reasonable
efforts to make available to the Registered Holder of this Warrant, at such
holder's request, Purchase Rights involving non-voting securities (except as
otherwise required by law) which are otherwise identical to the Purchase Rights
involving voting securities and which non-voting securities are convertible or
exchangeable into such voting securities.
Section 7. EVENTS OF NONCOMPLIANCE. If an Event of Noncompliance (as
defined the Series A Certificate of Designation) described in clauses (i), (ii)
or (v) of the definition thereof has occurred and continues of a period of 180
days, the Exercise Price shall be reduced immediately by 50% of the Exercise
Price in effect immediately prior to such adjustment and the number of shares of
the Common Stock issuable upon exercise of this Series A Warrant shall equal two
times the number of shares issuable immediately prior to such adjustment (the
"FIRST ADJUSTMENT"). If such Event of Noncompliance exist for an aggregate of 90
days after the First Adjustment (whether or not such days are successive and
whether or not such days immediately follow the First Adjustment), the Exercise
Price shall be reduced immediately by 10% of what the Exercise Price would have
been immediately prior to such adjustment if the First Adjustment had not been
made (as such amount is appropriately adjusted for stock splits, stock
dividends, combinations of shares and similar transactions affecting the Common
Stock) (the "SECOND ADJUSTMENT"). If any Event of Noncompliance exists for an
aggregate of 90 days after the Second Adjustment (whether or not such days are
successive and whether or not such days immediately follow the Second
Adjustment), the Exercise Price shall be reduced immediately by 10% of what the
Exercise Price would have been immediately prior to such adjustment if the First
Adjustment had not been made (as such amount is appropriately adjusted for stock
splits, stock dividends, combinations of shares and similar transactions
affecting the Common Stock). In no event shall any Exercise Price adjustment,
once made, be rescinded.
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Section 8. DEFINITIONS. The following terms have meanings set forth below:
"CERTIFICATE OF DESIGNATION" means the Certificate of Designation of
Preferred Stock, Series A, adopted by the Board of Directors of the Company as
of September 29, 1998.
"COMMON STOCK" means the Company's Common Stock, par value $1.00 per
share, and any capital stock of any class of the Company hereafter authorized
which is not limited to a fixed sum or percentage of par or stated value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company; provided that with respect to the shares of Common Stock issuable
upon the exercise of this Warrant, if there is a change such that the securities
issuable upon exercise of the Warrants are issued by an entityother than the
Company or there is a change in the class of securities so issuable, then the
term "Common Stock" shall mean one share of the security issuable upon exercise
of the Warrants if such security is issuable in shares, or shall mean the
smallest unit in which such security is issuable if such security is not
issuable in shares.
"COMMON STOCK DEEMED OUTSTANDING" means, without duplication, at any given
time, (a) the number of shares of Common Stock actually outstanding at such
time, plus (b) the number of shares of Common Stock deemed to be outstanding
pursuant to SECTIONS 2B(I) and 2B(II) hereof.
"CONVERTIBLE SECURITIES" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.
"DATE OF ISSUANCE" means the Closing Date, regardless of the number of
times new certificates representing the unexpired and unexercised rights
formerly represented by this Warrant shall be issued.
"MAJORITY WARRANT HOLDERS" at any time means the holders of a majority of
the Underlying Common Stock in existence at such time.
"MARKET PRICE" means as to any security the average of the closing prices
of such security's sales on all domestic securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, on such day, or, if on any day
such security is not quoted in the NASDAQ System, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 31 days
consisting of the day as of which "Market Price" is being determined and the 30
consecutive business days prior to such day; provided that if such security is
listed on any domestic securities exchange the term "business days" as used in
this sentence means business days on which such exchange is open for trading. If
at any time such security is not listed on any domestic securities exchange or
quoted in
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the NASDAQ System or the domestic over-the-counter market, the "Market Price"
shall be the fair value thereof determined jointly by the Company and the
Registered Holders of the Warrant representing a majority of the Common Stock
purchasable upon exercise of all of the Warrant then outstanding; provided that
if such parties are unable to reach agreement within a reasonable period of
time, such fair value shall be determined by an appraiser jointly selected by
the Company and the Registered Holders of the Warrant representing a majority of
the Common Stock purchasable upon exercise of all of the Warrant then
outstanding. The determination of such appraiser shall be final and binding on
the Company and the Registered Holders of the Warrant, and the fees and expenses
of such appraiser shall be paid by the Company.
"OPTIONS" means any rights or options to subscribe for or purchase Common
Stock or Convertible Securities, including without limitation, the Warrants.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"REGISTERED HOLDER" with respect to any Warrant means the Person who is
reflected as the holder thereof on the register maintained by the Company for
such purpose, and "REGISTERED HOLDERS" at any time means all Registered Holders
of the Warrants then outstanding.
"UNDERLYING COMMON STOCK" means, without duplication, (i) the Common Stock
issued or issuable upon exercise of or with respect to the Warrants, (ii) any
shares of stock issued or issuable with respect to the securities referred to in
any of clause (i) above by way of stock dividend or stock split or in connection
with a combination of stock, recapitalization, merger, consolidation or other
reorganization or otherwise pursuant to the Warrants or other sale or exchange
of all or substantially all of the stock of the Company. Any Person who holds
Warrants shall be deemed to be the holder of the Underlying Common Stock
obtainable upon exercise of the Warrants in connection with the transfer thereof
or otherwise regardless of any restriction or limitation on the exercise of the
Warrants. As to any particular shares of Underlying Common Stock, such shares
shall cease to be Underlying Common Stock when they have been (a) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them or (b) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or
any similar provision then in force).
Other capitalized terms used in this Warrant but not defined herein shall
have the meanings set forth in the Purchase Agreement.
Section 9. LIMITATIONS OF LIABILITY. No provision hereof, in the absence of
affirmative action by the Registered Holder to purchase Common Stock, and no
enumeration herein of the rights or privileges of the Registered Holder shall
give rise to any liability of such holder for the Exercise Price of Common Stock
acquirable by exercise hereof or as a stockholder of the Company.
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Section 10. WARRANT TRANSFERABLE. Subject to the transfer conditions
referred to in the legend endorsed hereon, this Warrant and all rights hereunder
are transferable, in whole or in part, without charge to the Registered Holder,
upon surrender of this Warrant with a properly executed Assignment (in the form
of EXHIBIT II hereto) at the principal office of the Company.
Section 11. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant
is exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrant of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new Warrant shall
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrant
representing portions of the rights hereunder are referred to herein as the
"WARRANT."
Section 12. REPLACEMENT. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Registered Holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Company (provided that
if the holder is a financial institution or other institutional investor its own
agreement shall be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Company shall (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 13. NOTICES. Except as otherwise expressly provided herein, all
notices referred to in this Warrant shall be in writing and shall be delivered
personally, sent by reputable overnight courier service (charges prepaid) or
sent by registered or certified mail, return receipt requested, postage prepaid
and shall be deemed to have been given when so delivered, sent or deposited in
the U.S. Mail (i) to the Company, at its principal executive offices and (ii) to
the Registered Holder of this Warrant, at such holder's address as it appears in
the records of the Company (unless otherwise indicated by any such holder).
Section 14. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of the Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Majority Warrant
Holders; provided that no such action may change the Exercise Price of the
Warrant or the number of shares or class of stock obtainable upon exercise of
each Warrant without the written consent of the Registered Holders of Warrant
representing a majority of the shares of Underlying Common Stock.
Section 15. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings
of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporation
laws of the State of Texas shall govern all issues
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concerning the relative rights of the Company and its stockholders. All other
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by the internal law of the State of Illinois,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Illinois or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of
Illinois.
* * * *
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated the Date of Issuance hereof.
ZIMMERMAN SIGN COMPANY
By
------------------------------
Its
-----------------------------
[Corporate Seal]
Attest:
- --------------------------------
Secretary
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EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. W-A-____), hereby agrees to subscribe for the purchase
of ______ shares of the Common Stock covered by such Warrant and makes payment
herewith in full therefor at the price per share provided by such Warrant.
Signature ____________________
Address ______________________
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EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant
(Certificate No. W-A-__) with respect to the number of shares of the Common
Stock covered thereby set forth below, unto:
NAMES OF ASSIGNEE ADDRESS NO. OF SHARES
- ----------------- ------- -------------
Dated: Signature
-----------------------
-----------------------
Witness
-----------------------
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Exhibit 10.13(b)
THE SECURITY REPRESENTED BY THIS CERTIFICATE WAS
ORIGINALLY ISSUED ON SEPTEMBER 30, 1998, AND HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE TRANSFER OF SUCH SECURITY IS SUBJECT TO
THE CONDITIONS SPECIFIED IN THE SENIOR SUBORDINATED
NOTE, PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT,
DATED AS OF SEPTEMBER 30, 1998 AS AMENDED AND MODIFIED
FROM TIME TO TIME, BETWEEN THE ISSUER HEREOF (THE
"COMPANY") AND THE INITIAL HOLDER HEREOF AND THE
STOCKHOLDERS AGREEMENT, DATED SEPTEMBER 30, 1998, AMONG
THE COMPANY AND CERTAIN OF ITS INVESTORS, AND THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF
SUCH SECURITY UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED
WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN REQUEST, A
COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE
COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE.
THIS SECURITY MAY BE CANCELLED IN WHOLE OR IN PART
PURSUANT TO THE TERMS OF A SIDE LETTER AGREEMENT, DATED
AS OF SEPTEMBER 30, 1998, BY AND AMONG THE COMPANY, THE
INITIAL HOLDER HEREOF AND CERTAIN OTHER PARTIES LISTED
THEREIN. A COPY OF THE SIDE LETTER IS ON FILE WITH THE
COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS AND SHALL BE
FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON
WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE
OF BUSINESS WITHOUT CHARGE.
ZIMMERMAN SIGN COMPANY
STOCK PURCHASE WARRANT
Date of Issuance: September 30, 1998 Certificate No. W-B-__
FOR VALUE RECEIVED, Zimmerman Sign Company, a Texas corporation (the
"COMPANY"), hereby grants to ___________________, or its registered assigns (the
"REGISTERED HOLDER") the right to purchase from the Company __________ shares of
Common Stock at a price per share equal to $3.79 (as adjusted from time to
time in accordance herewith, the "EXERCISE
<PAGE>
PRICE"). This warrant (this "WARRANT") is one of the warrants referred to in
SECTION 1A of, and is being issued pursuant to the terms of the Senior
Subordinated Note, Preferred Stock and Warrant Purchase Agreement, dated as of
September 30, 1998, between the Company, the Registered Holder, MIG Partners
VIII and certain management purchasers listed therein (the "PURCHASE
AGREEMENT"). Certain capitalized terms used herein are defined in SECTION 8
hereof. Capitalized terms used and not defined herein have the meanings set
forth in the Purchase Agreement. The amount and kind of securities obtainable
pursuant to the rights granted hereunder and the purchase price for such
securities are subject to adjustment pursuant to the provisions contained in
this Warrant.
For tax purposes, the value of this Warrant as of the date hereof is
$___________.
This Warrant is subject to the following provisions:
Section 1. EXERCISE OF WARRANT.
1A. EXERCISE PERIOD. The Registered Holder may exercise, in whole or in
part (but not as to a fractional share of Common Stock), the purchase rights
represented by this Warrant at any time and from time to time during the period
(the "EXERCISE PERIOD") after the Date of Issuance to and including the later of
(i) September 30, 2008 and (ii) the 90th day following the redemption in full of
all outstanding Series A Preferred, whether by prepayment, at maturity or
otherwise. The Company shall give the Registered Holder written notice of the
expiration of the Exercise Period at least 30 days but not more than 90 days
prior to the end of the Exercise Period.
1B. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been exercised when the
Company has received all of the following items (the "EXERCISE TIME"):
(a) a completed Exercise Agreement, as described in SECTION 1C
below, executed by the Person exercising all or part of the purchase
rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of the
Purchaser, an Assignment or Assignments in the form set forth in
EXHIBIT II hereto evidencing the assignment of this Warrant to the
Purchaser, in which case the Registered Holder shall have complied
with the provisions set forth in SECTION 10 hereof; and
(d) either (1) immediately available funds in an amount equal to
THE PRODUCT OF the Exercise Price, MULTIPLIED BY the number of shares
of Common Stock being purchased upon such exercise (the "AGGREGATE
EXERCISE PRICE"), (2) the surrender to the Company of debt or equity
securities of the Company having a Market Price equal to the Aggregate
Exercise Price of the Common Stock being purchased upon such exercise
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(provided that for purposes of this subparagraph, the Market Price of
any note or other debt security or any preferred stock of the Company
shall be deemed to be equal to the aggregate outstanding principal
amount or liquidation value thereof plus all accrued and unpaid
interest thereon or accrued or declared and unpaid dividends thereon)
or (3) a written notice to the Company that the Purchaser is
exercising the Warrant (or a portion thereof) by authorizing the
Company to withhold from issuance a number of shares of Common Stock
issuable upon such exercise of the Warrant which when multiplied by
the Market Price of the Common Stock is equal to the Aggregate
Exercise Price (and such withheld shares shall no longer be issuable
under this Warrant).
(ii) Certificates for shares of Common Stock purchased upon exercise
of this Warrant shall be delivered by the Company to the Purchaser within
fifteen (15) business days after the date of the Exercise Time. Unless this
Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company shall prepare a new Warrant, substantially
identical hereto, representing the rights formerly represented by this
Warrant which have not expired or been exercised and shall, within such
five-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(iii) The Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time,
and the Purchaser shall be deemed for all purposes to have become the
record holder of such Common Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Registered
Holder or the Purchaser for any issuance tax in respect thereof or other
cost incurred by the Company in connection with such exercise and the
related issuance of shares of Common Stock. Each share of Common Stock
issuable upon exercise of this Warrant shall, upon payment of the Exercise
Price therefor, be fully paid and nonassessable and free from all liens and
charges with respect to the issuance thereof.
(v) The Company shall not close its books against the transfer of this
Warrant or of any share of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant.
(vi) The Company shall assist and cooperate with any Registered Holder
or Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant (including, without limitation, making any filings required to be
made by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise of
any portion of this Warrant is to be made in connection with a registered
public offering or the sale of the Company, the exercise of any portion of
this Warrant may, at the election of the holder hereof, be conditioned upon
the consummation of the public offering or sale of the Company in which
case such exercise shall not be deemed to be effective until the
consummation of such transaction.
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(viii) The Company shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock solely for the
purpose of issuance upon the exercise of the Warrant, such number of shares
of Common Stock issuable upon the exercise of the Warrant. All shares of
Common Stock which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges. The Company shall take all such actions as may be necessary to
assure that all such shares of Common Stock may be so issued without
violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of
Common Stock may be listed (except for official notice of issuance which
shall be immediately delivered by the Company upon each such issuance). The
Company shall from time to time take all such action as may be necessary to
assure that the par value of the unissued Common Stock acquirable upon
exercise of this Warrant is at all times equal to or less than the Exercise
Price. The Company shall not take any action which would cause the number
of authorized but unissued shares of Common Stock to be less than the
number of such shares required to be reserved hereunder for issuance upon
exercise of the Warrants.
1C. EXERCISE AGREEMENT. Upon any exercise of this Warrant, the Exercise
Agreement shall be substantially in the form set forth in EXHIBIT I hereto,
except that if the shares of Common Stock are not to be issued in the name of
the Person in whose name this Warrant is registered, the Exercise Agreement
shall also state the name of the Person to whom the certificates for the shares
of Common Stock are to be issued, and if the number of shares of Common Stock to
be issued does not include all the shares of Common Stock purchasable hereunder,
it shall also state the name of the Person to whom a new Warrant for the
unexercised portion of the rights hereunder is to be delivered. Such Exercise
Agreement shall be dated the actual date of execution thereof.
Section 2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. In order to
prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this SECTION 2
and the number of shares of Common Stock obtainable upon exercise of this
Warrant shall be subject to adjustment from time to time as provided in this
SECTION 2.
2A. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON ISSUANCE OF
COMMON STOCK.
(i) If and whenever the Company issues or sells, or in accordance with
SECTION 2B is deemed to have issued or sold, any shares of Common Stock for
a consideration per share less than (a) the Exercise Price in effect
immediately prior to such time or (b) the Market Price of a share of the
Common Stock determined immediately prior to such issuance or sale
(treating any stock split, stock dividend, combination of shares or similar
transaction effected contemporaneously with such issuance or sale as if it
had been effected prior thereto), then immediately upon such issue or sale
the Exercise Price shall be reduced to whichever of the following Exercise
Prices is lower:
(a) the Exercise Price determined by multiplying the Exercise
Price in effect immediately prior to such issue or sale by a fraction,
the numerator of which shall be the sum of (1) the number of shares of
Common Stock Deemed Outstanding immediately prior to
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such issue or sale multiplied by the Exercise Price in effect
immediately prior to such issue or sale, plus (2) the consideration,
if any, received by the Company upon such issue or sale, and the
denominator of which shall be the product derived by multiplying the
Exercise Price in effect immediately prior to such issue or sale by
the number of shares of Common Stock Deemed Outstanding immediately
after such issue or sale; or
(b) the Exercise Price determined by multiplying the Exercise
Price in effect immediately prior to such issue or sale by a fraction,
the numerator of which shall be the sum of (1) the number of shares of
Common Stock Deemed Outstanding immediately prior to such issue or
sale multiplied by the Market Price of the Common Stock determined as
of the date of such issuance of sale, plus (2) the consideration, if
any, received by the Company upon such issue or sale, and the
denominator of which shall be the product derived by multiplying the
Market Price of the Common Stock by the number of shares of Common
Stock Deemed Outstanding immediately after such issue or sale.
(ii) Upon each such adjustment of the Exercise Price hereunder, the
number of shares of Warrant Stock acquirable upon exercise of this Warrant
shall be increased to the number of shares determined by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number
of shares of Warrant Stock acquirable upon exercise of this Warrant
immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
(iii) Notwithstanding the foregoing, there shall be no adjustment to
the Exercise Price or the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to the grants of options or the
issuance of Common Stock upon the exercise of options under the Company's
1996 Stock Option Plan.
2B. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of determining
the adjusted Exercise Price under SECTION 2A, the following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner grants
or sells any Options and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange
of any Convertible Securities issuable upon exercise of such Options, is
less than (a) the Exercise Price in effect immediately prior to the time of
the granting or sale of such Options or (b) the Market Price determined as
of such time, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options, or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon
the exercise of such Options, shall be deemed to be outstanding and to have
been issued and sold by the Company at such time for such price per share.
For purposes of this paragraph, the "price per share for which Common Stock
is issuable upon exercise of such Options or upon conversion or exchange of
such Convertible Securities" is determined by dividing (A) the total
amount, if any, received or receivable by the Company as consideration for
the granting or sale of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise of all
such Options, plus in the case of such Options which are exercisable into
Convertible
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Securities, the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon exercise of such Options or
upon the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options. No further adjustment of the Exercise
Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon the exercise of such Options or upon the
actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any manner
issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less
than (a) the Exercise Price in effect immediately prior to the time of such
issue or sale or (b) the Market Price determined as of such time, then the
maximum number of shares of Common Stock issuable upon conversion or
exchange of such Convertible Securities shall be deemed to be outstanding
and to have been issued and sold by the Company for such price per share.
For the purposes of this paragraph, the "price per share for which Common
Stock is issuable upon conversion or exchange thereof" is determined by
dividing (A) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (B) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment of the
Exercise Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and if any such
issue or sale of such Convertible Securities is made upon exercise of any
Options for which adjustments of the Exercise Price had been or are to be
made pursuant to other provisions of this SECTION 2B, no further adjustment
of the Exercise Price shall be made by reason of such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase price
provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Exercise Price in
effect at the time of such change shall be adjusted immediately to the
Exercise Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold and
the number of shares of Common Stock shall be correspondingly adjusted. For
purposes of this SECTION 2B, if the terms of any Option or Convertible
Security which was outstanding as of the date of issuance of this Warrant
are changed in the manner described in the immediately preceding sentence,
then such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to
have been issued as of the date of such change; provided that no such
change shall at any time cause the Exercise Price hereunder to be
increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible
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Securities issued at any time after the date of issuance without the
exercise of such Option or right, the Exercise Price then in effect and the
number of shares of Common Stock acquirable hereunder shall be adjusted
immediately to the Exercise Price and the number of shares which would have
been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately
prior to such expiration or termination, never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the net amount received by the Company therefor. In case any
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration,
except where such consideration consists of securities, in which case the
amount of consideration received by the Company shall be the Market Price
thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity
in connection with any merger in which the Company is the surviving entity
the amount of consideration therefor shall be deemed to be the fair value
of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Options or Convertible Securities,
as the case may be. The fair value of any consideration other than cash or
securities shall be determined jointly by the Company and the Majority
Warrant Holders. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an
appraiser jointly selected by the Company and the Majority Warrant Holders.
The determination of such appraiser shall be final and binding on the
Company and the Registered Holders of the Warrants, and the fees and
expenses of such appraiser shall be paid by the Company.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options shall be deemed to have been issued without consideration.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or
for the account of the Company or any Subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(viii) RECORD DATE. If the Company takes a record of the holders of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
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2C. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant shall be proportionately
increased, and if the Company at any time combines (by reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Common Stock obtainable upon exercise of this Warrant shall be proportionately
reduced.
2D. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company's assets or other transaction, which
in each case is effected in such a way that the holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "ORGANIC CHANGE." Prior to the consummation of any Organic Change,
the Company shall make appropriate provision (in form and substance satisfactory
to the Registered Holders of the Warrants representing a majority of the Warrant
Stock obtainable upon exercise of all Warrants then outstanding) to insure that
each of the Registered Holders of the Warrants shall thereafter have the right
to acquire and receive, in lieu of or addition to (as the case may be) the
shares of Common Stock immediately theretofore acquirable and receivable upon
the exercise of such holder's Warrant, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore acquirable and receivable upon
exercise of such holder's Warrant. In any such case, the Company shall make
appropriate provision (in form and substance satisfactory to the Registered
Holders of the Warrants representing a majority of the Warrant Stock obtainable
upon exercise of all Warrants then outstanding) with respect to such holders'
rights and interests to insure that the provisions of this SECTION 2 and
SECTIONS 3 and 4 hereof shall thereafter be applicable to the Warrants. In the
case of any such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, (a) if the value of the Common
Stock reflected by the terms of such consolidation, merger or sale is less than
the Exercise Price in effect immediately prior to such consolidation, merger or
sale, the Exercise Price shall be immediately reduced to the value for the
Common Stock reflected by the terms of such consolidation, merger or sale, and
(b) if the value of the Common Stock reflected by the terms of such
consolidation, merger or sale is less than the Exercise Price or the Market
Price in effect immediately prior to such consolidation, merger or sale, the
number of shares of Common Stock acquirable upon exercise of this Warrant shall
be immediately adjusted to the number equal to the product of (i) such number of
shares acquirable immediately prior to such consolidation, merger or sale
multiplied by (ii) the ratio equal to the greater of the Exercise Price and the
Fair Market Value of the Common Stock in effect immediately prior to such
consolidation, merger or sale divided by such value of the Common Stock as
reflected in the terms of such consolidation, merger or sale. The Company shall
not effect any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor entity (if other than the Company) resulting
from consolidation or merger or the entity purchasing such assets assumes by
written instrument (in form and substance reasonably satisfactory to the
Majority Warrant Holders) the obligation to deliver to each such
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holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
2E. CERTAIN EVENTS. If any event occurs of the type contemplated by the
provisions of this SECTION 2 but not expressly provided for by such provisions
or definition (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's board of directors shall make an appropriate adjustment in the number
of shares of Common Stock obtainable upon exercise of this Warrant so as to
protect the rights of the holders of the Warrant; provided that no such
adjustment pursuant to the provisions of this SECTION 2 shall decrease the
number of shares of Common Stock obtainable as otherwise determined pursuant to
this Warrant.
2F. NOTICES.
(i) Immediately upon any adjustment of the Exercise Price or the
number of shares of Common Stock acquirable upon exercise of this Warrant,
the Company shall give written notice thereof to the Registered Holder,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company shall give written notice to the Registered Holder at
least 20 days prior to the date on which the Company closes its books or
takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to
holders of Common Stock or (C) for determining rights to vote with respect
to any Organic Change, dissolution or liquidation.
(iii) The Company shall give written notice to the Registered Holders
at least 20 days prior to the date on which any Organic Change, dissolution
or liquidation shall take place.
2G. NO AVOIDANCE. In the event that the Company shall enter into any
transaction for the purpose of avoiding the application of the provisions of
this SECTION 2, the benefits provided by such provisions shall nevertheless
apply and be preserved.
Section 3. LIQUIDATING DIVIDENDS. If the Company declares or pays a
dividend upon the Common Stock payable otherwise than in cash out of earnings or
earned surplus (determined in accordance with generally accepted accounting
principles, consistently applied) except for a stock dividend payable in shares
of Common Stock (a "LIQUIDATING DIVIDEND"), then the Company shall pay to the
Registered Holder of this Warrant (or any Person designated by the Registered
Holder) at the time of payment thereof the Liquidating Dividend which would have
been paid to such Registered Holder on the Common Stock had this Warrant been
fully exercised immediately prior to the date on which a record is taken for
such Liquidating Dividend, or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividends are to be determined;
provided that if the Liquidating Dividends consist of voting securities, the
Company shall use commercially reasonable efforts to make available to the
Registered Holder of this Warrant, at such holder's request, Liquidating
Dividends consisting of non-voting securities
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(except as otherwise required by law) which are otherwise identical to the
Liquidating Dividends consisting of voting securities and which non-voting
securities are convertible into such voting securities.
Section 4. ADJUSTMENT OF NUMBER OF SHARES OF OUTSTANDING COMMON STOCK
ISSUED PURSUANT TO WARRANTS. In connection with any increase effected pursuant
to SECTION 2 (other than an increase solely pursuant to SECTION 2C) in the
number of shares of Common Stock issuable upon exercise of outstanding Warrants,
the Company shall issue to each holder of Common Stock directly or indirectly
issued with respect to the Warrants (including shares issued in respect of such
stock in connection with events of the type described in SECTION 2C and shares
issued pursuant to this SECTION 4), the number of shares of Common Stock (in the
same class of common stock in respect of which such additional shares of stock
are issued), which, when added to the number of shares held by such holder would
equal the product of (a) the number of such shares held by such holder
immediately prior to such increase multiplied by (b) the ratio of (i) the number
of shares of Common Stock obtainable upon exercise of the Warrants immediately
after such increase, divided by (ii) the number of shares of Common Stock
obtainable upon exercise of the Warrants immediately prior to such increase.
Section 5. CERTIFICATES, NOTICES AND CONSENTS.
5A. CERTIFICATES. Upon the occurrence of any event requiring adjustments of
the number of shares subject to this Warrant pursuant to SECTION 2, the Company
shall mail to the holders of Underlying Common Stock (by registered or certified
mail, postage prepaid) a certificate signed by the President or a Vice President
and by the Chief Financial Officer of the Company, setting forth in reasonable
detail the events requiring the adjustment and the method by which such proposed
adjustment was calculated, specifying the adjusted number of shares subject to
this Warrant after giving effect to the proposed adjustment and the number of
shares of Common Stock to be issued pursuant to SECTION 4 hereof.
5B. NOTICE. If the Company after the date hereof shall propose to: (i) pay
any dividend payable in stock to the holders of Common Stock generally or to
make any other distribution to the holders of Common Stock or any extraordinary
dividend directly or indirectly attributable to proceeds from the sale or other
disposition of a significant business or asset of the Company; (ii) offer to the
holders of Common Stock rights to subscribe for or purchase any additional
shares of any class of stock or any other rights or options; (iii) effect any
reclassification except the subdivision or combination of shares of outstanding
Common Stock; (iv) effect any Organic Change or sale transaction described in
SECTION 2D or the liquidation, dissolution or winding up of the Company; or (v)
engage in any diluting event not otherwise mentioned in this SECTION 5B, then,
in each such case, the Company shall mail (by registered or certified mail,
postage prepaid) to the holders of Underlying Common Stock notice of such
proposed action, which shall specify the date on which the books of the Company
shall close, or a record date shall be established for determining holders of
Common Stock entitled to receive such stock dividends or other distribution of
such rights or options, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, dissolution or winding up shall take place or
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commence, as the case may be, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to receive securities or
other property deliverable upon such action, if any such date is to be fixed.
Such notice shall be mailed, in the case of any action covered by clauses (i),
(ii) or (v) above, at least 10 days prior to the record date for determining
holders of Common Stock for purposes of receiving such payment or offer, and, in
the case of any action covered by clause (iii) above, at least 10 days prior to
the date upon which such action takes place, and, in the case of any action
covered by clause (iv) above, at least 30 days prior to the date upon which such
action takes place and at least 20 days prior to the date on which the Company
closes its books or takes a record for determining rights to vote with respect
to any event covered by clause (iv) and 30 days prior to any record date to
determine holders of Common Stock entitled to receive such securities or other
property. The holder of Underlying Common Stock hereby agrees to treat as
confidential (unless otherwise required by law) all information concerning
proposed actions to be taken by the Company.
5C. FAILURE AND DEFECTS. Failure to file any certificate or notice or to
mail any notice, or any defect in any certificate or notice, pursuant to this
SECTION 5, shall not affect the legality or validity of the adjustment of the
number of shares of Common Stock subject to this Warrant pursuant to SECTION 2
or any proposed action to be taken by the Company.
Section 6. PURCHASE RIGHTS. If at any time the Company grants, issues or
sells any options, convertible securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "PURCHASE RIGHTS"), then the Registered holder of this Warrant
(or any Person designated by the Registered Holder) shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Common Stock acquirable upon complete exercise of this
Warrant immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights; provided that if the Purchase
Rights involve voting securities, the Company shall use commercially reasonable
efforts to make available to the Registered Holder of this Warrant, at such
holder's request, Purchase Rights involving non-voting securities (except as
otherwise required by law) which are otherwise identical to the Purchase Rights
involving voting securities and which non-voting securities are convertible or
exchangeable into such voting securities.
Section 7. EVENTS OF NONCOMPLIANCE. If an Event of Noncompliance (as
defined the Series A Certificate of Designation) described in clauses (i), (ii)
or (v) of the definition thereof has occurred and continues of a period of 180
days, the Exercise Price shall be reduced immediately by 50% of the Exercise
Price in effect immediately prior to such adjustment and the number of shares of
the Common Stock issuable upon exercise of this Series A Warrant shall equal two
times the number of shares issuable immediately prior to such adjustment (the
"FIRST ADJUSTMENT"). If such Event of Noncompliance exist for an aggregate of 90
days after the First Adjustment (whether or not such days are successive and
whether or not such days immediately follow the First Adjustment), the Exercise
Price shall be reduced immediately by 10% of what the Exercise Price would have
been immediately prior to such adjustment if the First Adjustment had not been
made (as such amount is appropriately adjusted for stock splits, stock
dividends, combinations of shares and similar
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transactions affecting the Common Stock) (the "SECOND ADJUSTMENT"). If any Event
of Noncompliance exists for an aggregate of 90 days after the Second Adjustment
(whether or not such days are successive and whether or not such days
immediately follow the Second Adjustment), the Exercise Price shall be reduced
immediately by 10% of what the Exercise Price would have been immediately prior
to such adjustment if the First Adjustment had not been made (as such amount is
appropriately adjusted for stock splits, stock dividends, combinations of shares
and similar transactions affecting the Common Stock). In no event shall any
Exercise Price adjustment, once made, be rescinded.
Section 8. DEFINITIONS. The following terms have meanings set forth below:
"CERTIFICATE OF DESIGNATION" means the Certificate of Designation of
Preferred Stock, Series A, adopted by the Board of Directors of the Company as
of September 29, 1998. "COMMON STOCK" means the Company's Common Stock, par
value $1.00 per share, and any capital stock of any class of the Company
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company; provided that with respect to the shares of Common
Stock issuable upon the exercise of this Warrant, if there is a change such that
the securities issuable upon exercise of the Warrants are issued by an entity
other than the Company or there is a change in the class of securities so
issuable, then the term "Common Stock" shall mean one share of the security
issuable upon exercise of the Warrants if such security is issuable in shares,
or shall mean the smallest unit in which such security is issuable if such
security is not issuable in shares.
"COMMON STOCK DEEMED OUTSTANDING" means, without duplication, at any given
time, (a) the number of shares of Common Stock actually outstanding at such
time, plus (b) the number of shares of Common Stock deemed to be outstanding
pursuant to SECTIONS 2B(I) and 2B(II) hereof.
"CONVERTIBLE SECURITIES" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.
"DATE OF ISSUANCE" means the Closing Date, regardless of the number of
times new certificates representing the unexpired and unexercised rights
formerly represented by this Warrant shall be issued.
"MAJORITY WARRANT HOLDERS" at any time means the holders of a majority of
the Underlying Common Stock in existence at such time.
"MARKET PRICE" means as to any security the average of the closing prices
of such security's sales on all domestic securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System
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as of 4:00 P.M., New York time, on such day, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 31 days consisting of the day as of
which "Market Price" is being determined and the 30 consecutive business days
prior to such day; provided that if such security is listed on any domestic
securities exchange the term "business days" as used in this sentence means
business days on which such exchange is open for trading. If at any time such
security is not listed on any domestic securities exchange or quoted in the
NASDAQ System or the domestic over-the-counter market, the "Market Price" shall
be the fair value thereof determined jointly by the Company and the Registered
Holders of the Warrant representing a majority of the Common Stock purchasable
upon exercise of all of the Warrant then outstanding; provided that if such
parties are unable to reach agreement within a reasonable period of time, such
fair value shall be determined by an appraiser jointly selected by the Company
and the Registered Holders of the Warrant representing a majority of the Common
Stock purchasable upon exercise of all of the Warrant then outstanding. The
determination of such appraiser shall be final and binding on the Company and
the Registered Holders of the Warrant, and the fees and expenses of such
appraiser shall be paid by the Company.
"OPTIONS" means any rights or options to subscribe for or purchase Common
Stock or Convertible Securities, including without limitation, the Warrants.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"REGISTERED HOLDER" with respect to any Warrant means the Person who is
reflected as the holder thereof on the register maintained by the Company for
such purpose, and "REGISTERED HOLDERS" at any time means all Registered Holders
of the Warrants then outstanding.
"UNDERLYING COMMON STOCK" means, without duplication, (i) the Common Stock
issued or issuable upon exercise of or with respect to the Warrants, (ii) any
shares of stock issued or issuable with respect to the securities referred to in
any of clause (i) above by way of stock dividend or stock split or in connection
with a combination of stock, recapitalization, merger, consolidation or other
reorganization or otherwise pursuant to the Warrants or other sale or exchange
of all or substantially all of the stock of the Company. Any Person who holds
Warrants shall be deemed to be the holder of the Underlying Common Stock
obtainable upon exercise of the Warrants in connection with the transfer thereof
or otherwise regardless of any restriction or limitation on the exercise of the
Warrants. As to any particular shares of Underlying Common Stock, such shares
shall cease to be Underlying Common Stock when they have been (a) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them or (b) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or
any similar provision then in force).
13
<PAGE>
Other capitalized terms used in this Warrant but not defined herein shall
have the meanings set forth in the Purchase Agreement.
Section 9. LIMITATIONS OF LIABILITY. No provision hereof, in the absence of
affirmative action by the Registered Holder to purchase Common Stock, and no
enumeration herein of the rights or privileges of the Registered Holder shall
give rise to any liability of such holder for the Exercise Price of Common Stock
acquirable by exercise hereof or as a stockholder of the Company.
Section 10. WARRANT TRANSFERABLE. Subject to the transfer conditions
referred to in the legend endorsed hereon, this Warrant and all rights hereunder
are transferable, in whole or in part, without charge to the Registered Holder,
upon surrender of this Warrant with a properly executed Assignment (in the form
of EXHIBIT II hereto) at the principal office of the Company.
Section 11. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant
is exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrant of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new Warrant shall
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrant
representing portions of the rights hereunder are referred to herein as the
"WARRANT."
Section 12. REPLACEMENT. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Registered Holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Company (provided that
if the holder is a financial institution or other institutional investor its own
agreement shall be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Company shall (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 13. NOTICES. Except as otherwise expressly provided herein, all
notices referred to in this Warrant shall be in writing and shall be delivered
personally, sent by reputable overnight courier service (charges prepaid) or
sent by registered or certified mail, return receipt requested, postage prepaid
and shall be deemed to have been given when so delivered, sent or deposited in
the U.S. Mail (i) to the Company, at its principal executive offices and (ii) to
the Registered Holder of this Warrant, at such holder's address as it appears in
the records of the Company (unless otherwise indicated by any such holder).
Section 14. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of the Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained
14
<PAGE>
the written consent of the Majority Warrant Holders; provided that no such
action may change the Exercise Price of the Warrant or the number of shares or
class of stock obtainable upon exercise of each Warrant without the written
consent of the Registered Holders of Warrant representing a majority of the
shares of Underlying Common Stock.
Section 15. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings
of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporation
laws of the State of Texas shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
governed by the internal law of the State of Illinois, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Illinois or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of Illinois.
* * * *
15
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated the Date of Issuance hereof.
ZIMMERMAN SIGN COMPANY
By
------------------------------
Its
------------------------------
[Corporate Seal]
Attest:
- ------------------------------
Secretary
16
<PAGE>
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. W-B-____), hereby agrees to subscribe for the purchase
of ______ shares of the Common Stock covered by such Warrant and makes payment
herewith in full therefor at the price per share provided by such Warrant.
Signature
------------------------------
Address
------------------------------
17
<PAGE>
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant
(Certificate No. W-B-__) with respect to the number of shares of the Common
Stock covered thereby set forth below, unto:
NAMES OF ASSIGNEE ADDRESS NO. OF SHARES
- ----------------- ------- -------------
Dated: Signature
------------------------------
Witness
------------------------------
18
d
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1998 BALANCE SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,148
<SECURITIES> 0
<RECEIVABLES> 8,466,925
<ALLOWANCES> 140,638
<INVENTORY> 15,967,399
<CURRENT-ASSETS> 25,239,447
<PP&E> 7,995,866
<DEPRECIATION> 5,108,500
<TOTAL-ASSETS> 28,786,347
<CURRENT-LIABILITIES> 10,347,272
<BONDS> 21,222,486
4,961,346
0
<COMMON> 18,547
<OTHER-SE> (7,763,304)
<TOTAL-LIABILITY-AND-EQUITY> 28,786,347
<SALES> 35,327,230
<TOTAL-REVENUES> 35,327,230
<CGS> 27,923,994
<TOTAL-COSTS> 32,228,223
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,716,362
<INCOME-PRETAX> 1,382,645
<INCOME-TAX> 471,991
<INCOME-CONTINUING> 910,654
<DISCONTINUED> 0
<EXTRAORDINARY> 369,007
<CHANGES> 0
<NET-INCOME> 541,647
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
