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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 1, 1997
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DECORA INDUSTRIES, INC.
(Exact name of issuer as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-016072 68-0003300
(Commission File Number) (IRS Employer Identification No.)
1 Mill Street, Fort Edward, New York 12828
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (518) 747-6255
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ITEM 2. ACQUISITION OF SHARES
On October l, l997, a recently formed wholly-owned German subsidiary
("Newco") of Decora Industries, Inc (the "Company" or "Holdings") acquired 73.2
percent of the voting stock (the "Shares") of Konrad Hornschuch AG
("Hornschuch"). The Hornschuch Shares were acquired directly from its two
largest shareholders in private transactions for total consideration of DM
61,582,280, or approximately $34,704,018 US. The stockholders were Kunz Holding
GmbH and Baden-Wurttenbergische Bank AG. The transaction is being accounted for
pursuant to the purchase method of accounting. Shares of Hornschuch are
currently traded on the Frankfurt and Stuttgart stock exchanges. The Company
intends to purchase as many of the remaining 26.8 percent of the shares of
Hornschuch as soon as practicable using a combination of (i) open market
purchases sufficient to reach a minimum of 75 percent voting control, which
purchases are anticipated to commence shortly, and (ii) a tender offer pursuant
to German law to all minority shareholders of Hornschuch which is anticipated to
be completed within l8 months of the initial purchase of the Shares (the
"Minority Tender Offer").
Hornschuch employees approximately 760 persons; its revenues for
calender year l996 were DM 202,044,414, or approximately $115,000,000 US.
Hornschuch is the manufacturer and marketer of d-c fix and Noblessa decorative
products which account for approximately fifty-two percent of its revenues.
Along with its self-adhesive products, Hornschuch also markets a full line of
complementary table coverings and other decorative kitchen and table oriented
products. In addition to its market presence in Europe, Hornschuch has products
sales and distribution capabilities in Eastern Europe, Russia, the Middle East
and the Far East with over 80 sales, marketing and distribution partners
worldwide. Hornschuch also manufacturers decorative and functional films for use
by OEMs in the automotive, building , furniture, handbag, shoe and interior
decoration markets. Approximately one-half of its total revenues is derived from
sales in Germany; the remainder is derived from worldwide sales.
Hornschuch's self-adhesive products are similar to Decora's core product
offerings, and Decora anticipates ongoing benefits from manufacturing synergies
between the two companies following the acquisition. Potential synergies include
raw material purchasing, manufacturing efficiencies (including capacity
utilization), cross merchandising and distribution utilizing Hornschuch's
existing sales and distribution capabilities described above, research and
development (including product refinement) and overheard efficiencies. No
assurances can be given as to the amount of such benefits which will depend on a
variety of factors.
The Company's purchase of the Shares was funded from (i) a loan of
approximately $21,026,064 to the Company's German Newco subsidiary from Dresdner
Bank payable September 30, 2004, which loan includes a commitment to fund
approximately 33 percent of the Company's cash needs to complete the Minority
Tender Offer and (ii) a loan of $18,000,000 (the "Textron Loan") from a Textron
pension fund ("Textron" or "Purchaser"). $2,900,000 of such Textron Loan
proceeds were used to repay existing subordinated debt of Decora Manufacturing
and $15,100,000 of such proceeds were utilized for the purchase of the Shares.
Other closing costs associated with the transaction of approximately $2,930,000
US, which included commitment fees, legal,
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accounting and investment banking fees as well as other expenses were either
paid at closing or are to paid in the future pursuant to agreements between the
parties.
As part of the Textron Loan, Textron received several warrants to
purchase common stock of the Company, including a warrant to purchase Series A
Convertible Preferred Shares ("Series A Preferred Stock") (collectively, the
"Warrants"). The Warrants provide Textron with a right to purchase l7.5% of the
common stock of the Company on a fully diluted basis, exercisable at $l.00 for
each share of common stock. A warrant to purchase the Series A Preferred Stock
was issued in lieu of a common stock warrant because the Company did not have
sufficient shares of authorized, but unissued, common stock. Any increase in
authorized shares requires both Board of Directors and shareholders approval.
The Company's Board of Directors has already authorized an increase in its
authorized shares sufficient to allow conversion of the Series A Preferred Stock
to common stock (the "Additional Common Stock"). The proposal to increase the
authorized shares will be presented to the Company's shareholders as soon as is
practical which will be accomplished in connection with a one-for-five reverse
split.
The Warrants include (i) a warrant to purchase 2,136,534 shares of the
Company's common stock, (ii) a warrant to purchase 69,557 shares of Series A
Preferred Stock (with each share of Series A Preferred Stock to automatically
convert to l00 shares of common stock if authorized common stock is available
and (iii) a contingent warrant to purchase a fixed percentage of certain
additional shares of common stock which may be issued in the future. The ability
to exercise such contingent warrant is triggered solely by the issuance of
shares of the Company's common stock to Cigna affiliates in connection with an
existing exchange agreement or the sale of additional shares of the Company, the
proceeds of which are used to finance the Minority Tender Offer. All of the
Warrants are exercisable until September 30, 2005 at an exercise price of $1.00
per share.
So long as the Textron Loan or any of the Warrants are outstanding,
Textron shall have the right to nominate one person to the Company's Board of
Directors. The Textron Loan also provides that, in the event the shareholders of
the Company fail to authorize the Additional Common Stock by December 31, l997,
the existing l3% interest rate will increase to l4% and increase further to l5%
on March 31, l998. Immediately following shareholder approval, the interest rate
on the Textron Loan will return to its original l3% rate. If shareholder
approval is not obtained by June l998, it is an event of default and the entire
Textron Loan balance can be declared due and payable. Further, the interest rate
increases to l7%. An event of default under the Textron Loan would likely
constitute an event of default under the Company's outstanding financing
arrangements. Further, if there is no shareholder approval by June 30, l998,
Textron shall have the right to nominate a second member to the Company's Board
of Directors.
This report on Form 8-K includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities and Exchange Act of 1934, as amended. All statements other
than statements of historical facts, including, without limitation, the
statements regarding potential synergies, industry prospects and the Company's
financial position are forward-looking statements. Although the Company
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believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Factors that could cause actual results to differ materially from
the Company's expectations are disclosed in this report and the Company's Form
10-K for its year ended March 31, 1997 and Form 10-Q for its quarter ended June
30, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired. To be filed by amendment.
(b) Pro Forma financial information. To be filed by amendment.
(c) Exhibits
1. Stock Purchase Agreement by and between
Baden-Wurttenbergische Bank AG and Newco dated as of
September 3, 1997, as amended
2. Stock Purchase Agreement by and between der Kunz Holding
GmbH & Co. KG and Newco dated as of August 18, 1997, as
amended
3. Certificate of Designation of Series A Preferred Stock of
Holdings dated September 26, 1997
4. Note and Warrant Purchase Agreement, dated as of September
26, 1997 among Borrower, Holdings, Agent and Purchaser
5. Common Warrant Certificate with respect to 2,136,534
shares of Holdings Common Stock, dated September 29, 1997
issued by Holdings to Purchaser
6. Preferred Warrant Certificate with respect to 69,557
shares of Holdings Series A Stock, dated September 29,
1997 issued by Holdings to Purchaser
7. Contingent Common Warrant Certificate with respect to an
indeterminate number of shares of Holdings Common Stock,
dated September 29, 1997 issued by Holdings to Purchaser
8. 13% Senior Subordinated Note due 2005, dated September 29,
1997 issued by Borrower in the principal amount of
$18,000,000 to Purchaser
9. Intercreditor Subordination Agreement, dated September 26,
1997, among Fleet Bank, Purchaser, Borrower and Holdings
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10. Assignment, Pledge and Security Agreement dated September
26, 1997 of a $15,207,000 note to Fleet Bank from Borrower
11. First Amendment to March 27, 1997 Note dated September 26,
1997, by and between Fleet Bank and Borrower regarding a
$1,000,000 note
12. Second Amendment to Loan and Security Agreement dated
September 26, 1997 by and between Fleet Bank and Borrower
regarding a $3,354,167 note
13. Credit and Reimbursement Agreement Modification Agreement
No. 2 dated September 26, 1997, by and between Borrower
and Fleet Bank in connection with a letter of credit
issued by Fleet Bank in favor of Mellon Bank, FSB, as
Trustee, concerning the issuance of $2,460,000 industrial
revenue development bond
14. Sixth Amendment to Secured Revolving Line of Credit
Agreement dated September 26, 1997 by and between Fleet
Bank and Borrower regarding a note of up to $6,000,000
15. Note and Loan and Security Agreement Amendment No. 4 dated
September 26, 1997 by and between Borrower and Fleet Bank
regarding a $5,169,000 note
16. Promissory Note in the amount of $15,207,000 dated
September 30, 1997 by Holdings to Borrower
17. Loan Agreement dated September 29, 1997 among Newco,
Holdings and Dresdner Bank AG
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DECORA INDUSTRIES, INC.
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 hereunto duly authorized.
DECORA INDUSTRIES, INC.
(Registrant)
By: s/Timothy N. Burditt
--------------------------------
Timothy N. Burditt
Principal Accounting Officer
Dated: October 15, 1997
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EXHIBIT 99.1
AKTIENKAUFVERTRAG SHARE PURCHASE AGREEMENT
zwischen between
der
Baden-Wurttembergische Bank AG
Kleiner Schlo(beta)platz
70173 Stuttgart
-"Verau(beta)erer" - -"Seller -
und and
der Firma
Celeste 97 Vermogensverwaltungs GmbH
mit Sitz in Munchen with its seat in Munich
-"Erwerber" - -"Purchaser" -
Section 1
VERTRAGSGEGENSTAND
Im Handelsregister beim Amtsgericht Schwabisch-Hall ist unter HRB 167 die Firma
Konrad Hornschuch Aktiengesellschaft (nachfolgend: "Gesellschaft") mit Sitz in
Wei(beta)bach eingetragen. Das Grundkapital der Gesellschaft betragt DM
30.800.000,00 (in Worten: Deutsche Mark Drei(beta)ig Millionen
Achthundert-tausend). Es ist eingeteilt in 616.000 (in Worten:
Sechshundertsechzehntausend) Aktien im Nennwert von je DM 50,00 (in Worten:
Deutsche Mark Funfzig). Der Verau(beta)erer halt 135.378 (in Worten:
einhundertfunfunddrei(beta)igtausenddreihundertachtundsiebzig) Inhaberaktien im
Nennbetrag von je DM 50,00 (in Worten: Deutsche Mark Funfzig), welche seine
samtlichen an der Gesellschaft gehaltenen Aktien darstellen. Der Verau(beta)erer
halt die Aktien im eigenen Bestand.
SECTION 1
SCOPE OF THE AGREEMENT
In the Commercial Register of the Municipal Court of Schwabisch-Hall, docket no.
HRB 167 Konrad Hornschuch AG ("Company") with its seat in Weissbach is
registered. The stated capital of the Company amounts to DM 30,800,000.-
(deutschmarks thirty million eight hundred thousand). It is divided in 616,000
(six hundred and sixteen thousand) shares in the nominal amount of DM 50.00
(deutschmarks fifty), respectively. Seller owns 135,378 (one hundred and thirty
five thousand three hundred and seventy eight) bearer shares in the nominal
amount of DM 50.00 (deutschmarks fifty), respectively, which constitute all of
the shares being held by it. The Seller holds the shares in his own account.
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SHARE PURCHASE AGREEMENT 2
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SECTION 2
VERKAUF DER INHABERAKTIEN
(1) Der Verkaufer verkauft an den Erwerber alle in Section 1 naher
bezeichneten von ihm gehaltenen Inhaberaktien an der Gesellschaft sowie
alle mit diesen Aktien zusammenhangenden Gewinnanteilsscheine,
einschlie(beta)lich Erneuerungsscheinen (nachfolgend insgesamt "Aktien"
genannt). Der Erwerber nimmt den Verkauf hiermit an. Mitverkauft sind
samtliche an den Aktien bestehenden oder damit verbundenen Rechte und
Nebenrechte einschlie(beta)lich aller Gewinnbezugsrechte, insbesondere
auch das Gewinnbezugsrecht des bereits begonnenen Geschaftsjahres 1997.
(2) Der Verkauf der Aktien erfolgt mit Wirkung zum heutigen Tage. Von diesem
Zeitpunkt an gehen Nutzen, Lasten und Gefahr, insbesondere die
Dividendenanspruche, auch soweit sie Gewinnausschuttungen fur die
Zeitraume vor dem Ubertragungsstichtag betreffen, auf den Erwerber uber.
SECTION 2
SALE OF BEARER SHARES
(1) The Seller hereby sells to the Purchaser all bearer shares in the
company as described in sec. 1 hereof as well as all profit
participation coupons, including renewal coupons in these shares
(hereinafter referred to as "Shares"). The Purchaser hereby accepts the
sale. Also part of the sale are all rights and ancillary rights related
to the Shares, including all profit rights, particularly the profit
right of the current business year 1997.
(2) The sale of the shares shall be effective as of today. From this point
in time, beneficial ownership, in particular the claim to dividends,
including profit distributions for time periods prior to the transfer
date shall transfer to the Purchaser.
SECTION 3
VOLLZUG
(1) Der Verau(beta)erer und Erwerber sind sich uber den Ubergang des
Eigentums an den Aktien auf den Erwerber einig. Die Ubergabe erfolgt
durch Einlieferung der Aktien auf ein noch zu eroffnendes Depot des
Erwerbers beim Verau(beta)erer.
(2) Der Eigentumsubergang erfolgt unter der aufschiebenden Bedingung,
da(beta) der in Section 4 bezeichnete Kaufpreis vollstandig und
vorbehaltslos dem Konto des Verau(beta)erers bei der
Baden-Wurttembergischen Bank AG,
SECTION 3
EXECUTION
(1) Seller and Purchaser are in agreement regarding the transfer of the
property in the shares to the Purchaser. The transfer shall be
effectuated by transferring the shares into a deposit of the Purchaser
to be set up with Seller.
(2) The transfer of title shall be subject to the suspensive condition that
the purchase price referred to in sec. 4 herein is completely and
unrestrictedly credited to the account of the Seller with
Baden-Wurttember-
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SHARE PURCHASE AGREEMENT 3
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(BLZ 600 200 30) Nr. 1049804600, Verwendungszweck "Conny",
gutgeschrieben ist und die nach Section 12 notwendige Mitteilung uber
die Zustimmung des Board of Directors der Decora Industries Inc. in der
naher in Section 12 genannten Form erfolgt ist.
gische Bank AG (BLZ 600 200 30), no. 1049804600, payment purpose "Conny"
and the information regarding the consent of the board of directors of
Decora Industries Inc. according to sec. 12 has been made in the form
provided for in sec. 12.
SECTION 4
KAUFPREIS
(1) Der Kaufpreis fur jede vom Verau(beta)erer verkaufte Aktie betragt DM
110,- (in Worten: Deutsche Mark Einhundertzehn), insgesamt ergibt sich
dadurch ein Kaufpreis von DM 14.891.580,- (in Worten: Deutsche Mark
vierzehn Millionen achthunderteinundneunzigtausendfunf-hundertachtzig).
(2) Der Kaufpreis ist 5 Werktage nach erfolgter Mitteilung uber die
Zustimmung des Board of Directors der Decora Industries Inc. (Section
12) zur Zahlung fallig. Der Kaufpreis ist auf das inSection 3 genannte
Konto zu entrichten.
(3) Bei nicht fristgerechter Zahlung gema(beta)Abs. 2 schuldet der saumige
Erwerber vom Zeitpunkt der Falligkeit an Falligkeitszinsen in Hohe von 3
% p.a. uber dem jeweiligen Diskontsatz der Deutschen Bundesbank. Die
Geltendmachung eines daruber hinausgehenden Verzugsschadens bleibt
vorbehalten.
(4) Der Verau(beta)erer kann von dem Vertrag zurucktreten, wenn der Erwerber
nach Falligkeit des inSection 4 Abs. 1 genannten Betrages trotz
schriftlicher Mahnung und Setzung einer mindestens einwochigen
Zahlungsfrist mit der Zahlung des Betrages ganz oder teilweise in
Ruckstand gerat.
SECTION 4
PURCHASE PRICE
(1) The purchase price for each sold share amounts to DM 110.- (deutschmarks
one hundred and ten), therefore the total purchase price shall be DM
14,891,580.- (deutschmarks fourteen million eight hundred ninety one
thousand five hundred and eighty).
(2) The purchase price is due and payable five business days after receipt
of information regarding the consent of the board of directors of Decora
Inc. (sec. 12). The purchase price is payable on the account, referred
to in sec. 3 above.
(3) In case of default according to para. 2, the Purchaser shall pay as of
the due date interest amounting to 3 % above the respective applicable
discount rate of the Deutsche Bundesbank. The entitlement to claim
further rights due to the default remains uneffected.
(4) Seller is entitled to rescind from this agreement, if Purchaser after
the due date of the amount referred to in sec. 4 para. 1 and
notwithstanding a written notice with a payment period of at least one
week is partially or fully in default with the payment of the amounts.
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SHARE PURCHASE AGREEMENT 4
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(5) Die Parteien werden Verhandlungen fuhren mit dem Ziel der Finanzierung
von 50% des Kaufpreises durch ein vom Verau(beta)erer dem Erwerber
gewahrtes Darlehen.
(5) The parties will enter into negotiations with the purpose of financing
of 50% of the purchase price by a loan being granted by the Seller to
the Purchaser.
SECTION 5
ZUSICHERUNG
(1) Der Verau(beta)erer kann uber die Aktien uneingeschrankt verfugen. Die
Aktien sind nicht mit Rechten Dritter belastet, insbesondere
- - sind die Aktien und/oder Teile daraus weder gepfandet noch verpfandet
noch sicherheitshalber abgetreten;
- - bestehen keine Options- oder sonstige Rechte Dritter auf den Erwerb von
Aktien oder von Teilen derselben;
- - sind die Aktien nicht Gegenstand von Treuhandverhaltnissen mit Dritten
bzw. haben etwaige Treugeber dem Verkauf und der Ubertragung zugestimmt
und
- - unterliegen die Aktien oder Rechte daraus keinen Nie(beta)brauchsrechten
Dritter, Unterbeteiligungen, stillen Gesellschaften oder ahnlichen
Verhaltnissen.
(2) Sollte eine nach Abs. 1 abgegebene Zusicherung ganz oder teilweise
unrichtig, unvollstandig oder nicht erfullt sein, so kann der Erwerber
nach seiner Wahl Herabsetzung des Kaufpreises (Minderung) oder
Schadensersatz in Geld verlangen. Eine Ruckgangigmachung (Wandelung) ist
nur zulassig, wenn dem Erwerber ein Festhalten an dem Vertrag nicht mehr
zugemutet
SECTION 5
REPRESENTATIONS AND WARRANTIES
(1) The Seller can dispose of the Shares without any restrictions. The
Shares are not encumbered with third party rights, in particular
- - Shares and/or parts thereof are not seized or pledged nor transferred by
way of security;
- - there are no options or other third party rights with respect to the
acquisition of Shares or parts thereof;
- - the Shares are not subject to any fiduciary relationships with third
parties and no trustors have consented to the transfer thereof and
- - the Shares are not subject to any usufruct rights of third parties'
sub-participations, silent partnerships or similar legal relationships.
(2) Should any of the representations and warranties given according to
para. 1 be partially or fully incorrect, incomplete or not fulfilled,
then the Purchaser may choose to reduce the purchase price (purchase
price reduction) or claim for pecuniary damages. A rescission
(Rescission) is only permissible, if the Purchaser cannot further
adequately be expected to honor the agreement.
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SHARE PURCHASE AGREEMENT 5
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werden kann.
(3) Im ubrigen wird jede Gewahrleistung, soweit gesetzlich zugelassen,
ausgeschlossen.
(3) Moreover, any liability shall - to the degree permissible by law - be
excluded
SECTION 6
KOSTEN
Die Kosten fur die Hinzuziehung rechtlicher, steuerlicher und sonstiger Berater
im Zusammenhang mit dem Abschlu(beta) dieses Kaufvertrages tragt der jeweilige
Auftraggeber selbst.
SECTION 6
COSTS
The costs for legal, tax and other advisors in the context of the entering into
this purchase agreement have to be borne by the respective party giving an
assignment.
SECTION 7
KEINE NEBENVEREINBARUNGEN,
SCHRIFTFORM
Dieser Vertrag und die darin erwahnten Anlagen enthalten alle Vereinbarungen
zwischen den Parteien bezuglich des Gegenstandes dieses Vertrages. Anderungen
und Erganzungen dieses Vertrages bedurfen zu ihrer Wirksamkeit der Schriftform,
sofern nicht gesetzlich eine strengere Form vorgeschrieben ist. Dies gilt auch
fur die Abbedingung der Schriftform.
SECTION 7
NO ORAL SUBSIDIARY AGREEMENTS,
WRITTEN FORM
This Agreement and the Exhibits mentioned herein contain all agreements between
the parties with regard to the subject matter of this Agreement. Modifications
and amendments to this Agreement have to be made in writing in order to be
valid, unless a more stringent form is provided for by law. This also applies
with regard to the waiver of the written form requirement.
SECTION 8
SALVATORISCHE KLAUSEL
(1) Sollte eine Bestimmung dieses Vertrages einschlie(beta)lich aller
kunftigen aufgenommenen Bestimmungen ganz oder teilweise nichtig,
unwirksam oder undurchfuhrbar sein oder werden, so wird dadurch die
Wirksamkeit der ubrigen Bestimmungen nicht beruhrt. Die Beteiligten sind
in einem solchen Fall verpflichtet, an der Schaffung von Bestimmungen
mitzuwirken, durch die ein der nichtigen, unwirksamen oder
undurchfuhrbaren Bestimmung wirtschaftlich moglichst nahe kommendes
Ergebnis
SECTION 8
SEVERABILITY
(1) Should a provision of this Agreement including all future provisions be
partially or fully invalid or ineffective or not applicable, then this
shall have no impact on the validity of the other provisions of this
Agreement. The parties are obliged to engage in such a manner to create
new provisions, which from an economic point of view get as close as
possible to legally valid provisions which substitute the invalid,
ineffective or non-applicable provision.
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SHARE PURCHASE AGREEMENT 6
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rechtswirksam erzielt wird.
(2) Sind Bestimmungen dieses Vertrages auslegungs- oder erganzungsbedurftig,
so hat die Auslegung oder Erganzung in der Weise zu erfolgen,
da(beta)sie dem Geist, Inhalt und Zweck dieses Vertrages bestmoglich
gerecht wird. Dabei soll diejenige Regelung gelten, die die Beteiligten
bei Abschlu(beta)dieses Vertrages getroffen hatten, wenn sie die
Auslegungs- oder Erganzungsbedurftigkeit erkannt hatten.
(2) If provisions of this Agreement are subject to interpretation or
additions, the interpretation or addition has to be done in such a
manner that the spirit, contents and purpose of this agreement shall be
achieved in the best possible manner. Such provision shall apply, into
which the parties would have entered as of the conclusion of this
Agreement had they recognized the necessity to interpret or supplement
this Agreement.
SECTION 9
ANWENDBARES RECHT
Auf diesen Vertrag findet, soweit nicht zwingende gesetzliche Bestimmungen
entgegenstehen, deutsches Recht Anwendung.
SECTION 9
APPLICABLE LAW
This Agreement shall be subject to German law unless mandatory other legal
provisions prevail.
SECTION 10
GERICHTSSTAND
Als Gerichtsstand fur samtliche Streitigkeiten aus oder im Zusammenhang mit
diesem Vertrag wird Stuttgart vereinbart.
SECTION 10
FORUM
Forum for any and all disputes out of or in relation to this agreement shall be
Stuttgart.
SECTION 11
VERTRAULICHKEIT UND INFORMATIONEN
Der Inhalt dieses Vertrages ist von den Parteien vollstandig vertraulich zu
behandeln; er darf jedoch offengelegt werden gegenuber Angestellten oder
Beratern der jeweiligen Partei, die einer vergleichbaren
Vertraulichkeitsverpflichtung gegenuber der jeweils anderen Partei unterliegen
oder gegenuber Steuer- und anderen Behorden, soweit dies rechtlich erforderlich
ist. Die Offenlegung ist auch insoweit gestattet, als nach Ansicht des Erwerbers
im Rahmen des beabsichtigten
SECTION 11
CONFIDENTIALITY
The subject matter of this agreement is to be treated strictly confidential by
the parties. It may, however, be disclosed towards employees or advisors of the
respective party, who are subject to a similar obligation to maintain
confidentiality towards the respective party or towards tax and other
authorities as far as this is legally required. A disclosure is also permissible
as according to the opinion of the Purchaser information, in particular the
purchase price, shall be disclosed to other shareholders in the
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SHARE PURCHASE AGREEMENT 7
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freiwilligen Kaufangebotes durch den Erwerber an die au(beta)enstehenden
Aktionare Informationen, insbesondere zum Kaufpreis, offenzulegen sind.
course of the intended voluntary tender offer.
SECTION 12
AUFSCHIEBENDE BEDINGUNG
Die Wirksamkeit dieses Vertrages ist aufschiebend dadurch bedingt, da(beta) der
Erwerber gegenuber dem Verau(beta)erer die erfolgte Zustimmung des Board of
Directors der Decora Industries Inc., der Muttergesellschaft des Erwerbers, zum
Abschlu(beta) dieses Vertrages schriftlich oder per Telefax mitteilt. Die
Mitteilung des Erwerbers uber die Zustimmung kann lediglich bis zum 15.
September 1997 erklart werden. Fur die Frist ist der Eingang des Schreibens bzw.
des Telefax-Schreibens des Erwerbers beim Verau(beta)erer ma(beta)gebend. Auf
die tatsachliche Beschlu(beta)fassung durch den Board of Directors wie auch auf
die Wirksamkeit des Beschlusses kommt es nicht an.
SECTION 12
SUSPENSIVE CONDITION
The effectiveness of this Agreement shall be subject to the suspensive condition
that the Purchaser shall inform the Seller in writing or via telefax about the
consent of the Board of Directors of Decora Industries Inc., the parent company
of the Purchaser to the entering into this Agreement. This information of the
Purchaser regarding the consent can only be declared until September 15, 1997.
For the term, the receipt of a letter or a telefax letter of the Purchaser by
the Seller is decisive. The actual consent by the Board of Directors as well as
the effectiveness of such resolution is not relevant.
SECTION 13
GRUNDERWERBSTEUER
Etwaig anfallende Grunderwerbsteuer hat der Erwerber allein zu tragen.
SECTION 13
REAL ESTATE TRANSFER TAX
Any real estate transfer tax shall be borne exclusively by Purchaser.
SECTION 14
BUNDESKARTELLAMT
Eine etwaig erforderliche Anzeige nach Section 23 GWB an das Kartellamt oder die
Erfullung anderer kartellrechtlicher Vorschriften werden von den
Vertragsparteien in gegenseitiger Abstimmung gepruft und erledigt. Etwaige damit
zusammenhangende Kosten gehen zu Lasten des Erwerbers.
SECTION 14
ANTI-TRUST AUTHORITY
Any filing according to sec. 23 Merger Control Act with the cartel office or the
fulfillment of other provisions of the cartel office shall be checked and
fulfilled by both parties in mutual coordination. Any costs related thereto
shall be borne by Purchaser.
<PAGE> 8
SHARE PURCHASE AGREEMENT 8
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SECTION 15
SCHULDBEITRITT
Fur alle Zahlungsverpflichtungen des Erwerbers aus diesem Vertrage ubernimmt die
Decora Industries Inc., 1 Millstreet Fort Edward in New York/USA, - als
kunftiger Muttergesellschaft des Erwerbers - die gesamtschuldnerische
Mithaftung. Sie erbringt den Nachweis der ordnungsgema(beta)en
Vertretungsberechtigung der bei Unterzeichnung dieses Vertrages fur die kunftige
Muttergesellschaft unterzeichnenden Personen durch Vorlage einer im
internationalen Rechtsverkehr ublichen anwaltlichen Bestatigung
SECTION 15
COLLATERAL PROMISE
For all payment obligations of the acquiror arising from this agreement, Decora
Industries Inc., 1 Millstreet Fort Edward in New York/USA, as the future parent
company of the acquiror, shall take over the joint and several liability. It
will produce proof of proper entitlement of representation of the signing
parties with the signing of this agreement for the future holding company
through the presentation of a lawyer's certificate of confirmation customary in
international law.
SECTION 16
SPRACHE
A. Nur die deutsche Fassung dieses Vertrages ist verbindlich. Die englische
Fassung stellt lediglich eine zu Informationszwecken erstellte Ubersetzung des
ma(beta)geblichen deutschen Textes dar.
SECTION 16
LANGUAGE
A. Only the German version of this Agreement will be binding. The English
version constitutes merely a translation of the relevant German text for
information purposes.
SHARE PURCHASE AGREEMENT 8
- --------------------------------------------------------------------------------
Stuttgart,
den September 1997 this day of September 1997
--------------------------------------------------------
Erwerber Purchaser
------------------------------------------------------
Verau(beta)erer Seller
------------------------------------------------------
Decora Industries, Inc.
<PAGE> 1
EXHIBIT 99.2
AKTIENKAUFVERTRAG SHARE PURCHASE AGREEMENT
zwischen between
der
Kunz Holding GmbH & Co. KG
Kelterstra(beta)e 51
72669 Unterensingen
-"Verau(beta)erer" - -"Seller" -
und and
der Firma
Celeste 97 Vermogensverwaltungs GmbH
mit Sitz in Munchen with its seat in Munich
-"Erwerber" - -"Purchaser" -
SECTION 1
VERTRAGSGEGENSTAND
Im Handelsregister beim Amtsgericht Schwabisch-Hall ist unter HRB 167 die Firma
Konrad Hornschuch Aktiengesellschaft (nachfolgend: "Gesellschaft") mit Sitz in
Wei(beta)bach eingetragen. Das Grundkapital der Gesellschaft betragt DM
30.800.000,00 (in Worten: Deutsche Mark Drei(beta)ig Millionen
Achthundert-tausend). Es ist eingeteilt in 616.000 (in Worten:
Sechshundertsechzehntausend) Aktien im Nennwert von je DM 50,00 (in Worten:
Deutsche Mark Funfzig). Der Verau(beta)erer halt 315.370 (in Worten:
Dreihundertfunfzehntausenddreihundert-siebzig) Inhaberaktien im Nennbetrag von
je DM 50,00 (in Worten: Deutsche Mark Funfzig), welche seine samtlichen an der
Gesellschaft gehaltenen Aktien darstellen. Die vom Verau(beta)erer gehaltenen
Aktien werden zur Zeit bei der Deutsche Bank AG, Filiale Stuttgart, im Depot des
Verau(beta)erers unter der Nr. 123 700 700 gefuhrt.
SECTION 1
SCOPE OF THE AGREEMENT
In the Commercial Register of the Municipal Court of Schwabisch-Hall, docket no.
HRB 167 Konrad Hornschuch AG ("Company") with its seat in Weissbach is
registered. The stated capital of the Company amounts to DM 30,800,000.-
(deutschmarks thirty million eight hundred thousand). It is divided in 616,000
(six hundred and sixteen thousand) shares in the nominal amount of DM 50.00
(deutschmarks fifty), respectively. Seller owns 315,370 (three hundred and
fifteen thousand three hundred and seventy) bearer shares in the nominal amount
of DM 50.00 (deutschmarks fifty), respectively, which constitute all of the
shares being held by it. The shares held by Seller are presently deposited with
Deutsche Bank AG, Stuttgart branch, in Seller's deposit no. 123 700 700.
<PAGE> 2
SHARE PURCHASE AGREEMENT 2
- --------------------------------------------------------------------------------
SECTION 2
VERKAUF DER INHABERAKTIEN
(1) Der Verkaufer verkauft an den Erwerber alle inSection1 naher
bezeichneten von ihm gehaltenen Inhaberaktien an der Gesellschaft sowie
alle mit diesen Aktien zusammenhangenden Gewinnanteilsscheine,
einschlie(beta)lich Erneuerungsscheinen (nachfolgend insgesamt "Aktien"
genannt). Der Erwerber nimmt den Verkauf hiermit an. Mitverkauft sind
samtliche an den Aktien bestehenden oder damit verbundenen Rechte und
Nebenrechte einschlie(beta)lich aller Gewinnbezugsrechte, insbesondere
auch das Gewinnbezugsrecht des bereits begonnenen Geschaftsjahres 1997.
(2) Der Verkauf der Aktien erfolgt mit Wirkung zum heutigen Tage. Von diesem
Zeitpunkt an gehen Nutzen, Lasten und Gefahr, insbesondere die
Dividendenanspruche, auch soweit sie Gewinnausschuttungen fur die
Zeitraume vor dem Ubertragungsstichtag betreffen, auf den Erwerber uber.
SECTION 2
SALE OF BEARER SHARES
(1) The Seller hereby sells to the Purchaser all bearer shares in the
company as described in sec. 1 hereof as well as all profit
participation coupons, including renewal coupons in these shares
(hereinafter referred to as "Shares"). The Purchaser hereby accepts the
sale. Also party to the sale are all rights and ancillary rights,
including all profit rights, particularly the profit right of the
current business year 1997.
(2) The sale of the shares shall be effective as of today. From this point
in time, beneficial ownership, in particular the claim to dividends,
including profit distributions for time periods prior to the transfer
date shall transfer to the Purchaser.
SECTION 3
VOLLZUG
(1) Der Verau(beta)erer und Erwerber sind sich uber den Ubergang des
Eigentums an den Aktien auf den Erwerber einig. Der Verau(beta)erer
tritt hiermit seinen Anspruch gegen die Deutsche Bank AG, Filiale
Stuttgart, auf Herausgabe der bei der Deutsche Bank AG im Depot Nr. 123
700 700 verbuchten Aktien ab.
(2) Der Eigentumsubergang erfolgt unter der aufschiebenden Bedingung,
da(beta) die in Section 5 bezeichneten Betrage vollstandig und
vorbehaltslos dem
SECTION 3
EXECUTION
(1) Seller and Purchaser are in agreement regarding the transfer of the
property in the shares to the Purchaser. The Seller assigns his claim
against Deutsche Bank AG, Stuttgart branch, to transfer the Shares
deposited in the deposit no. 123 700 700 with Deutsche Bank AG.
(2) The transfer of title shall be subject to the suspensive condition that
the amounts referred to in sec. 5 herein are completely and unre-
<PAGE> 3
SHARE PURCHASE AGREEMENT 3
- --------------------------------------------------------------------------------
Konto des Verau(beta)erers bei der Deutsche Bank AG, Filiale Stuttgart, Nr. 123
700 700 gutgeschrieben sind und die nach Section 14 notwendige Mitteilung uber
die Zustimmung des Board of Directors der Decora Industries Inc. in der naher in
Section 14 genannten Form erfolgt ist. In der diesem Kaufvertrag beigefugten
Anlage bestatigt die Deutsche Bank AG, Filiale Stuttgart, da(beta) sie die
Aktien zugunsten des Erwerbers gesperrt halt und an diesen herausgibt, sobald
die vorgenannte aufschiebende Bedingung gema(beta) Mitteilung durch den
Verau(beta)erer eingetreten ist.
strictedly credited to the account of the Seller with Deutsche Bank AG,
Stuttgart branch, no. 123 700 700 and the information regarding the consent of
the board of directors of Decora Industries Inc. according to sec. 14 has been
made in the form provided for in sec. 14. In the exhibit to this purchase
agreement, Deutsche Bank, Stuttgart branch, confirms that the disposition of the
Shares has been prohibited for the benefit of the Purchaser and that the Shares
will be transferred to Purchaser as soon as the suspensive condition according
to an information of the Seller has been met.
SECTION 4
WETTBEWERBSVERBOT
(1) Der Verau(beta)erer verpflichtet sich auf die Dauer von 4 Jahren nach
Unterzeichnung dieses Vertrages, im Tatigkeitsbereich der Gesellschaft
und den mit ihr verbundenen Unternehmen ("Gesellschaften") keine
Konkurrenzunternehmen zu erwerben, Betriebe zu eroffnen oder
unmittelbare oder mittelbare Beteiligungen an einem
Konkurrenzunternehmen - mit Ausnahme des Erwerbs von nicht mehr als 5%
der borsennotierten Aktien eines Unternehmens - zu erwerben, die im
bisherigen raumlichen und sachlichen Tatigkeitsbereich der Gesellschaft
und der Gesellschaften tatig sind und im Tatigkeitsfeld der Gesellschaft
und der Gesellschaften mit nachfolgender Ausnahme jeglichen Wettbewerb
zu unterlassen. Der sachliche wie auch raumliche Tatigkeitsbereich
ergibt sich aus dem dem Erwerber bekannten Geschaftsbericht der
Gesellschaft des Geschaftsjahres 1996 und den
SECTION 4
PROHIBITION OF COMPETITION
(1) The Seller hereby undertakes for a period of 4 years after signing of
this agreement, not to acquire competitive businesses, set up
businesses, or acquire directly or indirectly participations in a
competitor, which undertake business in the present local and factual
scope of business activities of the Company and the Companies with the
exception of the purchase of not more than 5% of the shares of a
publicly quoted company and not to compete with the Company and the
Companies within their business scope with the following exception. The
factual and local scope of business activities can be derived from the
annual report of the Company for the year 1996 and the business
divisions referred to therein which are known to the Purchaser. This
prohibition to compete does not apply to the degree that some companies
affiliated with the Seller according to sec. 15 of the Stock Corporation
Act are al-
<PAGE> 4
SHARE PURCHASE AGREEMENT 4
- --------------------------------------------------------------------------------
dort aufgefuhrten Geschaftsbereichen. Das Wettbewerbsverbot greift
jedoch insoweit nicht, als einige mit dem Verau(beta)erer verbundene
Unternehmen i.S. Section 15 AktG bereits auf Geschaftsfeldern der Konrad
Hornschuch Aktiengesellschaft und den mit der Konrad Hornschuch
Aktiengesellschaft verbundenen Unternehmen tatig sind. Dies betrifft
ausschlie(beta)lich die W.K.P. Wurttembergische Kunststoffplattenwerke
GmbH & Co. KG, Unterensingen, und die CDM Lamines Inc. Drummondville,
Quebec/Kanada mit ihren Produkten: bedruckte und/oder lackierte
Dekorfolien auf Basis von Papier der Kunststoffen zur Beschichtung von
Holzwerkstoffen oder Metall.
ready in business in certain business divisions of Konrad Hornschuch
Aktiengesellschaft and companies affiliated with Konrad Hornschuch
Aktiengesellschaft. This exclusively refers to W.K.P. Wurttembergische
Kunststoffplattenwerke GmbH & Co. KG, Unterensingen, and CDM Lamines
Inc. Drummonville, Quebec/Canada with their products printed and/or
painted decorative folios on the basis of paper or synthetic materials
for coating of timber or metal.
(2) Der Verau(beta)erer steht dafur ein, da(beta) das vorstehende
Wettbewerbs-, Erwerbs- und Beteiligungsverbot von ihm wie auch von den
ihm verbundenen Unternehmen sowie seinen Gesellschaftern so eingehalten
wird, als seien diese Unternehmen bzw. seine Gesellschafter selbst
gegenuber den Gesellschaften zur Unterlassung von Wettbewerb, Erwerb und
Beteiligung verpflichtet.
(3) In jedem Fall der Verletzung des Wettbewerbs-, Erwerbs- wie auch
Beteiligungsverbots gema(beta)Abs. 1 und Abs. 2 hat der Verau(beta)erer
an den Erwerber eine Vertragsstrafe in Hohe von DM 100.000,- (in Worten:
Deutsche Mark Einhunderttausend) zu zahlen. Bei dauerhafter Verletzung
dieses Wettbewerbs von jeweils mehr als zwei Wochen gilt fur Zwecke des
vorstehenden Satzes jeder Zweiwochenzeitraum als erneute Verletzung
dieses Wettbewerbsverbots. Anspruche des Erwerbers auf Ersatz eines
weitergehenden Schadens oder auf
(2) The Seller hereby guarantees that the above mentioned competition,
purchase and participation prohibitions shall also be respected by its
affiliated companies as well as its shareholders as if these companies
or the shareholders, respectively, themselves would have entered
vis-a-vis the Companies into the obligation not to compete, to acquire
or to participate.
(3) In each case of a violation of the competition, acquire and
participation prohibitions according to para. 1 and 2, Seller shall pay
to Purchaser a contractual penalty amounting to DM 100,000.-
(deutschmarks one hundred thousand). A permanent breach of the
prohibition to compete of more than two weeks, respectively, each two
week period shall be deemed to be a new violation of this prohibition to
compete. The Purchaser's claims to recover damages or forbearance remain
unaffected.
<PAGE> 5
SHARE PURCHASE AGREEMENT 5
- --------------------------------------------------------------------------------
Unterlassung bleiben unberuhrt.
SECTION 5
KAUFPREIS, VERGUTUNG
(1) Der Kaufpreis fur jede vom Verau(beta)erer verkaufte Aktie betragt DM
110,- (in Worten: Deutsche Mark Einhundertzehn), insgesamt ergibt sich
dadurch ein Kaufpreis von DM 34.690.700,- (in Worten: Deutsche Mark
Vierunddrei(beta)igmillionensechshundertneunzigtausend-siebenhundert.
(2) Die Vergutung fur die Einhaltung des Wettbewerbsverbots
gema(beta)Section 4 betragt DM 12.000.000,- (in Worten: Deutsche Mark
Zwolfmillionen) zuzuglich 15% Umsatzsteuer DM 1.800.000.- (in Worten:
Deutsche Mark Einemillionachthunderttausend) und damit brutto DM
13.800.000,- (in Worten: Deutsche Mark
Dreizehnmillionenachthunderttausend).
(3) Der Kaufpreis gema(beta)vorstehendem Abs. 1 sowie die Vergutung
gema(beta) vorstehendem Abs. 2 ist 5 Werktage nach erfolgter Mitteilung
uber die Zustimmung des Board of Directors der Decora Industries Inc.
(Section 14) zur Zahlung fallig. Der Kaufpreis ist auf das inSection 3
genannte Konto bei der Deutsche Bank AG, Filiale Stuttgart, zu
entrichten.
(4) Bei nicht fristgerechter Zahlung schuldet der saumige Erwerber vom
Zeitpunkt der Falligkeit an Falligkeitszinsen in Hohe von 3 % p.a. uber
dem jeweiligen Diskontsatz der Deutschen Bundesbank. Die Geltendmachung
eines daruber hinausgehenden Verzugsschadens bleibt vorbehalten.
SECTION 5
PURCHASE PRICE, REMUNERATION
(1) The purchase price for each sold share amounts to DM 110.- (deutschmarks
one hundred and ten), therefore the total purchase price shall be DM
34,690,700.- (deutschmarks thirty four million six hundred ninety
thousand seven hundred).
(2) The remuneration for the observance of the prohibition to compete
according to sec. 4 amounts to DM 12,000,000.- (deutschmarks twelve
million) plus 15% value added tax of DM 1,800,000.- (deutschmarks one
million eight hundred thousand), therefore a gross total of DM
13,800,000.- (deutschmarks thirteen million eight hundred thousand).
(3) The purchase price according to the aforementioned para. 1 as well as
the remuneration according to para. 2 as above is due and payable five
business days after receipt of information regarding the consent of the
board of directors of Decora Inc. (sec. 14). The purchase price is
payable on the account with Deutsche Bank AG, Stuttgart branch, referred
to in sec. 3 above.
(4) In case of default, the Purchaser shall pay as of the due date interest
amounting to 3% above the respective applicable discount rate of the
Deutsche Bundesbank. The entitlement to claim further rights due to the
default remains uneffected.
<PAGE> 6
SHARE PURCHASE AGREEMENT 6
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(5) Der Verau(beta)erer kann von dem Vertrag zurucktreten, wenn der Erwerber
nach Falligkeit der inSection 5 Abs. 1 und 2 genannten Betrage trotz
schriftlicher Mahnung und Setzung einer mindestens einwochigen
Zahlungsfrist mit der Zahlung der Betrage ganz oder teilweise in
Ruckstand gerat.
(5) Seller is entitled to rescind from this agreement, if purchaser after
the due date of the amounts referred to in sec. 5 para. 1 and 2 and
notwithstanding the written notice with a payment period of at least one
week is partially or fully in default with the payment of the amounts.
SECTION 6
ZUSICHERUNG
(1) Der Verau(beta)erer kann uber die Aktien uneingeschrankt verfugen. Die
Aktien stellen nicht das ganze oder nahezu ganze Vermogen des
Verau(beta)erers i.S.d. Section 419 BGB dar. Die Aktien sind nicht mit
Rechten Dritter belastet, insbesondere
- sind die Aktien und/oder Teile daraus weder gepfandet noch
verpfandet noch sicherheitshalber abgetreten;
- bestehen keine Options- oder sonstige Rechte Dritter auf den
Erwerb von Aktien oder von Teilen derselben;
- sind die Aktien nicht Gegenstand von Treuhandverhaltnissen mit
Dritten bzw. haben etwaige Treugeber dem Verkauf und der
Ubertragung zugestimmt und
- unterliegen die Aktien oder Rechte daraus keinen
Nie(beta)brauchsrechten Dritter, Unterbeteiligungen, stillen
Gesellschaften oder ahnlichen Verhaltnissen.
(2) Sollte eine nach Abs. 1 abgegebene Zusicherung ganz oder teilweise
unrichtig, unvollstandig oder nicht
SECTION 6
REPRESENTATIONS AND WARRANTIES
(1) The Seller can dispose of the Shares without any restrictions. The
Shares do not represent the whole or almost the whole of the assets of
the Seller in the sense of sec. 419 of the German Civil Code. The shares
are not encumbered with third party rights, in particular
- Shares and/or parts thereof are not seized or pledged nor
transferred by way of security;
- there are no options or other third party rights with respect to
the acquisition of Shares or parts thereof;
- the Shares are not subject to any fiduciary relationships with
third parties and no trustors have consented to the transfer
thereof and
- the Shares are not subject to any usufruct rights of third
parties' sub-participations, silent partnerships or similar
legal relationships.
(2) Should any of the representations and warranties given according to
para. 1 be partially or fully incor-
<PAGE> 7
SHARE PURCHASE AGREEMENT 7
- --------------------------------------------------------------------------------
erfullt sein, so kann der Erwerber nach seiner Wahl Herabsetzung des Kaufpreises
(Minderung) oder Schadensersatz in Geld verlangen. Eine Ruckgangigmachung
(Wandelung) ist nur zulassig, wenn dem Erwerber ein Festhalten an dem Vertrag
nicht mehr zugemutet werden kann.
(3) Im ubrigen wird jede Gewahrleistung, soweit gesetzlich zugelassen,
ausgeschlossen.
rect, incomplete or not fulfilled, then the Purchaser may choose to reduce the
purchase price (purchase price reduction) or claim for pecuniary damages. A
rescission (Rescission) is only permissible, if the Purchaser cannot further
adequately be expected to honor the agreement.
(3) Moreover, any liability shall - to the degree permissible by law - be
excluded.
SECTION 7
AUFSICHTSRAT
Der Verau(beta)erer stellt in geeigneter Weise sicher, da(beta) die von ihm
"entsandten" Mitglieder des Aufsichtsrates mit Wirksamkeit dieses Vertrages
unverzuglich mit sofortiger Wirkung, hilfsweise satzungsgema(beta) ihr
Aufsichtsratsmandat niederlegen werden. Bei den vom Verau(beta)erer "entsandten"
Aufsichtsratsmitgliedern handelt es sich um Herrn Eberhard Christian Kunz, Herrn
Dr. Wilhelm Dengler und Herrn Helmut Menges. Der Erwerber wird sein Stimmrecht
in der nachsten Hauptversammlung der Gesellschaft dahingehend ausuben, da(beta)
den vorgenannten Aufsichtsratsmitgliedern Entlastung erteilt wird.
SECTION 7
SUPERVISORY BOARD
Seller shall appropriately oversee that the supervisory board members which have
been "delegated" by him will resign from their mandates as of the day this
contract becomes effective without delay and immediate effect, however in any
event according to the rules of the articles of association. The members of the
supervisory board "delegated" by the Seller are Mr. Eberhad Christian Kunz, Dr.
Wilhelm Dengler and Mr. Helmut Menges. The Purchaser will exercise his voting
rights in the next general assembly of the Company in such a manner that the
supervisory board members referred to above will be discharged from their
obligations.
SECTION 8
KOSTEN
Die Kosten fur die Hinzuziehung rechtlicher, steuerlicher und sonstiger Berater
im Zusammenhang mit dem Abschlu(beta) dieses Kaufvertrages tragt der jeweilige
Auftraggeber selbst.
SECTION 8
COSTS
The costs for legal, tax and other advisors in the context of the entering into
this purchase agreement have to be borne by the respective party giving an
assignment.
<PAGE> 8
SHARE PURCHASE AGREEMENT 8
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SECTION 9
KEINE NEBENVEREINBARUNGEN,
SCHRIFTFORM
Dieser Vertrag und die darin erwahnten Anlagen enthalten alle Vereinbarungen
zwischen den Parteien bezuglich des Gegenstandes dieses Vertrages. Anderungen
und Erganzungen dieses Vertrages bedurfen zu ihrer Wirksamkeit der Schriftform,
sofern nicht gesetzlich eine strengere Form vorgeschrieben ist. Dies gilt auch
fur die Abbedingung der Schriftform.
SECTION 9
NO ORAL SUBSIDIARY AGREEMENTS,
WRITTEN FORM
This Agreement and the Exhibits mentioned herein contain all agreements between
the parties with regard to the subject matter of this Agreement. Modifications
and amendments to this Agreement have to be made in writing in order to be
valid, unless a more stringent form is provided for by law. This also applies
with regard to the waiver of the written form requirement.
SECTION 10
SALVATORISCHE KLAUSEL
(1) Sollte eine Bestimmung dieses Vertrages einschlie(beta)lich aller
kunftigen aufgenommenen Bestimmungen ganz oder teilweise nichtig,
unwirksam oder undurchfuhrbar sein oder werden, so wird dadurch die
Wirksamkeit der ubrigen Bestimmungen nicht beruhrt. Die Beteiligten sind
in einem solchen Fall verpflichtet, an der Schaffung von Bestimmungen
mitzuwirken, durch die ein der nichtigen, unwirksamen oder
undurchfuhrbaren Bestimmung wirtschaftlich moglichst nahe kommendes
Ergebnis rechtswirksam erzielt wird.
(2) Sind Bestimmungen dieses Vertrages auslegungs- oder erganzungsbedurftig,
so hat die Auslegung oder Erganzung in der Weise zu erfolgen,
da(beta)sie dem Geist, Inhalt und Zweck dieses Vertrages bestmoglich
gerecht wird. Dabei soll diejenige Regelung gelten, die die Beteiligten
bei Abschlu(beta) dieses Vertrages getroffen hatten, wenn sie die
Auslegungs- oder Erganzungsbedurftigkeit erkannt hatten.
SECTION 10
SEVERABILITY
(1) Should a provision of this Agreement including all future provisions be
partially or fully invalid or ineffective or not applicable, then this
shall have no impact on the validity of the other provisions of this
Agreement. The parties are obliged to engage in such a manner to create
new provisions, which from an economic point of view get as close as
possible to legally valid provisions which substitute the invalid,
ineffective or non-applicable provision.
(2) If provisions of this Agreement are subject to interpretation or
additions, the interpretation or addition has to be done in such a
manner that the spirit, contents and purpose of this agreement shall be
achieved in the best possible manner. Such provision shall apply, into
which the parties would have entered as of the conclusion of this
Agreement had they recognized the necessity to interpret or supplement
this Agreement.
<PAGE> 9
SHARE PURCHASE AGREEMENT 9
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SECTION 11
ANWENDBARES RECHT
Auf diesen Vertrag findet, soweit nicht zwingende gesetzliche Bestimmungen
entgegenstehen, deutsches Recht Anwendung.
SECTION 11
APPLICABLE LAW
This Agreement shall be subject to German law unless mandatory other legal
provisions prevail.
SECTION 12
GERICHTSSTAND
Als Gerichtsstand fur samtliche Streitigkeiten aus oder im Zusammenhang mit
diesem Vertrag wird Stuttgart vereinbart.
SECTION 12
FORUM
Forum for any and all disputes out of or in relation to this agreement shall be
Stuttgart.
SECTION 13
VERTRAULICHKEIT UND INFORMATIONEN
(1) Der Inhalt dieses Vertrages ist von den Parteien vollstandig vertraulich
zu behandeln; er darf jedoch offengelegt werden gegenuber Angestellten
oder Beratern der jeweiligen Partei, die einer vergleichbaren
Vertraulichkeitsverpflichtung gegenuber der jeweils anderen Partei
unterliegen oder gegenuber Steuer- und anderen Behorden, soweit dies
rechtlich erforderlich ist. Die Offenlegung ist auch insoweit gestattet,
als nach Ansicht des Erwerbers im Rahmen des beabsichtigten freiwilligen
Kaufangebotes durch den Erwerber an die au(beta)enstehenden Aktionare
Informationen, insbesondere zum Kaufpreis, offenzulegen sind.
2) Dem Erwerber ist ab Unterzeichnung dieses Vertrages gestattet, sich beim
Vorstand der Gesellschaft Informationen uber den augenblicklichen
wirtschaftlichen Stand der Gesellschaft wie auch uber Aussichten und
Gewinnerwartungen
SECTION 13
CONFIDENTIALITY
(1) The subject matter of this agreement is to be treated strictly
confidential by the parties. It may, however, be disclosed towards
employees or advisors of the respective party, who are subject to a
similar obligation to maintain confidentiality towards the respective
party or towards tax and other authorities as far as this is legally
required. A disclosure is also permissible as according to the opinion
of the Purchaser information, in particular the purchase price, shall be
disclosed to other shareholders in the course of the intended voluntary
tender offer.
(2) Purchaser is entitled to receive, as of the day of the signing of this
Agreement information from the executive board of the Company regarding
the present economic situation of the Company as well as information
regarding the fore-
<PAGE> 10
SHARE PURCHASE AGREEMENT 10
- --------------------------------------------------------------------------------
der Gesellschaft geben zu lassen. Der Verau(beta)erer wird den dazu notwendigen
Kontakt zwischen Vorstand und Erwerber herstellen
cast and profit expectations of the Company. Seller will establish the necessary
contact between the executive board and the Purchaser.
SECTION 14
AUFSCHIEBENDE BEDINGUNGEN
(1) Die Wirksamkeit dieses Vertrages ist aufschiebend dadurch bedingt,
da(beta)der Erwerber gegenuber dem Verau(beta)erer die erfolgte
Zustimmung des Board of Directors der Decora Industries Inc., 1
Millstreet Fort Edward in New York/USA, der kunftigen Muttergesellschaft
des Erwerbers, zum Abschlu(beta)dieses Vertrages schriftlich oder per
Telefax (Telefax-Nr.: 07022 / 96 74 30) mitteilt. Die Mitteilung des
Erwerbers uber die Zustimmung kann lediglich bis zum 15. September 1997
erklart werden. Fur die Frist ist der Eingang des Schreibens bzw. des
Telefax-Schreibens des Erwerbers beim Verau(beta)erer ma(beta)gebend.
Auf die tatsachliche Beschlu(beta)fassung durch den Board of Directors
wie auch auf die Wirksamkeit des Beschlusses kommt es nicht an.
(2) Sollte die vorstehende Bedingung nicht fristgerecht eintreten und damit
kein Kaufvertrag zustandegekommen sein, ist der Erwerber verpflichtet,
an den Verau(beta)erer eine einmalige Ausgleichszahlung von DM
1.000.000,- (in Worten: Deutsche Mark Eine Million) zu zahlen. Daruber
hinausgehende Anspruche des Verau(beta)erers, gleich aus welchem
Rechtsgrund, sind ausgeschlossen.
SECTION 14
SUSPENSIVE CONDITIONS
(1) The effectiveness of this Agreement shall be subject to the suspensive
condition that the Purchaser shall inform the Seller in writing or via
telefax (telefax no. 07022 / 96 74 30) about the consent of the Board of
Directors of Decora Industries Inc., 1 Millstreet Fort Edward in New
York/USA, the future parent company of the Purchaser to the entering
into this Agreement. This information of the Purchaser regarding the
consent can only be declared until September 15, 1997. For the term, the
receipt of a letter or a telefax letter of the Purchaser by the Seller
is decisive. The actual consent by the Board of Directors as well as the
effectiveness of such resolution is not relevant.
(2) Should the above condition not be fulfilled in time thereby no purchase
agreement become effective, the Purchaser is obligated to make a
settlement payment to Seller in the amount of DM 1,000,000.-
(deutschmarks one million). Any further claims of the Seller,
irrespective of the legal basis, shall be excluded.
<PAGE> 11
SECTION 15
SPRACHE
Nur die deutsche Fassung dieses Vertrages ist verbindlich. Die englische Fassung
stellt lediglich eine zu Informationszwecken erstellte Ubersetzung des
ma(beta)geblichen deutschen Textes dar.
SECTION 15
LANGUAGE
Only the German version of this agreement shall be binding. The English version
constitutes merely a translation of the relevant German text for information
purposes.
SECTION 16
GRUNDERWERBSTEUER
Etwaig anfallende Grunderwerbsteuer hat der Erwerber allein zu tragen.
SECTION 16
REAL ESTATE TRANSFER TAX
Any real estate transfer tax shall be borne exclusively by Purchaser.
SECTION 17
BUNDESKARTELLAMT
Eine etwaig erforderliche Anzeige nach Section 23 GWB an das Kartellamt oder die
Erfullung anderer kartellrechtlicher Vorschriften werden von den
Vertragsparteien in gegenseitiger Abstimmung gepruft und erledigt. Etwaige damit
zusammenhangende Kosten gehen zu Lasten des Erwerbers.
SECTION 17
ANTI-TRUST AUTHORITY
Any filing according to sec. 23 Merger Control Act with the cartel office or the
fulfillment of other provisions of the cartel office shall be checked and
fulfilled by both parties in mutual coordination. Any costs related thereto
shall be borne by Purchaser.
SECTION 18
SCHULDBEITRITT UND FINANZIERUNGSGARANTIE
Fur alle Zahlungsverpflichtungen des Erwerbers aus diesem Vertrage ubernimmt die
Decora Industries Inc., 1 Millstreet Fort Edward in New York/USA, - als
kunftiger Muttergesellschaft des Erwerbers - die gesamtschuldnerische
Mithaftung. Sie erbringt den Nachweis der ordnungsgema(beta)en
Vertretungsberechtigung der bei Unterzeichnung dieses Vertrages fur die kunftige
Muttergesellschaft unterzeichnenden Personen durch Vorlage einer im
internationalen Rechtsverkehr ublichen anwaltlichen Bestatigung.
SECTION 18
COLLATERAL PROMISE AND FINANCE GUARANTEE
For all payment obligations of the acquiror arising from this agreement, Decora
Industries Inc., 1 Millstreet Fort Edward in New York/USA, as the future parent
company of the acquiror, shall take over the joint and several liability. It
will produce proof of proper entitlement of representation of the signing
parties with the signing of this agreement for the future holding company
through the presentation of a lawyer's certificate of confirmation customary in
international law.
<PAGE> 12
SHARE PURCHASE AGREEMENT 12
- --------------------------------------------------------------------------------
den 18. August 1997 this 18th day of August 1997
--------------------------------------------------------
Erwerber Purchaser
------------------------------------------------------
Verau(beta)erer Seller
------------------------------------------------------
Decora Industries, Inc.
<PAGE> 1
EXHIBIT 99.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
($.01 PAR VALUE PER SHARE)
of
DECORA INDUSTRIES, INC.
Pursuant to Section 151(g) of the
General Corporation Law of the
State of Delaware
We, Richard A. DeCoste, Executive Vice President, and Timothy N. Burditt,
Executive Vice President and Secretary, of Decora Industries, Inc., (hereinafter
called the "Corporation"), a corporation organized and existing under and by
virtue of the provisions of the General Corporation Law of the State of
Delaware,
DO HEREBY CERTIFY:
FIRST: The Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), of the Corporation authorizes the issuance of 5,000,000 shares
of preferred stock, $.01 par value per share (the "Preferred Stock"), in one or
more series, and further authorizes the Board of Directors of the Corporation to
provide by resolution for the issuance of shares of Preferred Stock in one or
more series not exceeding the aggregate number of shares of Preferred Stock
authorized by the Certificate of Incorporation and to determine with respect to
each such series, the voting powers, if any (which voting powers if granted may
be full or limited), and such designations, preferences, and relative,
participating, optional and other rights, and the qualifications, limitations
and restrictions appertaining thereto.
SECOND: A resolution providing for and in connection with the issuance of
the Preferred Stock was duly adopted by the Board of Directors of the
Corporation pursuant to authority conferred on the Board of Directors by the
provisions of the Certificate of Incorporation as aforesaid, which resolution
provides as follows:
RESOLVED: that the Board of Directors, pursuant to authority vested in it
by the provisions of the certificate of incorporation, as amended (the
"Certificate of Incorporation"), of Decora Industries, Inc. (the "Corporation"),
hereby authorizes the issuance of a series of convertible preferred stock (the
"Convertible Preferred Stock") of the Corporation and hereby establishes the
powers, designations, preferences and relative, participating, optional and
other rights, and the qualifications, limitations and restrictions appertaining
thereto in addition to those set forth in such
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Certificate of Incorporation (or otherwise provided by law) as follows (the
following, referred to hereinafter as "this resolution" or "this Certificate of
Designations", is to be filed as part of a Certificate of Designations under
Section 151(g) of the General Corporation Law of the State of Delaware):
1. Designation and Number. The designation of Convertible Preferred
Stock created by this resolution shall be Series A Convertible Preferred Stock,
$.01 par value per share, of the Corporation (hereinafter referred to as the
"Series A Stock"), and the number of shares of Series A Stock which the
Corporation shall be authorized to issue shall be 69,557 shares.
2. Certain Definitions.
(a) Unless otherwise defined herein, capitalized terms used herein shall
have the meanings given thereto in the Purchase Agreement. For purposes of this
Certificate of Designations, the following terms shall have the meanings
indicated (such definitions to be equally applicable to both singular and plural
forms of the terms defined):
"Business Day" means any day other than a Saturday, Sunday or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Closing Date" means September 29, 1997.
"Common Shares" means the Corporation's Common Stock, as presently
authorized by the Certificate of Incorporation and $.01 par value per
share, any capital stock or other securities into which such Common Stock
may hereafter be changed or for which such Common Stock may be exchanged
after giving effect to the terms of such change or exchange (by way of
reorganization, recapitalization, merger, consolidation or otherwise).
"Event of Default" means the failure by the Corporation, prior to
June 30, 1998, to increase the number of authorized Common Shares by a
sufficient number of additional Common Shares to permit the exercise in
full of the Warrants (as defined in the Purchase Agreement) and the
conversion in full of Preferred Shares (as defined in the Purchase
Agreement) and to reserve such Common Shares for issuance in connection
with such conversion, in each case in accordance with the General
Corporation Law of the State of Delaware.
"Person" or "person" means an individual, corporation, partnership,
firm, association, joint venture, trust, unincorporated organization,
limited liability company, government, governmental body, agency,
political subdivision or other entity.
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"Purchase Agreement" means the Note and Warrant Purchase Agreement
dated as of September 26, 1997 by and among the Corporation, Decora,
Incorporated, Dorrance Street Capital Advisers, L.L.C., as Agent and the
Purchaser named therein.
(b) The words "hereof", "herein" and "hereunder" and other words of
similar import refer to this Certificate of Designations as a whole and not to
any particular Section or other subdivision.
(c) References herein to the Certificate of Incorporation include such
Certificate as amended by this Certificate of Designations.
3. Voting Rights.
(a) General Voting Rights. Except as otherwise provided specifically
herein or by law, each share of Series A Stock shall have the right and power to
vote on any question upon which, or in any proceeding at which, the holders of
Common Shares of the Corporation are entitled to vote and to be represented at
and to receive notice of any meeting of stockholders. The holder of each share
of Series A Stock shall be entitled to one vote for each Common Share into which
such Series A Stock would then convertible pursuant to Sections 6 and 7 hereof
if sufficient Common Shares were authorized and reserved to permit such
conversion. The holders of shares of Series A Stock and Common Shares shall vote
together and not as separate classes except as otherwise provided specifically
herein or by law.
(b) Consent Required. So long as any shares of the Series A Stock remain
outstanding, unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the affirmative vote or consent of the
holders of a majority of all of the shares of Series A Stock at the time
outstanding, voting separately as a class, given in person or by proxy either in
writing (as may be permitted by law and the Certificate of Incorporation and
By-laws of the Corporation) or at any special or annual meeting, shall be
necessary to permit, effect or validate the taking of any of the following
actions by the Corporation:
(i) authorize, issue or agree to authorize or issue any shares of
capital stock of the Corporation, any rights or options to receive any
capital stock, or any security convertible into or exchangeable for
capital stock, except that the Corporation may (x) issue Common Shares
upon the exercise of warrants and options outstanding on the Closing Date
(including the Common Stock Purchase Warrants issued pursuant to the
Purchase Agreement) and (y) issue Series A Stock in accordance with the
exercise of rights under the Warrants issued under the Purchase Agreement;
(ii) amend, alter or repeal this Certificate of Designations or any
other provision of the Certificate of Incorporation, any provision of the
by-laws of the Corporation, or in any other manner alter or change the
powers, rights, privileges or preferences of the Series A
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<PAGE> 4
Stock, if such action would adversely affect the powers, rights,
privileges or preferences of the holders of the Series A Stock; or
(iii) voluntarily dissolve, liquidate or wind-up or carry out any
partial liquidation or distribution or transaction in the nature of a
partial liquidation or distribution.
(c) Additional Voting Rights.
(i) Upon the occurrence of an Event of Default and continuing
until such time as such Event of Default shall no longer exist
(hereinafter called the "Class Voting Period"), the size of the Board of
Directors of the Corporation shall be increased by one seat. During the
Class Voting Period, the holders of a majority of the then outstanding
shares of Series A Stock, by the affirmative vote in person or by proxy at
a special meeting of stockholders called for such purpose (or at any
adjournment thereof) by holders of at least twenty-five (25%) of the then
outstanding shares of Series A Stock or at any annual meeting of
stockholders, or by written consent delivered to the Secretary of the
Corporation, with the holders of such Series A Stock voting as a class and
with each such share of Series A Stock having one vote, shall be entitled,
as a class, to the exclusion of the holders of all other classes or series
of capital stock of the Corporation, to elect, in addition to any
director(s) such holders are entitled to elect under the terms of the
Purchase Agreement, one director.
(ii) At any time when such voting rights under this Section 3(c)
shall have vested in the holders of shares of Series A Stock entitled to
vote thereon, and if such right shall not already have been initially
exercised, an officer of the Corporation shall, upon the written request
of at least twenty-five (25%) of the holders of record of shares of the
Series A Stock then outstanding, addressed to the Treasurer of the
Corporation, call a special meeting of holders of shares of the Series A
Stock. Such meeting shall be held at the earliest practicable date upon
the notice required for annual meetings of stockholders at the place for
holding annual meetings of stockholders of the Corporation or, if none, at
a place designated by the Treasurer of the Corporation. If such meeting
shall not be called by the proper officers of the Corporation within 30
days after the personal service of such written request upon the Treasurer
of the Corporation, or within 30 days after mailing the same within the
United States, by registered mail, addressed to the Treasurer of the
Corporation at its principal office (such mailing to be evidenced by the
registry receipt issued by the postal authorities), then the holders of
record of at least twenty-five (25%) of the shares of Series A Stock then
outstanding may designate in writing any person to call such meeting at
the expense of the Corporation, and such meeting may be called by such
person so designated upon the notice required for annual meetings of
stockholders and shall be held at the same place as is elsewhere provided
in this paragraph or, if none, at a place designated by the person
selected to call the meeting. Any holder of shares of Series A Stock then
outstanding that would be entitled to vote at such meeting shall have
access to the stock books of the Corporation for the purpose of causing a
meeting of stockholders to be called pursuant to the provisions of this
paragraph.
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<PAGE> 5
(iii) Any director who shall have been elected by the holders of
Series A Stock pursuant to this Section 3(c) (a "Series A Director") may
be removed at any time during a Class Voting Period, by the vote of the
holders of a majority of all of the then outstanding shares of Series A
Stock, voting as a separate class in person or by proxy at a special
meeting of stockholders called for such purpose by holders of at least
twenty-five (25%) of the outstanding shares of Series A Stock. Any Series
A Director may not be removed at any time during a Class Voting Period
without the consent of the holders of a majority of all of the outstanding
shares of Series A Stock. Any vacancy created by the removal, death or
resignation of a Series A Director may be filled during such Class Voting
Period by the holders of a majority of all of the outstanding shares of
Series A Stock by vote in person or by proxy at a special meeting of
stockholders of the Corporation called for such purpose by holders of at
least twenty-five (25%) of the outstanding shares of Series A Stock.
(iv) During the Class Voting Period, other than to increase the
size of the Board of Directors in accordance with clause (i) of this
Section 3(c), the size of the Board of Directors of the Corporation, which
shall consist of six members, shall not otherwise be changed without the
vote of the holders of a majority of all of the then outstanding shares of
Series A Stock, voting as a separate class; provided, however that the
size of the Board may be increased to eight directors if and so long as
the holders of Series A Stock are entitled to elect a second Series A
Director.
(v) At the end of the Class Voting Period, the holders of Series A
Stock shall be automatically divested of all voting power vested in them
under this Section 3(c) except as herein or by law expressly provided. The
term of any director elected pursuant to the provisions of this Section
3(c) shall in all events expire at the end of the Class Voting Period and
the size of the Board shall be reduced accordingly.
4. Dividend Rights. Except as may be otherwise approved in writing by
the holders of a majority of the outstanding shares of Series C Stock then
outstanding:
(a) When, as and if a dividend is declared on Common Shares by the Board
of Directors of the Corporation, the holders of shares of Series A Stock shall
be entitled to receive dividends, out of any assets legally available therefor,
in an amount per share of Series A Stock which is equal to the product of (i)
the number of Common Shares into which one share of Series A Stock would then be
convertible at the time of declaration of such dividend if sufficient Common
Shares were authorized and reserved to permit such conversion, multiplied by
(ii) the aggregate per Common Share amount of all cash dividends and the
aggregate per share amount (payable, at the option of the holder, in kind or in
cash, based upon the fair market value at the time the non-cash dividend or
other distribution is declared or paid as determined in good faith by the Board
of Directors) of all non-cash dividends or other distributions on Common Shares.
Such dividends shall accumulate and be declared and paid contemporaneously with
the declaration and payment of the related dividend on Common Shares, so that
the Series A Stock participates equally with the Common Shares in such dividend
or distribution with respect to the number of Common Shares into which the
Series A Stock would then
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<PAGE> 6
be convertible pursuant to Sections 6 and 7 hereof if sufficient Common Shares
were authorized and reserved to permit such conversion.
(b) So long as any share of Series A Stock is outstanding, no deposit,
payment, or distribution of any kind shall be made in respect of, or pursuant
to, any purchase or redemption requirement applicable to any Common Shares,
unless all accumulations, if any, of dividends on the Series A Stock shall have
been paid. So long as any Series A Stock shall remain outstanding, no dividend
or other distribution (except in Common Shares) shall be paid or made on the
Common Shares and no Common Share shall be purchased or otherwise acquired by
the Corporation or any subsidiary of the Corporation, unless (whether or not
there shall be funds legally available therefor) all accumulations, if any, of
dividends earned on the Series A Stock shall have been paid. Subject to the
above limitations, dividends may be paid on the Common Shares out of any funds
legally available for such purpose when and as declared by the Board of
Directors
5. Liquidation Rights.
(a) General Liquidation Rights. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of the shares of Series A Stock shall be entitled to receive from
the assets of the Corporation, whether represented by capital, surplus, reserves
or earnings and on the same basis as holders of Common Shares, such payment or
distribution per share of Series A Stock that would have been payable had each
such share been converted to Common Shares immediately prior to such event of
liquidation, dissolution or winding-up pursuant to Sections 6 and 7 hereof,
assuming that sufficient Common Shares are authorized and reserved to permit
such conversion.
(b) Liquidation Rights Upon Continuance of Event of Default. In the
event of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, after the occurrence and during the continuance of an
Event of Default, the holders of the shares of Series A Stock shall be entitled
to receive from the assets of the Corporation, before any payment or
distribution of the assets of the Corporation (whether from capital or surplus)
shall be made to or set apart for the holders of Common Stock, payment in cash
of an amount equal to $1.00 for each Common Share into which the Series A Stock
would have been convertible immediately prior to such event of liquidation,
dissolution or winding up pursuant to Sections 6 and 7, assuming that sufficient
Common Shares are authorized and reserved to permit such conversion. If the
assets distributable upon such liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, shall be insufficient to permit
payment to the holders of the shares of Series A Stock of the full preferential
amounts as set forth in this Section 5(b), then such assets shall be distributed
ratably among the shares of Series A Stock. After payment shall have been made
in full to the holders of Series A Stock as provided in this Section 5(b) upon
any liquidation, dissolution or winding up of the Corporation, the holders of
Common Shares shall be entitled to receive from the assets of the Corporation
payment in the amount of $1.00 for each Common Share. Any and all assets
remaining to be paid or distributed upon such liquidation, dissolution or
winding up shall be paid ratably to the holders of Series A Stock (on the basis
of the number of shares into which such Series A Stock is
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<PAGE> 7
then convertible pursuant to Sections 6 and 7, assuming that sufficient Common
Shares are authorized and reserved to permit such conversion) and to the holders
of Common Shares.
(c) Notice of Liquidation. Written notice of any liquidation,
dissolution or winding up of the Corporation, stating the payment date or dates
when and the place or places where the amounts distributable in such
circumstances shall be payable, shall be given (not less than thirty (30) days
prior to any payment date stated therein), to the holders of record of the
Series A Stock at their respective addresses as the same shall appear on the
stock register of the Corporation.
6. Conversion.
(a) Automatic Conversion. At such time as sufficient additional Common
Shares are authorized under the Corporation's Certificate of Incorporation and
reserved for issuance upon the conversion of all Series A Stock issued or
issuable upon exercise of the Preferred Warrants issued under the Purchase
Agreement, each share of Series A Stock shall automatically, without any further
action by any Person or payment of any kind, be converted into and exchanged for
fully paid and nonassessable Common Shares, provided that prior thereto all
accumulated dividends, if any, are paid to the holders of the Series A Stock.
Such conversion of shares of Series A Stock to Common Shares shall be made
initially at a conversion ratio (the "Conversion Ratio") as of the Closing Date
of one share of Series A Stock for 100 Common Shares, but shall be adjusted from
time to time in accordance with the provisions of Section 7. The Common Shares
issuable upon conversion of the shares of Series A Stock, when such Common
Shares shall be issued in accordance with the terms hereof, are hereby declared
to be and shall be duly authorized, validly issued, fully paid and nonassessable
Common Shares held by the holders thereof.
(b) Effective Date. The conversion of each share of Series A Stock
pursuant to Section 6(a) hereof shall be deemed to have been effected
immediately prior to the close of business on the Business Day on which the
increase in authorized share capital referenced in such subsection shall have
occurred. On the day that the conversion of a share of Series A Stock is deemed
effected, the person or persons in whose name or names any certificate or
certificates for Common Shares are issuable upon such conversion, as provided in
Section 6(c) hereof, shall be deemed to have become the holder or holders of
record of such Common Shares.
(c) Share Certificates. As promptly as practicable after the conversion
of a share of Series A Stock, in whole or in part, and in any event within five
(5) Business Days thereafter, the Corporation at its expense (including the
payment by it of any applicable issue, stamp or other taxes, other than any
income taxes) will cause to be issued in the name of and delivered to the holder
thereof or as such holder may direct, a certificate or certificates for the
number of Common Shares to which such holder shall be entitled upon such
conversion on the effective date of such conversion plus cash in lieu of any
fractional shares as provided in Section 6(f) hereof.
(d) Acknowledgment of Obligation. The Corporation will, at the time of
or at any time after each conversion of a share of Series A Stock, upon the
request of the holder thereof or of
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<PAGE> 8
any Common Shares issued upon such conversion, acknowledge in writing its
continuing obligation to afford to such holder all rights, if any, to which such
holder shall continue to be entitled; provided, that if any such holder shall
fail to make any such request, the failure shall not affect the continuing
obligations of the Corporation to afford such rights to such holder.
(e) Reservation of Common Shares. The Corporation shall, as soon as
practicable after the Closing Date, and in any event at all times after June 30,
1998, reserve and keep available out of its authorized but unissued share
capital the maximum number of Common Shares into which all shares of Series A
Stock from time to time outstanding are convertible, but Common Shares held in
the treasury of the Corporation may, in its discretion, be delivered upon any
conversion of shares of Series A Stock.
(f) Fractional Shares. No fractional Common Shares shall be issued upon
conversion of Series A Stock, but, in lieu of any fraction of a Common Share
which would otherwise be issuable in respect of the aggregate number of shares
of Series A Stock surrendered by the holder thereof for conversion, the holder
shall have the right to receive an amount in cash equal to the same fraction of
the current Market Price on the effective date of the conversion of such shares
of Series A Stock. Notwithstanding the foregoing, all shares of Series A Stock
held of record by the same holder and then being converted shall be aggregated
for purposes of determining fractional shares.
7. Adjustments to Conversion Ratio. The Conversion Ratio shall be
adjusted from time to time as follows:
(a) Reorganizations. If at any time after the Closing Date there shall
be a reorganization or reclassification of the capital stock of the Corporation
(other than a change in par value or a stock split-up) or the Corporation shall
declare and distribute a dividend or other distribution payable solely in
additional Common Shares, then the Conversion Ratio shall be adjusted, effective
upon the effective immediately after the record date at which the holders of
Common Shares are determined for purposes of such reorganization,
reclassification or dividend, to a number determined by multiplying the
Conversion Ratio in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of Common Shares outstanding after
giving effect to such reorganization, reclassification or dividend and the
denominator of which shall be the number of Common Shares outstanding on such
record date before giving effect to such reorganization, reclassification or
dividend.
(b) Consolidation or Merger. If the Corporation shall at any time after
the Closing Date consolidate with or merge into another corporation (where the
Corporation is not the continuing corporation after such merger or
consolidation), then, effective upon the effective date of such merger or
consolidation, the holder of a share of Series A Stock shall thereafter be
entitled to receive, upon the conversion of the Series A Stock, the securities
or other property to which a holder would have owned or been entitled to receive
after such consolidation or merger. A sale, transfer or lease (in one, or a
series of related, transactions) of all or substantially all of the assets of
the Corporation to another person shall be deemed a consolidation or merger for
the foregoing purposes.
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In such event, the provisions set forth herein with respect to the rights and
interest of such holder shall be appropriately adjusted so as to be applicable,
as nearly as may reasonably be, to any shares of stock or other securities or
property thereafter receivable upon the conversion of the Series A Stock. The
above provisions of this Section 7(b) shall apply to successive consolidations,
mergers, sales and conveyances.
(c) Certain Other Events. Without limiting any provisions of this
Section 7 or any other provisions of this Certificate of Designations, in case
event occurs as to which the foregoing provisions of this Section 7 are not
strictly applicable or, if strictly applicable, would not, in the good faith
judgment of the Board of Directors of the Corporation, fairly protect the
conversion rights of the holders of Series A Stock in accordance with the
essential intent and principles of such provisions or would violate applicable
law, then such Board shall make such adjustments in the application of such
provisions in accordance with such essential intent and principles, as shall be
reasonably necessary, in the good faith opinion of such Board, to protect such
purchase rights as aforesaid.
(d) Adjustment Rules. Any adjustments pursuant to this Section 7 shall
be made successively whenever an event referred to herein shall occur. If the
Corporation shall set a record date to determine the holders of Common Shares
for purposes of a reorganization, reclassification or dividend pursuant to
subsection (a) or a consolidation or merger pursuant to subparagraph (b) and
shall legally abandon such action prior to effecting such action, then no
adjustment shall be made pursuant to this Section 7 in respect of such action.
(e) Proceeding Prior to Any Action Requiring Adjustment. As a condition
precedent to the taking of any action which would require an adjustment pursuant
to this Section 7, the Corporation shall take any action which may be necessary,
including obtaining regulatory approvals or exemptions, in order that the
Corporation may thereafter validly and legally issue as fully paid and
nonassessable all Common Shares which the holders of outstanding Series A Stock
will be entitled to receive upon conversion thereof.
(f) Notice of Adjustment. Not less than 15 days prior to the record date
of any action which requires or might require an adjustment or readjustment
pursuant to this Section 7, the Corporation shall give notice to each holder of
Series A Stock of such event, describing such event in reasonable detail and
specifying the record date or effective date, as the case may be, and, if
determinable, the required adjustment and the computation thereof. If the
required adjustment is not determinable at the time of such notice, the
Corporation shall give notice to each holder of Series A Stock of such
adjustment and computation promptly after such adjustment becomes determinable.
(g) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of Section
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6 and this Section 7 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Stock against impairment.
8. Status of Converted Stock. In the event any shares of Series A Stock
shall be converted pursuant to Section 6 hereof, the shares so converted shall
be canceled and shall not be reissuable by the Corporation.
9. Notices. Unless otherwise expressly specified or permitted by the
terms hereof, all notices, requests, demands, consents and other communications
hereunder shall be in writing and shall be deemed given if delivered by hand,
deposited in the United States mail, postage prepaid, or sent by telex or
telecopy (confirmed by registered, certified or overnight mail or courier,
postage and delivery charges prepaid), to the following addresses:
(i) if to the holder of a share of Series A Stock, at the holder's
address as set forth in the stock register of the Corporation, or at such
other address as may have been furnished to the Corporation by the holder
in writing; or
(ii) if to the Corporation, at One Mill Street, Fort Edward, New
York 12828, or at such other address as may have been furnished in writing
by the Corporation to the holders of the shares of Series A Stock.
Whenever any notice is required to be given hereunder, such notice shall be
deemed given and such requirement satisfied only when such notice is delivered
or, if sent by telex or telecopier, when received, unless otherwise expressly
specified or permitted by the terms hereof.
10
<PAGE> 11
IN WITNESS WHEREOF, Decora Industries, Inc. has caused this Certificate of
Designations to be signed by its Chief Executive Officer and its Executive Vice
President and Secretary this __ day of September, 1997.
DECORA INDUSTRIES, INC.
By: _____________________________________
Richard A. DeCoste
Executive Vice President
Attest: ___________________________________
Timothy N. Burditt
Executive Vice President,
Secretary
<PAGE> 1
EXHIBIT 99.4
================================================================================
NOTE AND WARRANT PURCHASE AGREEMENT
among
DECORA, INCORPORATED
DECORA INDUSTRIES, INC.
DORRANCE STREET CAPITAL ADVISORS, L.L.C.,
as Agent
and
THE PURCHASERS NAMED HEREIN
---------------------------
Dated as of September 26, 1997
---------------------------
$18,000,000 Principal Amount of 13% Senior
Subordinated Notes due 2005 of Decora, Incorporated
Warrants to Purchase 2,136,534 Shares
of Common Stock of Decora Industries, Inc.
Warrants to Purchase 69,557 Shares of Series A
Convertible Preferred Stock of Decora Industries, Inc.
Contingent Warrants to Purchase Shares
of Common Stock of Decora Industries, Inc.
================================================================================
<PAGE> 2
NOTE AND WARRANT PURCHASE AGREEMENT dated as of September 26, 1997,
by and among DECORA INDUSTRIES, INC., a Delaware corporation ("Holdings");
DECORA, INCORPORATED, a Delaware corporation (the "Company"); DORRANCE STREET
CAPITAL ADVISERS, L.L.C., a Delaware limited liability company (the "Agent");
and each of the persons listed in Exhibit A (the "Purchasers").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. SALE AND PURCHASE OF NOTES AND WARRANTS
(a) The Company agrees to issue and sell to each Purchaser and,
subject to the terms and conditions hereof and in reliance upon the
representations and warranties of Holdings and the Company contained herein or
made pursuant hereto, each Purchaser agrees to purchase from the Company, on the
Closing Date, a Note or Notes in the aggregate principal amount set forth
opposite such Purchaser's name on Exhibit A. Holdings agrees to issue and sell
to each Purchaser and, subject to the terms and conditions hereof and in
reliance upon the representations and warranties of Holdings and the Company
contained herein or made pursuant hereto, each Purchaser agrees to purchase from
Holdings, on the Closing Date, (i) a Common Warrant or Common Warrants to
purchase the aggregate number of shares of Common Stock set forth opposite such
Purchaser's name on Exhibit A, (ii) a Preferred Warrant or Preferred Warrants to
purchase the aggregate number of shares of Series A Convertible Preferred Stock
set forth opposite such Purchaser's name on Exhibit A and (iii) a Contingent
Warrant or Contingent Warrants to purchase shares of Common Stock as set forth
opposite such Purchaser's name on Exhibit A. The aggregate purchase price to be
paid to Holdings and the Company by each Purchaser for such Notes and such
Warrants is 100% of the aggregate principal amount of the Notes to be purchased
by such Purchaser, which purchase price shall be allocated in accordance with
Section 2(c).
(b) As used herein, "Notes" means $18,000,000 aggregate principal
amount of the Company's 13% Senior Subordinated Notes Due 2005, together with
all Notes issued in exchange therefor or replacement thereof. Each Note shall be
substantially in the form of, and be payable as provided in, Exhibit B. Interest
on the Notes shall accrue from the Closing Date, shall compound quarterly and
shall be payable quarterly in arrears on the last day of March, June, September
and December of each year, except that the first such payment shall be due
September 30, 1998 (which first interest payment shall be for the period from
and including the Closing Date through and including September 30, 1998), at the
interest rates and in the manner specified in the form of Note attached hereto
as Exhibit B.
(c) If all or a portion of (i) the principal amount of the Notes,
(ii) the interest payable thereon or (iii) any fee or other amount payable
hereunder or under any other Loan Document shall not be paid when due (whether
at the stated maturity of the Notes or at a date fixed for prepayment or
otherwise), such overdue amount shall bear interest at a rate per annum
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<PAGE> 3
equal to the Default Rate from the date of such nonpayment until paid in full
(both before and after judgment).
(d) As used herein, "Common Warrants" means Common Stock Purchase
Warrants to purchase an aggregate of 2,136,534 shares of Common Stock, together
with all Warrants issued in exchange therefor or replacement thereof. The Common
Warrants to be issued and sold to each Purchaser hereunder shall be evidenced by
one or more Common Warrant certificates substantially in the form of Exhibit C.
Each Common Warrant shall initially entitle the holder thereof to purchase one
share of Common Stock at a purchase price of $1.00 per share, with such number
of shares and such price being subject to adjustment as provided in the form of
Common Warrant certificate attached hereto as Exhibit C.
(e) As used herein, "Contingent Common Warrants" means Contingent
Common Stock Purchase Warrants to purchase a number of shares of Common Stock
equal to 21.2% of (i) the sum of the number of shares, if any, as may be issued
after the date hereof pursuant to the terms of the Cigna Exchange Agreement, the
number of shares of Common Stock, if any, which are issued by Holdings, either
in exchange for securities of Conny which are not owned by German Newco after
consummation of the purchase of Conny securities on the Closing Date under the
Conny Stock Purchase Agreement (the "Conny Minority Shares"), or to provide,
directly or indirectly, funds to make the offer by Holdings, German Newco or
Conny or any of their respective affiliates or subsidiaries to acquire the Conny
Minority Shares (the "Conny Minority Acquisition Shares") together with all
Contingent Common Warrants issued in exchange therefor or replacement thereof.
Without limiting the generality of the foregoing, the Conny Minority Acquisition
Shares shall include all shares issued in a public offering of Common Stock
after the date hereof and until the second anniversary of the completion of the
offer for the Conny Minority Shares under the German Takeover Code, to the
extent that the net proceeds therefrom, in the aggregate, do not exceed the
aggregate purchase price paid for the Conny Minority Shares, excluding that
portion of the purchase price paid from the proceeds of a financing from
Dresdner Bank pursuant to the terms of the Dresdner Bank Loan Agreement dated
September 29, 1997. The Contingent Common Warrants to be issued and sold to each
Purchaser hereunder shall be evidenced by one or more Contingent Common Warrant
certificates substantially in the form of Exhibit D. Each Contingent Common
Warrant shall initially entitle the holder thereof to purchase one share of
Common Stock at a purchase price of $1.00 per share, with such number of shares
and such price being subject to adjustment as provided in the form of the
Contingent Common Warrant certificate attached hereto as Exhibit D.
(f) As used herein, "Preferred Warrants" means Series A
Convertible Preferred Stock Purchase Warrants to purchase an aggregate of 69,557
shares of Series A Convertible *Preferred Stock, together with all Preferred
Warrants issued in exchange therefor or replacement thereof. The Preferred
Warrants to be issued and sold to each Purchaser hereunder shall be evidenced by
one or more Preferred Warrant certificates substantially in the form of Exhibit
E. Each Preferred Warrant shall initially entitle the holder thereof to purchase
one share of Series A Convertible Preferred Stock at a purchase price of $100.00
per share, with such number of shares
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<PAGE> 4
and such price being subject to adjustment as provided in the form of Preferred
Warrant certificate attached hereto as Exhibit E. The Series A Convertible
Preferred Stock (the "Series A Preferred") shall have the rights, limitations,
privileges and preferences set forth in Exhibit F.
(g) The obligations of each Purchaser under this Agreement are
separate from the respective obligations of the other Purchasers under this
Agreement, and no Purchaser shall be liable for any obligation of any other
Purchaser under this Agreement.
SECTION 2. THE CLOSING
(a) Subject to the terms and conditions hereof, the closing (the
"Closing") of the purchase and sale of the Notes, the Common Warrants, the
Contingent Common Warrants and the Preferred Warrants, will take place at the
offices of Morgan, Lewis & Bockius LLP located at 101 Park Avenue, New York, New
York 10178, at such time and date as shall be mutually agreed to by the Company
and the Purchasers. Such date is herein referred to as the "Closing Date".
(b) Subject to the terms and conditions hereof, on the Closing
Date, (i) the Company shall deliver to each Purchaser a Note or Notes,
substantially in the form of Exhibit B, payable to such Purchaser (or its
nominee as notified to the Company) and dated the Closing Date, in the aggregate
principal amount set forth opposite such Purchaser's name on Exhibit A, (ii)
Holdings shall deliver to each Purchaser Common Warrants to purchase the number
of shares of Common Stock set forth opposite such Purchaser's name on Exhibit A,
evidenced by one or more Common Warrant certificates substantially in the form
of Exhibit C, registered in the name of such Purchaser (or its nominee as
notified to Holdings) and dated the Closing Date, (iii) Holdings shall deliver
to each Purchaser Preferred Warrants to purchase the number of shares of Series
A Preferred set forth opposite such Purchaser's name on Exhibit A, evidenced by
one or more Preferred Warrant certificates substantially in the form of Exhibit
D, registered in the name of such Purchaser (or its nominee as notified to
Holdings) and dated the Closing Date, (iv) Holdings shall deliver to each
Purchaser Contingent Common Warrants to purchase shares of Common Stock as set
forth opposite such Purchaser's name on Exhibit A, evidenced by one or more
Contingent Common Warrant certificates substantially in the form of Exhibit E,
registered in the name of such Purchaser (or its nominee as notified to
Holdings) and dated the Closing Date, and (iv) upon such Purchaser's receipt of
such Notes, Common Warrants, Preferred Warrants and Contingent Common Warrants,
such Purchaser shall deliver to the Company by wire transfer an amount equal to
the purchase price for such Notes, Common Warrants, Preferred Warrants and
Contingent Common Warrants (in each case as specified in Section 1(a)) in
federal or other immediately available funds.
(c) Each of the Purchasers, Holdings and the Company acknowledges
that the Notes, Common Warrants, the Preferred Warrants and the Contingent
Common Warrants constitute an "investment unit" within the meaning of Section
1273(c)(2) of the Code and thatHoldings and the Company will allocate the "issue
price" (within the meaning of Section 1273(b)
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<PAGE> 5
of the Code) of such investment unit, for all federal, state, local and foreign
tax purposes, between the Notes, Common Warrants and Preferred Warrants as
follows: (i) the price at which all of the Common Warrants are to be sold by
Holdings is $186,502.00, (ii) the price at which all of the Preferred Warrants
are to be sold by Holdings is $607,123.00, (iii) the price at which all of the
Contingent Common Warrants are to be sold by Holdings is $1.00, and (iv) the
price at which all of the Notes are to be sold by the Company is $17,206,374.00.
Each of the Purchasers, Holdings and the Company agrees to abide by Treasury
Regulation ss. 1.1273-2(h)(2) with respect to such allocation of the issue
price.
SECTION 3. DEFINITIONS
(a) For purposes of the Loan Documents, the following definitions
shall apply (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
"Accounting Changes" has the meaning set forth in Section 21.10.
"Acquisition Documents" means, collectively, the Conny Stock
Purchase Agreements and all other agreements, documents and instruments
entered into on or prior to the Closing Date in connection with the Conny
Stock Purchase Agreements as such other agreements, documents and
instruments may be amended, supplemented or otherwise modified from time
to time in accordance with the provisions thereof and hereof.
"Acquisition Transactions" means the acquisition by Holdings of all
of the outstanding securities which represent at least 73% of all Voting
Stock of Conny and at least 73% of all securities which are entitled to
share without limitation in the earnings of Conny (the "Participating
Securities").
"ADA" means the Americans with Disabilities Act of 1990 (42 U.S.C.
ss. 12101, et seq.) and all applicable rules, regulations, codes,
ordinances and guidance documents promulgated or published thereunder.
"Affiliate" means, with respect to any person, (i) each person
(other than the Purchasers, the lenders under the Senior Loan Documents
and their respective affiliates) that, directly or indirectly, owns or
controls, whether beneficially, or as a trustee, guardian or other
fiduciary, 5% or more of the Stock having ordinary voting power in the
election of directors of such person, (ii) each person (other than the
Purchasers, the lenders under the Senior Loan Documents and their
respective affiliates) 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 general or limited
partners (other than, in the case of Holdings, a director nominated by the
Purchasers pursuant to Section 7.31). For the purpose of this definition,
"control" of a person shall mean the possession,
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<PAGE> 6
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. Under no circumstances shall any
Purchaser, the Agent, any lender or agent under the Senior Loan Documents
or their respective affiliates be deemed an "Affiliate" of or affiliated
with Holdings, the Company or any of their respective Subsidiaries.
"Agent" means Dorrance Street Capital Advisors, L.L.C. and any
successor agent hereunder.
"Blue Sky Application" has the meaning set forth in Section 17.6(a).
"Board" or "Board of Directors" means, with respect to any person
which is a corporation, business trust or other entity, the board of
directors or other group, however designated, which is charged with legal
responsibility for the management of such person, or any committee of such
board of directors or group, however designated, which is authorized to
exercise the power of such board or group in respect of the matter in
question.
"Business" means the business currently conducted by the Company and
Conny and their respective Subsidiaries on the date hereof, and all other
activities ancillary or related thereto.
"Business Day" means a day that is not a Saturday, a Sunday or a day
on which banks are required or permitted to be closed in New York, New
York.
"Capital Lease" means, with respect to any person, any Lease of any
property (whether real, personal or mixed) by such person as lessee that,
in accordance with GAAP, would be required to be classified and accounted
for as a capital Lease on a balance sheet of such person.
"Capital Lease Obligation" means, with respect to any Capital Lease,
the amount of the obligation of the lessee thereunder that, in accordance
with GAAP, would appear on a balance sheet of such lessee in respect of
such capital lease.
"Change of Control Event" means:
(i) Holdings shall fail to own, of record and beneficially,
with full power to vote, all shares of capital stock of the Company
entitling Holdings to cast at least 80% of the votes for the
election of directors of the Company and at any meeting of the
shareholders of the Company;
(ii) Any person or group of related persons for purposes of
Section 13(d) of the Securities Exchange Act (a "Group") either (A)
is or becomes, by purchase,
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<PAGE> 7
tender offer, exchange offer, open market purchases, privately
negotiated purchases or otherwise, the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act,
whether or not applicable, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has
the right to acquire, whether such right is exercisable immediately
or after the passage of time only), directly or indirectly, of more
than 30% of the total then outstanding Voting Stock of Holdings (for
the purpose of this clause (ii), such person or Group will be deemed
to "beneficially own" (determined as aforesaid) any Voting Stock of
a corporation (the "specified corporation") held by any other
corporation (the "parent corporation") if such person or Group
"beneficially owns," directly or indirectly, a majority of the
voting power of the Voting Stock of such parent corporation), or (B)
otherwise has the ability to elect, directly or indirectly, a
majority of the members of the Board of Directors of Holdings;
(iii) Holdings consolidates with or merges into another person
and the stockholders immediately prior to such merger or
consolidation hold less than a majority of the Voting Stock of the
resulting entity;
(iv) Timothy N. Burditt shall fail to be substantially
involved in the management and operations of the Company; or
(v) Nathan Hevrony shall fail to be substantially involved
in the management and operations of Holdings.
provided, however, that a Change in Control Event shall not be
deemed to have occurred if, with respect to Timothy N. Burditt and
Nathan Hevrony, either shall fail to be substantially involved in
the management and operations of the Company and Holdings,
respectively, and the Company and/or Holdings, as the case may be,
shall within 90 days of such failure replace Burditt and/or Hevrony,
as the case may be, with a person acceptable to the Majority
Noteholders.
"Charges" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including, without limitation, taxes
owed to the PBGC at the time due and payable), levies, assessments or
Liens upon or relating to (i) the Obligations, (ii) the employees,
payroll, income or gross receipts of the Company, Holdings or any
Subsidiary thereof, (iii) the Company's, Holdings' or any such
Subsidiary's properties and assets or its ownership or use thereof or (iv)
any other aspect of the Business.
"Cigna Exchange Agreement" means the Exchange Agreement dated March
31, 1996 by and among the Company, CIGNA Mezzanine Partners, Inc., and
CIGNA Property and Casualty Insurance Company of North America.
"Closing" has the meaning set forth in Section 2(a).
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"Closing Date" has the meaning set forth in Section 2(a).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and interpretations thereunder.
"Collateral Documents" means, collectively, the (i) Mortgage dated
as of the date hereof between the Company and Agents; (ii) Assignment,
Pledge and Security Agreement dated as of the date hereof between the
Company and Agent relating to that certain BDA Management Agreement dated
March 27, 1997, that certain policy issued by Export-Import Bank of the
United States to the Company (policy no. ESC-147470), collateral listed on
Schedule A thereto; (iii) Assignment, Pledge and Security Agreement dated
as of the date hereof between the Company and Agent relating to various
equipment leases; (iv) Assignment, Pledge and Security Agreement dated as
of the date hereof between the Company and Agent relating to two
promissory notes in the amounts of $15,207,000 and $6,000,000 from
Holdings to the Company; (v) Assignment, Pledge and Security Agreement
between Holdings and Agent regarding the capital stock of the Company
owned by Holdings, to be entered into after the Closing pursuant to
Section 7.11 hereof; (vi) Assignment, Pledge and Security Agreement dated
the date hereof between Holdings and Agent relating to the ComTel Notes
and fees payable under that certain Management Agreement dated April 1,
1995 between Holdings and the Company (the "Management Agreement"); and
(vii) all other documents instruments and agreements entered into on or
prior to the Closing Date in connection with the foregoing, as such other
agreements, documents and instruments may be amended, supplemented or
otherwise modified from time to time in accordance with the provisions
hereof or thereof..
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering
the Securities Act or the Securities Exchange Act.
"Common Share" or "Common Shares" means shares of Common Stock, or
other securities, which can be obtained or have been obtained by an
exercise in whole or in part of any Common Warrant or Contingent Common
Warrant or are obtained upon an exchange of Shares pursuant to the terms
of a Common Warrant or Contingent Common Warrant or upon conversion of
Preferred Shares pursuant to the terms thereof.
"Common Stock" means the Common Stock, par value $.01, of Holdings.
"Common Warrant" has the meaning set forth in Section 1(d).
"Company" has the meaning set forth in the preamble hereto. For
purposes of this Agreement, the "Company" shall be deemed to include,
without limitation, the Company's successors and permitted assigns and any
debtor-in-possession on behalf of the Company.
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"Company Common Stock" means the common stock, par value $.01 per
share, of the Company.
"ComTel Notes" shall mean the Secured Promissory Note I and the
Secured Promissory Note II, each dated as of March 31, 1995, by ComTel
Systems Corporation to ComTel Industries, Inc. which have been assigned
to, and are currently held by, Holdings.
"Conny" shall mean Konrad Hornschuch AG, a German corporation.
"Conny Stock Purchase Agreement" means those certain Stock Purchase
Agreements dated as of September 3, 1997 and August 18, 1997 between
Holdings and Baden-Wurttenbergische Bank AG and between Holdings and der
Kunz Holding GmbH & Co. KG, respectively, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
the provisions thereof and hereof.
"Contingent Common Warrant" has the meaning set forth in Section
1(e).
"Credit Agreement" means the Loan and Security Agreement dated as of
April 18, 1990, among the Company and the Senior Lender, as the same has
been (as described in the Subordination Agreement) and may be extended,
renewed, refinanced, refunded, replaced, amended, supplemented or
otherwise modified from time to time in accordance with the provisions
thereof and hereof.
"Default Rate" means a rate per annum equal to the interest rate on
the Notes plus two percent (2%).
"Disclosure Materials" has the meaning set forth in Section 4.18.
"Environmental Laws" shall have the meaning ascribed thereto in the
Environmental Compliance and Indemnification Agreement of even date
herewith by the Company.
"Equipment" means all of the Company's, Holdings' or any
Subsidiary's present and future (i) equipment, including without
limitation machinery, manufacturing, distribution, selling, data
processing and office equipment, assembly systems, tools, molds, dies,
fixtures, appliances, furniture, furnishings, vehicles, vessels, aircraft,
aircraft engines and trade fixtures, (ii) other tangible personal property
(other than the Company's, Holdings' or any Subsidiary's Inventory), and
(iii) any and all accessions, parts and appurtenances attached to any of
the foregoing or used in connection therewith, and any substitutions and
replacements for any of the foregoing.
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"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 (a) each "person" (as defined in Section
3(a) of ERISA) which is under "common control" with the Company (within
the meaning of Section 414(b), (c), (m) or (o) of the Code) and (b) each
other person that is a Subsidiary of the Company or Holdings.
"ERISA Event" means, with respect to the Company or any ERISA
Affiliate: (i) a Reportable Event with respect to a Title IV Plan or a
Multiemployer Plan; (ii) the withdrawal of the Company or any ERISA
Affiliate 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 the
Company or any ERISA Affiliate 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 any proceeding to terminate a Title IV Plan or
Multiemployer Plan by the PBGC; (vi) the failure to make any required
contribution to a Qualified Plan subject to Section 412 of the Code; 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 for 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 14.
"Fair Market Value" of any property means the fair market sale value
which a willing buyer of such property would pay a willing seller, each
under no compulsion to buy or sell and in full possession of all relevant
facts.
"Financials" means the historical and pro forma financial statements
referred to in Schedule 4.6(a).
"Fiscal Month" means the approximately one-month accounting periods
of Holdings, the Company and their respective Subsidiaries ending nearest
the last day of each calendar month. Subsequent changes of the fiscal
months of Holdings, the Company or any such Subsidiary shall not change
the term "Fiscal Month," unless the Majority Noteholders shall consent in
writing to such change.
"Fiscal Quarter" means the approximately 3-month quarterly
accounting periods of Holdings, the Company and their respective
Subsidiaries ending nearest March 31st, June 30th, September 30th and
December 31st of each year. Subsequent changes of the fiscal
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quarters of Holdings, the Company or any such Subsidiary shall not change
the term "Fiscal Quarter," unless the Majority Noteholders shall consent
in writing to such change.
"Fiscal Year" means the 12-month accounting periods of Holdings, the
Company and their respective Subsidiaries ending on March 31st (or
December 31st in the case of Conny) of each year. Except for a change in
such fiscal year of Holdings or the Company or any Subsidiary to December
31st of each year, subsequent changes of the fiscal year of Holdings, the
Company or any such Subsidiary shall not change the term "Fiscal Year,"
unless the Majority Noteholders shall consent in writing to such change.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, consistently
applied with the accounting principles used in the preparation of the
Financials, changing as and when provided pursuant to the terms of Section
23.10.
"German Newco" means Decora Industries Deutscheland GmbH, a German
GmbH.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" means as to any person, any obligation of
such person guaranteeing any Indebtedness, Lease, dividend or other
obligation ("primary obligations") of any other person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such person (i) to purchase or repurchase any such primary
obligation, (ii) to advance or supply funds (a) for the purchase or
payment of any such primary obligation or (b) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the net
worth or solvency or any balance sheet condition of the primary obligor,
(iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation
or (iv) to indemnify the owner of any such primary obligation against loss
in respect thereof.
"Guaranty" means that certain Guaranty dated as of the Closing Date
by Holdings of the Obligations, in substantially the form of Exhibit G, as
the same may be amended, supplemented or otherwise modified from time to
time in accordance with the provisions hereof and thereof.
"Holdings" has the meaning set forth in the recitals hereto. For
purposes of this Agreement, "Holdings" shall be deemed to include, without
limitation, its successors and permitted assigns and any
debtor-in-possession on behalf of Holdings.
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"Indebtedness" of any person means (i) all indebtedness of such
person 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, but not including obligations to
trade creditors incurred in the ordinary course of business), (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 by such
person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale
of such property), (iv) all Capital Lease Obligations, (v) all Guaranteed
Indebtedness with respect to the Indebtedness referred to in clauses (i),
(ii), (iii) and (iv) above and (vi) all Indebtedness referred to in clause
(i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including, without limitation,
accounts and contract rights) owned by such person, even though such
person has not assumed or become liable for the payment of such
Indebtedness.
"Indemnified Person" has the meaning as set forth in Section 18(b).
"Initiating Holders" has the meaning set forth in Section 17.1(a).
"Inventory" means any "inventory," as such term is defined in the
UCC, now or hereafter owned or acquired by Holdings, the Company and its
Subsidiaries, wherever located, including without limitation all
inventory, merchandise, goods and other personal property which are held
by or on behalf of Holdings, the Company and its Subsidiaries for sale or
Lease or are furnished or are to be furnished under a contract of service
or which constitute raw materials, work in process or materials used or
consumed or to be used or consumed in the Business or in the processing,
production, packaging, promotion, delivery or shipping of the same.
"IRS" means the Internal Revenue Service, or any successor thereto.
"Leases" means all of those leasehold estates in real property now
owned or hereafter acquired by Holdings, the Company or any Subsidiary
thereof, whether as lessor, lessee, sublessee or assignee.
"Lien" means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any lease or title retention agreement,
any financing lease having substantially the same economic effect as any
of the foregoing and the filing of, or agreement to give, any financing
statement perfecting a security interest under the UCC or comparable law
of any jurisdiction).
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<PAGE> 13
"Loan Documents" means, collectively, (a) this Agreement, (b) the
Notes, (c) the Common Warrant certificates, (d) the Contingent Common
Warrant certificates, (e) the Preferred Warrant Certificates, (f) the
Guaranty, (g) the Subordination Agreement, (h) the Collateral Documents
and (i) all other agreements, instruments and documents entered into in
connection with this Agreement, as such other agreements, instruments and
documents may be extended, renewed, refinanced, refunded, replaced,
amended, supplemented or otherwise modified from time to time in
accordance with the provisions hereof and thereof.
"Losses" has the meaning set forth in Section 18(b).
"Majority Noteholders" means, at any time of determination, the
holders of Notes evidencing more than 50% of the aggregate principal
amount of all Notes then outstanding.
"Material Adverse Effect" means (a) a material adverse effect on (i)
the business, assets, operations, prospects or financial condition of
Holdings, the Company and their Subsidiaries, taken as a whole, (ii) the
Company's ability to pay the Obligations in accordance with the terms
thereof or (iii) the rights and remedies of any Purchaser or other holder
of any Note, Warrant or Share under the Loan Documents or (b) the
incurrence by Holdings, the Company or any Subsidiary thereof of material
liability, contingent or liquidated, that is not permitted by the terms
hereof.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which the Company or any ERISA
Affiliate is making, is obligated to make, has made, or has been obligated
to make, contributions on behalf of participants who are or were employed
by the Company or any ERISA Affiliate.
"Net Worth" means, at a particular date, all amounts which would be
included under consolidated shareholders' equity for Holdings, the Company
and their Subsidiaries as of such date, determined in accordance with
GAAP.
"Notes" has the meaning set forth in Section l(b).
"Obligations" means all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for
payment of monetary amounts (whether or not such performance is then
required or contingent, or such amounts are liquidated or determinable)
owing by Holdings or the Company to any holder of a Note, and all
covenants and duties regarding such amounts, of any kind or nature,
present or future, whether or not evidenced by any note, agreement or
other instrument, in each case arising under any of the Loan Documents
(other than the Warrants). This term includes, without limitation, all
principal, interest (including without limitation any interest that, but
for the provisions of any federal or state bankruptcy, insolvency or
similar laws, would have
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<PAGE> 14
accrued), fees, Charges, expenses, attorneys' fees and other sums
chargeable to the Company under any of the Loan Documents (other than the
Warrants).
"Outstanding" or "outstanding" means, when used with reference to
the Notes, Warrants or Shares as of a particular time, all Notes, Warrants
or Shares as the case may be, theretofore duly issued except (i) Notes,
Warrants represented by Warrants, certificates or Shares represented by
stock certificates, theretofore reported as lost, stolen, mutilated or
destroyed or surrendered for transfer, exchange or replacement, in respect
of which new or replacement Notes, Warrant certificates or stock
certificates have been issued by the Company or Holdings, as the case may
be, (ii) Notes theretofore paid in full, (iii) Warrants theretofore fully
exercised, (iv) any such Shares then held in treasury by Holdings or
theretofore acquired for value and canceled by Holdings and (v) Notes
theretofore canceled by the Company, whether upon an exercise of Warrants
or otherwise; except that for the purpose of determining whether holders
of the requisite amount of Notes, Warrants or Shares have made or
concurred in any declaration, waiver, consent, approval, notice, annulment
of acceleration or other communication under this Agreement or under any
Notes or Warrants, Notes, Warrants and Shares registered in the name of,
or owned beneficially by, Holdings, the Company or any of their respective
Affiliates (other than the Purchasers) shall not be deemed to be
outstanding.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" means an employee pension benefit plan, as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan), which is not an
individual account plan, as defined in Section 3(34) of ERISA, and which
the Company or any ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were
employed by the Company or any ERISA Affiliate.
"Permitted Encumbrances" means the following Liens: (i) Liens for
taxes or assessments or other governmental Charges or levies, either not
yet delinquent and payable or to the extent that nonpayment thereof is
permitted by the terms of Section 7.6(b); (ii) pledges or deposits
securing obligations under workmen's compensation, unemployment insurance,
social security or public liability laws or similar legislation; (iii)
pledges or deposits securing bids, tenders, contracts (other than
contracts for the payment of money) or Leases to which the Company or any
Subsidiary thereof is a party as lessee made in the ordinary course of
business; (iv) deposits securing public or statutory obligations of the
Company, Holdings or any Subsidiary thereof; (v) inchoate and unperfected
workers', mechanics', suppliers' or similar liens arising in the ordinary
course of business; (vi) carriers', warehousemen's or other similar
possessory liens arising in the ordinary course of business and securing
Indebtedness not yet due and payable in an outstanding aggregate amount
not in excess of $100,000 at any time; (vii) deposits securing, or in lieu
of, surety, appeal or customs bonds in proceedings to which the
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<PAGE> 15
Company, Holdings or any Subsidiary thereof is a party; (viii) any
attachment or judgment lien, unless the judgment it secures shall not,
within 30 days after the entry thereof, have been discharged or stayed
pending appeal, or shall not have been discharged within 30 days after the
expiration of any such stay; (ix) zoning restrictions, easements, licenses
or other restrictions on the use of real property or other minor
irregularities in title (including leasehold title) thereto, so long as
the same do not materially impair the use, value or marketability of such
real property, Leases or leasehold estates; (x) purchase money Liens
(including the interest of a lessor under a Capital Lease and Liens to
which any property is subject at the time of the acquisition thereof)
securing Indebtedness permitted under Section 8.5; provided that such
Liens shall not apply to any property of the Company, Holdings or any
Subsidiary thereof other than that purchased or subject to such Capital
Lease; (xi) precautionary filings under the UCC by bailors, lessors or
consignors to the extent that the transaction giving rise thereto is
permitted pursuant to the terms of this Agreement and the other Loan
Documents; (xii) Liens currently existing and securing the Obligations of
the Company and Holdings under the Senior Loan Documents; and (xiii) Liens
currently existing and securing the Obligations of the Company under the
Loan Agreement, dated September 20, 1995, between the Company and
Washington County Local Development Corporation.
"person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or
department thereof).
"Plan" means, with respect to the Company or any ERISA Affiliate, an
employee benefit plan, as defined in Section 3(3) of ERISA, which the
Company or any ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were
employed by the Company or any ERISA Affiliate.
"Potential Default" means a condition or event which, with notice or
lapse of time or both, would constitute an Event of Default.
"Preferred Shares" means shares of Series A Convertible Preferred
Stock, par value $.01 per share, of Holdings, or other securities, which
can be obtained or have been obtained by an exercise in whole or in part
of any Preferred Warrant or are obtained upon an exchange of Preferred
Shares pursuant to the terms of a Preferred Warrant.
"Preferred Warrant" has the meaning set forth in Section 1(f)
hereof.
"Prospectus" has the meaning set forth in Section 17.6(a).
"Projections" means the projections referred to in Schedule 4.6(b).
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<PAGE> 16
"Purchasers" means the persons listed on Schedule A hereto and the
future holders of Notes and/or Warrants and/or Shares.
"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 Code, and which the Company or any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf
of participants who are or were employed by the Company or any ERISA
Affiliate.
"Redemption Percentage" means, with respect to any prepayment of
Notes pursuant to Section 6.2(a) during any period set forth below, the
percentage of the aggregate principal amount of Notes to be prepaid set
forth opposite such period:
<TABLE>
<CAPTION>
Redemption
Period Percentage
------ ----------
<S> <C>
October 1, 1999-September 30, 2000................. 105%
October 1, 2000-September 30, 2001................. 104%
October 1, 2001-September 30, 2002................. 103%
October 1, 2002-September 30, 2003................. 102%
October 1, 2003-September 30, 2004................. 101%
Thereafter......................................... 100%
</TABLE>
"Registrable Securities" has the meaning set forth in Section
17.1(c).
"Requesting Holder" has the meaning set forth in Section 17.4(b).
"Reportable Event" means any of the events described in Section
4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Restricted Payment" means (i) the declaration or payment of any
dividend or the occurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of the
Company's Stock, (ii) any payment on account of the purchase, redemption,
defeasance, sinking fund or other retirement of the Stock of Holdings, the
Company or any of their respective Subsidiaries, or any other payment or
distribution made in respect of any such Stock, either directly or
indirectly, (iii) any payment, loan, contribution or other transfer of
funds or other property by the Company or any Subsidiary thereof to
Holdings or any Subsidiary of Holdings (other than the Company and its
Subsidiaries); and (iv) any payment of management fees (or other fees of a
similar nature) by the Company to Holdings, any Stockholder of Holdings or
their respective Affiliates, other than to the extent permitted by Section
8.2; provided, however,
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<PAGE> 17
that the following shall not constitute a Restricted Payment: (x) the
advance by the Company to Holdings and the contribution by Holdings to the
capital of German Newco of up to $15.1 million to be used to pay the
purchase price under the Conny Stock Purchase Agreements, (y) the offer of
German Newco or Conny to purchase the outstanding equity securities of
Conny not owned by German Newco or (z) the advance by Company to Holdings
of $107,000 to repay debt of Holdings to the Senior Lender.
"Retiree Welfare Plan" means any Welfare Plan providing for
continuing coverage or benefits for any participant or any beneficiary of
a participant after such participant's termination of employment, other
than continuation coverage provided pursuant to Section 4980B of the Code.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and the rules, regulations and
interpretations thereunder.
"Senior Indebtedness" means "Fleet Obligations" (as defined in the
Subordination Agreement).
"Senior Lender" means Fleet Bank, a New York bank.
"Senior Loan Documents" means (a) the Credit Agreement, (b) the
Subordination Agreement and (c) all other documents, instruments and
agreements entered into on or prior to the Closing Date in connection with
the Credit Agreement as described in the Subordination Agreement, as such
other documents, instruments and agreements may be extended, renewed,
refinanced, refunded, replaced, amended, supplemented or otherwise
modified from time to time in accordance with the provisions thereof and
hereof.
"Share" or "Shares" means Common Shares and Preferred Shares.
"Solvent" has the meaning set forth in Section 4.25.
"Stock" means all shares, options, warrants, general or limited
partnership interests, participations or other equivalents (regardless of
how designated) of or in a corporation, partnership or other entity,
whether voting or nonvoting, including, without limitation, common stock,
preferred stock or any other "equity security" (as such term is defined in
Rule 3a11-1 of the General Rules and Regulations promulgated by the
Commission under the Securities Exchange Act).
"Subordination Agreement" means that certain Subordination Agreement
dated as of the date hereof among the Purchasers and the Senior Lender, in
substantially the form
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<PAGE> 18
of Exhibit H, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the provisions thereof.
"Subject Property" means all real property owned, Leased or operated
by Holdings, the Company or any Subsidiary of the Company, which is
comprised solely of the Company's facility at One Mill Street, Fort
Edward, New York.
"Subsidiary" means with respect to any person, (i) any corporation
of which an aggregate of 50% or more of the outstanding Stock having
ordinary voting power to elect a majority of the Board of Directors of
such corporation (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) is at the time, directly or
indirectly, owned legally or beneficially by such person and one or more
Subsidiaries of such person, or with respect to which such person and one
or more Subsidiaries of such person have at the time the right to vote or
designate the vote of an aggregate of 50% or more of such Stock, whether
by proxy, agreement, operation of law or otherwise, and (ii) any
partnership or other entity (other than a corporation) in which such
person and one or more Subsidiaries of such person have at the time an
aggregate interest (whether in the form of voting, participation in
profits or capital contributions or otherwise) of 50% or more or of which
any such person or any of its Subsidiaries is at the time a general
partner, trustee or similar official or may exercise the powers of a
general partner, trustee or similar official; provided, however, that
neither Conny nor German Newco shall be a Subsidiary and provided further
that an entity shall not be deemed a Subsidiary so long as on the date
hereof and at all times hereafter such entity conducts no business or
investment activities and has no assets or liabilities in each case in
excess of $10,000 in the aggregate.
"Taxes" means all taxes, levies, imposts, deductions, Charges and
withholdings of any kind, and all liabilities with respect thereto.
"Termination Event" means: (i) a Reportable Event; (ii) the
withdrawal of the Company or any ERISA Affiliate from a Title IV Plan
during a plan year in which the Company or such ERISA Affiliate was a
"substantial employer" as defined in Section 4001(a)(2) or 4062(e) of
ERISA; (iii) the imposition of an obligation on the Company or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties with
written notice of intent to terminate a Title IV Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution by
the PBGC of proceedings to terminate a Title IV Plan; or (v) any event or
condition which might constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any
Title IV Plan.
"Title IV Plan" means a Pension Plan, other than a Multiemployer
Plan, which is covered by Title IV of ERISA.
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<PAGE> 19
"Transaction Documents" means (a) all Loan Documents, (b) all
Acquisition Documents and (c) all Senior Loan Documents.
"Transaction Parties" has the meaning set forth in Section 4.2.
"UCC" means the Uniform Commercial Code as the same may, from time
to time, be in effect in the State of New York.
"Unfunded Pension Liability" means, at any time, the aggregate
amount, if any, of the sum of (i) the amount by which the present value of
all accrued benefits under each Title IV Plan exceeds the fair market
value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for such Title IV Plan using the actuarial assumptions in
effect under such Title IV Plan, and (ii) for a period of five (5) years
following a transaction reasonably likely to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by
the Company or any ERISA Affiliate as a result of such transaction.
"Voting Stock" means, with respect to any person, securities of any
class or classes of capital stock in such person entitling the holders
thereof (whether at all times or only so long as no senior class of stock
has voting power by reason of any contingency) to vote in the election of
members of the Board of Directors of such person.
"Warrants" means the Common Warrants, the Contingent Common Warrants
and the Preferred Warrants.
"Welfare Plan" means any welfare plan, as defined in Section 3(1) of
ERISA, which the Company or any ERISA Affiliate maintains, contributes to
or has an obligation to contribute to on behalf of participants who are or
were employed by the Company or any ERISA Affiliate.
"Withdrawal Liability" means, at any time, the aggregate amount of
the liabilities, if any, pursuant to Section 4201 of ERISA, and any
increase in contributions pursuant to Section 4243 of ERISA, with respect
to all Multiemployer Plans.
(b) For all purposes of the Loan Documents, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to the particular Loan Document as a whole
and not to any particular Section or other subdivision thereof;
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<PAGE> 20
(ii) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP;
(iii) all computations provided for herein shall be made in
accordance with GAAP consistently applied, unless another method of
computation is herein specified;
(iv) any uses of the masculine, feminine or neuter gender
shall also be deemed to include any other gender, as appropriate; and
(v) any exhibit, annex or schedule to any Loan Document
shall be deemed a part of such Loan Document, and all references in any
Loan Document to exhibits, annexes and schedules refer to exhibits,
annexes and schedules to such Loan Document.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE COMPANY
Holdings and the Company jointly and severally represent and warrant
as follows as of the date hereof and as of the Closing Date (after giving effect
to the consummation of the Acquisition Transactions and the other transactions
contemplated hereby):
4.1. Corporate Existence; Compliance with Law. The Company and each
of its Subsidiaries: (i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of organization, in the case
of the Company is duly qualified to do business and in good standing under the
laws of the State of New York as Decora Manufacturing, and is duly qualified to
do business as a foreign corporation and in good standing under the laws of each
other jurisdiction where its ownership or Lease of property or the conduct of
its business requires such qualification and except where the failure to be so
qualified and in good standing would not have or result in a Material Adverse
Effect; (ii) 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
and proposed to be conducted; (iii) except as set forth on Schedule 4.1, has all
licenses, permits, consents or approvals from or by, and has made all filings
with, and has given all notices to, all Governmental Authorities having
jurisdiction, to the extent they are material to such ownership, operation and
conduct; (iv) is in compliance with its certificate or articles of incorporation
and By-laws; and (v) is in compliance with all applicable provisions of law and
all licenses, permits, consents and approvals described in clause (iii) above
where the failure to comply, individually or together with all such other
failures, could have or result in a Material Adverse Effect.
4.2. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by each of the Company, Holdings and German
Newco (collectively, the "Transaction Parties"), of the Transaction Documents,
to the extent such Transaction Party is a party thereto, and the consummation of
the transactions contemplated by the Transaction Documents (including, without
limitation, the issuance of the Notes on the Closing Date): (i) are
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<PAGE> 21
within such Transaction Party's power (individual, corporate, partnership or
otherwise); (ii) have been duly authorized by all necessary or proper corporate
or partnership and shareholder or partner action, as applicable; (iii) are not
in contravention of any provision of any Transaction Party's certificate or
articles of incorporation, By-laws, partnership agreement or other constitutive
documents; (iv) will not violate any law or regulation, or any order or decree,
of any Governmental Authority applicable to any Transaction Party; (v) will not
conflict with or result in the breach or termination of, constitute a default
under or accelerate any performance required by, any indenture, mortgage, deed
of trust, Lease, agreement or other instrument to which any Transaction Party is
a party or by which any Transaction Party or any of its property is bound; (vi)
will not result in the creation or imposition of any Lien upon any of the
property of any Transaction Party, other than Liens granted on the Closing Date
pursuant to the Collateral Documents in favor of the Agent; (vii) except as set
forth on Schedule 4.2 hereof, will not cause anti-dilution clauses of any
outstanding securities to become operative or give rise to any preemptive
rights; and (viii) do not require the consent or approval of, or any
registration, declaration, qualification or filing by or with, any Governmental
Authority or any other person, except those which were duly obtained, made or
complied with prior to the Closing Date. At or prior to the Closing Date, each
of the Transaction Documents was duly executed and delivered by or on behalf of
the Transaction Parties and Kunze Holding GmbH & Co. KG and Baden-
Wurtternbergische Bank A.G. (the "German Sellers") which are parties thereto and
each constitutes a legal, valid and binding obligation of each such Transaction
Party and German Sellers, enforceable against each such Transaction Party and
German Sellers in accordance with its terms.
4.3. Stock Ownership. On the Closing Date, the authorized capital
stock of the Company will consist of 20,000,000 shares of Company Common Stock.
On the Closing Date, (a) 1,000 shares of Company Common Stock will be issued and
outstanding, (b) such outstanding shares will be duly authorized, validly issued
and outstanding and fully paid and nonassessable, free and clear of all
preemptive rights, and (c) such outstanding shares will be owned beneficially
and of record entirely by Holdings free and clear of all Liens other than those
granted under the Senior Loan Documents and the Loan Documents, and (d) such
outstanding shares will constitute all of the issued and outstanding Stock of
the Company. There are no outstanding options, warrants, rights, convertible
securities or other agreements, commitments or plans under which the Company may
become obligated to issue, sell or transfer any shares of its capital stock or
any other Stock of the Company.
4.4. Subsidiaries; Joint Ventures; Indebtedness. The Company and
Holdings do not have any Subsidiaries and are not engaged in any joint venture
or partnership with any other person, and have no outstanding Indebtedness, in
each case except as described on Schedule 4.4.
4.5. Business. The Company and its Subsidiaries are solely engaged
in the Business.
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<PAGE> 22
4.6. Financial Statements and Projections. (a) True and complete
copies of all the historical and pro forma balance sheets and other historical
financial statements identified in Schedule 4.6(a) have been furnished by or on
behalf of Holdings and the Company to the Purchasers prior to the Closing Date.
Such historical balance sheets and other historical financial statements (i)
have been, except as expressly set forth therein or in the footnotes thereto,
prepared in accordance with GAAP, and (ii) present fairly in all material
respects the consolidated financial position of the Company and Holdings at the
respective dates thereof, and the consolidated results of operations and cash
flows of the Company and Holdings for the respective periods then ended
(subject, in the case of any unaudited interim financial statements, to normal
year-end audit adjustments and the absence of footnotes). Each such pro forma
balance sheet (assuming the acquisition of Conny as described therein) has been
prepared in accordance with GAAP (assuming that the financial statements of
Conny prepared under German accounting principles were prepared in accordance
with GAAP except to the extent adjustments were made in such pro forma
financials to reflect differences in GAAP and German accounting principles) to
the extent applicable to such balance sheet. Except as set forth in Schedule
4.6, Holdings is not aware of any material changes which need to be made to the
Conny financial statements to cause them to be in accordance with GAAP, and, in
the opinion of Holdings and the Company, the assumptions on which the pro forma
adjustments reflected in each such pro forma balance sheet are based provide a
reasonable basis for presenting the significant effects of the transactions
contemplated by such pro forma balance sheet (including, without limitation, the
Acquisition Transactions) and such pro forma adjustments give appropriate effect
to such assumptions and are properly applied in such pro forma balance sheet.
(b) True and complete copies of the projections identified in
Schedule 4.6(b) have been furnished by or on behalf of Holdings and the Company
to the Purchasers prior to the Closing Date. The Projections disclose all
assumptions made with respect to general economic, financial and market
conditions in formulating the Projections. The Projections are based upon
reasonable estimates and assumptions, all of which are fair in light of current
conditions, have been prepared on the basis of the assumptions stated therein
and reflect the reasonable estimate of Holdings and the Company of the results
of operations and other information projected therein (assuming the acquisition
of Conny as described therein).
4.7. Material Adverse Change. The Company, Holdings and their
Subsidiaries, as of the Closing Date, do not have any obligations or liabilities
(contingent or otherwise) for Charges, long-term Leases or unusual forward or
long-term commitments which are not reflected in the pro forma balance sheet of
the Company dated as of the Closing Date and described on Schedule 4.6(a). There
has been no event or series of events which has had or could reasonably be
expected to have a material adverse effect on the business, condition (financial
or otherwise), operations, performance, projections, properties or prospects of
the Company, Holdings, their Subsidiaries or the industry in which it operates
since June 30, 1997. Except as permitted hereunder or set forth in Schedule 4.7,
since June 30, 1997 no dividends, advances or other distributions have been
declared, paid or made upon any Stock of the Company or Holdings, and
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<PAGE> 23
no shares of Stock of the Company or Holdings have been, or are now required to
be redeemed, retired, purchased or otherwise acquired for value by the Company
or Holdings.
4.8. Ownership of Property; Liens. Except as described on Schedule
4.8, the real property listed on Schedule 4.8 constitutes all of the real
property owned, Leased or used by the Company, Holdings or their Subsidiaries.
The Company, Holdings or their Subsidiaries owns (i) good and marketable fee
simple title to all of the real property owned by it, and valid and marketable
Leasehold interests in all of its Leases (both as lessor and lessee, sublessee
or assignee), all as described on Schedule 4.8, and (ii) good and marketable
title to, or valid Leasehold interests in, all of its other properties and
assets. Except as described on Schedule 4.8, none of the properties and assets
of the Company, Holdings or their Subsidiaries are subject to any Liens, except
Permitted Encumbrances. Except as described on Schedule 4.8, the Company has
received all deeds, assignments, waivers, consents, non-disturbance and
recognition or similar agreements, bills of sale and other documents, and duly
effected all recordings, filings and other actions, necessary to establish,
protect and perfect the Company's, Holdings' or their Subsidiaries' right, title
and interest in and to all such real property and other assets or property.
Except as described on Schedule 4.8, (A) neither the Company, Holdings or their
Subsidiaries nor any other party to any Lease described on Schedule 4.8 is in
default of its obligations thereunder or has delivered or received any notice of
default under any such Lease, and no event has occurred which, with the giving
of notice, the passage of time or both, would constitute a default under any
such Lease; (B) the Company, Holdings or their Subsidiaries do not own or hold,
and are not obligated under or a party to, any option, right of first refusal or
other contractual right to purchase, acquire, sell, assign or dispose of any
real property owned or Leased by the Company, Holdings or their Subsidiaries;
and (C) no portion of any real property owned or Leased by the Company, Holdings
or their Subsidiaries has suffered any material damage by fire or other casualty
loss which has not heretofore been completely repaired and restored to its
original condition. All material permits required to have been issued or
appropriate to enable the real properties owned or Leased by the Company,
Holdings or their Subsidiaries to be lawfully occupied and used for all of the
purposes for which they are currently occupied and used, have been lawfully
issued and are, as of the Closing Date, in full force and effect. There are no
pending or, to Holdings' and the Company's knowledge, threatened condemnation or
eminent domain proceedings affecting or which could reasonably be expected to
affect all or any material part of the real properties owned or leased by the
Company, Holdings or their Subsidiaries.
4.9. Restrictions; No Default. (a) No contract, Lease, agreement or
other instrument to which the Company, Holdings or their Subsidiaries is a party
or by which it or any of its properties or assets is bound or affected, and no
provision of any applicable law or governmental regulation, has or results in a
Material Adverse Effect or, insofar as Holdings or the Company can reasonably
foresee, could have or result in a Material Adverse Effect. Except as set forth
on Schedule 4.9, the Company, Holdings or their Subsidiaries are not in default,
and to Holdings' and the Company's knowledge no third party is in default, under
or with respect to any contract, agreement, Lease or other instrument to which
the Company, Holdings or their Subsidiaries are a party or by which it or any of
its properties or assets is bound or affected,
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<PAGE> 24
except for defaults which could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. No Potential Default or Event of
Default has occurred and is continuing.
(b) There are no adverse orders, judgments, writs, injunctions or
decrees of any Governmental Authority or arbitrator, domestic or foreign,
outstanding against the Company, Holdings or their Subsidiaries which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
4.10. Status Under Certain Statutes. None of the Company, Holdings
or any of their Subsidiaries is: (i) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a "holding company," or
an "affiliate" of such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, (ii) a "public utility"
as defined in the Federal Power Act, as amended, (iii) an "investment company"
or an "affiliated person" thereof, or an "affiliated person" of any such
"affiliated person," or a person "controlled" by an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended, or
(iv) a "common carrier" as defined in the Interstate Commerce Act, as amended.
4.11. Labor Matters. (a) Except as set forth on Schedule 4.11, there
are no strikes, work stoppages, slow-downs, picketing or other labor disputes
against the Company, Holdings or their Subsidiaries that are pending or, to
Holdings' and the Company's knowledge, threatened which could have or result in
a Material Adverse Effect. Hours worked by and payments made to employees of the
Company, Holdings or their Subsidiaries have not been in violation of the Fair
Labor Standards Act or any other applicable law dealing with such matters, which
violations, individually or in the aggregate, could have or result in a Material
Adverse Effect. All premium payments due from the Company, Holdings or their
Subsidiaries on account of employee health and welfare insurance which could
have or result in a Material Adverse Effect if not paid have been paid or
accrued as a liability on the books of the Company and Holdings. There is no
organizing activity involving the Company, Holdings or their Subsidiaries
pending or, to Holdings' and the Company's knowledge, threatened by any labor
union or group of employees. Except as set forth on Schedule 4.11, there are no
representation or unfair labor practice proceedings pending or threatened with
the National Labor Relations Board, and no labor organization or group of
employees of the Company has made a pending demand for recognition. Except as
set forth on Schedule 4.11, there are no complaints, charges or grievances
against the Company, Holdings or their Subsidiaries pending or, to Holdings' and
the Company's knowledge, threatened to be filed with any federal, state, local
or foreign Governmental Authority or arbitrator based on, arising out of, in
connection with, or otherwise relating to, the employment or termination of
employment by the Company of any individual or the compliance with or violation
of the duty to bargain or the compliance with a violation of any collective.
(b) The Company, Holdings and their Subsidiaries have at all times
complied in all material respects with, and are currently in material compliance
with, all applicable federal,
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<PAGE> 25
state and local laws, rules and regulations respecting employment, wages, hours,
compensation, benefits, occupational health and safety, and payment and
withholding of taxes in connection with employment. The Company, Holdings and
their Subsidiaries have withheld all amounts required by law or agreement to be
withheld from wages, salaries, commissions and other compensation to employees,
and the Company, Holdings and their Subsidiaries are not liable for any arrears
of wages or any taxes or penalties for failure to comply with any of the
foregoing.
4.12. Taxes. All federal, state, local and foreign tax returns,
reports and statements, including, but not limited to, information returns (Form
1120-S) required to be filed with any Governmental Authority by or with respect
to the Company, Holdings, or any of their Subsidiaries, their business or their
assets, have been duly filed, to the knowledge of the Company and Holdings each
such return correctly and completely reflects the liability for Charges and
other impositions and all other information required to be reported thereon, and
all Charges and other impositions shown thereon to be due and payable have been
paid, except to the extent permitted to be contested in accordance with the
terms of Section 7.6(b). All Charges and other impositions (in each case
together with all related fines, penalties and interest) (i) owed by the Company
or Holdings or any of their Subsidiaries, (ii) for which the Company or Holdings
or any of their Subsidiaries is or could otherwise be held liable, or (iii)
which are or could otherwise become chargeable as a Lien upon any property or
assets of Holdings, the Company or any of their Subsidiaries, have been duly and
timely paid. Proper and accurate amounts have been withheld by the Company,
Holdings and their Subsidiaries, as appropriate, from its employees for all
periods in full and complete compliance with the tax, social security and
unemployment withholding provisions of applicable federal, state, local and
foreign laws and such withholdings have been timely paid to the respective
Governmental Authorities. Schedule 4.12 sets forth those taxable years for which
the Company's or Holdings' or any of their Subsidiaries' tax returns are
currently being audited by the IRS or any other applicable Governmental
Authority and any assessments or threatened assessments in connection with any
such audit or otherwise currently outstanding. Except as described on Schedule
4.12, the Company, Holdings and their Subsidiaries have not executed or filed
with the IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges. The Company, Holdings and their Subsidiaries have not
filed a consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any dispositions of "subsection (f) assets" (as
such term is defined in Section 341(f)(4) of the Code). None of the property
owned by the Company is property which the Company, Holdings and their
Subsidiaries are required to treat as being owned by any other person pursuant
to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, and in effect immediately prior to the enactment of the Tax Reform Act
of 1986, or is "tax-exempt use property" within the meaning of Section 168(h) of
the Code. The Company, Holdings and their Subsidiaries have not agreed or been
requested to make any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise. The Company, Holdings and their
Subsidiaries are not a party to any obligation under any tax sharing agreement,
and the Company, Holdings and their Subsidiaries have not assumed any liability
of any person for Charges or other impositions payable by such person.
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<PAGE> 26
4.13. ERISA. (a) Schedule 4.13 lists all Plans maintained or
contributed to by the Company or Holdings or their Subsidiaries and all
Qualified Plans maintained or contributed to by any ERISA Affiliate, and
separately identifies the Title IV Plans, Multiemployer Plans, any multiple
employer plans subject to Section 4064 of ERISA, unfunded Pension Plans, Welfare
Plans and Retiree Welfare Plans. Except as disclosed in Schedule 4.13, each Plan
is in compliance with the provisions of applicable law, including ERISA and the
Code, including the filing of reports required under the Code or ERISA which are
true and correct as of the date filed, or the failure to comply with all such
Plans would not result in a liability in excess of $50,000 and with respect to
each Plan, all required contributions and benefits have been paid in accordance
with the provisions of such Plan. Neither the Company nor any ERISA Affiliate
maintains or contributes to any Qualified Plan subject to Section 412 of the
Code or Section 302 of ERISA or Title IV. The Company and its ERISA Affiliates
do not maintain or contribute to any Retiree Welfare Plans. Except as set forth
in Schedule 4.13, neither the Company nor any ERISA Affiliate maintains or
contributes to any Pension Plan or Multiemployer Plan. Neither Holdings nor the
Company nor their Subsidiaries, to their knowledge, has engaged in a prohibited
transaction, as defined in Section 4975 of the Code or Section 406 of ERISA, in
connection with any Plan, which would subject the Company or Holdings or their
Subsidiaries (after giving effect to any exemption) to a material tax on
prohibited transactions imposed by Section 4975 of the Code or any other
material liability.
(b) Except as set forth on Schedule 4.13 and except to the extent
the following could not subject the Company or its ERISA Affiliates to liability
in excess of $50,000 individually or in the aggregate: (i) there are no pending,
or to the knowledge of Holdings and the Company, threatened claims, actions or
lawsuits (other than claims for benefits in the normal course) asserted or
instituted against (x) any Plan or its assets, (y) any fiduciary with respect to
any Plan or (z) the Company or any ERISA Affiliate with respect to any Plan;
(ii) within the last five years neither the Company nor any ERISA Affiliate has
engaged in a transaction which resulted in a Title IV Plan with Unfunded Pension
Liabilities being transferred outside of the "controlled group" (within the
meaning of Section 4001(a)(14) of ERISA) of any such entity; (iii) no plan which
is a Retiree Welfare Plan provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment (except as may be required by Section 4980B of the
Code and at the sole expense of the participant or the beneficiary of the
participant); and (iv) the Company and each ERISA Affiliate have complied with
the notice and continuation coverage requirements of Section 4980B of the Code
and the regulations thereunder, except where the failure to comply could not
have or result in any Material Adverse Effect.
(c) Assuming the accuracy of the representation contained in
Section 5(b), the execution, delivery and performance of the Loan Documents and
the consummation of the transactions contemplated thereby (including, without
limitation, (i) the offer, issue and sale by the Company and Holdings, and the
purchase by the Purchasers, of the Notes and the Warrants, and (ii) the issuance
of Shares upon the exercise from time to time of the Warrants) will not involve
any "prohibited transaction" within the meaning of ERISA or the Code.
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<PAGE> 27
4.14. No Litigation. Except as set forth on Schedule 4.14, no
action, claim, suit, investigation or proceeding is now pending or, to the
knowledge of Holdings and the Company, threatened against the Company, Holdings
or their Subsidiaries, at law, in equity or otherwise, before any Governmental
Authority or any arbitrator or panel of arbitrators, which (i) challenges any
such person's or any of its Affiliates' right, power or competence to enter into
or perform any of its obligations under any Transaction Document, or the
validity or enforceability of any Transaction Document or any action taken
thereunder or (ii) could reasonably be expected to have or result in a Material
Adverse Effect, nor to the knowledge of Holdings and the Company does a state of
facts exist which could reasonably be expected to give rise to any such action,
claim, suit, investigation or proceeding.
4.15. Brokers. Except as set forth in Schedule 4.15, (i) no broker
or finder acting on behalf of Holdings or the Company brought about the making
or closing of the sale and purchase of the Notes and the Warrants pursuant to
this Agreement or the other transactions contemplated by the Transaction
Documents, and (ii) neither Holdings nor the Company have any obligation to any
person in respect of any finder's or brokerage fees in connection therewith.
4.16. Employment Matters. Except as set forth on Schedule 4.16,
there are no (i) employment, consulting, management or similar agreements
covering management of the Company, Holdings or their Subsidiaries or (ii)
collective bargaining agreements or other labor agreements, white papers or side
agreements covering any employees of the Company, Holdings or their
Subsidiaries. True and complete copies of each such agreement have been
furnished to the Purchasers.
4.17. Patents, Trademarks, Copyrights and Licenses. Except as
otherwise set forth on Schedule 4.17, the Company, Holdings and their
Subsidiaries own all material licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications and trade names
necessary to continue to conduct its business as heretofore conducted, now
conducted by it and proposed to be conducted by it, each of which is listed,
together with Patent and Trademark Office application or registration numbers,
where applicable, on Schedule 4.17. Schedule 4.17 lists all trade names or other
names under which the Company, Holdings and their Subsidiaries conduct business.
The Company, Holdings and their Subsidiaries conduct their business without
infringement or claim of infringement of any license, patent, copyright, service
mark, trademark, trade name, trade secret or other intellectual property right
of others, except where such infringement or claim of infringement, individually
or together with all such other infringements and claims, could not have or
result in a Material Adverse Effect. There is no infringement or claim of
infringement by others of any material license, patent, copyright, service mark,
trademark, trade name, trade secret or other intellectual property right of the
Company, Holdings and their Subsidiaries.
dave
4.18. Full Disclosure. No information contained in this Agreement,
the other Transaction Documents, the Projections, the Financials or any other
document furnished by or on behalf of the Company or Holdings pursuant to or in
contemplation of this Agreement which has
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<PAGE> 28
been delivered to any Purchaser on or prior to the Closing Date (collectively,
the "Disclosure Materials"), contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. Except as described on Schedule 4.18
or in the Disclosure Materials, there are no facts known to the Company or
Holdings other than facts of a general economic nature not relating specifically
to the Company or the Business, which have or result in, or could reasonably be
expected to have or result in, a Material Adverse Effect.
4.19. Offering of Securities. None of the Transaction Parties or
Holdings or any agent or other person acting on any Transaction Party's or
Holdings' behalf, directly or indirectly, (i) offered any of the Notes, Warrants
or any similar security of the Company or Holdings (A) by any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or (B) for sale to, or solicited offers to buy any thereof
from, or otherwise approached with respect thereto or negotiated with respect
thereto with, any person other than the Purchasers and not more than 20 other
institutional investors each of which such Transaction Party or Holdings, as the
case may be, reasonably believed was an "accredited investor" within the meaning
of Regulation D under the Securities Act or (ii) has done or caused to be done
(or has omitted to do or to cause to be done) any act, which act (or which
omission) would result in bringing the issuance or sale of the Notes or Warrants
within the provisions of Section 5 of the Securities Act.
4.20. Holdings Orders. There are no adverse orders, judgements,
writs, injunctions or decrees of any Governmental Authority or arbitrator,
domestic or foreign, outstanding against Holdings.
4.21. Insurance Policies. Schedule 4.21 lists all insurance policies
of any nature maintained for current occurrences by the Company, Holdings or
their Subsidiaries, as well as a summary of the terms of such insurance
policies. Such insurance policies comply with the standards set forth in Section
7.5.
4.22. No Foreign Assets Control Regulation Violation. The
transactions contemplated by this Agreement will not result in a violation of
any of the foreign assets control regulations of the United States Treasury
Department, 31 C.F.R., Subtitle B, Chapter V, as amended, or any ruling issued
thereunder or any enabling legislation or other Presidential Executive Order
granting authority therefor, and the proceeds of the Notes and the Warrants will
not be used by the Company or Holdings in a manner which would violate any such
regulation.
4.23. Outstanding Securities. Since January 1, 1988, all
securities (as defined in the Securities Act) of each of Holdings and the
Company have been offered, issued, sold and delivered in compliance with, or
pursuant to exemptions from, all applicable federal and state laws, and the
rules and regulations of federal and state regulatory bodies, governing the
offering, issuance, sale and delivery of securities. Neither Holdings nor the
Company is required to file or has filed, pursuant to Section 12 of the
Securities Exchange Act, a registration statement relating
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<PAGE> 29
to any class of its debt or equity securities, except as set forth on Schedule
4.23. Except as provided in Section 17 or as set forth on Schedule 4.23 hereof
neither Holdings nor the Company has registered or agreed to register any
securities under the Securities Act.
4.24. No Burdensome Agreements. Neither Holdings nor the Company is
a party to any contract or agreement with any of its Affiliates, the terms of
which are less favorable to Holdings or the Company, as the case may be, than
those which might have been obtained, at the time such contract or agreement was
entered into, from a person who was not such an Affiliate.
4.25. Solvency. (a) The Company is and, immediately after giving
effect to the issue and sale of the Notes and the Warrants and the consummation
of the other transactions contemplated hereby (including, without limitation,
the Acquisition Transactions), will be Solvent.
(b) For purposes of this Section 4.25, the term "Solvent" means,
with respect to any person, that:
(i) the assets of such person, at a fair valuation, exceed
the total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such person;
(ii) the cash flow of such person is sufficient to enable it
to pay its debts as they mature; and
(iii)such person does not have an unreasonably small capital
with which to engage in its anticipated business.
(c) For purposes of this Section 4.25, the "fair valuation" of the
assets of any person shall be determined on the basis of the amount which may be
realized within a reasonable time, either through collection or sale of such
assets at their Fair Market Value.
4.26. Americans with Disabilities Act of 1990. The Company's
employment practices and procedures are in compliance with the requirements of
the ADA in all material respects, and the Company, Holdings and their
Subsidiaries have received no notice or complaint alleging any noncompliance
with the ADA on its part or on the part of any of its facilities.
4.27. Additional Representations with Respect to Holdings. (a)
Except as set forth in Schedule 4.4, Holdings and each of its Subsidiaries: (i)
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of organization and is duly qualified to do business as
a foreign corporation and in good standing under the laws of each other
jurisdiction where its ownership or Lease of property or the conduct of its
business requires such qualification; (ii) 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 and proposed to be conducted; (iii) has
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<PAGE> 30
all licenses, permits, consents or approvals from or by, and has made all
filings with, and has given all notices to, all Governmental Authorities having
jurisdiction, to the extent they are material to such ownership, operation and
conduct; (iv) is in compliance with its certificate or articles of incorporation
and By-laws; and (v) is in compliance with all applicable provisions of law and
all licenses, permits, consents and approvals described in clause (iii) above.
(b) The execution, delivery and performance by Holdings of the
Transaction Documents to which it is a party, and the consummation of the
transactions contemplated by the Transaction Documents (including, without
limitation, the issuance of the Warrants on the Closing Date, and the issuance
of Shares upon the exercise from time to time of the Warrants): (i) are within
its corporate power; (ii) have been duly authorized by all necessary or proper
corporate and shareholder action; (iii) are not in contravention of any
provision of its certificate or articles of incorporation or By-laws; (iv) will
not violate any law or regulation, or any order or decree, of any Governmental
Authority applicable to it; (v) will not conflict with or result in the breach
or termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, Lease, agreement or other
instrument to which it is a party or by which it or any of its property is
bound; (vi) will not result in the creation or imposition of any Lien upon any
of its property, other than Liens granted by Holdings pursuant to the Collateral
Documents in favor of the Purchasers; (vii) except as set forth on Schedule 4.2,
will not cause anti-dilution clauses of any outstanding securities to become
operative or give rise to any preemptive rights; and (viii) do not require the
consent or approval of, or any registration, declaration, qualification or
filing by or with, any Governmental Authority or any other person, except those
which were duly obtained, made or complied with prior to the Closing Date. At or
prior to the Closing Date, each of the Transaction Documents to which Holdings
is a party was duly executed and delivered by or on behalf of Holdings and each
constitutes a legal, valid and binding obligation of Holdings, enforceable
against Holdings in accordance with its terms.
(c) The authorized capital stock of Holdings as of the date of
this Agreement and immediately prior to the Closing consists of 45,000,000
shares of common stock, par value $.01 per share, of which 35,719,390 are
outstanding, and 5,000,000 shares of series preferred stock, $.01 par value per
share, of which there have been validly designated by all requisite corporate
action only 69,557 shares of Series A Convertible Preferred Stock, having the
rights, limitations, privileges and preferences set forth in Exhibit F, none of
which are outstanding. All of the designated shares of Series A Preferred and
2,136,534 shares of Common Stock have been reserved for issuance upon exercise
of the Preferred Warrants and the Common Warrants, respectively. Schedule
4.27(c) sets forth a true and correct list of all outstanding options, warrants,
calls, puts, commitments and other rights to purchase, or securities or other
rights convertible or exchangeable into, capital stock of Holdings as of the
date of this Agreement contemplated hereby, indicating the record, and, to the
knowledge of Holdings and its Subsidiaries, the beneficial owner thereof, the
exercise, conversion or exchange price and period thereof, the term and any
vesting or other conditions thereon (excluding the rights under the Cigna
Exchange Agreement, the "Existing Converts").
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<PAGE> 31
(d) On the Closing Date, Holdings will not (i) own any assets
other than as set forth on Schedule 4.27(d) and the shares of Company Common
Stock described in Section 4.3 hereof and the issued and outstanding shares of
German Newco capital stock set forth opposite its name on Schedule 4.27(d) or
(ii) be subject to any liabilities or obligations other than as set forth on
Schedule 4.27(d) and its obligations under the Transaction Documents. Since
1988, Holdings has not engaged in any business or activities other than those
connected with, arising out of or incidental to investing in the Company and
Conny and other business corporate entities.
(e) Holdings has previously furnished the Purchasers with true and
complete copies of each final prospectus and definitive proxy statement filed by
Holdings with the Commission, and each annual, quarterly or periodic report
filed by Holdings with the Commission since March 31, 1995. None of such
documents or other communications contained as of the date of such document any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
such documents which is subject to the Securities Act or the Securities Exchange
Act or the regulations promulgated thereunder, complied in all material respects
at the time of their filing in form and substance with such Acts and
regulations.
(f) The Board of Directors of Holdings, by unanimous vote of its
members has resolved to (i) amend the certificate of incorporation of the
Company to authorize a sufficient number of additional shares of Common Stock of
Holdings to permit the exercise in full of the Warrants and the conversion in
full of the Preferred Shares, (ii) submit such proposed amendment to the vote of
its stockholders at a stockholders meeting to be held as promptly as practicable
after the date hereof, (iii) recommend that the Holdings stockholders vote in
favor of such amendment and (iv) reserve for issuance a sufficient number of
additional shares of Common Stock of Holdings to permit the exercise in full of
the Warrants and the conversion in full of the Preferred Shares, as such number
may be adjusted in accordance with the terms of the Series A Preferred and the
Warrants.
SECTION 5. REPRESENTATIONS OF THE PURCHASERS
Each Purchaser, severally and not jointly represents and warrants to
Holdings and the Company, with respect to such Purchaser only, that:
(a) Such Purchaser has all requisite power, authority and legal
right to execute, deliver and perform the Loan Documents to which it is a party.
The execution, delivery and performance of the Loan Documents to which such
Purchaser is a party have been duly authorized by all required corporate and
other actions on the part of such Purchaser. Such Purchaser has duly executed
and delivered the Loan Documents to which it is a party, and the Loan Documents
to which it is a party constitute the legal, valid and binding obligation of
such Purchaser enforceable against such Purchaser in accordance with their
respective terms.
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<PAGE> 32
(b) At least one of the following statements is an accurate
representation as to each source of funds (a "Source") to be used to pay the
purchase price of the Notes and Warrants to be purchased hereunder on the
Closing Date by such Purchaser:
(i) no part of the Source constitutes the assets of any
employee benefit plan subject to Title I of ERISA or any plan subject to
section 4975 of the Code;
(ii) the Source is either an insurance company pooled
separate account within the meaning of United States Department of Labor
Prohibited Transaction Class Exemption ("PTCE") 90-1, an insurance company
general account within the meaning of PTCE 95-60, a bank collective
investment fund within the meaning of PTCE 91-38, an investment fund
acting at the direction of a professional asset manager within the meaning
of PTCE 84-14, or an employee benefit plan subject to Title I of ERISA
acting at the direction of an in-house asset manager within the meaning of
PTCE 96-23; or
(iii)the Source constitutes the assets of one or more employee
benefit plans subject to Title I of ERISA or plans subject to section 4975
of the Code, each of which has been identified in Schedule 5(b).
(c) Such Purchaser is capable of evaluating the risk of its
investment in the Notes and Warrants being purchased by it hereunder and is able
to bear the economic risk of such investment. Such Purchaser is purchasing the
Notes and Warrants to be purchased by it hereunder for its own account, and such
Notes and Warrants are being purchased by it for investment and not with a
present view to any distribution thereof. Such Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
It is understood that the disposition of such Purchaser's property
shall, subject to the terms of this Agreement, at all times be within such
Purchaser's control. If such Purchaser should in the future decide to dispose of
any of its Notes, Warrants or Shares, it is understood that it may do so only in
compliance with the Securities Act and this Agreement.
SECTION 6. PREPAYMENTS AND REPAYMENTS
6.1. Prepayment at Holder's Option. (a) In the event of a Change of
Control Event, each holder of a Note or Notes shall have the right, at such
holder's option, to require the Company to prepay such holder's Note or Notes in
whole or in part at a price equal to (i) 100% of the aggregate principal amount
of Notes to be prepaid plus (ii) all accrued interest on such aggregate
principal amount of Notes to the date of prepayment. Such option shall be
exercised by written notice to the Company under Section 6.1(b) given at any
time before or after the Change of Control Event. As soon as possible after the
Company has knowledge that a Change of Control Event is reasonably likely to
occur, the Company shall give written notice to each holder of a Note or Notes
notifying each such holder of the likely occurrence of such Change of Control
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<PAGE> 33
Event and informing each such holder of its right to require, at its option, a
prepayment under this Section 6.1(a).
(b) In order to exercise its right to require a prepayment under
this Section 6.1, a holder requiring such prepayment shall send to the Company a
written notice demanding prepayment under this Section 6.1 and specifying the
date of such prepayment (which must be a Business Day and which shall not be
earlier than the date of such Change of Control Event).
(c) In the event that on any date for prepayment pursuant to this
Section 6.1 the Company, for whatever reason, does not pay in full all such
prepayment amounts due to the holders of Notes who have exercised their rights
to require prepayment, then the amount actually prepaid by the Company to all
such holders of Notes pursuant to this Section 6.1 shall be allocated among all
such holders of Notes in proportion, as nearly as practicable, to the respective
aggregate principal amount of Notes as to which each such holder has exercised
its prepayment right; provided, however, such failure to pay all such prepayment
amounts in full shall constitute an Event of Default.
6.2. Optional Prepayments. (a) The Company may prepay at any time
on or after the second anniversary of the Closing Date all or a portion of the
Notes at a price equal to the Redemption Percentage of the principal amount
being prepaid plus all interest accrued thereon to the date of prepayment.
(b) The aggregate amount of each prepayment of the principal
amount of Notes pursuant to this Section 6.2 shall be allocated among all Notes
at the time outstanding, in proportion, as nearly as practicable, to the
respective unpaid principal amounts of such Notes.
(c) Any partial prepayment of Notes by the Company pursuant to
Section 6.2(a) shall be in a minimum amount of $500,000 and in integral
multiples of $500,000.
(d) The right of the Company to prepay Notes pursuant to this
Section 6.2 shall be conditioned upon its giving notice of prepayment, signed by
its principal financial officer, to the holders of Notes not less than 20 days
and not more than 60 days prior to the date upon which the prepayment is to be
made, specifying (i) the registered holder of each Note to be prepaid, (ii) the
aggregate principal amount of Notes being prepaid, (iii) the date of such
prepayment (which must be a Business Day), (iv) the accrued and unpaid interest
on such aggregate principal amount of Notes (to but not including the date upon
which the prepayment is to be made) and (v) that the prepayment of Notes is
being made pursuant to paragraph (a) or (b) of this Section 6.2, as the case may
be. Notice of prepayment having been so given, the prepayment price of the
aggregate principal amount of Notes so specified in such notice or the total
principal amount of the Notes, as applicable, shall become due and payable on
the specified prepayment date; provided, however, that the right to apply any or
all of the Notes as payment to exercise any Warrant or Warrants shall continue
to be exercisable by each holder of Notes to, but not including, the date of
such prepayment.
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(e) Except as set forth in Section 6.2(a), the Notes may not be
prepaid by or on behalf of the Company.
6.3. Obligations Unconditional. The Company hereby agrees and
confirms that its obligations under the Notes shall be deemed to constitute for
all purposes obligations for the payment of indebtedness for borrowed money and
shall accordingly be absolute and unconditional in accordance with the terms of
the Notes and this Agreement and shall not be affected by (and the Company
agrees not to assert) any right the Company may now or at any time hereafter
have in connection with the Acquisition Transactions or the Acquisition
Documents, including without limitation (i) any right of set-off, counterclaim,
recoupment or defense against any person, (ii) any right by reason of any defect
in the title to the assets acquired in connection with the Acquisition
Transactions and (iii) any right to terminate, cancel, quit or surrender this
Agreement or any Note except in accordance with the express terms hereof or
thereof.
SECTION 7. AFFIRMATIVE COVENANTS
The Company and Holdings jointly and severally covenant and agree
that unless the Majority Noteholders shall otherwise consent in writing, so long
as any Obligations remain outstanding:
7.1. Use of Proceeds; Mandatory Payment. The Company will apply the
proceeds of the loan provided for in this Agreement to prepay amounts
outstanding under the 14% Senior Subordinated Notes due April 15, 1998 of the
Company by $2,900,000 and advance the balance of such proceeds to Holdings which
shall contribute such balance to German Newco to fund the purchase of capital
stock of Conny under the Conny Stock Purchase Agreement. Promptly after the
Closing, Holdings shall pay to Fleet Bank $107,000 to repay in full all amounts
outstanding under the Business Purpose Note dated January 24, 1996 by Holdings
to Fleet Bank.
7.2. Taxes. The Company and Holdings will promptly pay or discharge
all Taxes imposed upon them or upon any of their property and all lawful claims
for labor, material, or supplies which, if unpaid, might become a Lien upon any
such property.
7.3. Existence. The Company and Holdings will do all things
necessary to preserve and keep in full force and effect their corporate
existences, rights, and franchises.
7.4. Financial Covenants. The Company and Holdings must be in
compliance with the following financial covenants, as would be shown on the
quarterly and fiscal year end financial statements of the Company and Holdings
prepared in accordance with GAAP:
(i) for the Company, a minimum current ratio of; 1.30 to
1.00 during fiscal year 1998; 1.50 to 1.00 during fiscal year 1999 and
thereafter. For the purposes of this Agreement, current ratio shall be
defined as the ratio of the Company's current assets (including the unused
formula loan availability under that certain $6,000,000.00 revolving
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line of credit loan extended by the Senior Lender to the Company and that
certain $1,000,000.00 revolving line of credit loan extended by the Senior
Lender to the Company dated March 27, 1997 [collectively, the "Revolver
Loans"]) to the Company's current liabilities (excluding the
aforementioned Revolver Loans) as would be shown on each fiscal quarter
end and fiscal year end balance sheets of the Company prepared in
accordance with GAAP;
(ii) for the Company, a minimum working capital of Four
Million and no/100 Dollars ($4,000,000.00) as of September 30, 1997
through December 31, 1997 and Five Million Five Hundred Thousand and
no/100 Dollars ($5,500,000.00) as at March 31, 1998. During fiscal year
1999 and thereafter, the Company must maintain a minimum working capital
of Seven Million and no/100 Dollars ($7,000,000.00), all as would be shown
on the fiscal quarter end and fiscal year end balance sheets of the
Company prepared in accordance with GAAP. For the purposes of determining
working capital, the Company's liability to the Senior Lender pursuant to
the Revolver Loans will be excluded, and the Company's current assets
shall be increased by the Company's unused formula loan availability under
the Revolver Loans;
(iii)a total debt to tangible net worth ratio at fiscal year
end March 31, 1998 of 5.00 to 1.00, at fiscal year end March 31, 1999 of
4.00 to 1.00, at fiscal year end March 31, 2000 of 3.00 to 1.00, and at
fiscal year end March 31, 2001 and thereafter at each March 31 fiscal year
end of 2.50 to 1.0. For the purposes of this Agreement, debt to tangible
net worth ratio shall be defined as the ratio of the Company's total
liabilities (less subordinated debt) divided by the sum of the Company's
tangible net worth plus subordinated debt less the amount of the
outstanding principal balance of the notes receivable from Holdings, as
would be shown on the fiscal quarter end and fiscal year end balance
sheets of the Company prepared in accordance with GAAP; for the purposes
of this subsection, the calculation for fiscal year ended March 31, 1998
shall exclude the one time charge to earnings from September 26, 1997 to
and including December 31, 1997, in an amount not to exceed $750,000.00
for efficiencies realized as a result of "right sizing" of the business of
the Company, Holdings and German Newco which reduce the Company's
consolidated stockholders equity;
(iv) a minimum debt service coverage ratio during fiscal year
1998 of 1.15 to 1.0 and during fiscal year 1999 and thereafter of 1.20 to
1.0. For the purposes of this Agreement, debt service coverage ratio will
be calculated using the trailing four quarters of the Company's earnings
before interest, taxes, depreciation and amortization minus the Company's
cash capital expenditures (net of financed capital expenditures) divided
by the sum of Company's trailing four quarters debt service payments
(principal and interest) less funds raised to finance the Company's
repayment of indebtedness owed to CIGNA (whether in the form of debt or
equity) minus amortization of non-cash debt discount associated with
subordinated debt, as would be shown on the fiscal quarter end and fiscal
year end balance sheets of the Company prepared in accordance with GAAP.
For the
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purposes of this subsection, the calculation for fiscal year ended March
31, 1998 shall exclude the one time charge to earnings from September 26,
1997 to and including December 31, 1997, in an amount not to exceed
$750,000.00 for efficiencies realized as a result of "right sizing" of the
business of the Company, Holdings and German Newco which reduce the
Company's consolidated stockholders equity;
(v) the Company shall be limited to making annual capital
expenditures in the maximum amount of One Million Five Hundred Thousand
and no/100 Dollars ($1,500,000.00) during fiscal year 1998 and One Million
and no/100 Dollars during the balance of the term of this Agreement. If
required by the terms of the manufacturing agreement between the Company
and Rubbermaid Incorporated, for each year during the term of this
Agreement, the Company must provide evidence, satisfactory to the Agent,
that the Company has received the consent of Rubbermaid Incorporated to
make capital expenditures exceeding One Million and no/100 Dollars
($1,000,000.00) in said year;
(vi) the Company's expenditures for management fees shall not
exceed Eight Hundred Thousand and no/100 Dollars ($800,000.00) per annum;
(vii)the consolidated stockholders equity of the Company as of
March 31, 1998 shall not be less than the remainder of $14,415,000.00
minus the lesser of (a) $750,000.00 or (b) the one time charge to earnings
from September 26, 1997 to and including December 31, 1997 for
efficiencies realized as a result of "right sizing" of the business of the
Company, Holdings and German Newco which reduce the Company's consolidated
stockholders equity (such remainder the "1998 Company Net Worth"); the
consolidated stockholders equity of the Company at March 31, 1999 shall
not be less than the sum of the 1998 Company Net Worth plus $2,500,000.00;
the consolidated stockholders equity of the Company at March 31, 2000
shall not be less than the sum of the 1998 Company Net Worth plus
$6,500,000.00; and at each fiscal year end thereafter, the consolidated
stockholders equity of the Company shall not be less than the sum of the
consolidated stockholders equity of the Company required to be maintained
at the end of the immediately prior fiscal year plus $6,000,000.00; and
(viii) the consolidated stockholders equity of Holdings at
March 31, 1999 shall not be less than the sum of the consolidated
stockholders equity of Holdings at March 31, 1998 (the "1998 Net Worth")
plus $4,000,000.00; the consolidated stockholders equity of Holdings at
March 31, 2000 shall not be less than the sum of the 1998 Net Worth plus
$10,000,000.00; and at each fiscal year end thereafter, the consolidated
stockholders equity of Holdings shall not be less than the sum of the
consolidated stockholders equity of Holdings required to be maintained at
the end of the immediately prior fiscal year plus $8,000,000.00."
7.5. Insurance. The Company, Holdings and their Subsidiaries will
carry insurance as required in the Collateral Documents. They will carry
insurance with responsible
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insurance companies for which the Purchasers and the Agent will be named as an
insured against such other risks of whatever kind and in such amounts as the
Majority Noteholders may from time to time reasonably request in writing for
their protection. The Company and Holdings will deliver to the Agent the
insurance policies provided for above and they will reimburse the Agent and
Purchasers for any premiums paid for insurance by the Agent and Purchasers on
the failure of them to carry such insurance or deliver and assign such policies.
In addition to the foregoing, the Company, Holdings and their Subsidiaries will
carry such other types and amounts of insurance as are usually carried by
corporations engaged in the same or similar businesses similarly situated.
7.6. General Compliance. The Company, Holdings and their
Subsidiaries will maintain their properties in good repair and condition and
will make all needed renewals and replacements so that their businesses may be
properly and advantageously conducted at all times. They will comply with all
statutes, ordinances, rules, regulations and orders of any Federal, State,
municipal authority or official having jurisdiction over their property;
provided that they may contest in good faith any statutes, ordinances, rules,
regulations and orders of such bodies or officials in any reasonable manner
which will not, in the opinion of the Majority Noteholders, adversely affect its
rights under the Loan Documents. As to any real property owned or occupied by
the Company, Holdings and their Subsidiaries, the Company or Holdings will cure
any violation of any governmental requirements respecting the property, if
within Company's or Holdings' power to do so, including without limitation any
laws, rules or regulations governing hazardous waste removal and clean-up or
arising from an intentional or unintentional act or omission of the Company,
Holdings and their Subsidiaries or any previous owner and/or operator of the
real property, within twenty (20) days after receipt of written notice and
demand from the Agent. The expenses of any environmental testing and clean-up,
or fees for environmental auditors or engineers, shall be chargeable to the
Company and shall be secured by any and all Collateral Documents. The Company
and Holdings agree to indemnify and hold Agent and the Purchasers harmless
against any loss or liability, cost or expense (including, without limitation,
reasonable attorney's fees and disbursements) which Agent and the Purchasers may
sustain as a result of or on account of any Lien imposed upon any Collateral
Document by any federal, state or local authority charged with the enforcement
of Environmental Laws or by reason of Company's failure, or the failure of
Holdings or their Subsidiaries, or the failure of any of the Company's,
Holdings' or their Subsidiaries' predecessors in title, or the failure of any of
Company's, Holdings' or their Subsidiaries' (sub)tenants, to perform any of its,
or their, obligations pursuant to any Environmental Laws. The provisions of this
paragraph shall survive any transfer of any asset included in any Collateral
Document, including a transfer after a foreclosure of real property subject to a
mortgage, and delivery of the deed affecting such transfer.
7.7. Information. The Company, Holdings and their Subsidiaries will
at all times keep proper books of record and account in accordance with GAAP,
and the Company shall furnish to the Purchasers:
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(i) within ninety-five (95) days of the end of its fiscal
year, annual certified public accountant audited, consolidated statements
for the Company and Holdings (which must include a consolidating statement
schedule), all prepared in accordance with GAAP consistently applied, as
well as copies of Holdings' 10K reports;
(ii) within thirty (30) days of each calendar month end,
internally prepared financial statements for the Company for the preceding
month, in form acceptable to the Agent, all prepared in accordance with
GAAP;
(iii)within fifty (50) days of the end of each fiscal quarter,
10Q reports for Holdings;
(iv) within sixty (60) days after the end of each fiscal
quarter, a compliance letter acknowledged by the chief financial officers
of both the Company and Holdings concerning those financial covenants
referenced above in Section 7.4;
(v) with reasonable promptness upon the written request of
any Purchaser or Agent, such further information regarding the business
affairs at financial condition of the Company, Holdings or their
Subsidiaries as any Purchaser or Agent may reasonably request;
(vi) simultaneously at the time they are so furnished, a copy
of all statements and reports furnished to stockholders of the Company and
Holdings; and
(vii) within 45 days after the beginning of their respective
fiscal year, each of the Company and Holdings shall deliver to each Holder
the respective projected consolidated balance sheets, projected
consolidated cash flow statements and projected income statements for each
of the Company and Holdings for such fiscal year on a monthly basis.
7.8. Charter, By-Laws. The Company and Holdings will furnish to
each Purchaser and the Agent promptly after their effectiveness copies of all
amendments or other documents modifying the Certificates of Incorporation of the
Company and Holdings, certified by the Secretary for the States that they are
incorporated in and authorized to do business in, and copies of all amendments
to the By-Laws of the Company and Holdings, certified by their Secretaries.
7.9. Inspection. The Company and Holdings will permit each
Purchaser, by its officers and agents, to have access to and examine at all
reasonable times the properties, minute books and other corporate records, and
books of account and financial records of the Company, Holdings and their
Subsidiaries.
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7.10. Event of Default. The Company will promptly notify the Agent
upon the occurrence of any Event of Default, or Potential Default, as provided
in this Agreement, of which the Company has knowledge.
7.11. Collateral Documents. The Company has made, executed and
delivered to the Agent, and caused others to make, execute and deliver to the
Agent those Collateral Documents listed below, all as security for the
indebtedness evidenced by the Notes and the Loan Documents, plus any amendments,
modifications, extensions or renewals of any of the foregoing or any present or
future indebtedness arising therefrom, and for their performance of this
Agreement and the other Loan Documents:
(1) The Company has made, executed and delivered to the Agent, a
second security interest in all of its now owned or hereafter acquired
machinery, equipment, furniture, and fixtures, Accounts Receivable,
Inventory, Raw Materials, Work in Process, Finished Goods, Contract
Rights, Instruments, General Intangibles, Chattel Paper Choses in Action,
that certain ISDA Master Agreement dated March 27, 1997 executed by the
Company in favor of Fleet National Bank, that certain policy issued by
Export-Import Bank of the United States to the Company (policy no.
ESC-147470), and Patents, Copyrights and Trademarks (as those terms are
defined in the Senior Loan Documents), pursuant to a Subordinated
Assignment, Pledge and Security Agreement relating to said collateral,
dated the date hereof.
(2) The Company has caused Holdings to execute and deliver to the
Purchasers the Guaranty.
(3) The Company has made, executed and delivered to the Agent a
second mortgage on the Subject Property.
(4) The Company has delivered, assigned and pledged with the
Agent, all of the machinery and equipment leases that it has now or may
hereafter acquire, pursuant to a Subordinated Assignment, Pledge and
Security Agreement relating to said collateral, dated the date hereof.
(5) The Company has delivered, assigned and pledged to the Agent a
subordinated interest in all of the Company's right, title and interest in
and to that certain $6,000,000.00 Note from Holdings to the Company dated
as of July 20, 1994 and the $15,207,000 Note from Holdings to the Company
contemplated by clause (x) of the definition of Restricted Payments
contained herein
(6) Holdings has delivered, assigned and pledged to the Agent all
of its right, title and interest in and to the ComTel Notes and the
Management Agreement.
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In addition, after the Closing Holdings and the Company will use
their respective best efforts to obtain all necessary consents to pledge to the
Agent as security as aforesaid all of the issued and outstanding shares of
capital stock of the Company and upon obtaining such consent will execute and
deliver all necessary documents to grant such interest to the Agent subordinated
only to the rights of the Senior Lender.
7.12. Expenses. The Company agrees to reimburse the Agent and the
Purchasers for any and all out-of-pocket expenses incurred by the Agent and the
Purchasers in connection with the making of this Agreement, the Notes and the
other Loan Documents, or in connection with the enforcement thereof
(irrespective of whether litigation is actually commenced), including, if
applicable, reasonable counsel fees, searches for prior liens, recording and
filing fees, and if applicable, mortgage taxes, title insurance premiums, and
the cost of surveying the property covered by any Collateral Documents. Counsel
fees to Morgan, Lewis & Bockius LLP in connection with their representation of
the Purchasers concerning this Agreement, the Notes and the other Loan Documents
prepared and delivered in connection therewith, shall be paid in full by the
Company prior to or simultaneously with the disbursement of any loan proceeds
hereunder.
7.13. Change in Control Event. Promptly after obtaining knowledge of
the occurrence of any Change of Control Event (or of any proposed or attempted
Change of Control Event), the Company will notify the Agent and Purchasers
thereof, specifying in reasonable detail the facts and circumstances surrounding
such event.
7.14. Public Documents; Senior Lender Communications. The Company
shall deliver to each Purchaser and the Agent:
(a) as soon as practicable, copies of any public statements or
press releases made by Holdings, the Company or any of their respective
Subsidiaries and copies of all reports, registration statements, proxy materials
and other documents filed by any such person with the Commission pursuant to the
Securities Act or the Securities Exchange Act; and
(b) concurrently with the delivery thereof to the Senior Lender,
copies of all notices, certificates and other documents which the Company
provides to the Senior Lender pursuant to the Senior Loan Documents, except to
the extent that such documents and communications relate solely to the revolving
credit facility provided by such Senior Lender or the calculation of eligible
receivables or eligible inventory thereunder.
7.15. Communication with Accountants. The Company and Holdings
hereby authorizes each of the Purchasers, following prior notice to the Company
and providing the chief financial officer of the Company a reasonable
opportunity to participate therein, to communicate directly with its and its
Subsidiaries' independent certified public accountants and tax advisors, and
authorizes those accountants and tax advisors to disclose to the Purchasers any
and all financial statements and other supporting financial documents and
schedules, including, without limitation, copies of any management letter with
respect to the business, financial condition and
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other affairs of the Company and Holdings and Conny or any of their respective
Subsidiaries. Promptly after the Closing Date, the Company and Holdings shall
have delivered a letter addressed to such accountants and tax advisors, in form
and substance acceptable to the Purchasers, instructing such accountants and tax
advisors to comply with the provisions of this Section 7.15. The Company and
Holdings shall cause such accountants to agree, not later than March 31, 1998,
that the holders of the Notes are authorized to rely on the certified financial
statements prepared by such accountants.
7.16. Inspection. The Company shall permit each Purchaser and the
Agent, and any authorized representative of any Purchaser and the Agent, to
visit and inspect any of the properties of the Company, Holdings and Conny or
any Subsidiary thereof, to examine the books of account of the Company, Holdings
or any such Subsidiary, and to discuss the business, affairs, finances and
accounts of the Company, Holdings and Conny or any such Subsidiary with its
officers, all at such reasonable times (during normal business hours and after
notice to the Company) and as often as may be reasonably requested and, if there
is no Potential Default or Event of Default continuing, at the expense of such
Purchaser and otherwise at the Company's expense.
7.17. Maintenance of Intellectual Property and Business. The Company
and Holdings shall, and shall cause each of their Subsidiaries and Conny to:
(a) at all times be engaged primarily in the Business; and
(b) at all times maintain, preserve and protect all of its
trademarks, trade names and other intellectual property and rights as licensee
or licensor thereof.
(c) in the case of Holdings, to act solely as a holding company
for controlling interests in business entities engaged primarily in the
Business.
7.18. Books and Records. The Company and Holdings shall, and shall
cause each of its Subsidiaries to, keep adequate records and books of account
with respect to its business activities, in which proper entries, reflecting all
of its financial transactions, are made in accordance with GAAP and on a basis
consistent with the audited financial statements of the Company and Holdings
included in the Financials.
7.19. Office for Payment, Exchange and Registration. So long as any
of the Notes or Warrants are outstanding, each of Holdings and the Company will
maintain an office or agency where Notes or Warrants, respectively, may be
presented for payment, exchange, exercise or registration of transfer as
provided in this Agreement or in the certificates representing the Warrants.
Such office or agency initially shall be the office of Holdings and the Company
located at One Mill Street, Fort Edward, New York 12828, which place may from
time to time be changed by notice to the holders of all Notes and Warrants then
outstanding.
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7.20. Notices. The Company shall give notice to each holder of a
Note promptly after it learns of the existence of any of the following:
(a) any default in respect of any Senior Indebtedness, including
without limitation any default under the Senior Loan Documents, or any default
in respect of any other Indebtedness of the Company, Holdings, German Newco or
Conny or any of their respective Subsidiaries in an aggregate amount exceeding
$100,000, including without limitation any default under any indenture, mortgage
or other instrument or agreement relating to or evidencing any such other
Indebtedness, provided, however, that non-compliance with a covenant shall not
constitute such a default if such non-compliance would not permit a lender (with
the giving of notice or the passage of time) to declare any Indebtedness to be
due and payable prior to its stated maturity or to be entitled to equitable
relief or monetary damages in excess of $25,000;
(b) any action, suit, proceeding or investigation which has been
commenced or threatened against the Company, Holdings, German Newco or Conny or
any of their respective Subsidiaries which, individually or in the aggregate,
(i) could reasonably be expected to involve an amount in excess of $500,000, or
(ii) could reasonably be expected to have or result in a Material Adverse Effect
if adversely determined; and
(c) any ERISA Event has occurred or is reasonably expected to
occur. Each such notice (x) if delivered pursuant to paragraph (a) above, shall
specify the nature and period of existence of any such default and what the
Company proposes to do or cause to be done with respect thereto and (y) if
delivered pursuant to paragraph (c) above, shall specify the nature of each
actual or prospective ERISA Event referred to therein, what action the Company
proposes to take with respect thereto and what action any other relevant person
is taking or proposes to take with respect thereto.
7.21. No Impairment. The Company and Holdings shall not, and shall
not permit any of its Subsidiaries to, by any amendment of its certificate or
articles of incorporation or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of any Loan Document.
7.22. Agreements. The Company and Holdings shall, and shall cause
each of its Subsidiaries to, perform, within all required time periods (after
giving effect to any applicable grace periods), all of its obligations and
enforce all of its rights under each agreement to which it is a party
(including, without limitation, any leases and customer contracts to which it is
a party), where the failure to so perform and enforce, individually or together
with all such other failures of the Company and Holdings and its Subsidiaries,
could have or result in a Material Adverse Effect. The Company and Holdings
shall not, and shall not permit any of its Subsidiaries to, terminate or modify
any provision of any agreement to which it is a party which termination or
modification, individually or in the aggregate, could have or result in a
Material Adverse Effect.
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7.23. Board Seat. As long as any of the Purchasers holds a Note, a
Warrant, any shares of Series A Stock or 5% or more of the aggregate outstanding
Common Stock of Holdings, (x) Holdings shall, at the request of the Majority
Noteholders, use its best efforts to cause a person selected by the Majority
Noteholders and approved by Holdings (which approval will not be unreasonably
withheld) to be elected to the Board of Directors of Holdings, (y) Holdings will
notify the Agent of each meeting of the Board of Directors or shareholders of
Holdings at least 10 days prior to such meeting and permit any person selected
by the Majority Noteholders to attend any such Board meeting, and (z) Holdings
will provide to the Agent, not later than the date first provided to any
Holdings director, all information and documents provided to the Holdings Board
of Directors or any committee thereof.
7.24. Taxes. (a) Any and all payments by the Company hereunder or
under any of the Notes (whether of principal, interest, premium or other
amounts) shall be made, in accordance with this Section 7.24, free and clear of
and without deduction for any and all present or future Taxes. If the Company
shall be required by law to deduct any Taxes from or in respect of any sum
payable to a holder of Notes, (i) the Company shall make such deductions, (ii)
the Company shall pay the full amount deducted to the relevant taxing or other
authority in accordance with applicable law, and (iii) if such Taxes are
Indemnifiable Taxes, the sum payable shall be increased as may be necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 7.24) such holder receives an amount
equal to the sum it would have received had no such deductions been made. For
purposes of this Agreement, "Indemnifiable Taxes" shall mean all Taxes other
than (i) any Taxes that are imposed on, based on or measured by net income or
net profits by the jurisdiction under the laws of which a holder of Notes is
organized, in which such holder is controlled and managed or in which the
principal office of such holder is located or any political subdivision or
taxing authority thereof or therein (other than Taxes described in the first
parenthesis in Section 7.24(b)) and (ii) any withholding taxes imposed by the
United States that would not have been imposed if such holder had submitted, on
a timely basis, to the Company any certificate or form pursuant to the first
sentence of Section 7.24(e) except for any such withholding taxes imposed as a
result of any change or amendment in or to any applicable law, treaty or
regulation or any judicial or administrative interpretation thereof after the
Closing Date.
(b) The Company shall indemnify and pay, within 10 days of demand
therefor, any holder of Notes for the full amount of Indemnifiable Taxes
(including, without limitation, any Taxes imposed by any jurisdiction on amounts
payable under this Section 7.24) paid by such holder and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Indemnifiable Taxes were correctly or legally
asserted.
(c) Within 30 days after the date of any payment of Taxes, the
Company shall furnish to the applicable holder of Notes, at its address referred
to in Exhibit A hereto, the original or a certified copy of a receipt (or any
other written evidence reasonably acceptable to the relevant holder of Notes)
evidencing payment thereof.
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(d) If any holder of Notes shall obtain a refund, credit or
deduction as a result of the payment or indemnification for any Indemnifiable
Taxes made by the Company to such holder hereunder, such holder shall pay to the
Company an amount with respect to such refund, credit or deduction equal to any
net tax benefit received by such holder as a result thereof which is
attributable to such payment so long as no Obligations owed to such Holder shall
then be due and payable, in which event such amount shall be applied to such
Obligations.
(e) Without limiting the obligations of the Company under this
Section 7.24, each holder of Notes that is not a United States person within the
meaning of Section 7701(a)(30) of the Code shall deliver to the Company on or
before the Closing Date, or, if later, the date on which such holder becomes a
holder, (i) a true and accurate certificate executed in duplicate by a duly
authorized officer of such holder, in a form reasonably satisfactory to the
Company, to the effect that such holder is capable, under the provisions of an
applicable tax treaty concluded by the United States (in which case the
certificate shall be accompanied by two executed copies of Form 1001 of the IRS)
or under Section 1442 of the Code (in which case the certificate shall be
accompanied by two copies of Form 4224 of the IRS), of receiving payments of
interest, fees and any other amounts under the Notes without deduction or
withholding of United States federal income tax, or (ii) if such holder is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver
Form 1001 or 4224 of the IRS pursuant to clause (i) above, a true and accurate
certificate executed in duplicate by a duly authorized officer of such holder,
in a form reasonably satisfactory to the Company, to the effect that such holder
is capable of receiving payments of interest hereunder without deduction or
withholding of United States federal income tax, accompanied by (x) a
certificate substantially in the form of Exhibit F attached hereto and (y) two
accurate and complete original signed copies of Form W-8 of the IRS (or
successor form). Each such holder further agrees to deliver to the Company from
time to time a true and accurate certificate or form executed in duplicate by a
duly authorized officer of such holder, substantially in a form satisfactory to
the Company, before or promptly upon the occurrence of any event requiring a
change in the most recent certificate or form previously delivered by it to the
Company pursuant to this paragraph (e). Further, each holder which delivers a
certificate accompanied by Form 1001 or W-8 of the IRS covenants and agrees to
deliver to the Company within 15 days prior to January 1, 1998, and every second
anniversary of such date thereafter on which any Note held by such holder is
outstanding, another such certificate and two accurate and complete original
signed copies of Form 1001 or W-8 (or any successor form or forms required under
the Code or the applicable regulations promulgated thereunder), and each holder
that delivers a certificate accompanied by Form 4224 of the IRS covenants and
agrees to deliver to the Company within 15 days prior to the beginning of each
subsequent taxable year of such holder during which any Note held by such holder
is outstanding, another such certificate and two accurate and complete original
signed copies of Form 4224 (or any successor form or forms required under the
Code or the applicable regulations promulgated thereunder). A holder of Notes
that is not a United States person within the meaning of Section 7701(a)(30) of
the Code and that cannot provide a certificate or form described in clause (i)
or (ii) of this Section 7.24(e) shall provide a certificate certifying as to one
of the following:
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(A) that such holder is not capable of receiving payments of
interest hereunder without deduction or withholding of United States
federal income tax as specified therein but is capable of recovering the
full amount of any such deduction or withholding from a source other than
the Company and will not seek any such recovery from the Company; or
(B) that, as a result of the adoption of or any change in any law,
treaty, rule, regulation, guideline or determination of a Governmental
Authority or any change in the interpretation or application thereof by a
Governmental Authority after the Closing Date, such holder is not capable
of receiving payments of interest hereunder without deduction or
withholding of United States federal income tax as specified therein and
that it is not capable of recovering the full amount of the same from a
source other than the Company.
Each holder of Notes shall promptly furnish to the Company such additional
documents as may be reasonably required by the Company to establish any
exemption from or reduction of any Taxes required to be deducted or withheld and
which may be obtained without undue expense to such holder.
(f) The Company shall not, and shall not permit any of its
Subsidiaries to, file or consent to the filing of any consolidated income tax
return with any person other than Holdings and its Subsidiaries.
7.25. Payment of Dividends by Subsidiaries. The Company shall cause
its Subsidiaries to pay dividends or make other distributions or advances to the
Company and Holdings, to the extent of funds legally available therefor, in
sufficient amounts (after taking into account the other sources of funds readily
available to the Company) and at sufficient times to enable the Company to have
sufficient funds to pay on a timely basis all amounts due with respect to the
Senior Debt and the Notes and any other amounts due in respect of the
Obligations.
7.26. Further Assurances. The Company and Holdings shall from time
to time, upon the request of the Majority Noteholders, promptly and duly execute
and deliver any and all such further instruments and documents as the Majority
Noteholders may reasonably deem necessary or desirable to obtain the full
benefits of (i) the obligations of the Company and Holdings under the Loan
Documents and (ii) the other rights and powers granted in the Loan Documents.
7.27. Delivery of Information for Rule 144A Transactions. If a
holder of Notes proposes to transfer any such Notes pursuant to Rule 144A under
the Securities Act (as in effect from time to time), the Company agrees to
provide (upon the request of such holder or the prospective transferee) to such
holder and such prospective transferee any financial or other information
concerning Holdings, the Company and their respective Subsidiaries which is
required to be delivered by such holder to any transferee of such Notes pursuant
to Rule 144A.
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7.28. Environmental Reports. The Company must provide to the Agent
and the Purchasers, within forty-five (45) days of the end of each fiscal
quarter update reports regarding the environmental regulatory status and
compliance of the Subject Property, including but not limited to, (i) the
Company's compliance with Environmental Laws with respect to tankage, releases,
storage requirements, air emissions, (ii) the status of pending environmental
litigation in which the Company is involved, and (iii) the status of the
Company's emission compliance plan, the estimated cost to comply with same and
the Company's plans for funding the cost of said compliance, and (iv) any
information regarding adopted changes in Environmental Law and environmental
requirements that could have a material adverse effect on Borrower's financial
condition, operations, business, properties, assets or liabilities, or require
significant capital expenditures. These reports shall be of a scope and level of
detail satisfactory to the Agent and Purchasers and be prepared by an
environmental engineer or other qualified person acceptable to the Agent and
Purchasers, at the Company's expense.
7.29. Conny Stock. Holdings shall own at least 73.2% of all the
Voting Stock of Conny by the Closing Date. Holdings shall own at least 75% of
all Voting Stock of Conny not later than 150 days after the Closing. By March
31, 1999, Holdings shall own either (i) at least 95% of the Voting Stock and 95%
of the Participating Stock, or (ii) or 75% of the Voting Stock and 99% of the
Participating Stock.
7.30. Stockholders Meeting; Restated Certificate and Bylaws.
(a) Holdings shall take all actions necessary, in accordance with
the Delaware General Corporation Law and its Certification of Incorporation and
Bylaws, to duly call, give notice to, convene and hold a meeting of its
stockholders as promptly as practicable, to consider and vote upon the approval
and adoption of an amendment to the Certificate of Incorporation of the Company
to authorize a sufficient number of additional shares of Common Stock of
Holdings to permit the exercise in full of the Warrants and the conversion in
full of the Preferred Shares, Holdings shall use its best efforts to solicit
from stockholders proxies in favor of the foregoing proposals and to take all
other action necessary to secure the vote of stockholders in respect thereof
required by the Delaware General Corporation Law, the rules of the NASDAQ
SmallCap and the Company's Certificate of Incorporation and Bylaws. Holdings
shall prepare and file with the Commission as promptly as practicable a proxy
statement with respect to the matters to be voted on by stockholders pursuant to
this Section. Holdings will thereafter use its best efforts to respond to any
comments of the Commission with respect thereto and to cause a definitive proxy
statement and proxy to be mailed to stockholders of Holdings as promptly as
practicable. The proxy statement shall include the unanimous recommendation of
the Board of Directors of Holdings that the stockholders of Holdings vote in
favor of adoption and approval of the matters described in this Section.
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SECTION 8. NEGATIVE COVENANTS
The Company and Holdings jointly and severally covenant and agree
that unless the Majority Noteholders shall otherwise consent in writing, so long
as any Obligations remain outstanding:
8.1. Indebtedness. The Company, Holdings and their Subsidiaries
will not create, assume, incur or in any manner be or become liable to any
person or persons, directly or indirectly for any Indebtedness (other than
Indebtedness from a Subsidiary to the Company or Holdings) except that (i) the
Company, Holdings and their Subsidiaries may incur in each fiscal year in the
aggregate up to $250,000 for the purchase of Equipment and for Capital Lease of
Equipment; (ii) Holdings may incur up to $2,500,000 of debt solely for the
purpose of paying expenses and fees arising out of the transactions contemplated
hereby and by the Conny Stock Purchase Agreement; and (iii) the Company may
refinance or refund the Senior Indebtedness provided that (A) the principal
amount of the replacement Indebtedness shall not exceed the outstanding
principal and accrued interest on the Senior Indebtedness immediately prior to
the refinancing, (B) the terms, covenants, events of default and other
conditions of the refinancing are no more favorable to the Company than those of
the Senior Indebtedness (except for interest rates, commitment fees and similar
monetary obligations which shall not be, in the aggregate, less favorable to the
Company than those of the Senior Indebtedness), and (C) the position of the
holders of the Notes is not adversely affected as a result of such refinancing.
8.2. Management Fees. The Company will not pay management fees to
Holdings or any other person except that when no Potential Default under Section
14(a)(i) is continuing, the Company may pay to Holdings such fees in an amount
not in excess of Eight Hundred Thousand and no/100 Dollars ($800,000.00)
annually during the term of this Agreement.
8.3. Upstream Funding. Except for (i) those management fees
referred to in Section 8.2 hereof, (ii) the advances to Holdings contemplated by
clauses (x) and (z) of the definition of Restricted Payments herein, and (iii)
those income taxes payable by the Company to Holdings pursuant to the terms of
the Tax Sharing Agreement, during the term of this Agreement, the Company shall
be prohibited from advancing, loaning or upstreaming any funds to Holdings.
8.4. Guarantees. The Company, Holdings and their Subsidiaries will
not guarantee the obligations of any person, except endorsement of negotiable
instruments for deposit or collection in the ordinary course of business. The
Company, Holdings and their Subsidiaries will not lend to any persons or invest
in any other businesses or in the securities of any other persons except that
the Company may make advances to customers in the ordinary course of business
not to exceed $50,000 in the aggregate. The Company will not make advances to
Holdings, except for management fees permitted by Section 8.2 hereunder and
except as described in Section 8.3, or any other Subsidiary of Holdings or the
Company, or any officer or shareholder of the Company, Holdings, or any
Affiliate.
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8.5. Liens. The Company and Holdings will not, and each agrees to
cause its Subsidiaries to not, pledge or otherwise create or suffer the
imposition of any Liens upon any of its assets, whether now owned or hereafter
acquired, except Liens specifically provided for in this Agreement or the Senior
Loan Documents and except for Permitted Encumbrances; provided, however, that
(x) Liens in connection with Indebtedness not exceeding $250,000 in the
aggregate, (y) a Lien granted to other persons if the same Lien is provided to
the Agent for the benefit of the Noteholders on an equal and ratable basis, and
(z) Liens securing Indebtedness which refinances the Senior Indebtedness in
accordance with Section 8.1 hereof shall not constitute a violation of this
paragraph.
8.6. Merger; Sales. The Company, Holdings and their Subsidiaries
will not consolidate with or merge into any other corporation unless (x) the
surviving corporation assumes all obligations of its predecessor under the Loan
Documents in a manner satisfactory to the Majority Noteholders and (y) no Event
of Default or Potential Default is continuing before or just after such merger
or consolidation. The Company, Holdings and their Subsidiaries will not sell,
lease, or otherwise dispose of all or any part of their assets to any other
person except for (x) sales in the ordinary course of business and (y) other
sales if total assets so sold in any rolling twelve-month period do not account
for more than 10% of the consolidated operating income of Holdings for the
fiscal year most recently ended before the commencement of such rolling period
and (z) other sales the proceeds from which are used to prepay Senior
Indebtedness or Obligations or to purchase other operating assets used in the
Business if such other assets are so acquired within 12 months of such sales.
The Agent agrees to execute and deliver to the Company, Holdings and their
Subsidiaries all necessary releases to the end that the Company, Holdings and
their Subsidiaries may sell such assets free from the Agent's security interest
and lien.
8.7. Authorization or Issuance of Capital Stock. (a) The Company
will not issue any shares of its Common Stock.
(b) Holdings will not authorize any additional shares of Common
Stock unless it first reserves from such additional authorized shares a
sufficient number of shares to permit the conversion from time to time of the
Preferred Shares issued or issuable upon exercise of the Warrants. During any
time when there have not been authorized and reserved for issuance sufficient
Common Shares to permit the conversion in full of the Preferred Shares issued or
issuable under the terms of the Preferred Warrants and the exercise in full of
the Common Warrants and the Contingent Common Warrants, Holdings shall not
authorize, issue or agree to authorize or issue any shares of capital stock of
Holdings, any rights or options to receive any capital stock of Holdings, or any
security convertible into or exchangeable for capital stock of Holdings, except
for (i) the issuance of Common Shares upon the exercise of the Existing
Converts, (ii) the issuance of Series A Preferred in accordance with the
exercise of rights under the Preferred Warrants and the issuance of Common
Shares in accordance with the exercise of rights under the Common Warrants and
the Contingent Common Warrants and upon the conversion of the Preferred Shares,
(iii) up to 1,000,000 shares of Common Stock of Holdings,
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provided that (w) the net proceeds from the issuance thereof shall be used
solely for the purpose of paying expenses and fees arising out of the
transactions contemplated hereby and by the Conny Stock Purchase Agreement, (x)
such net proceeds shall reduce the amount of Indebtedness which can be issued
under clause (ii) of Section 8.1 hereof, (y) the amount of Indebtedness incurred
pursuant to clause (ii) of Section 8.1 hereof shall proportionately reduce the
number of shares of Common Stock which can be issued under this clause (iii),
and (z) sufficient shares of authorized Common Stock are available to permit
such issuance, and (iv) up to 500,000 shares of Common Stock of Holdings for the
purposes described in clause (iii)(w) of this Section 8.7(b), (v) the grant of
options to purchase Common Stock of Holdings to employees of Holdings, its
Subsidiaries, or Conny subject to the authorization of additional shares of
Holdings Common Stock.
8.8. Restricted Payments. The Company will not make any Restricted
Payments.
8.9. Affiliate Transactions. The Company and Holdings shall not,
and shall not permit any of its Subsidiaries to, enter into any transaction
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service to any of their Affiliates, except pursuant to the
reasonable requirements of the Company's, Holdings' or such Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company,
Holdings or such Subsidiary (as the case may be) than the Company, Holdings or
such Subsidiary (as the case may be) would obtain in a comparable arm's-length
transaction with an unaffiliated person.
8.10. ERISA. Neither the Company nor any ERISA Affiliate shall
acquire or otherwise affiliate with any new ERISA Affiliate that maintains or
has an obligation to contribute to a Pension Plan that has either an
"accumulated funding deficiency," as defined in Section 302 of ERISA, or any
"unfunded vested benefits," as defined in Section 4006(a)(3)(e)(iii) of ERISA in
the case of any Plan other than a Multiemployer Plan, and in Section 4211 of
ERISA in the case of a Multiemployer Plan. Additionally, neither the Company nor
any ERISA Affiliate shall: (i) terminate any Pension Plan that is subject to
Title IV of ERISA where such termination could reasonably be anticipated to
result in liability to the Company or any Subsidiary thereof, except where such
liability individually or in the aggregate with all other such liabilities is
less than $100,000; (ii) permit any accumulated funding deficiency, as defined
in Section 302(a)(2) of ERISA, to be incurred with respect to any Pension Plan;
(iii) fail to make any contributions or fail to pay any amounts due and owing as
required by the terms of any Plan before such contributions or amounts become
delinquent, except where such failure individually or in the aggregate with all
other such failures is less than $100,000; (iv) make a complete or partial
withdrawal (within the meaning of Section 4201 of ERISA) from any Multiemployer
Plan, except where such withdrawal, individually or in the aggregate with all
other such withdrawals, results in a liability less than $100,000; or (v) at any
time fail to provide the holders of the Notes with copies of any Plan documents
or governmental reports or filings, if reasonably requested by Majority
Noteholders.
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8.11. Amendments to Agreements. The Company and Holdings shall not
enter into or otherwise consent to any amendment or other modification to any of
the Acquisition Documents in any way that would be materially adverse to
Holdings, the Company or any holder of Notes.
8.12. Sale-Leasebacks. The Company and Holdings shall not, and shall
not permit any of its Subsidiaries to, engage in any sale-leaseback or similar
transaction involving any of its properties or assets.
8.13. Cancellation of Indebtedness. The Company and Holdings shall
not, and shall not permit any of its Subsidiaries to, cancel any claim or debt
owing to it, except for reasonable consideration and in the ordinary course of
its business, and except that the ComTel Notes may be discounted for less than
the amount of its outstanding principal amount and accrued interest.
8.14. Amendments to Indebtedness. Except as provided in the
Subordination Agreement, the Company shall not amend, supplement or otherwise
modify the terms of the Senior Indebtedness.
8.15. Fiscal Year. The Company and Holdings shall not, and shall not
permit any of its Subsidiaries to, change its Fiscal Year for accounting or tax
purposes from a period consisting of the 12-month period ending on March 31st of
each calendar year; provided, however, that the Company, Holdings and their
respective Subsidiaries may change their fiscal year to end on December 31st of
each year.
8.16. Private Placement Status. None of Holdings, the Company or any
agent or other person acting on Holdings' or the Company's behalf will do or
cause to be done (or will omit to do or to cause to be done) any act, which act
(or omission) would result in bringing the issuance or sale of the Notes, the
Warrants or the Shares within the provisions of Section 5 of the Securities Act
(other than in accordance with a registration of any such shares or Shares under
Section 17 hereof).
SECTION 9. SUBORDINATION
Each holder of a Note, whether upon original issue or upon transfer
or assignment thereof, by his acceptance thereof agrees that the Notes shall be
subject to the provisions contained in the Subordination Agreement.
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SECTION 10. CONDITIONS TO PURCHASERS' OBLIGATIONS
The Purchasers' obligations to purchase a Note or Notes and a
Warrant or Warrants hereunder are subject to satisfaction of the following
conditions at the Closing (any of which may be waived by the Purchasers):
10.1. Accuracy of Representations and Warranties. The
representations and warranties of each of Holdings and the Company in the Loan
Documents shall be correct and complete on and as of the Closing Date with the
same effect as though made on and as of the Closing Date (after giving effect to
the Acquisition Transactions).
10.2. Compliance with Agreements; No Defaults. Each of Holdings and
the Company shall have performed and complied in all material respects with all
agreements, covenants and conditions contained in the Loan Documents which are
required to be performed or complied with by it on or before the Closing Date.
On the Closing Date (after giving effect to the Acquisition Transactions), there
shall be no Event of Default or Potential Default.
10.3. Officers' Certificates. The Purchasers shall have received one
or more certificates dated the Closing Date and signed by the president or any
vice president and by the secretary, treasurer or chief financial officer of
each of Holdings and the Company, to the effect that the conditions set forth in
Sections 10.1, 10.2 and 10.8 have been satisfied.
10.4. Proceedings. All corporate and other proceedings in connection
with the transactions contemplated by the Loan Documents, and all documents
incident thereto, shall be in form and substance satisfactory to the Purchasers
and their counsel, and the Purchasers shall have received all such originals or
certified or other copies of such documents as the Purchasers or their counsel
may reasonably request.
10.5. Legality; Governmental and Other Authorization. The purchase
of and payment for the Notes and the Warrants shall not be prohibited by any law
or governmental order, rule, ruling, regulation, release, interpretation or
opinion applicable to any Purchaser and shall not subject any Purchaser to any
penalty, Charge, liability or other onerous condition. Any necessary consents,
approvals, licenses, permits, orders and authorizations of, and any necessary
filings, declarations, registrations or qualifications with, any Governmental
Authority or other person, with respect to the transactions contemplated by the
Transaction Documents shall have been obtained or made and shall be in full
force and effect. The Company shall have delivered to the Purchasers, upon their
reasonable request, factual certificates or other evidence, in form and
substance satisfactory to the Purchasers and their counsel, to enable the
Purchasers to establish compliance with the conditions set forth in this Section
10.5.
10.6. Time of Purchase. The Closing shall not occur later than
October 15, 1997.
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10.7. No Change in Law, etc. No legislation, order, rule, ruling or
regulation shall have been proposed, enacted or made by or on behalf of any
Governmental Authority, and no legislation shall have been introduced in either
House of Congress, and no investigation by any Governmental Authority shall have
been commenced or threatened, and no action, suit or proceeding shall have been
commenced before and no decision shall have been rendered by any Governmental
Authority or arbitrator, which, in any such case, in the Purchasers' reasonable
judgment, (a) could adversely affect, restrain, prevent or change the
transactions contemplated by the Loan Documents (including without limitation
the issuance of the Notes and the Warrants hereunder or the issuance of Shares
upon the exercise of Warrants) or (b) has had or resulted in, or would have or
result in, a Material Adverse Effect.
10.8. Completion of Acquisition Transactions. The Acquisition
Transactions shall have been consummated in accordance with the terms of the
Acquisition Agreements and Holdings shall own at least 73% of all of the
outstanding Voting Stock of Conny.
10.9. Environmental Report. The Purchasers shall have received an
environmental site assessment report concerning all Subject Properties prepared
by a firm satisfactory to Purchasers which report is in form and substance
satisfactory to Purchasers.
10.10. Fees. The Purchasers shall have received on the Closing
Date a non-refundable fee in the amount of $180,000.00 plus payment of their
expenses and their counsel's fees and disbursements.
10.11. No Material Adverse Change. There shall have been no material
adverse change in the business, projections, performance, properties,
operations, condition (financial or otherwise) or prospects of the Company or
Holdings since June 30, 1997.
10.12. Certain Loan Documents. The Purchasers shall have received
the Guaranty and the Collateral Documents duly executed and delivered by each
party thereto (other than the Purchasers) and dated no later than the Closing
Date.
10.13. Senior Loan Documents. Each of the Senior Loan Documents
(other than the Subordination Agreement) shall be satisfactory in form and
substance to the Purchasers and shall have been duly executed and delivered by
the parties thereto.
10.14. Intercreditor Agreement. The Purchasers shall have received
the Subordination Agreement duly executed and delivered by each party thereto
(other than the Purchasers) and dated no later than the Closing Date.
10.15. Searches. The Purchasers shall have received satisfactory tax
lien, Uniform Commercial Code and judgment searches with respect to the Company
and Holdings.
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10.16. Material Agreements. The Purchasers shall have received
copies of all material agreements to which the Company or Holdings is a party,
including without limitation, all documents in respect of the borrowing of
money, joint venture agreements, supply agreements or requirements contracts,
royalty agreements, license agreements, employee or management incentive
agreements and product warranties.
10.17. Pay-off Letters and Releases. The Company shall have provided
to the Purchasers documents in form and substance satisfactory to them setting
forth the amounts necessary to repay and satisfy in full, and evidencing the
repayment and satisfaction in full of, the Indebtedness described in Section 7.1
to be repaid in connection with the transactions described herein and evidencing
the release of any and all of the holders' of such Indebtedness Liens upon any
of the properties or assets of the Company or Holdings, including without
limitation, Uniform Commercial Code termination statements.
10.18. Acquisition Documents. Each of the Acquisition Documents
shall be satisfactory in form and substance to the Purchasers and shall have
been duly executed and delivered by the parties thereto. The Purchasers shall
have received a certificate dated the Closing Date of the chief executive
officer of the Company to the effect that no material provision of the
Acquisition Documents has been waived by Holdings or the Company without the
Purchasers' prior consent.
10.19. Insurance. The Purchasers shall have received evidence
satisfactory to them that the Company, Holdings and their Subsidiaries are
maintaining in full force and effect casualty, hazard, public liability, product
liability and such other insurance as may be reasonably required by the
Purchasers, in each case written by insurers and in amounts and forms
satisfactory to the Purchasers.
10.20. Solvency Certificate. The Purchasers shall have received a
solvency certificate with respect to the Company, satisfactory to them in form
and substance and dated the Closing date, from the principal financial officer
of the Company.
10.21. Opinions of Counsel. The Purchasers shall have received legal
opinions from special outside counsel to Holdings and the Company, each dated
the Closing Date, addressed to the Purchasers and the Agent, and otherwise in
form and substance satisfactory to the Purchasers and their counsel.
10.22. Other Documents and Opinions. The Purchasers shall have
received such other certificates, documents and opinions, including advice from
Holdings' auditors with respect to GAAP and the Conny financial statements, in
form and substance satisfactory to the Purchasers and their counsel, relating to
matters incident to the transactions contemplated hereby as the Purchasers may
reasonably request.
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SECTION 11. AMENDMENT AND WAIVER
(a) Each of this Agreement, the Notes and the Warrants may be
amended (or any provision hereof or thereof waived) (i) as to the rights or
obligations of the holders of the Notes, only with the written consent of the
Majority Noteholders and (ii) as to the rights or obligations of the holders of
Warrants and Shares, only with the written consent of the holder or holders of
Warrants or Shares representing at least a majority of the sum of the Shares
then outstanding and the Shares then obtainable upon the exercise of all
Warrants then outstanding, if any; provided, however, that (w) no such amendment
or waiver as to the rights or obligations of the holders of the Notes shall
change the fixed maturity of any Note, the rate or the time of payment of
interest thereon, the principal amount thereof, the premium thereon, the
redemption price thereof, the currency in which the Notes are payable or the
prepayment provisions of Section 6, without the consent of the holder of each
Note affected thereby, (x) no such amendment or waiver as to the rights or
obligations of the holders of Warrants and Shares shall change the current
exercise price of a Warrant or the registration rights under Section 17, hereof,
without the consent of the holder of each Warrant or Share affected thereby, (y)
no such amendment or waiver shall reduce the aforesaid percentage of Notes,
Warrants or Shares, as the case may be, the holders of which are required to
consent to any such amendment or waiver as to the rights or obligations of such
holders, without the consent of the holders of all the Notes then outstanding or
the holders of all Warrants and Shares then outstanding, as the case may be, and
(z) no such amendment or waiver as to the rights or obligations of the holders
of the Notes shall increase the percentage of the amount of the Notes, the
holders of which may declare the Notes to be due and payable under Section 14,
without the consent of the holders of all the Notes then outstanding.
(b) Holdings and the Company agree that all holders of Notes,
Warrants and Shares shall be notified by Holdings or the Company in advance of
any proposed amendment or waiver of any Loan Document as to the rights or
obligations of such holders, but failure to give such notice shall not in any
way affect the validity of any such amendment or waiver. In addition, promptly
after obtaining the written consent of the holders required pursuant to
paragraph (a) above, the Company shall transmit a copy of any amendment or
waiver which has been adopted to all holders of Notes, Warrants and Shares then
outstanding, but failure to transmit such copies shall not in any way affect the
validity of any such amendment or waiver.
(c) Holdings, the Company and the holders of all Notes, Warrants
and Shares then or thereafter outstanding (to the extent that the applicable
amendment or waiver has been effected as to such holders) shall be bound by any
amendment or waiver effected in accordance with the provisions of this Section
11, whether or not such Notes, Warrants and Shares shall have been marked to
indicate such modification, but any Note or Warrant certificate issued
thereafter shall bear a notation identifying any such modification as to the
holders of the Notes or the Warrants and Shares, as the case may be (but the
failure to bear any such notation shall not affect the validity of any such
subsequently issued Note or Warrant, which shall be enforceable in accordance
with its terms subject to any such modification).
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SECTION 12. EXCHANGE OF NOTES AND WARRANTS; CANCELLATION OF SURRENDERED NOTES
(a) Subject to Section 16, at any time at the request of any
holder of one or more of the Notes to the Company at its office provided under
Section 7.19, the Company at its expense (except for any transfer tax or any
other tax arising out of the exchange) will issue and deliver to or upon the
order of the holder in exchange therefor new Notes, in such denomination or
denominations as such holder may request (which must be in denominations of no
less than $100,000 plus one Note in a lesser denomination, if required), in
aggregate principal amount equal to the unpaid principal amount of the Note or
Notes surrendered and substantially in the form thereof, dated as of the date to
which interest has been paid on the Note or Notes surrendered (or, if no
interest has yet been paid thereon, then dated the date of the Note or Notes so
surrendered) and payable to such person or persons or order as may be designated
by such holder. Any such new Note shall bear any notation required by Section
11.
(b) Subject to Section 16, at any time at the request of any
holder of one or more of the Warrants to Holdings at its office provided under
Section 7.19, Holdings at its expense (except for any transfer tax or any other
tax arising out of the exchange) will issue and deliver to or upon the order of
the holder in exchange therefor a new Warrant certificate or certificates of
like tenor, in such amount or amounts as such holder may request and calling in
the aggregate on the face or faces thereof for the number of Shares which are
called for on the face or faces of the Warrant certificate or certificates so
surrendered, and in the name of such holder or as such holder may direct. Any
such new Warrant certificate shall bear any notation required by Section 11.
(c) In the event that any Note or portion thereof is surrendered
to the Company upon the exercise of all or a portion of any Warrant, or upon a
prepayment under Section 6, the Company shall pay all accrued and unpaid
interest on such Note or such portion thereof and interest shall cease to accrue
upon that portion of the principal amount of such Note used for such exercise or
which was prepaid, all upon the date of such exercise or prepayment and upon
presentation and surrender of such Note to the Company.
(d) Upon the exercise in whole or in part of any Warrant or upon
any prepayment under Section 6, if only a portion of the principal amount of a
Note is used or paid in such exercise or prepayment, then such Note shall be
surrendered to the Company and the Company shall simultaneously execute and
deliver to or on the order of the holder thereof, at the expense of the Company,
a new Note or Notes in principal amount equal to the unused or unpaid portion of
such Note.
(e) Subject to paragraph (d) above, all Notes or portions thereof
which have been used to exercise all or a portion of a Warrant, or which have
been prepaid under Section 6, shall be canceled by the Company and no Notes
shall be issued in respect of the principal amount so used or prepaid.
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SECTION 13. REGISTRATION; REPLACEMENT OF NOTES AND WARRANTS
(a) The Company shall keep a register in which provisions shall be
made for the registration of the Notes and the registration of transfers of the
Notes. The register shall be kept at the chief executive office of the Company.
Upon surrender for registration of transfer of any Note at the chief executive
office of the Company, the Company shall execute and deliver, in the name of the
designated transferee or transferees, one or more new Notes for a like aggregate
principal amount of Notes. At the option of the holder of any Notes, its Notes
may be exchanged for other Notes of any authorized denominations and of a like
aggregate principal amount of Notes, upon surrender of the Notes to be exchanged
at the chief executive office of the Company. Each new Note issued upon transfer
or exchange shall be in a principal amount of at least $100,000 and in integral
multiples of $100,000 and dated the date or dates to which interest on the Notes
surrendered shall have been paid. All Notes issued upon any registration of
transfer or exchange of Notes shall be the valid obligations of the Company
evidencing the same respective obligations, and entitled to the same benefits
under this Agreement and the other Loan Documents, as the Notes surrendered upon
such registration of transfer or exchange. The Company shall make a notation on
each new Note of the amount of all payments of principal previously made on the
old Notes with respect to which such new Note is issued and the date to which
interest accrued on such old Note has been paid.
(b) 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, upon delivery of an indemnity
agreement reasonably satisfactory to the Company, or in the case of any such
mutilation, upon surrender of such Note (which surrendered Note shall be
canceled by the Company), the Company will, without charge, issue new Note of
like tenor in lieu of such lost, stolen, destroyed or mutilated Note as if the
lost, stolen, destroyed or mutilated Note were then surrendered for exchange.
(c) Holdings shall keep a register in which provisions shall be
made for the registration of the Warrants and the registration of transfers of
the Warrants. The register shall be kept at the chief executive office of
Holdings. Upon surrender for registration of transfer of any Warrant certificate
at the chief executive office of Holdings, Holdings shall execute and deliver,
in the name of the designated transferee or transferees, one or more new Warrant
certificates for a like aggregate number of Shares. At the option of the holder
of any Warrants, its Warrant certificates may be exchanged for other Warrant
certificates of any authorized denominations and for a like aggregate number of
Shares, upon surrender of the Warrant certificates to be exchanged at the chief
executive office of Holdings. Each new Warrant certificate issued upon transfer
or exchange shall be for at least 2% of the total number of Shares and dated the
date of the original Warrant certificate. All Warrant certificates issued upon
any registration of transfer or exchange of Warrant certificates shall be the
valid obligations of Holdings evidencing the same respective obligations, and
entitled to the same benefits under this Agreement and the other Loan Documents,
as the Warrant certificates surrendered upon such registration of transfer or
exchange.
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(d) Upon receipt of evidence reasonably satisfactory to Holdings
of the loss, theft, destruction or mutilation of any Warrant certificates and,
in the case of any such loss, theft or destruction, upon delivery of an
indemnity agreement reasonably satisfactory to Holdings, or in the case of any
such mutilation, upon surrender of such Warrant certificates (which surrendered
Warrant certificates shall be canceled by Holdings), Holdings will, without
charge, issue new Warrant certificates of like tenor in lieu of such lost,
stolen, destroyed or mutilated Warrant certificates as if the lost, stolen,
destroyed or mutilated Warrant certificates were then surrendered for exchange.
SECTION 14. DEFAULTS
(a) Any of the following shall constitute an "Event of Default"
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any Governmental Authority or arbitrator or any law, rule or
regulation of any Governmental Authority):
(i) the Company defaults in the payment (whether or not such
payment is prohibited under Section 9 hereof or under the Subordination
Agreement) of (A) any part of the principal of any Note, when the same
shall become due and payable, whether at maturity or at a date fixed for
prepayment or by acceleration or otherwise, or (B) any part of the
interest on any Note, when the same shall become due and payable, and such
default in the payment of interest shall have continued for ten days, or
(C) any other amount due under a Loan Document, and such default shall
have continued for five Business Days after notice thereof from any holder
of Notes;
(ii) the Company fails to observe any of the covenants or
agreements contained in Section 7.1, 7.10, or 8 hereof; or
(iii) the Company defaults in the performance of any other
agreement or covenant contained in the Loan Documents, and such default
shall have continued for a period of ten days after written notice of such
default is given by any holder of Notes; or
(iv) any representation or warranty made by the Company or
Holdings in the Loan Documents or any statement or representation in any
certificate, financial statement, report or other document delivered by
the Company, any Subsidiary thereof or Holdings pursuant to any Loan
Document proves to have been incorrect in any material respect when made;
or
(v) Holdings, the Company or any of their respective
Subsidiaries defaults in the performance of any agreement or covenant
contained in any Senior Loan Document, and such default causes or results
in the acceleration of the Senior Indebtedness or any portion thereof; or
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(vi) a default occurs under any other agreement, document or
instrument relating to Indebtedness (other than Senior Indebtedness) to
which the Company, Holdings or any of their Subsidiaries is a party or by
which the Company, Holdings or any such Subsidiary or the Company's,
Holdings' or any such Subsidiary's property is bound and such default (x)
involves the failure to make any payment (whether of principal, interest
or otherwise) due (whether at scheduled maturity or at a date fixed for
prepayment or by acceleration or otherwise) in respect of any Indebtedness
in an aggregate amount exceeding $100,000 or (y) causes (or permits any
holder of such Indebtedness or a trustee to cause) such Indebtedness, or a
portion thereof in an aggregate amount exceeding $100,000, to become due
prior to its stated maturity or prior to its regularly scheduled dates of
payment; or
(vii) any of the assets of the Company, Holdings or any
Subsidiary thereof is attached, seized, levied upon or subjected to a writ
or distress warrant, or comes within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors of the
Company, Holdings or such Subsidiary; or any person other than the
Company, Holdings or such Subsidiary shall apply for the appointment of a
receiver, trustee or custodian for any assets of the Company, Holdings or
any Subsidiary thereof, and such application shall remain unstayed or
undismissed for 60 consecutive days; or the Company, Holdings or any of
their Subsidiaries shall have concealed or 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 by fraudulent under any bankruptcy, fraudulent conveyance or other
similar law; or
(viii) a case or proceeding is commenced against the Company,
Holdings or any of their Subsidiaries in a court having competent
jurisdiction seeking a decree or order (x) under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other
applicable federal, state or foreign bankruptcy or other similar law, (y)
appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of the Company, Holdings or any such
Subsidiary or of any substantial part of the Company's, Holdings' or any
such Subsidiary's properties, or (z) ordering the winding up or
liquidation of the affairs of the Company, Holdings or any such
Subsidiary, and such case or proceeding shall remain undismissed or
unstayed for 60 consecutive days or such court shall enter a decree or
order granting the relief sought in such case or proceeding; or
(ix) the Company, Holdings or any of their Subsidiaries (w)
files a petition seeking relief under Title 11 of the United States Code,
as now constituted or hereafter amended, or any other applicable federal,
state or foreign bankruptcy or other similar law, (x) consents to the
institution of proceedings thereunder or to the filing of any such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of the Company, Holdings or any such Subsidiary or of any
substantial part of the Company's, Holdings' or any such Subsidiary's
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properties, (y) fails generally to pay its debts as such debts become due,
or (z) takes any corporate action in furtherance of any such action; or
(x) final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $500,000
in the aggregate are rendered against the Company, Holdings or any of
their Subsidiaries unless the same are (x) fully covered by insurance or
(y) vacated, stayed, bonded, paid or discharged within a period of 30 days
from the date of such judgment and the date of termination of any such
stay; or
(xi) (A) any Termination Event occurs which the Majority
Noteholders believe could subject the Company or any of its ERISA
Affiliates to a material liability to pay money; or (B) the plan
administrator of any Title IV Plan applies under Section 412(d) of the
Code for a waiver of the minimum funding standards of Section 412(a) of
the Code and the Majority Noteholders believe that the substantial
business hardship upon which the application for the waiver is based could
subject the Company or any of its ERISA Affiliates to a material liability
to pay money; or
(xii) in the event that the Rubbermaid Incorporated
Manufacturing Agreement dated April 17, 1995 is severed or terminated,
unless a similar agreement is entered into with another business entity
within a period of 90 days of said severance or termination, in form and
substance satisfactory to the Majority Noteholders; or
(xiii) failure to notify the Purchasers of a Change in Control
Event as required by Section 7.13; or
(xiv) substantial damage, or destruction to all or
substantially all of the Fixed Asset Collateral (as defined in the Senior
Loan Documents) or unauthorized sale of all or any part of the Fixed Asset
Collateral; or
(xv) in the event that the Certificate of Incorporation of
Holdings is not amended on or prior to June 30, 1998 to authorize, and the
Board of Directors of Holdings had not reserved, a sufficient number of
shares of Common Stock to permit the exercise in full of the Warrants and
the conversion in full of the Preferred Shares.
(b) If an Event of Default occurs pursuant to any of Sections
14(a)(i) through (vi), or Sections 14(a)(x) through (xv), then and in each such
event any holder or holders of more than 25% in aggregate principal amount of
the Notes then outstanding may at any time (unless all such Events of Default
shall theretofore have been waived or remedied), at its or their option, by
written notice or notices to the Company, declare all the Notes to be due and
payable in full. Upon any such declaration or upon the occurrence of an Event of
Default pursuant to clause (vii), (viii) or (ix) of Section 14(a) (in which case
no declaration is required), all Notes shall forthwith immediately mature and
become due and payable, together with all interest accrued thereon, without
presentment, demand, protest or notice, all of which are hereby waived. However,
if at
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any time after the principal of the Notes shall so become due and payable and
prior to the date of maturity stated in the Notes, all arrears (without giving
effect to any such acceleration) of principal and interest on the Notes (with
interest at the rate specified in the Notes on any overdue principal and, to the
extent legally enforceable, on any overdue interest) shall be paid by or for the
account of the Company, then the holders of Notes evidencing at least 50% of the
principal amount outstanding under all Notes, by written notice or notices to
the Company, may rescind or annul such declaration, but not waive the underlying
Event of Default, and thereafter the Notes may be accelerated as a result of
such Event of Default only upon notice from the Majority Noteholders. If any
holder of a Note shall give any notice or take any other action with respect to
a claimed default, the Company, forthwith upon receipt of such notice or
obtaining knowledge of such other action, shall give written notice thereof to
all other holders of the Notes then outstanding, describing such notice or other
action and the nature of the claimed default.
SECTION 15. ADDITIONAL REMEDIES
(a) In case any one or more Events of Default shall occur and be
continuing, (x) the holder of any Note then outstanding may proceed to protect
and enforce the rights of such holder by an action at law, suit in equity or
other appropriate proceeding, whether for the specific performance of any
agreement contained herein or in any other Loan Document, or for an injunction
against a violation of any of the terms hereof or thereof, or in aid of the
exercise of any power granted hereby or thereby or by law, or for any other
remedy (including, without limitation, damages) and/or (y) the Agent may
exercise any or all remedies under the Collateral Documents.
(b) In case of a default in the payment of any principal of or
interest on any Note, or a default in the payment of any other amount owing
under any Loan Document, or a default in the observance of any other agreement
or covenant of the Company or Holdings in any Loan Document, Holdings and the
Company jointly and severally agree to pay to the holders of the Notes and the
holders of the Warrants, as applicable, in addition to any interest or premium
otherwise required, such further amount as shall be sufficient to cover any and
all costs and expenses of enforcement and collection, including, without
limitation, reasonable attorneys' fees and expenses.
(c) No course of dealing and no delay on the part of any holder of
any Note or Warrant in exercising any rights or remedies shall operate as a
waiver thereof or otherwise prejudice such holder's rights. No right or remedy
conferred hereby or by any other Loan Document shall be exclusive of any other
right or remedy referred to herein or therein or available at law, in equity, by
statute or otherwise.
(d) Each of the Purchasers and the holders of the Notes, the
Warrants and the Shares shall, in addition to other remedies provided by law,
have the right and remedy to have the provisions of any Loan Document
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any breach or threatened breach of the provisions
of any Loan Document will cause irreparable injury to the Purchasers and such
holders and that money
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damages will not provide an adequate remedy. Nothing contained herein or in any
other Loan Document shall be construed as prohibiting any of the Purchasers or
such holders from pursuing any other remedies available to it for such breach or
threatened breach, including, without limitation, the recovery of damages from
the Company and Holdings.
SECTION 16. RESTRICTIONS ON TRANSFER
Each holder of a Note, Warrant or Share, by its acceptance thereof,
agrees that it will not sell or otherwise dispose of such Note, Warrant or Share
unless such Note, Warrant or Share has been registered under, or has been sold
pursuant to an exemption from registration under, the Securities Act. As a
condition to the Company's obligation to issue a new Note or Warrant to a
transferee thereof the transferor must represent to the Company in writing that
the transfer is so exempt.
SECTION 17. REGISTRATION RIGHTS
17.1. Requested Registration. (a) At any time, the holder or
holders of any of the Registrable Securities (as defined below) then outstanding
and entitled to registration rights under this Section 17 (the "Initiating
Holders") may, upon written request to Holdings, require that Holdings effect a
registration, qualification or compliance with respect to all or a part of such
Registrable Securities. Holdings will, within ten days of the receipt of such
request, give written notice of such request to all other holders of Registrable
Securities and shall file a registration statement with the Commission on a form
deemed appropriate by Holdings' counsel as expeditiously as possible, but in no
event later than 90 days after receipt of such written request; provided,
however, that Holdings shall not be obligated to file such a registration
statement with the Commission prior to the first anniversary of the Closing.
Such registration statement shall cover all the Registrable Securities requested
to be included therein by the Initiating Holders and by such other holders as
specified by such other holders in writing given within 20 days of receipt of
the notice given by Holdings pursuant to this subsection (a). After the filing
of such registration statement, Holdings shall use its best efforts to cause
such registration statement to become effective as expeditiously as possible.
Holdings shall pay the expenses (as defined in Section 17.7) of such
registration.
Holdings shall also use its best efforts to effect promptly all such
other registration, qualification and compliance (including, without limitation,
the execution of an undertaking to file post-effective amendments, appropriate
qualification under the applicable blue sky, or other state securities laws, and
appropriate compliance with exemptive regulations issued under the Securities
Act) as may be so requested by a holder of Registerable Securities covered by a
registration statement filed pursuant to this Section 17.1 and as would permit
or facilitate the sale and distribution of all or any portion of such
Registrable Securities.
Holdings shall not be obligated to effect such registration,
qualification or compliance (1) after Holdings already has effected two such
registrations pursuant to this
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subsection (a), (2) if the Initiating Holders hold less than 20% of the
Registerable Securities then outstanding, or (3) within six months after the
effective date of the registration statement most recently filed by Holdings
under the Securities Act with respect to any class of Registerable Securities if
the holders of the Registerable Securities shall have had the opportunity
pursuant to Section 17.2 to participate in the offering effected pursuant to
such registration statement without any reduction of the number of Registerable
Securities included in such offering pursuant to Section 17.3.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by such request by means of an underwriting, they shall so
advise Holdings as a part of such request made pursuant to Section 17.1(a).
Holdings shall enter into an agreement in customary form for a secondary
distribution with the underwriter or underwriters selected by Holdings for such
underwriting, provided such underwriters are reasonably acceptable to the
Initiating Holders.
(c) As used herein, the term "Registrable Securities" means,
collectively, the Preferred Shares and all Common Shares (including all such
Shares issued or issuable upon exercise of any Warrant or upon the conversion of
the Preferred Shares). Registrable Securities will cease to be such when (i) a
registration statement covering such Registrable Securities has become or been
declared or ordered effective and they have been disposed of pursuant to such
effective Registration Statement or (ii) they are sold, transferred or
distributed pursuant to and in compliance with Rule 144 (or any similar
provision then in force, but not including Rule 144A) under the Securities Act.
(d) Notwithstanding the foregoing, if Holdings shall furnish to
Holders requesting a registration statement pursuant to this Section 17.1, a
certificate signed by the President of Holdings stating that, in the good faith
judgment of the Board of Directors of Holdings, it would be seriously
detrimental to Holdings and its shareholders for such registration statement to
be filed and it is therefore essential to defer the filing of such registration
statement, Holdings shall have the right to defer such filing for a period of
not more than 30 days after receipt of the request of the Initiating Holders;
provided, however, that Holdings may not utilize this right more than once in
any twelve month period.
17.2. Incidental Registration. (a) If at any time or times after the
date hereof, Holdings intends to file a registration statement for the
registration of securities under the Securities Act of the same class as any
Registerable Securities in connection with a public offering (other than any
offering pursuant to any stock option plan or stock purchase, savings or similar
plan, any offering in connection with any merger or acquisition of or by
Holdings, any exchange of outstanding Common Stock or any registration of any
security convertible into Common Stock), Holdings shall notify in writing each
of the holders of record of Registrable Securities at least 40 days prior to
each such filing of Holdings' intention to file such a registration statement.
Such notice shall state the date on which Holdings proposes to file such
registration statement and the number and class of securities proposed to be
registered thereby and shall advise the holders
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of such Registrable Securities of their rights to have such securities included
in such registration. If any holder of Registrable Securities notifies Holdings
within 25 days after receipt of such notice from Holdings of its desire to have
included in such registration statement any of its Registrable Securities, then
Holdings shall include such shares in such registration statement for sale in
the same manner and upon the same terms and conditions as for the securities
originally to be subject to such registration statement; provided that if, at
any time after giving written notice of its intention to register any securities
and prior to the effective date of the registration statement filed in
connection with such registration, Holdings shall determine for any reason
either not to register, to discontinue registration or to delay registration of
such securities, Holdings may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register or to discontinue registration,
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
registration expenses in connection therewith) and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities for the same period as the delay in registering such
other securities. Holdings shall pay the expenses (as defined in Section 17.7)
of such registration.
(b) If the registration of which Holdings gives notice is for a
registered public offering involving an underwriting, Holdings shall so advise
the holders of Registrable Securities as a part of the written notice given
pursuant to subsection (a) above. In such event the right of such holders to
registration pursuant to this Section 17.2 shall be conditioned upon such
holders' participation in such underwriting and the inclusion of such holders'
Registrable Securities in the underwriting to the extent provided herein. The
holders of Registrable Securities shall (together with Holdings and any other
shareholders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or underwriters
selected for underwriting by Holdings and shall use their best efforts to
arrange for all documents and opinions required to be delivered thereunder in
respect of their participation as selling shareholders to be delivered. If any
of the holders of Registrable Securities or any officer, director or other
shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to Holdings and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
(c) The holders of Registrable Securities shall be entitled to
have their shares included in an unlimited number of registrations pursuant to
this Section 17.2.
17.3. Underwriter Cutbacks. Notwithstanding any other provision
of this Section 17, if any registration provided for in Section 17.1 or 17.2
involves an underwriting and if the managing underwriter determines that
marketing factors require a limitation on the number of shares to be
underwritten, then Holdings shall include in the underwriting only that number
of such securities, including Registrable Securities, which the managing
underwriter believes will not jeopardize the success of the offering. The
securities to be so included will be apportioned, in the case of Section 17.2,
pro rata among the securityholders (including the selling holders of
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Registrable Securities) seeking to include their respective securities in the
offering according to the total amount of securities entitled to be included
therein owned by each such selling securityholder or in such other apportions as
shall be mutually agreed to by such selling securityholders. The securities to
be so included will be apportioned, in the case of a Section 17.1 registration
first, to the selling holders of Registrable Securities to the extent of their
Warrants and Shares, and pro rata as aforesaid among them, and, second, pro rata
as aforesaid among all other selling securityholders and the Company. The rights
granted to the holders of Registrable Securities in this Section 17.3 shall be
subject only to the rights of the holders of Common Stock of Holdings issued in
accordance with the Exchange Agreement dated March 31, 1996 among the Company,
CIGNA Mezzanine Partners Inc., and CIGNA Property and Casualty and Insurance
Company of North America.
17.4. Right to Review the Registration Statement. (a) In connection
with the preparation and prior to the filing of each registration statement
under the Securities Act pursuant to Sections 17.1 and 17.2, Holdings will give
the holders of Registrable Securities registered under such registration
statement, the underwriters, and their respective counsel and accountants, the
opportunity to review and comment upon such registration statement, each
prospectus included therein or filed with the Commission and each amendment
thereof or supplement thereto, and will give each of them such access to its
books and records and such opportunities to discuss the business of Holdings
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such holders' and
such underwriters' respective counsel to conduct a reasonable investigation
within the meaning of the Securities Act.
(b) Each such holder of Registrable Securities shall have the
right to review and comment upon such registration statement and to request the
insertion therein of material furnished to Holdings in writing which in the
judgment of such holder (a "Requesting Holder") of Registrable Securities should
be included; provided, however, such information shall not be required to be
included if in the reasonable opinion of counsel of Holdings, the inclusion of
such material furnished by such holder would be misleading or otherwise in
violation of the rules and regulations of the Securities Act. Furthermore, a
Requesting Holder has the right to require the deletion of any reference to such
Requesting Holder by name or otherwise if such reference is not required by the
Securities Act or the rules promulgated thereunder.
Holdings will not file any registration statement or amendment
thereto or any prospectus or any supplement thereto (including such documents
incorporated by reference and proposed to be filed after the initial filing of
the registration statement) to which the holders of at least a majority of the
securities (including Registrable Securities) covered by such registration
statement or the underwriter or underwriters, if any, shall reasonably object,
provided that Holdings may file such document in a form required by law or upon
the advice of its counsel.
17.5. Registration Procedures. In the case of each registration,
qualification or compliance effected by Holdings pursuant to this Section 17,
Holdings shall:
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(a) notify each holder of Registrable Securities as to the filing
of the Registration Statement and of all amendments or supplements thereto filed
prior to the effective date of said Registration Statement;
(b) notify each holder of Registrable Securities, promptly after
it shall receive notice thereof, of the time when said Registration Statement
becomes effective or when any amendment or supplement to any prospectus forming
a part of said Registration Statement has been filed;
(c) notify each holder of Registrable Securities promptly of any
request by the Commission for the amending or supplementing of such Registration
Statement or prospectus or for additional information;
(d) prepare and promptly file with the Commission and promptly
notify each holder of Registrable Securities of the filing of any amendments or
supplements to such Registration Statement or prospectus as may be necessary to
correct any statements or omissions if, at any time when a prospectus relating
to the Registrable Securities is required to be delivered under the Securities
Act, any event with respect to Holdings shall have occurred as a result of which
any such prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made, in the light of the circumstances under
which they were made, not misleading; and, in addition, prepare and file with
the Commission, promptly upon the written request of any holder of Registrable
Securities, any amendments or supplements to such Registration Statement or
prospectus which may be reasonably necessary or advisable in connection with the
distribution of the Registrable Securities;
(e) advise each holder of Registrable Securities promptly after
Holdings shall receive notice or obtain knowledge of the issuance of any stop
order by the Commission suspending the effectiveness of any such Registration
Statement or amendment thereto or of the initiation or threatening of any
proceeding for that purpose, and promptly use its best efforts to prevent the
issuance of any stop order or obtain its withdrawal promptly if such stop order
should be issued;
(f) use its best efforts to qualify as soon as reasonably
practicable the Registrable Securities included in the Registration Statement
for sale under the securities or blue sky laws of such states and jurisdictions
within the United States as shall be reasonably requested by any holder of
Registrable Securities; provided that Holdings shall not be required in
connection therewith or as a condition thereto to become subject to taxation in
any of the aforesaid states or jurisdictions; and
(g) furnish each holder of Registrable Securities, as soon as
available, copies of any Registration Statement and each preliminary or final
prospectus, or supplement or amendment
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required to be prepared pursuant hereto, all in such quantities as any holder of
Registrable Securities may from time to time reasonably request.
At its expense, Holdings shall keep such registration statement
effective until 90 days after such registration statement becomes effective.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from Holdings of the
occurrence of any event of the kind described in subsection (d) above, such
holder will forthwith discontinue such holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by subsection (d) above and, if so directed by
Holdings, will deliver to Holdings (at Holdings' expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice. In the event Holdings shall give any such notice, the period mentioned
in the immediately preceding paragraph of this Section 17.5 shall be extended by
the length of the period from and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received such notice to the date on which each such seller has received the
copies of the supplemented or amended prospectus contemplated by subsection (d)
above.
17.6. Indemnity. (a) In connection with a Registration Statement
filed with the Commission pursuant to this Section 17 or any other registration
statement filed by Holdings, Holdings will indemnify and hold harmless any
seller of Registrable Securities and each person, if any, who controls any
holder of Registrable Securities within the meaning of the Securities Act, any
underwriter who participates in the distribution of Registrable Securities and
any Requesting Holder and each person, if any, who controls any Requesting
Holder against any loss, claim, damage or liability, joint or several, to which
such holder or such controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any Registration
Statement (including any preliminary prospectus and the prospectus as a part
thereof (the "Prospectus") or any amendment or supplement thereof, or (B) in any
blue sky application or other document executed by Holdings specifically for
that purpose or based upon written information furnished by Holdings filed in
any state or other jurisdiction in order to qualify any or all of the
Registrable Securities under the securities laws thereof (any such application,
document or information being hereinafter called a "Blue Sky Application"), or
(ii) the omission or alleged omission to state in any Registration Statement
(including any preliminary prospectus and the Prospectus as a part thereof) or
any amendment or supplement thereof or in any Blue Sky Application a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and
will reimburse each holder of Registrable Securities, each Requesting Holder and
each such controlling person for any legal or other expenses reasonably incurred
by such holder of Registrable Securities, such Requesting Holder or such
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controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action; provided that Holdings will not be liable to any
holder of Registrable Securities in any such case to the extent, but only to the
extent, that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
furnished to Holdings by such holder of Registrable Securities specifically
stating that it is for use in the preparation of any Registration Statement or
any such amendment or supplement thereof or any such Blue Sky Application or any
such preliminary prospectus or the Prospectus or any such amendment thereof or
supplement thereto. This indemnity agreement is in addition to any liability
which Holdings may otherwise have.
(b) Each holder of Registrable Securities included in the
securities covered by the Registration Statement severally, but not jointly,
will indemnify and hold harmless Holdings, each of Holdings' directors, each of
Holdings' officers, and each person, if any, who controls Holdings within the
meaning of the Securities Act, as well as any underwriter who participates in
the distribution of securities covered by such Registration Statement against
any loss, claim, damage or liability to which Holdings, or any such director or
officer or controlling person or any underwriter may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage or liability
(or action in respect thereof) arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in any
Registration Statement (including any preliminary prospectus and the Prospectus
as a part thereof) or any amendment or supplement thereof, or (B) in any Blue
Sky Application, or (ii) the omission or alleged omission to state in the
Registration Statement (including any preliminary prospectus and the Prospectus
as a part thereof) or any amendment or supplement thereto or in any Blue Sky
Application a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to Holdings by or on
behalf of such holder of Registrable Securities specifically stating that it is
for use in the preparation of the Registration Statement or any such amendment
or supplement thereof or any such Blue Sky Application or any such preliminary
prospectus or the Prospectus or any such amendment thereof or supplement
thereto; and will reimburse any legal or other expenses reasonably incurred by
Holdings or any such director or officer or controlling person in connection
with investigating or defending against any such loss, claim, damage, liability
or action. No holder of Registrable Securities shall be required by this
subsection (b) to pay an amount in excess of the amount of proceeds (net of
underwriting discounts or commissions) received by such holder upon the sale of
Registrable Securities included in such Registration Statement. This indemnity
agreement is in addition to any liability which such holder of Registrable
Securities may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 17.6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect
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thereof is to be made against any indemnifying party under this Section 17.6,
notify in writing the indemnifying party of the commencement thereof within a
reasonable time thereafter, provided that the failure so to notify the
indemnifying party shall not relieve the indemnifying party from any liability
which it may have under this Section 17.6, except to the extent it has been
prejudiced by such failure, or from any liability which it may have to an
indemnified party otherwise than under this Section 17.6. In case any such
action, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel who shall be reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 17.6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, provided that if it is necessary to prevent a conflict
of interest for the holders of Registrable Securities, Requesting Holders or
their respective controlling persons to be represented by separate counsel, the
holders of Registrable Securities shall have the right to employ a single
counsel to represent the holders of Registrable Securities and such controlling
persons, in which event the reasonable fees and expenses of such separate
counsel shall be borne by Holdings.
17.7. Expenses. Holdings shall bear all registration expenses in
connection with a registration of Registrable Securities pursuant to this
Section 17. As used in this Section 17, "registration expenses" of a
registration shall mean, without limitation, all registration, filing and
National Association of Securities Dealers' fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and disbursements
of counsel for Holdings and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance and the fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (including
fees paid to a qualified independent underwriter) and the reasonable fees and
expenses of one firm (which firm shall be reasonably satisfactory to the selling
holders of Registrable Securities) to act as special counsel for all holders of
Registrable Securities and such other local counsel as to matters of local laws
as such special counsel and such holders of Registrable Securities may
reasonably request. All underwriting discounts and commissions relating to
securities registered on behalf of the holders of Registrable Securities and
transfer taxes shall be borne by such holders pro rata on the basis of the
number of Registrable Securities so registered.
17.8. Lock-Ups. To the extent requested by the managing underwriter
in respect of an offering of securities of Holdings described in this Section
17, each holder of Registrable Securities and Holdings shall agree to refrain
from selling or offering to sell, making any short sale of, loaning, granting
any option for the purchase of, effecting any public sale or distribution of or
otherwise disposing of (other than pursuant to such Registration Statement) any
securities of Holdings during the seven days prior to and the 180 days after the
effective date of any
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Registration Statement described herein, whether or not such holder participates
in such registration. Nothing in this Section 17.8 shall preclude Holdings from
issuing shares of Registrable Securities upon exercise of outstanding options or
conversion of outstanding convertible securities. Each holder of Registrable
Securities agrees that Holdings may instruct its transfer agent to place stop
transfer notations in its records to enforce this Section 17.8.
17.9. Other Obligations of Holdings. In connection with Holdings'
obligations to the holders of Registrable Securities with respect to the sale of
Registrable Securities pursuant to a public offering thereof as provided in this
Section 17, Holdings shall use its best efforts to register Registrable
Securities as required, or permitted if any holder of Registrable Securities so
requests, by Section 12 of the Securities Exchange Act of 1934, as amended, and,
if the Registrable Securities to be sold meet the criteria for listing on any
exchange on which the Common Stock is then listed, apply for listing of such
Registrable Securities on such exchange.
17.10.Transferability. The registration rights granted in this
Section 17 shall not be assignable in any manner to any transferee of any of the
Warrants or Registrable Securities except in connection with the sale by the
holder of the Warrants or the Registrable Securities issued upon exercise
thereof in a transaction not involving a public offering for the purposes of the
Securities Act.
SECTION 18. EXPENSES; INDEMNIFICATION
(a) Expenses; Taxes. Holdings and the Company jointly and
severally agree to pay the fees and disbursements of counsel to the holders of
Notes, Warrants and Shares in connection with any amendments or modifications to
or waivers of any provisions of the Loan Documents or in connection with any
other agreements between such holders, on the one hand, and the Company or
Holdings, on the other hand, and the fees and expenses of any investment banker,
broker or finder involved with the Loan Documents or any of the transactions
contemplated hereby or thereby. The obligations of Holdings and the Company
under this Section 18 shall survive the Closing, the payment or cancellation of
the Notes and the exercise of the Warrants and any termination of the Loan
Documents.
Holdings and the Company agree to pay, or cause to be paid, all
documentary, stamp and other similar taxes levied under the laws of the United
States or any state or local taxing authority thereof or therein in connection
with the issuance and sale of the Notes, the Warrants and the Shares and the
execution and delivery of this Agreement and any other Loan Document or other
agreements, documents or instruments contemplated hereby or thereby and any
modification of any of the Loan Documents or any such other documents or
instruments, and shall hold the Purchasers harmless without limitation as to
time against any and all liabilities with respect to all such taxes; provided,
however, that neither Holdings nor the Company shall be required to pay any tax
or other governmental charge which may be payable in respect of any transfer
involved in the issue or delivery of any Warrant or Share certificate in a name
other than that of the holder of record of the applicable Warrants.
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(b) Indemnification. Whether or not the transactions contemplated
by this Agreement are consummated, Holdings and the Company jointly and
severally agree to indemnify and hold harmless each Purchaser and each holder of
a Note, Warrant or Share (including, without limitation, any of such Purchaser's
or holder's affiliated companies) and any of such Purchaser's or holder's
directors, officers, employees or agents and any person controlling (within the
meaning of Section 20(a) of the Securities Exchange Act) such Purchaser or
holder or any of its affiliated companies (collectively, the "Indemnified
persons") from and against any and all losses, claims, damages, liabilities,
securities law penalties and expenses whatsoever (including, but not limited to,
any and all reasonable fees and expenses whatsoever incurred by an Indemnified
person and its attorneys in investigating, preparing for, defending against,
acting as a witness, providing evidence, producing documents or taking any other
action in respect of any litigation or proceeding, commenced or threatened, or
any claim whatsoever) (collectively, the "Losses") arising out of or in
connection with the Loan Documents, other than to the extent Losses result from
the gross negligence or wilful misconduct of the Indemnified person or the
breach of any covenant in the Loan Documents by the Indemnified person. The
foregoing indemnity shall be in addition to any other rights which the
Indemnified persons may have against Holdings and the Company otherwise than
under this paragraph (b). If a court shall hold for any reason that the
preceding indemnification is unavailable to any Indemnified person as to any
Loss for which it would be available if enforceable in accordance with its
terms, Holdings and the Company, on the one hand, and the Indemnified person, on
the other hand, agree to contribute to such Loss in such proportion as is
appropriate to reflect the relative benefits and the relative fault of Holdings
and the Company, on the one hand, and of the Indemnified person, on the other
hand, in connection with the statements, actions or omissions which result in
such Loss, as well as any other relevant equitable considerations.
If any Indemnified person is entitled to indemnification hereunder,
such Indemnified person shall give prompt notice to the Company of any claim or
of the commencement of any proceeding with respect to which such Indemnified
person seeks indemnification pursuant hereto and of which such Indemnified
person knew or reasonably should have known; provided, however, that the failure
so to notify the Company shall not relieve Holdings or the Company from any
obligation or liability except to the extent that the amount owed by Holdings
and the Company has been increased by such failure. Holdings and the Company
shall have the right, exercisable by giving written notice to an Indemnified
person within 20 Business Days after receipt of written notice from such
Indemnified person of such claim or proceeding, to assume, at their expense, the
defense of any such claim or proceeding with counsel reasonably satisfactory to
the Indemnified Person (taking into account, among other factors, any potential
exposure of the Indemnified person to criminal liability); provided, however,
that an Indemnified person shall have the right to employ separate counsel in
any such claim or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
person unless: (1) Holdings or the Company agrees to pay such fees and expenses;
(2) Holdings and the Company fail promptly to assume, or to diligently pursue,
the defense of such claim or proceeding; (3) the named parties to any such claim
or proceeding (including any impleaded parties) include both such Indemnified
person and one or more of Holdings, the Company or an Affiliate of Holdings or
the Company, and such Indemnified person shall have been advised by counsel that
there may be one or more material
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defenses available to such Indemnified person which are different from or
additional to those available to Holdings, the Company or such Affiliate; or (4)
an Event of Default is continuing (in which case if such Indemnified person
notifies Holdings and the Company in writing that it elects to employ separate
counsel at the expense of Holdings and the Company, Holdings and the Company
shall not have the right to assume the defense thereof, it being understood,
however, that Holdings and the Company shall not, in connection with any one
such claim or proceeding or separate but substantially similar or related claims
or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for all such Indemnified persons). Whether or not such defense is assumed
by Holdings and the Company, no Indemnified person will be subject to any
liability for any settlement made without its consent (but such consent will not
be unreasonably withheld or delayed).
SECTION 19. HOME OFFICE PAYMENTS
As long as a Purchaser or any payee named in the Notes delivered to
a Purchaser on the Closing Date, or any institutional holder which is a direct
or indirect transferee from such Purchaser or such payee, shall be the holder of
any Note, the Company will make payments (whether at scheduled maturity or at a
date fixed for prepayment or upon acceleration or otherwise) of principal,
interest and premium, if any, (i) by check payable to the order of such
Purchaser or such other holder, as the case may be, duly mailed or delivered to
such Purchaser at its address specified in Exhibit A, or at such other address
as such Purchaser or such other holder may designate in writing, or (ii) if
requested by such Purchaser or such other holder, as the case may be, by wire
transfer to such Purchaser's or such other holder's (or its nominee's) account
at any bank or trust company in the United States, notwithstanding any contrary
provision herein or in any Note with respect to the place of payment. IF A
PURCHASER HAS PROVIDED AN ADDRESS ON EXHIBIT A HERETO FOR PAYMENTS BY WIRE
TRANSFER, THEN SUCH PURCHASER SHALL BE DEEMED TO HAVE REQUESTED WIRE TRANSFER
PAYMENTS UNDER THE PRECEDING CLAUSE (ii). All such payments shall be made in
federal or other immediately available funds and shall arrive by 11:00 a.m.
local time at the place of payment on the day when due.
SECTION 20. NOTICES
Unless otherwise expressly specified or permitted by the terms
hereof or thereof, all notices, requests, demands, consents and other
communications hereunder or under the other Loan Documents shall be in writing
and shall be delivered by hand or shall be sent by telex or telecopy (confirmed
by registered, certified or overnight mail or courier, postage and delivery
charges prepaid), to the following addresses:
(a) if to any Purchaser or the Agent, at such Purchaser's address
as set forth in Exhibit A, or at such other address as may have been furnished
to the Company by such Purchaser in writing; or
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(b) if to any other holder of a Note, Warrant or Share, at such
address as the payee or registered holder thereof shall have designated to the
Company in writing; or
(c) if to the Company or Holdings, at One Mill Street, Fort
Edward, New York 12828 (telecopier: (518) 747-5089), Attention: Timothy N.
Burditt, or at such other address as may have been furnished in writing by the
Company or Holdings to the Purchasers, the Agent and to the other holders of
Notes, Warrants and Shares.
Whenever any notice is required to be given hereunder, such notice shall be
deemed given and such requirement satisfied only when such notice is delivered
or, if sent by telex or telecopier, when received, unless otherwise expressly
specified or permitted by the terms hereof.
SECTION 21. MISCELLANEOUS
21.1. Entire Agreement. The Loan Documents, together with any
further agreements entered into by the Purchasers, on the one hand, and Holdings
or the Company, on the other hand, at the Closing, contain the entire agreement
between the Purchasers, the Agent, the Company and Holdings, and supersede any
prior oral or written agreements, commitments, terms or understandings regarding
the subject matter hereof and thereof.
21.2. Survival. All agreements, representations and warranties
contained in the Loan Documents or any document or certificate delivered
pursuant hereto or thereto shall survive, and shall continue in effect
following, the execution and delivery of such Loan Documents, the closings
hereunder and thereunder, any investigation at any time made by the Purchasers,
the Agent or on their behalf or by any other person, the issuance, sale and
delivery of the Notes and the Warrants, any disposition thereof and any payment
or cancellation of the Notes, and any exercise of the Warrants; provided, that
Sections 4 (other than Section 4.1, 4.2, 4.18 and 4.27 thereof), 5, 6, 7 (other
than Sections 7.1, 7.7, 7.8, 7.9, 7.12, 7.13, 7.14, 7.15, 7.16, 7.19, 7.23, 7.27
and 7.30), 8 (other than Section 8.7), 9, 10, 14 and 15 shall terminate upon the
payment of all outstanding Notes. All statements contained in any certificate or
other document delivered by or on behalf of Holdings or the Company pursuant
hereto shall constitute representations and warranties by Holdings and the
Company hereunder.
21.3. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument, and all signatures need not appear on any one
counterpart.
21.4. Headings. The headings and captions in this Agreement and the
table of contents are for convenience of reference only and shall not define,
limit or otherwise affect any of the terms or provisions hereof.
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21.5. Binding Effect and Assignment. (a) The terms of this Agreement
shall be binding upon, and inure to the benefit of, the parties and their
respective successors and permitted assigns whether so expressed or not.
(b) Neither Holdings nor the Company may assign any of its
obligations, duties or rights under any of the Loan Documents.
(c) In addition to any assignment by operation of law, each
Purchaser may assign, in whole or in part, any or all of its rights and
obligations under any of the Loan Documents to any transferee of any or all of
its Notes, Warrants or Shares, subject to the terms of Section 16 hereof and the
Warrant certificates, and (unless this Agreement or such assignment expressly
provides otherwise) any such assignment shall not diminish the rights such
Purchaser would otherwise have under this Agreement or with respect to any
remaining Notes, Warrants or Shares held by the Purchaser.
21.6. Severability. Any provision of any Loan Document which 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 thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforce
able such provision in any other jurisdiction. To the extent permitted by
applicable law, the parties hereby waive any provision of law which may render
any provision hereof prohibited or unenforceable in any respect.
21.7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York (other than any
conflict of laws rule which might result in the application of the laws of any
other jurisdiction).
21.8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH OF
HOLDINGS AND THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT, SUBJECT TO THE ELECTION OF THE PURCHASERS OR ANY OTHER
HOLDER OF NOTES, ALL ACTIONS OR PROCEEDINGS RELATING TO THE LOAN DOCUMENTS MAY
BE LITIGATED IN SUCH COURTS. EACH OF HOLDINGS AND THE COMPANY ACCEPTS GENERALLY
AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LOAN DOCUMENTS. EACH OF
HOLDINGS AND THE COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL AT ITS
ADDRESS PROVIDED IN SECTION 20 HEREOF SHALL CONSTITUTE SUFFICIENT NOTICE AND
SERVICE OF PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY PURCHASER OR
ANY OTHER HOLDER
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OF NOTES, WARRANTS OR SHARES TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS
AGAINST HOLDINGS OR THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
21.9. WAIVER OF JURY TRIAL. EACH OF HOLDINGS, THE COMPANY AND THE
PURCHASERS HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY LOAN DOCUMENT, OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. EACH OF HOLDINGS, THE
COMPANY AND THE PURCHASERS ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE PURCHASERS. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL- ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF HOLDINGS,
THE COMPANY AND THE PURCHASERS FURTHER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
SUPPLEMENTS OR OTHER MODIFICATIONS TO (OR ASSIGNMENTS OF) ANY LOAN DOCUMENT. IN
THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL (WITHOUT A JURY) BY THE COURT.
21.10. Changes in GAAP. If any changes in GAAP are hereafter
required or permitted and are adopted by Holdings or the Company with the
agreement of its independent certified public accountants and such changes
result in a change in the method of calculation of any of the financial
covenants, restrictions or standards herein or in the related definitions or
terms used therein ("Accounting Changes"), the parties hereto agree to enter
into negotiations, in good faith, in order to amend such provisions in a credit
neutral manner so as to reflect equitably such changes with the desired result
that the criteria for evaluating the Company's financial condition shall be the
same after such changes as if such changes had not been made; provided, however,
that until such provisions are amended in a manner reasonably satisfactory to
the Majority Noteholders, no Accounting Change shall be given effect in such
calculations and all financial statements and reports required to be delivered
hereunder shall be prepared in accordance with GAAP without taking into account
such Accounting Change. In the event such amendment is entered into, all
references in this Agreement to GAAP shall mean generally accepted accounting
principles as of the date of such amendment.
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21.11. Confidentiality. Each of the Purchasers, severally and not
jointly, agrees that it shall not disclose to any other person, without the
prior written consent of the Company, any information with respect to Holdings,
the Company or their respective Subsidiaries which is furnished pursuant to this
Agreement ("Confidential Information"), except that each Purchaser may disclose
any such Confidential Information (a) as has become generally available to the
public (other than by a breach of this Section 21.11), (b) as may be required by
any appropriate report, statement or testimony submitted to any municipal, state
or federal Governmental Authority having or claiming to have jurisdiction over
such Purchaser, Holdings, the Company or any such Subsidiary, (c) as may be
required or appropriate in response to any summons or subpoena or any law,
order, regulation or ruling applicable to such Purchaser, (d) to any Affiliate
of such Purchaser as may be desirable in connection with or such Purchaser's
internal monitoring and reporting of matters related to the Loan Documents and
(e) to any prospective transferee in connection with any contemplated transfer
permitted under the Loan Documents provided that prior to delivery of any
Confidential Information to a prospective transferee, such Purchaser shall
execute an agreement with such person containing provisions substantially
identical to those contained in this Section 21.11. Each Purchaser will use its
best efforts to give the Company prior notice before complying with any subpoena
or summons requesting the disclosure of Confidential Information.
21.12. Waiver of Bond. The Company and Holdings waive the posting of
any bond otherwise required of Agent or any Purchaser in connection with any
judicial process or proceeding to enforce any judgment or other court order
entered in favor of the Agent or Purchaser, or to enforce by specific
performance, temporary restraining order, or preliminary or permanent
injunction, in connection with any Loan Document.
21.13. Advice of Counsel. Each of the Company and Holdings
represents and warrants that it has consulted with its legal counsel regarding
all waivers under any Loan Document, including without limitation those under
Sections 21.8, 21.9 and 21.12 hereof, that it believes that it fully understands
all rights that it is waiving and the effect of such waivers, that it assumes
the risk of any misunderstanding that it may have regarding any of the
foregoing, and that it intends that such waivers shall be a material inducement
to the Purchasers to purchase the Notes.
SECTION 22. THE AGENT
22.1. Appointment. Each Purchaser hereby irrevocably designates and
appoints the Agent as the agent of such Purchaser under this Agreement and the
Loan Documents, and each such Purchaser irrevocably authorizes the Agent, as the
agent for such Purchaser, to take such action on its behalf under the provisions
of this Agreement and the Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the Loan Documents, together with such other powers as are
reasonably incidental thereto.
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22.2. Application of Proceeds of the Collateral. All collateral
under the Collateral Documents shall be held or administered by the Agent for
the ratable benefit of the Purchasers. Any proceeds received by the Agent from
the foreclosure, sale, lease or other disposition of any of the collateral and
any other proceeds received pursuant to the terms of the Loan Documents shall be
applied, first, to the cost of any such foreclosure, sale, lease or other
disposition and, second, to the payment in full of the remaining Company's
Obligations pro rata in proportion to the amount of the Company's Obligations
owed to each Person.
22.3. Delegation of Duties. The Agent may execute any of its duties
under this Agreement by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
22.4. Reliance by Agent. The Agent may deem and treat the registered
owner of any Note as the owner thereof for all purposes. The Agent shall be
fully justified in failing or refusing to take any action under this Agreement
unless it shall first receive such advice or concurrence of the Majority
Noteholders as it deems appropriate. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement, the
Notes or any Loan Document in accordance with a request of the Majority
Noteholders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Purchasers and all future holders of the
Notes.
22.5. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Potential Default or Event of
Default hereunder unless the Agent has received notice from the Company or
Holdings referring to this Agreement, describing such Potential Default or Event
of Default and stating that such notice is a "notice of default". The Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Potential Default or Event of Default as it shall
deem advisable and in the best interests of the Purchasers.
22.6. Agent in Its Individual Capacity. The Agent and its Affiliates
may make loans to and generally engage in any kind of business with the Company
or Holdings as though the Agent were not the Agent hereunder. With respect to
any Note issued to it, the Agent shall have the same rights and powers under
this Agreement as any Purchaser and may exercise the same as though it were not
the Agent, and the terms "Purchaser" and "Purchasers" shall include the Agent in
its individual capacity.
22.7. Successor Agent. The Agent may resign as Agent upon 20 days'
notice to the Purchasers. If the Agent shall resign as Agent under this
Agreement and the other Loan Documents, then the Purchasers on whose behalf such
Agent is acting shall appoint a successor agent for the Purchasers, whereupon
such successor agent shall succeed to the rights, powers and duties of the
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to
-75-
<PAGE> 77
this Agreement or any Loan Document or any holders of the Notes. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Section
22 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement and the other Loan Documents. The
Agent shall use its best efforts to notify the Company of any such resignation;
provided, however, neither the Agent nor the Purchasers shall be held liable in
any respect for the failure to provide such notice; and further provided,
however, that until the Company receives notice of the Agent's resignation and
of the appointment of a successor agent, the Company shall be entitled to rely
upon the Agent as the Agent hereunder.
-76-
<PAGE> 78
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
DECORA, INCORPORATED
By: _____________________________________
Name: Timothy N. Burditt
Title: Vice President, Administration
DECORA INDUSTRIES, INC.
By: _____________________________________
Name: Timothy N. Burditt
Title: Executive Vice President,
Administration and Finance
State Street Bank and Trust Company, as
Trustee for THE TEXTRON MASTER TRUST
By: _____________________________________
Name:
Title:
DORRANCE STREET CAPITAL ADVISORS, L.L.C.,
as Agent
By: _____________________________________
Name: John D. Lemery
Title: Managing Principal
-77-
<PAGE> 79
EXHIBIT A
<TABLE>
<CAPTION>
Number of
Common
Shares, Number of
Subject to Preferred
Adjustment, Shares, Subject % of
Principal Initially to Adjustment, Contingent
Amount of Covered By Initially Covered Common
Name and Address of Purchaser Notes to be Common by Preferred Warrants
- ----------------------------- Purchased Warrants Warrants Issued
----------- ----------- ----------------- ----------
<S> <C> <C> <C> <C>
1. State Street Bank and Trust Company as
Trustee for the Textron Master Trust $18,000,000 2,136,534 69,557 100%
(a) address for communications:
State Street Bank and Trust
Company as Trustee for the
Textron Master Trust
One Enterprise Drive
Master Trust-W6C
North Quincy, MA 02171
Attention: Thomas C. Poppey
with a copy to:
Dorrance Street Capital
Advisors, L.L.C.
Attn: John D. Lemery
One Hospital Trust Tower
Suite 1515
Providence, R.I. 02903
Telephone: (401) 453-3706
Facsimile: (401) 453-3704
(b) address for payments, by wire
transfer:
State Street Bank and Trust
Company
ABA No. 011000028
Account Name: Textron/TX8A
Account Number: 67613075
Attention: Thomas C. Poppey
(providing sufficient information
with such wire transfer to identify
the source and application of such
funds)
(c) Tax Identification Number:
04-3283284
</TABLE>
<PAGE> 80
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. SALE AND PURCHASE OF NOTES AND WARRANTS.......................................1
SECTION 2. THE CLOSING...................................................................3
SECTION 3. DEFINITIONS...................................................................4
SECTION 4. REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE
COMPANY......................................................................19
4.1. Corporate Existence; Compliance with Law.....................................19
4.2. Corporate Power; Authorization; Enforceable Obligations......................19
4.3. Stock Ownership..............................................................20
4.4. Subsidiaries; Joint Ventures; Indebtedness...................................20
4.5. Business.....................................................................20
4.6. Financial Statements and Projections.........................................20
4.7. Material Adverse Change......................................................21
4.8. Ownership of Property; Liens.................................................22
4.9. Restrictions; No Default.....................................................22
4.10. Status Under Certain Statutes................................................23
4.11. Labor Matters................................................................23
4.12. Taxes........................................................................24
4.13. ERISA........................................................................25
4.14. No Litigation................................................................26
4.15. Brokers......................................................................26
4.16. Employment Matters...........................................................26
4.17. Patents, Trademarks, Copyrights and Licenses.................................26
4.18. Full Disclosure..............................................................27
4.19. Offering of Securities.......................................................27
4.20. Holdings Orders..............................................................27
4.21. Insurance Policies...........................................................27
4.22. No Foreign Assets Control Regulation Violation...............................27
4.23. Outstanding Securities.......................................................27
4.24. No Burdensome Agreements.....................................................28
4.25. Solvency.....................................................................28
4.26. Americans with Disabilities Act of 1990......................................28
4.27. Additional Representations with Respect to Holdings..........................29
SECTION 5. REPRESENTATIONS OF THE PURCHASERS............................................30
</TABLE>
i
<PAGE> 81
<TABLE>
<S> <C> <C>
SECTION 6. PREPAYMENTS AND REPAYMENTS...................................................32
6.1. Prepayment at Holder's Option................................................32
6.2. Optional Prepayments.........................................................32
6.3. Obligations Unconditional....................................................33
SECTION 7. AFFIRMATIVE COVENANTS........................................................33
7.1. Use of Proceeds; Mandatory Payment...........................................33
7.2. Taxes........................................................................34
7.3. Existence....................................................................34
7.4. Financial Covenants..........................................................34
7.5. Insurance....................................................................36
7.6. General Compliance...........................................................36
7.7. Information..................................................................37
7.8. Charter, By-Laws.............................................................37
7.9. Inspection...................................................................38
7.10. Event of Default.............................................................38
7.11. Collateral Documents.........................................................38
7.12. Expenses.....................................................................39
7.13. Change in Control Event......................................................39
7.14. Public Documents; Senior Lender Communications...............................39
7.15. Communication with Accountants...............................................40
7.16. Inspection...................................................................40
7.17. Maintenance of Intellectual Property and Business............................40
7.18. Books and Records............................................................40
7.19. Office for Payment, Exchange and Registration................................41
7.20. Notices......................................................................41
7.21. No Impairment................................................................41
7.22. Agreements...................................................................42
7.23. Board Seat...................................................................42
7.24. Taxes........................................................................42
7.25. Payment of Dividends by Subsidiaries.........................................44
7.26. Further Assurances...........................................................45
7.27. Delivery of Information for Rule 144A Transactions...........................45
7.28. Environmental Reports........................................................45
7.29. Conny Stock..................................................................45
7.30. Stockholders Meeting; Restated Certificate and Bylaws........................45
SECTION 8. NEGATIVE COVENANTS...........................................................46
8.1. Indebtedness.................................................................46
8.2. Management Fees..............................................................46
8.3. Upstream Funding.............................................................46
8.4. Guarantees...................................................................47
8.5. Liens........................................................................47
</TABLE>
ii
<PAGE> 82
<TABLE>
<S> <C> <C>
8.6. Merger; Sales................................................................47
8.7. Authorization or Issuance of Capital Stock...................................47
8.8. Restricted Payments..........................................................48
8.9. Affiliate Transactions.......................................................48
8.10. ERISA........................................................................48
8.11. Amendments to Agreements.....................................................49
8.12. Sale-Leasebacks..............................................................49
8.13. Cancellation of Indebtedness.................................................49
8.14. Amendments to Indebtedness...................................................49
8.15. Fiscal Year..................................................................49
8.16. Private Placement Status.....................................................49
SECTION 9. SUBORDINATION................................................................50
SECTION 10. CONDITIONS TO PURCHASERS' OBLIGATIONS........................................50
10.1. Accuracy of Representations and Warranties...................................50
10.2. Compliance with Agreements; No Defaults......................................50
10.3. Officers' Certificates.......................................................50
10.4. Proceedings..................................................................50
10.5. Legality; Governmental and Other Authorization...............................50
10.6. Time of Purchase.............................................................51
10.7. No Change in Law, etc........................................................51
10.8. Completion of Acquisition Transactions.......................................51
10.9. Environmental Report.........................................................51
10.10. Fees.........................................................................51
10.11. No Material Adverse Change...................................................51
10.12. Certain Loan Documents.......................................................51
10.13. Senior Loan Documents........................................................51
10.14. Intercreditor Agreement......................................................51
10.15. Searches.....................................................................52
10.16. Material Agreements..........................................................52
10.17. Pay-off Letters and Releases.................................................52
10.18. Acquisition Documents........................................................52
10.19. Insurance....................................................................52
10.20. Solvency Certificate.........................................................52
10.21. Opinions of Counsel..........................................................52
10.22. Other Documents and Opinions.................................................52
SECTION 11. AMENDMENT AND WAIVER.........................................................53
SECTION 12. EXCHANGE OF NOTES AND WARRANTS; CANCELLATION OF
SURRENDERED NOTES.....................................................54
</TABLE>
iii
<PAGE> 83
<TABLE>
<S> <C> <C>
SECTION 13. REGISTRATION; REPLACEMENT OF NOTES AND WARRANTS..............................55
SECTION 14. DEFAULTS.....................................................................56
SECTION 15. ADDITIONAL REMEDIES..........................................................59
SECTION 16. RESTRICTIONS ON TRANSFER.....................................................60
SECTION 17. REGISTRATION RIGHTS..........................................................60
17.1. Requested Registration.......................................................60
17.2. Incidental Registration......................................................61
17.3. Underwriter Cutbacks.........................................................63
17.4. Right to Review the Registration Statement...................................63
17.5. Registration Procedures......................................................64
17.6. Indemnity....................................................................65
17.7. Expenses.....................................................................67
17.8. Lock-Ups.....................................................................68
17.9. Other Obligations of Holdings................................................68
17.10. Transferability..............................................................68
SECTION 18. EXPENSES; INDEMNIFICATION....................................................68
(a) Expenses; Taxes........................................................68
(b) Indemnification........................................................69
SECTION 19. HOME OFFICE PAYMENTS.........................................................70
SECTION 20. NOTICES......................................................................71
SECTION 21. MISCELLANEOUS................................................................71
21.1. Entire Agreement.............................................................71
21.2. Survival.....................................................................71
21.3. Counterparts.................................................................72
21.4. Headings.....................................................................72
21.5. Binding Effect and Assignment................................................72
21.6. Severability.................................................................72
21.7. Governing Law................................................................72
21.8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS...............................72
21.9. WAIVER OF JURY TRIAL.........................................................73
21.10. Changes in GAAP..............................................................73
21.11. Confidentiality..............................................................74
21.12. Waiver of Bond...............................................................74
21.13. Advice of Counsel............................................................74
</TABLE>
iv
<PAGE> 84
<TABLE>
<S> <C> <C>
SECTION 22. THE AGENT....................................................................75
22.1. Appointment..................................................................75
22.2. Application of Proceeds of the Collateral....................................75
22.3. Delegation of Duties.........................................................75
22.4. Reliance by Agent............................................................75
22.5. Notice of Default............................................................75
22.6. Agent in Its Individual Capacity.............................................75
22.7. Successor Agent..............................................................76
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
Exhibit A - Purchasers' Note, Common Stock and Warrant Amounts Purchasers'
Addresses for Notices and Payment Instructions
Exhibit B - Form of Note
Exhibit C - Form of Common Warrant Certificate
Exhibit D - Form of Preferred Warrant Certificate
Exhibit E - Form of Contingent Common Warrant Certificate
Exhibit F - Terms of Series A Preferred
Exhibit G - Form of Guaranty
Exhibit H - Form of Subordination Agreement
Exhibit I - Form of Certificate Regarding United States Withholding Tax
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C> <C>
Schedule 4.1 - Certain Licenses, Permits, etc.
Schedule 4.2 - Dilution
Schedule 4.4 - Outstanding Indebtedness and Subsidiaries
Schedule 4.6(a) - Financial Statements
Schedule 4.6(b) - Projections
Schedule 4.7 - Certain Dividends, Distributions, etc.
Schedule 4.8 - Ownership of Property; Liens
Schedule 4.9 - Third Party Defaults
Schedule 4.11 - Certain Labor Matters
Schedule 4.12 - Tax Matters
Schedule 4.13 - ERISA Matters
Schedule 4.14 - Litigation (Company)
Schedule 4.15 - Brokers
Schedule 4.16 - Employment Agreements, etc.
Schedule 4.17 - Intellectual Property
Schedule 4.18 - Certain Material Facts
Schedule 4.21 - Insurance Policies
Schedule 4.23 - Registration Statements; Registration Rights
Schedule 4.27(d) - Holdings Common Stock
Schedule 5(b) - Employee Benefit Plans
</TABLE>
v
<PAGE> 1
EXHIBIT 99.5
No. __
THIS WARRANT CERTIFICATE (AND THE COMMON STOCK OR OTHER SECURITIES ISSUABLE
UPON EXERCISE HEREOF) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR UNDER ANY APPLICABLE REGULATION OF ANY STATE AND ARE NOT TRANSFERABLE EXCEPT
UPON THE CONDITIONS SPECIFIED HEREIN AND IN THE PURCHASE AGREEMENT REFERRED TO
HEREIN.
DECORA INDUSTRIES, INC.
Common Stock Purchase Warrant Certificate
Dated September __, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned DECORA INDUSTRIES, INC., a
Delaware corporation (herein referred to as the "Company"), hereby certifies
and agrees that _____________________________,(1) or registered assigns, is
entitled to purchase from the Company up to an aggregate of _____(2) duly
authorized, validly issued, fully paid and nonassessable shares of the
Company's Common Stock, par value $.01 per share, or any stock into which such
Common Stock shall have been changed or any stock or other securities resulting
from a reclassification thereof (all such shares, stock or other securities
which may be purchased by this, and all other, Warrants are herein known as the
"Shares") at a purchase price per Share of $1.00 at any time and from time to
time, but not after September 30, 2005. The foregoing agreement and rights are
all subject to the terms, conditions and adjustments (in both the number of
Shares and the purchase price per Share) set forth below in this Warrant
Certificate.
This Warrant Certificate is one of the Common Stock Purchase
Warrant Certificates (the "Warrants", which term includes all Warrants issued
in substitution therefor) originally issued in connection with the issue and
sale by Decora, Incorporated, a Delaware
- -----------------
(1) Insert name of Warrantholder.
(2) Insert number of shares of Common Stock issuable under Warrant Certificate.
<PAGE> 2
corporation and a subsidiary of the Company (the "Borrower") of $18,000,000 of
its Senior Subordinated Notes (the "Notes"). The Warrants and the Notes have
been issued pursuant to the Note and Warrant Purchase Agreement dated as of
September 26, 1997 (the "Purchase Agreement") between the Company, the Borrower
and the Purchasers and Agent named therein. The Warrants originally so issued
evidence rights to purchase an aggregate of Shares at an exercise price of
$1.00 per share, subject to adjustment as provided herein. This Warrant is
subject to the provisions, and is entitled to the benefits, of the Purchase
Agreement.
The Company represents that all Shares to which the holders of
the Warrants shall be entitled upon the exercise thereof (i) are duly
authorized by the Certificate of Incorporation of the Company in accordance
with the laws of the State of Delaware, (ii) have been duly authorized to be
issued upon the exercise of the Warrants from time to time in whole or in part,
(iii) will be, when issued in accordance with the terms of the Warrants, duly
authorized and validly issued and fully paid and nonassessable and free and
clear of all Liens and preemptive and other rights of others whatsoever (other
than Liens and rights of others claiming by, through or under the holder
hereof) and (iv) will not be at the time of such exercise subject to any
restrictions on transfer or sale except as provided (A) in the Purchase
Agreement and (B) by applicable laws.
Section 1. Exercise of Warrant.
1.1. Manner of Exercise.
(a) This Warrant may be exercised by the holder hereof, in
whole or in part, during normal business hours on any Business Day by surrender
of this Warrant, together with the form of subscription attached as Annex A
hereto (or a reasonable facsimile thereof) duly executed by such holder in
substantially such form, to the Company at its office at One Mill Street, Fort
Edward, New York 12828 (or, if such exercise is in connection with an
underwritten public offering of Shares subject to this Warrant, at the location
at which the underwriting agreement requires that such Shares be delivered).
(b) Payment of the exercise price for Shares shall be made,
at the option of the holder (i) as provided in Section 2 hereof or (ii) by
check or wire transfer payable to the order of the Company, in any case, in an
amount equal to (A) the number of Shares specified in such form of
subscription, multiplied by (B) the then current exercise price. Such holder
shall thereupon be entitled to receive the number of Shares specified in such
form of subscription.
1.2. Effective Date. Each exercise of this Warrant pursuant
to Section 1.1(a) hereof shall be deemed to have been effected immediately
prior to the close of business on the Business Day on which this Warrant is
surrendered to the Company as provided in Section 1.1 hereof (except that if
such exercise is in connection with an underwritten public offering of Shares
subject to this Warrant, then such exercise shall be deemed to have been
effected upon such surrender of this Warrant), and such exercise shall be at
the current exercise price in effect at such time. On each such day that an
exercise of this Warrant is deemed effected, the person or persons in whose
name or names any certificate or certificates for Shares are issuable upon such
exercise
2
<PAGE> 3
(as provided in Section 1.3 hereof) shall be deemed to have become the holder
or holders of record thereof.
1.3. Share Certificates, Fractional Shares, and Reissuance of
Warrants. As promptly as practicable after the exercise of this Warrant, in
whole or in part, and in any event within five (5) Business Days thereafter
(unless such exercise shall be in connection with a public offering of Shares
subject to this Warrant, in which event concurrently with such exercise), the
Company at its expense (including the payment by it of any applicable issue,
stamp or other taxes) will cause to be issued in the name of and delivered to
the holder hereof or such other person as such holder may direct:
(a) a certificate or certificates for the number (which may
be fractional) of Shares to which such holder shall be entitled upon such
exercise; and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or faces thereof
for the number (which may be fractional) of Shares (without giving effect to
any adjustment therein) equal to the number of such Shares called for on the
face of this Warrant minus the number of Shares which could have been obtained
upon such exercise for the exercise price paid if the then current exercise
price had been $1.00 per Share. If this Warrant shall have been fully
exercised, the new Warrant shall indicate that no additional Shares may be
purchased by the exercise thereof.
1.4. Acknowledgment of Obligation. The Company will, at the
time of or at any time after each exercise of this Warrant, upon the request of
the holder hereof or of any Shares issued upon such exercise, acknowledge in
writing its continuing obligation to afford to such holder all rights
(including, without limitation, any rights to registration of any such Shares
pursuant to the Purchase Agreement) to which such holder shall continue to be
entitled under this Warrant, and the Purchase Agreement; provided, that if any
such holder shall fail to make any such request, the failure shall not affect
the continuing obligation of the Company to afford such rights to such holder.
1.5. Application of Note. The holder shall have the option,
but not the obligation, upon any exercise of this Warrant, to apply to the
payment required by Section 1.1 hereof all or any part of all or any part of
the accrued and unpaid interest on, or principal of (without prepayment penalty
or premium), any Notes at the time held by the holder. The Company will accept
the amount of accrued and unpaid interest or principal, if such election is
selected, specified in the form of subscription in satisfaction of the exercise
price for such Shares to be purchased. The holder shall have the right to
apply all or any portion of such accrued and unpaid interest or principal to
exercise all or any portion of this Warrant whether or not payment on the Notes
is otherwise prohibited.
3
<PAGE> 4
1.6. Restriction. The holder acknowledges that the Shares
acquired upon exercise of the Warrant will be "restricted securities" as that
term is defined under the regulations promulgated under the Securities Act,
will not be saleable in the absence of an effective registration statement
under the Securities Act or an exemption from registration, and accordingly may
be required to be held for an indefinite period of time. The holder agrees
that Shares issued pursuant hereto may contain the following legend on the face
thereof: "This security has not been registered pursuant to the Securities Act
of 1933, as amended, and each holder of this security by the acceptance hereof
agrees that this security shall not be transferred in violation of said Act."
Each holder of a Warrant by acceptance thereof agrees that it
will not sell or otherwise dispose of any Warrants or Shares unless such
Warrants or Shares have been registered under, or have been sold pursuant to an
exemption from registration under, the Securities Act.
Prior to any transfer of any Warrants or Shares (either of the
foregoing "Restricted Securities"), other than as set forth later in this
Section 1.6, the holder thereof will give written notice to the Company of such
holder's intention to effect such Transfer. Each such notice shall describe
the manner and circumstances of the proposed transfer in sufficient detail, and
shall contain an undertaking by the holder giving such notice to furnish such
other information as may be required, to enable counsel to render the opinion
referred to below. The Company will promptly submit a copy of such notice to
its counsel, and the following provisions shall then apply:
(x) If in the opinion of such counsel the proposed transfer
may be effected without registration of such Restricted Securities
under the Securities Act, the Company shall, as promptly as
practicable, so notify the holder of such Restricted Securities and
such holder shall thereupon be entitled, subject to the other
provisions of this Warrant, to transfer such Restricted Securities in
accordance with the terms of the notice delivered by such holder to
the Company.
(y) If such counsel is unable to conclude that the proposed
transfer may be effected without registration of such Restricted
Securities under the Securities Act (such view to be expressed in
writing in a letter stating the legal or factual basis of the
conclusions reached therein), the Company will, as promptly as
practicable, so notify the holder thereof and thereafter such holder
shall not be entitled to transfer such Restricted Securities until
either such Restricted Securities have been effectively registered
under the Securities Act or the provisions of this Section 1.6 have
otherwise been complied with.
Notwithstanding the foregoing provisions of this Section 1.6, any holder of
Restricted Securities shall be permitted, subject to the other provisions of
this Warrant, the Purchase Agreement, and applicable law, to transfer any such
Restricted Securities to a limited number of institutional investors, provided
that each such investor either (A) represents in writing that it is an
institutional investor acquiring such Restricted Securities for investment and
not with a view to the distribution thereof (subject, however, to any
requirement of law that the disposition thereof shall at all times be within
the control of such transferee), or (B) is an institutional investor to whom
such
4
<PAGE> 5
Restricted Securities may be transferred pursuant to a rule or regulation of
the Commission permitting resales of securities to a limited class of
institutional investors. The Company shall pay the cost of any counsel
described above.
The restrictions imposed by this Section 1.6 upon the
transferability of Restricted Securities shall cease and terminate as to any
particular Restricted Securities (A) when, in the opinion of counsel for the
Company, such restrictions are no longer required in order to ensure compliance
with the Securities Act, (B) when such Restricted Securities shall have been
effectively registered under the Securities Act (including, without limitation,
pursuant to Section 17 of the Purchase Agreement), or (C) when such Restricted
Securities shall have been sold to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act. Whenever such restrictions
shall cease and terminate as to any Restricted Securities, the holder thereof
shall be entitled to receive from the Company, without expense (other than
applicable transfer taxes, if any), new certificates representing such
Restricted Securities of like tenor but not bearing the legend otherwise
required by this Section 1.6.
Section 2. Conversion of Warrant.
(a) In addition to and without limiting the rights of the
holder under the terms of this Warrant, the holder shall have the option, but
not the obligation, to convert this Warrant, or any portion thereof (the
"Conversion Right") into Shares as provided in this Section 2 at any time when
this Warrant can be exercised pursuant to the first paragraph hereof. Upon
exercise of the Conversion Right with respect to a particular number of Shares
(the "Converted Warrant Shares"), the Company shall deliver to the holder
(without payment by the holder of any exercise price or any cash or other
consideration) that number (which may be fractional) of Shares equal to the
quotient obtained by dividing (x) the value of this Warrant (or the specified
portion hereof) on the Conversion Date (as defined in Section 2(b) hereof),
which value shall be determined by subtracting (A) the aggregate current
exercise price applicable to the Converted Warrant Shares immediately prior to
the exercise of the Conversion Right from (B) the aggregate Market Price of
such Converted Warrant Shares on the Conversion Date by (y) the Market Price of
one Share on the Conversion Date.
(b) The Conversion Right may be exercised by the holder by
surrendering this Warrant at the designated office of the Company together with
a written statement (a "Conversion Notice") specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of Converted
Warrant Shares (i.e., the Shares as to which this Warrant is being exercised
in connection with the exercise of the Conversion Right). Such conversion
shall be effective upon receipt by the Company of this Warrant together with
the Conversion Notice, or on such later date as is specified therein (the
"Conversion Date") and, at the election of the holder, may be made contingent
upon the occurrence of any event specified in the Conversion Notice.
Certificates for the Shares issuable upon exercise of the Conversion Right and,
if applicable, a new Warrant evidencing the balance of the Shares remaining
subject to this Warrant, shall be issued as of the Conversion Date and shall be
delivered to the holder promptly following the Conversion Date.
5
<PAGE> 6
Section 3. Current Exercise Price and Adjustments.
3.1. Current Exercise Price. The term "current exercise
price" shall mean initially $1.00 per Share, subject to adjustment from time to
time as hereinafter provided, in effect at any given time. In determining the
current exercise price, the result shall be expressed to the nearest $.001, but
any such lesser amount shall be carried forward and shall be considered at the
time of and together with the next subsequent adjustment which, together with
any adjustments required to be carried forward, shall amount to $.001 per Share
or more.
3.2. Adjustment of Current Exercise Price. The current
exercise price shall be subject to adjustment, from time to time (but not below
zero), as follows:
(a) Adjustments for Stock Dividends, Recapitalization, etc.
In the event the Company shall, after the Closing Date, issue any shares of
voting or non-voting common stock of any class ("Common Stock") (i) by stock
dividend or any other distribution upon the stock of the Company payable in
Common Stock or in securities convertible into or exercisable or exchangeable
for shares of Common Stock or (ii) in subdivision of its outstanding Common
Stock, by reclassification or otherwise, the current exercise price then in
effect shall be reduced proportionately; and, in like manner, in the event of
any combination of shares of Common Stock, by reclassification or otherwise,
the current exercise price then in effect shall be proportionately increased.
An adjustment made pursuant to this Section 3.2(a) shall become effective
retroactively immediately after the record date in the case of a dividend and
shall become effective immediately after the effective date in the case of a
subdivision or combination.
(b) Adjustments for Other Distributions. In case the Company
shall, after the Closing Date, make a distribution to all holders of its Common
Stock (including any such distribution made in connection with a consolidation
or merger in which the Company is the continuing corporation) of (i) cash
(whether or not payable out of earnings or surplus), (ii) other assets (other
than dividends payable in the Company's Common Stock), (iii) evidences of
indebtedness or other securities of the Company or of any entity other than the
Company (other than dividends payable in the Company's Common Stock), or (iv)
subscription rights, options or warrants to purchase any of the foregoing
assets or securities, whether or not such rights, options or warrants are
immediately exercisable (hereinafter collectively referred to as "Distributions
on Common Stock"), the Company shall deliver to the holders of outstanding
Warrants the Distributions on Common Stock to which the holders of outstanding
Warrants would have been entitled if they had exercised the Warrants held by
them for Common Stock immediately prior to the record date for the purpose of
determining stockholders entitled to receive such Distributions on Common
Stock.
(c) Adjustments for Issuance of Additional Stock. Subject to
the exception referred to in Section 3.2(e) hereof and except as otherwise
provided for in Section 3.2(a) hereof, in case the Company shall at any time or
from time to time after the Closing Date issue any additional shares of its
Common Stock, excluding shares of Common Stock issued pursuant to the Existing
Converts (as defined in the Purchase Agreement), ("Additional Common Stock")
either
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(I) for consideration per share less than the then current Market Price per
share of the Company's Common Stock (determined as provided in Section 3.2(g)
hereof) immediately prior to the issuance of such Additional Common Stock, or
(II) for a consideration per share less than the then current exercise price
immediately prior to the issuance of such Additional Common Stock, or (III)
without consideration, then (in the case of either clause (I), (II) or (III)),
and thereafter successively upon each such issuance, the current exercise price
shall forthwith be reduced to a price equal to the lesser of:
(A) the price determined by multiplying such current exercise
price by a fraction, of which
(1) the numerator shall be (i) the number of shares of the
Company's Common Stock outstanding when the then current exercise
price became effective plus (ii) the number of shares of the Company's
Common Stock which the aggregate amount of consideration, if any,
received by the Company upon all issues of its Common Stock since the
current exercise price became effective (including the consideration,
if any, received for such Additional Common Stock) would purchase at
the greater of (x) the then current Market Price per share of the
Company's Common Stock or (y) the then current exercise price per
Share, and
(2) the denominator shall be (i) the number of shares of the
Company's Common Stock outstanding when the then current exercise
price became effective plus (ii) the number of shares of the Company's
Common Stock issued since the current exercise price became effective
(including the number of shares of such Additional Common Stock); or
(B) the price determined by dividing (x) the aggregate amount
of consideration, if any, received by the Company upon all
issues of its Common Stock since the then current exercise
price became effective (including the consideration, if any,
received for such Additional Common Stock) by (y) the number
of shares of Common Stock of the Company issued since the
current exercise price became effective (including the number
of shares of such Additional Common Stock),
provided, however, that such adjustment shall be made only if the current
exercise price determined from the aforesaid calculations shall be less than
the current exercise price in effect immediately prior to the issuance of such
Additional Common Stock. The Company may, but shall not be required to, make
any adjustment of the current exercise price if the amount of such adjustment
shall be less than $.001, but any adjustment that would otherwise be required
then to be made which is not so made shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to not less than $.001.
The adjustment described in this Section 3.2(c) shall be made whenever such
Common Stock is issued, and shall become effective retroactively immediately
after the date on which the Company committed to make such issuance.
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For the avoidance of doubt, the issuance of shares of Common Stock after the
Closing Date pursuant to the Cigna Exchange Agreement shall be deemed to be the
issuance of Additional Common Stock for no consideration.
(d) Certain Rules in Applying the Adjustment for Additional
Stock Issuances. For purposes of any adjustment as provided in Section 3.2(c),
the following provisions shall also be applicable:
(1) Cash Consideration. In case of the issuance of
Additional Common Stock for cash, the consideration received by the
Company therefor shall (subject to the last sentence of Section 3.2(g)
hereof) be deemed to be the net cash proceeds received by the Company
for such Additional Common Stock after deducting any commissions or
other expenses paid or incurred by the Company for any underwriting
of, or otherwise in connection with the issuance of, such Additional
Common Stock.
(2) Non-Cash Consideration. In case of the issuance
(other than upon conversion or application of obligations or shares of
stock of the Company) of Additional Common Stock for a consideration
other than cash, or a consideration a part of which shall be other
than cash, the amount of the consideration other than cash so received
or to be received by the Company shall be deemed to be the value of
such consideration at the time of its receipt by the Company as
determined in good faith by the Board of Directors of the Company,
provided, that where the non-cash consideration consists of the
cancellation, surrender or exchange of outstanding obligations of the
Company (or where such obligations are otherwise converted into shares
of the Company's Common Stock), the value of the non-cash
consideration shall be deemed to be the amount, including principal
and any accrued interest, as of the time of the Company's receipt, of
the obligations canceled, surrendered, exchanged or converted. If the
Company receives consideration, part or all of which consists of
publicly traded securities, the value of such non-cash consideration
shall be the aggregate market value of such securities (based on the
latest reported trades on the principal securities exchange on which
such securities are then traded) as of the close of the day
immediately preceding the date of their receipt by the Company.
(3) Options, Warrants, Convertibles, etc. In case of
the issuance (other than by way of a Distribution on Common Stock
pursuant to Section 3.2(b) hereof), whether by distribution or sale to
holders of its Common Stock or to others, by the Company of (i) any
security that is convertible into the Company's Common Stock or (ii)
any rights, options or warrants to purchase the Company's Common Stock
(except for the Warrants), if inclusion thereof would result in a
current exercise price lower than if excluded, the Company shall be
deemed to have issued, for the consideration described below, the
number of shares of the
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Company's Common Stock into which such convertible security may be
converted when first convertible, or the number of shares of the
Company's Common Stock deliverable upon the exercise of such rights,
options or warrants when first exercisable, as the case may be (and
such shares shall be deemed to be Additional Common Stock for purposes
of Section 3.2(c) hereof). The consideration deemed to be received by
the Company at the time of the issuance of such convertible securities
or such rights, options or warrants shall be the consideration so
received determined as provided in Sections 3.2(d)(1) and (2) hereof
deducting any commissions or other expenses paid or incurred by the
Company for any underwriting of, or otherwise in connection with, the
issuance of such convertible securities or rights, options or
warrants, plus (x) any consideration or adjustment payment to be
received by the Company in connection with such conversion, or, as
applicable, (y) the aggregate price at which shares of the Company's
Common Stock are to be delivered upon the exercise of such rights,
options or warrants when first exercisable (or, if no price is
specified and such shares are to be delivered at an option price
related to the Market Price of the subject Common Stock, an aggregate
option price bearing the same relation to the Market Price of the
subject Common Stock at the time such rights, options or warrants were
granted). In case any such securities, rights, options or warrants
shall be issued in connection with the issue or sale of other
securities of the Company comprising one integral transaction in which
no specific consideration is allocated to such securities, rights,
options or warrants, such securities, rights, options or warrants
shall be deemed to have been issued without consideration. If,
subsequently, (1) such number of shares into which such convertible
security is convertible, or which are deliverable upon the exercise of
such right, options or warrants, is increased or (2) the conversion or
exercise price of such convertible security, rights, options or
warrants is decreased, then the calculations under the preceding two
sentences (and any resulting adjustment to the current exercise price
under 3.2(c) hereof) with respect to such convertible security,
rights, options or warrants, as the case may be, shall be recalculated
as of the time of such issuance but giving effect to such changes (but
any such recalculation shall not result in the current exercise price
being higher than that which would be calculated without regard to
such issuance). On the expiration or termination of such rights,
options or warrants, or rights to convert, the current exercise price
hereunder shall be readjusted (up or down as the case may be) to such
current exercise price as would have been obtained had the adjustments
made upon the issuance of such rights, options, warrants or
convertible securities been made upon the basis of the delivery of
only the number of shares of the Company's Common Stock actually
delivered upon the exercise of such rights, options or warrants or
upon the conversion of any such securities and at the actual exercise
or conversion prices (but any such recalculation shall not result in
the current exercise price being higher than that which would be
calculated without regard to such issuance).
(4) Number of Shares Outstanding. The number of
shares of the Company's Common Stock as at the time outstanding shall
exclude all shares of the Company's Common Stock then owned or held by
or for the account of the Company but shall include the aggregate
number of shares of the Company's Common Stock at the time deliverable
in respect of the convertible securities, rights, options and warrants
referred to
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in Section 3.2(d)(3); provided, that to the extent that such rights,
options, warrants or conversion privileges are not exercised, such
shares of Common Stock shall be deemed to be outstanding only until
the expiration dates of the rights, warrants, options or conversion
privileges or the prior cancellation thereof.
(5) Special Rules for Conny Minority Acquisition
Shares. If Conny Minority Acquisition Shares (as defined in the
Purchase Agreement) are issued for consideration per share
(determined in accordance with subsections (1) and (2) of this Section
3.2(d)) of less than the current exercise price of this Warrant
immediately prior to such issuance, the adjustment otherwise required
therefor under Section 3.2(c) hereof shall not apply and instead, the
current exercise price under this Warrant shall immediately be
adjusted to the lowest consideration per share received for the
issuance of any of such Conny Minority Acquisition Shares. If Conny
Minority Acquisition Shares are issued for a consideration per share
of more than the current exercise price of this Warrant immediately
prior to such issuance, but less than the current Market Price per
share of the Company's Common Stock immediately prior to the issuance
of such Additional Common Stock, the provisions of Section 3.2(c)
hereof shall be applicable.
(e) Exclusions from the Adjustment for Additional Stock
Issuances. No adjustment of the current exercise price under Section 3.2(c)
hereof shall be made as a result of or in connection with the issuance of
Shares upon exercise of the Warrants or upon conversion of Preferred Shares (as
defined in the Purchase Agreement). To the extent that the issuance (or deemed
issuance) of the Company's Common Stock shall not result in any adjustment of
the current exercise price pursuant to the provisions of this Section 3.2(e),
then such Common Stock shall not be taken into account for purposes of
determining any fraction referred to in Section 3.2(c) hereof.
(f) Accountants' Certification. Whenever the current
exercise price is adjusted as provided in this Section 3.2, the Company will
promptly obtain a certificate of a firm of independent public accountants of
recognized national standing selected by the Board of Directors of the Company
(who may not be the regular auditors of the Company and who shall be reasonably
acceptable to the Majority Holders) setting forth the current exercise price as
so adjusted, the computation of such adjustment and a brief statement of facts
accounting for such adjustment, and will mail to the holders of the Warrants a
copy of such certificate from such firm of independent public accountants.
(g) Determination of Market Price. The current "Market
Price" per share of the Company's Common Stock on any date shall be deemed to
be the average of the daily closing prices for the thirty (30) consecutive
trading dates commencing twelve (12) trading days before such date (subject to
the last sentence of this paragraph). The closing price for each day shall be
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the last reported sale price or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, in either case on the
principal national United States or Canadian securities exchange on which the
Company's Common Stock is listed or admitted to trading, or if the Company's
Common Stock is not listed or admitted to trading on any such national
securities exchange, the average of the highest reported bid and lowest
reported asked prices as furnished by the National Association of Securities
Dealers Inc., Automated Quotation System Level I, or comparable system. If the
closing price cannot be so determined, the Market Price shall be determined:
(x) by the written agreement of the Company and the
holders of Warrants representing a majority of the Shares then
obtainable from the exercise of outstanding Warrants (the
"Majority Holders"); or
(y) in the event that no such agreement is reached
within fifteen (15) days after the event giving rise to the
need to determine the Market Price, by a nationally recognized
U.S. investment banking firm, selected by the Company
("Company Appraiser") not more than 5 Business Days after the
end of such 15 day period. Any appraiser appointed pursuant
to this paragraph shall be instructed to make its
determination as promptly as possible and in any event within
30 days of appointment. If no such selection is made within
such period, then the Majority Holders shall as promptly as
possible select such a firm whose determination shall be final
and binding. If such selection is timely made by the Company,
and the Majority Holders do not object to the Market Price as
determined by the Company Appraiser within 10 days of receipt
of notice thereof by all holders of Warrants, then the Market
Price as determined by the Company Appraiser shall be the
Market Price. If the Majority Holders do so object to the
Company Appraiser's determination of Market Price, then the
Majority Holders can select a nationally recognized U.S.
investment banking firm ("Alternate Appraiser") to review the
Company Appraiser's report and other relevant information.
Within 10 days after receipt by the Alternate Appraiser of
such report and such other information as is reasonably
requested by the Alternate Appraiser, the Company Appraiser
and Alternate Appraiser shall communicate and/or meet to
resolve any questions or differences with respect to the
Market Price. If such appraisers agree on a Market Price,
such Market Price shall be the Market Price. If no agreement
is reached then the Company Appraiser and Alternate Appraiser
shall select a third nationally recognized firm ("Third
Appraiser"). If the Company Appraiser and the Alternate
Appraiser cannot agree on a Third Appraiser within 20 days of
the end of such 10 day period, either may apply to the
American Arbitration Association to appoint the Third
Appraiser. The Third Appraiser shall, within 30 days of their
hire, issue a report with its determination of Market Price
which shall be conclusive and binding. All expenses of the
Company Appraiser shall be borne by the Company. All expenses
of the Alternate Appraiser shall be borne by the holders of
the
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Warrants. All expenses of the Third Appraiser shall be borne
equally by the Company and such holders.
Market Price shall be determined on the basis of the fair market value of the
Company as if it were sold as a going concern on the date of valuation and
without regard to the lack of any trading market for, or the lack of liquidity
in, the Common Stock of the Company.
The Company shall cooperate, and shall provide all necessary information and
assistance, to permit any determination under the preceding clause (x) or (y).
Each Appraiser shall be instructed to use its best efforts to give the Company
and all holders of Warrants reasonable advance notice of the Market Price and
the contents of its report (by delivering a draft report) before the report is
delivered in final form. Any communications or reports by an appraiser to
either the Company or any of the holders regarding Market Price shall be given
simultaneously to both the Company and all of the holders.
(h) Antidilution Adjustments Under Other Securities. Without
limiting any other rights available hereunder to the holders of Warrants, if
there is an antidilution adjustment (x) under any security which is convertible
into Common Stock of the Company whether issued prior to or after the date
hereof or (y) under any rights, options or warrants to purchase Common Stock of
the Company whether issued prior to or after the date hereof (except for the
Warrants and except as stated in Section 3.2(e) hereof) which (in the case of
the preceding clause (x) or (y)) results in a reduction in the exercise or
purchase price with respect to such security or rights or results in an
increase in the number of shares obtainable under such security or rights, then
an adjustment shall be made under this Section 3.2(h) to the current exercise
price hereunder. Any such adjustment under this Section 3.2(h) shall be
whichever of the following results in a lower current exercise price: (A) a
reduction in the current exercise price equal to the percentage reduction in
such exercise or purchase price with respect to such security or rights or (B)
a reduction in the current exercise price which will result in the same
percentage increase in the number of Shares available hereunder as the
percentage increase in the number of shares of Common Stock available under
such security or rights. Any such adjustment under this Section 3.2(h) shall
only be made if it would result in a lower current exercise price than that
which would be determined pursuant to any other antidilution adjustment
otherwise required hereunder as a result of the event or circumstance which
triggered the adjustment to the security or rights described in clause (x) or
(y) above (and if any such adjustment is so made under this Section 3.2(h),
then such other antidilution adjustment otherwise required hereunder shall not
be made as a result of such event or circumstance). Notwithstanding the
foregoing, no adjustment shall be made under this subsection (h) as a result of
antidilution adjustments to Existing Converts caused by the issuance or
exercise of the Warrants or the Preferred Warrants or the conversion of the
Preferred Shares.
(i) Reorganization Adjustments. In case of any capital
reorganization or reclassification of the capital stock of the Company (other
than a change in par value or a stock
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split-up), the holder of this Warrant shall thereafter be entitled to purchase
for the current exercise price the securities and property receivable upon such
capital reorganization or reclassification by a holder of the number of shares
of Common Stock which this Warrant entitled the holder hereof to purchase
immediately prior to such capital reorganization or reclassification. In the
event that at any time, as a result of an adjustment made pursuant to this
Section 3.2(i), the holder of this Warrant shall become entitled to purchase
any other securities or property other than Common Stock, thereafter the number
of such other securities or property so purchasable upon exercise of this
Warrant and the current exercise price shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in this Section 3.2.
(j) Other Adjustments. Without limiting any provisions of
this Section 3.2 or any other provisions of this Warrant, in case any event
shall occur as to which any of the provisions of this Section 3.2 are not
strictly applicable but the failure to make any adjustment would not fairly
protect the exercise rights represented by the Warrants in accordance with the
intent and principles of this Section 3.2, the Company shall at its expense
appoint a firm of independent public accountants of recognized national
standing selected by the Board of Directors of the Company (who may not be the
regular auditors of the Company and who shall be reasonably acceptable to the
Majority Holders), which shall give their opinion upon the adjustment, if any,
on a basis consistent with the intent and principles established in this
Section 3.2, necessary to preserve, without dilution, the economic and other
rights represented by the Warrants. Upon receipt of such opinion, the Company
will promptly mail copies thereof to the holders of the Warrants and shall make
the adjustments described therein.
(k) Meaning of "Issuance". References in this Warrant to
"issuance" of stock by the Company include issuances by the Company of
previously unissued shares and issuances, sales or other transfers by the
Company of treasury stock.
Section 4. Company's Consolidation or Merger. If the Company
shall at any time consolidate with or merge into another corporation (where the
Company is not the continuing corporation after such merger or consolidation),
the holder of a Warrant shall thereafter be entitled to receive, upon the
exercise thereof in whole or in part, the securities or other property to which
(and upon the same terms and with the same rights as) a holder of the number of
Shares then deliverable upon the exercise thereof would have been entitled upon
such consolidation or merger (subject to adjustments under Section 3.2 hereof),
and the Company shall take such steps in connection with such consolidation or
merger as may be necessary to assure such holder that the provisions of the
Warrants and the Purchase Agreement shall thereafter be applicable in relation
to any securities or property thereafter deliverable upon the exercise of this
Warrant, including, but not limited to, obtaining a written acknowledgment from
the continuing corporation of its obligation to supply such securities or
property upon such exercise and to be so bound by the Warrant and the Purchase
Agreement. A sale, transfer or lease (in one, or a series of related,
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transactions) of all or substantially all of the assets of the Company to
another person shall be deemed a consolidation or merger for the foregoing
purposes.
Section 5. Notice to Holders of Warrants. In case at any time
(i) the Company shall take any action which would require an
adjustment in the current exercise price pursuant to Section 3.2(a),
(c), (h), (i) or (j); or
(ii) the Company shall authorize the granting to the holders
of its Common Stock of any Distributions on Common Stock as set forth
in Section 3.2(b); or
(iii) there shall be any capital reorganization or
reclassification of the Company's Common Stock (other than a change in
par value or from par value to no par value or from no par value to
par value of the Common Stock), or any consolidation or merger to
which the Company is a party and for which approval of any
stockholders of the Company is required, or any sale, transfer or
lease (in one, or a series of related, transactions) of all or
substantially all of the assets of the Company; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give written notice
to the holders of the Warrants, not less than twenty (20) days before any
record date or other date set for definitive action, of the date on which such
action, reorganization, reclassification, sale, transfer, lease, consolidation,
merger, dissolution, liquidation or winding-up, as the case may be, and the
terms thereof.
If the Company shall propose to issue or sell Common Stock (other than pursuant
to the Warrants) or options, rights or warrants to purchase Common Stock, it
shall, as promptly as practicable and not later than the date of such sale or
the execution of a definitive agreement for such sale, notify the holder in
writing of the name and address of the purchaser, whether such purchaser is an
Affiliate of the Company, the price and terms of the sale and the type of
securities to be sold. If the Company determines that the provisions of
Section 3.2 do not result in any adjustment, such notice shall be accompanied
by a written certification approved by the Board of Directors of the Company,
or a committee thereof, to that effect. If the Majority Holders object they
shall, within 15 days after receipt of such notice, notify the Company of the
name of a nationally recognized investment banking firm which has been selected
by the Majority Holders to determine whether any such adjustment is required.
The Company shall promptly make available to such firm all information and data
it may reasonably acquire to make such determination. The determination of
such investment banking firm shall be final. If the investment banker does not
give notice to the Company and the Holder of its decision prior to a date 45
days following the Company's initial notice to the Holder, then the proposed
sale shall be deemed not to require an adjustment. All costs and expenses of
the investment banker shall be paid by the Company.
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Section 6. Number of Shares. Upon any adjustment of the
current exercise price, the holder of this Warrant shall thereafter (until
another such adjustment) be entitled to purchase at the current exercise price
the number of Shares, calculated to the nearest 1/100 of a Share, obtained by
multiplying the current exercise price in effect immediately prior to such
adjustment by the number of Shares purchasable pursuant hereto immediately
prior to such adjustment and dividing the product thereof by the new current
exercise price resulting from such adjustment.
Section 7. Specific Performance. The Company stipulates that
the remedies at law of a holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or compliance with any
of the terms of this Warrant are not and will not be adequate and that, to the
fullest extent permitted by law, such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
Section 8. No Rights or Liabilities as Stockholder. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof any rights as a stockholder of the Company (prior to exercise of all or
a portion of this Warrant) or as imposing any liabilities on such holder to
purchase any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or stockholders of the
Company or otherwise.
Section 9. Ownership; Transfer. The Company may treat the
Person in whose name this Warrant is registered pursuant to Section 13(a) of
the Purchase Agreement as the owner and holder of this Warrant for all
purposes, and the Company shall not be affected by any notice to the contrary
(except that the Company shall comply with the provisions of Section 16 of the
Purchase Agreement regarding the issuance of a new Warrant or Warrants to
transferees). This Warrant is transferable upon the conditions specified in
the Stockholders Agreement, Section 16 of the Purchase Agreement and Section
1.6 above.
Section 10. Covenants
10.1. Reservation of Shares. There have been reserved, and
the Company shall at all times keep reserved, out of its authorized Common
Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the then outstanding
Warrants.
10.2. No Dilution or Impairment. The Company will not, by
amendment of its Certificate of Incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant. The Company will at all
times in good faith assist in the carrying out of all such terms, and in the
taking of all such action, as may be necessary or appropriate in order to
protect the rights of the holder of this
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Warrant against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not permit the par value of any shares
of Common Stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of the Company's Common
Stock, free from all taxes, Liens and charges with respect to the issue
thereof, upon the exercise of this Warrant from time to time outstanding and
(c) will not take any action which results in any adjustment of this current
exercise price under this Warrant if the total number of shares of the
Company's Common Stock (or other securities) issuable after the action upon the
exercise of all of the Warrants would exceed the total number of shares of
Common Stock (or other securities) then authorized by the Company's Certificate
of Incorporation and available for the purpose of issue upon such exercise.
10.3. Listing of Shares. If the Company shall list any
shares of its Common Stock on any national securities exchange, it will take
such action as may be necessary, from time to time, to list the Shares, subject
to issuance, on such exchange.
10.4. Maintenance of Public Market. At any time that the
Company is required to comply with Section 17.3 of the Purchase Agreement, the
Company will not proceed with a program of acquisition of its own Common Stock,
initiate a corporate reorganization or recapitalization or authorize or consent
to any action which would have the effect of:
(a) removing the Company from registration with the
Commission under the Securities Exchange Act,
(b) requiring the Company to make a filing under Section
13(e) of the Securities Exchange Act,
(c) reducing substantially or eliminating the public market
for shares of Common Stock of the Company,
(d) if any shares of the Company's Common Stock are at any
time listed on the National Association of Securities Dealers Inc. Automated
Quotation System, causing a delisting of the Company's Common Stock from such
System (unless such stock is delisted as a result of being listed on a national
securities exchange), or
(e) if any shares of the Company's Common Stock are at any
time listed on a national exchange, causing a delisting of such stock from such
exchange.
10.5. Delivery of Information for Rule 144A Transactions. If
a holder of Shares proposes to transfer any such Shares pursuant to Rule 144A
under the Securities Act (as in effect from time to time), the Company agrees
to provide (upon the request of such holder or the prospective transferee) to
such holder and (if requested) to the prospective transferee any financial or
other information concerning the Company and its Subsidiaries which is required
to be delivered by such holder to any transferee of such Shares pursuant to
such Rule 144A.
16
<PAGE> 17
Section 11. Headings. The headings and captions in this
Warrant are for convenience of reference only and shall not define, limit or
otherwise affect any of the terms or provisions hereof.
Section 12. Governing Law. This Warrant shall be governed
by, and construed in accordance with, the laws of the State of New York (other
than any conflict of laws rule which might result in the application of the
laws of any other jurisdiction).
Section 13. Survival. The obligations of the Company under
this Warrant shall survive its full exercise.
Section 14. Definitions. Terms defined in the Purchase
Agreement are used herein with the same definition. The following terms are
defined in the following Sections of this Warrant:
<TABLE>
<S> <C>
Shares First Paragraph
Warrants Second Paragraph
Purchase Agreement Second Paragraph
current exercise price 3.1
Distributions on Common 3.2(b)
Stock
Additional Common Stock 3.2(c)
Market Price 3.2(g)
Majority Holders 3.2(g)
</TABLE>
IN WITNESS WHEREOF, the Company has caused this
Warrant to be dated and to be executed and issued on its behalf by its
officer thereunto duly authorized.
DECORA INDUSTRIES, INC.
By ________________________
Name: Timothy N. Burditt
Title: Executive Vice President,
Administration and Finance
17
<PAGE> 18
ANNEX A
FORM OF SUBSCRIPTION
(To be executed only upon exercise of the Warrant
in whole or in part)
To: DECORA INDUSTRIES, INC.
The undersigned registered holder of the accompanying Warrant
hereby irrevocably exercises such Warrant or portion thereof for, and purchases
thereunder, ____________(3) Shares (as defined in such Warrant) and herewith
[makes payment therefor by application pursuant to Section 2 of such Warrant of
___________________] [or] [makes payment therefor of $_________. The
undersigned requests that the certificates for such Shares be issued in the
name of, and delivered to, _____________________ whose address is
_________________________________].
Dated: _______________________
___________________________________
(Name must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
- -------------
(3) Insert the number of Shares as to which this Warrant is being exercised.
In the case of a partial exercise, a new Warrant or Warrants will be issued
and delivered, representing the unexercised portion of this Warrant, to the
holder surrendering the same.
18
<PAGE> 19
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto
__________________________ the right represented by the within Warrant to
purchase _________ shares of Common Stock of DECORA INDUSTRIES, INC. to which
the within Warrant relates, and appoints ______________________ Attorney to
transfer such right on the books of DECORA INDUSTRIES, INC. with full power of
substitution in the premises.
Dated: _________________
--------------------------------------
(Name must conform to name of holder as
specified on the face of the Warrant)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
_____________________________
19
<PAGE> 1
EXHIBIT 99.6
No. __
THIS WARRANT CERTIFICATE (AND THE SERIES A CONVERTIBLE PREFERRED STOCK OR OTHER
SECURITIES ISSUABLE UPON EXERCISE HEREOF) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR UNDER ANY APPLICABLE REGULATION OF ANY STATE AND ARE
NOT TRANSFERABLE EXCEPT UPON THE CONDITIONS SPECIFIED HEREIN AND IN THE
PURCHASE AGREEMENT REFERRED TO HEREIN.
DECORA INDUSTRIES, INC.
Series A Convertible Preferred Stock Purchase Warrant Certificate
Dated September __, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned DECORA INDUSTRIES, INC., a
Delaware corporation (herein referred to as the "Company"), hereby certifies
and agrees that _____________________________,(1) or registered assigns, is
entitled to purchase from the Company up to an aggregate of _____(2) duly
authorized, validly issued, fully paid and nonassessable shares of the
Company's Series A Convertible Preferred Stock, par value $.01 per share (the
"Series A Stock"), or any stock into which such Series A Stock shall have been
changed or any stock or other securities resulting from a reclassification
thereof (all such shares, stock or other securities which may be purchased by
this, and all other, Warrants are herein known as the "Preferred Shares") at a
purchase price per Preferred Share of $100.00 at any time and from time to
time, but not after September 30, 2005. The foregoing agreement and rights are
all subject to the terms, conditions and adjustments (in both the number of
Preferred Shares and the purchase price per Preferred Share) set forth below in
this Warrant Certificate.
- ----------------
(1) Insert name of Warrantholder.
(2) Insert number of shares of Series A Stock issuable under Warrant
Certificate.
<PAGE> 2
This Warrant Certificate is one of the Preferred Stock
Purchase Warrant Certificates (the "Warrants", which term includes all Warrants
issued in substitution therefor) originally issued in connection with the issue
and sale by Decora, Incorporated, a Delaware corporation and a subsidiary of
the Company (the "Borrower") of $18,000,000 of its Senior Subordinated Notes
(the "Notes"). The Warrants, the Contingent Common Warrants, the Common
Warrants (each, as defined in the Purchase Agreement) and the Notes have been
issued pursuant to the Note and Warrant Purchase Agreement dated as of
September 26, 1997 (the "Purchase Agreement") between the Company, the Borrower
and the Purchasers and Agent named therein. The Warrants originally so issued
evidence rights to purchase an aggregate of 69,557 Preferred Shares at an
exercise price of $100.00 per Preferred Share, subject to adjustment as
provided herein. This Warrant is subject to the provisions, and is entitled to
the benefits, of the Purchase Agreement.
The Company represents that all Preferred Shares to which the
holders of the Warrants shall be entitled upon the exercise thereof (i) are
duly authorized by the Certificate of Incorporation of the Company in
accordance with the laws of the State of Delaware, (ii) have been duly
authorized to be issued upon the exercise of the Warrants from time to time in
whole or in part, (iii) will be, when issued in accordance with the terms of
the Warrants, duly authorized and validly issued and fully paid and
nonassessable and free and clear of all Liens and preemptive and other rights
of others whatsoever (other than Liens and rights of others claiming by,
through or under the holder hereof) and (iv) will not be at the time of such
exercise subject to any restrictions on transfer or sale except as provided (A)
in the Purchase Agreement and (B) by applicable laws.
Section 1. Exercise of Warrant.
1.1. Manner of Exercise.
(a) This Warrant may be exercised by the holder hereof, in
whole or in part, during normal business hours on any Business Day by surrender
of this Warrant, together with the form of subscription attached as Annex A
hereto (or a reasonable facsimile thereof) duly executed by such holder in
substantially such form, to the Company at its office at One Mill Street, Fort
Edward, New York 12828 (or, if such exercise is in connection with an
underwritten public offering of Preferred Shares subject to this Warrant, at
the location at which the underwriting agreement requires that such Preferred
Shares be delivered).
(b) Payment of the exercise price for Preferred Shares shall
be made, at the option of the holder (i) as provided in Section 2 hereof or
(ii) by check or wire transfer payable to the order of the Company, in any
case, in an amount equal to (A) the number of Preferred Shares specified in
such form of subscription, multiplied by (B) the then current exercise price.
Such holder shall thereupon be entitled to receive the number of Preferred
Shares specified in such form of subscription.
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<PAGE> 3
1.2. Effective Date. Each exercise of this Warrant pursuant
to Section 1.1(a) hereof shall be deemed to have been effected immediately
prior to the close of business on the Business Day on which this Warrant is
surrendered to the Company as provided in Section 1.1 hereof (except that if
such exercise is in connection with an underwritten public offering of
Preferred Shares subject to this Warrant, then such exercise shall be deemed to
have been effected upon such surrender of this Warrant), and such exercise
shall be at the current exercise price in effect at such time. On each such
day that an exercise of this Warrant is deemed effected, the person or persons
in whose name or names any certificate or certificates for Preferred Shares are
issuable upon such exercise (as provided in Section 1.3 hereof) shall be deemed
to have become the holder or holders of record thereof.
1.3. Preferred Share Certificates, Fractional Preferred
Shares, and Reissuance of Warrants. As promptly as practicable after the
exercise of this Warrant, in whole or in part, and in any event within five (5)
Business Days thereafter (unless such exercise shall be in connection with a
public offering of Preferred Shares subject to this Warrant, in which event
concurrently with such exercise), the Company at its expense (including the
payment by it of any applicable issue, stamp or other taxes) will cause to be
issued in the name of and delivered to the holder hereof or such other person
as such holder may direct:
(a) a certificate or certificates for the number (which may
be fractional) of Preferred Shares to which such holder shall be entitled upon
such exercise; and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or faces thereof
for the number (which may be fractional) of Preferred Shares (without giving
effect to any adjustment therein) equal to the number of such Preferred Shares
called for on the face of this Warrant minus the number of Preferred Shares
which could have been obtained upon such exercise for the exercise price paid
if the then current exercise price had been $100.00 per Preferred Share. If
this Warrant shall have been fully exercised, the new Warrant shall indicate
that no additional Preferred Shares may be purchased by the exercise thereof.
1.4. Acknowledgment of Obligation. The Company will, at the
time of or at any time after each exercise of this Warrant, upon the request of
the holder hereof or of any Preferred Shares issued upon such exercise,
acknowledge in writing its continuing obligation to afford to such holder all
rights (including, without limitation, any rights to registration of any such
Preferred Shares pursuant to the Purchase Agreement) to which such holder shall
continue to be entitled under this Warrant, and the Purchase Agreement;
provided, that if any such holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Company to afford
such rights to such holder.
1.5. Application of Note. The holder shall have the option,
but not the obligation, upon any exercise of this Warrant, to apply to the
payment required by Section 1.1 hereof all or any part of all or any part of
the accrued and unpaid interest on, or principal of (without prepayment penalty
or premium), any Notes at the time held by the holder. The Company will
3
<PAGE> 4
accept the amount of accrued and unpaid interest or principal, if such election
is selected, specified in the form of subscription in satisfaction of the
exercise price for such Preferred Shares to be purchased. The holder shall
have the right to apply all or any portion of such accrued and unpaid interest
or principal to exercise all or any portion of this Warrant whether or not
payment on the Notes is otherwise prohibited.
1.6. Restriction. The holder acknowledges that the Preferred
Shares acquired upon exercise of the Warrant will be "restricted securities" as
that term is defined under the regulations promulgated under the Securities
Act, will not be saleable in the absence of an effective registration statement
under the Securities Act or an exemption from registration, and accordingly may
be required to be held for an indefinite period of time. The holder agrees
that Preferred Shares issued pursuant hereto may contain the following legend
on the face thereof: "This security has not been registered pursuant to the
Securities Act of 1933, as amended, and each holder of this security by the
acceptance hereof agrees that this security shall not be transferred in
violation of said Act."
Each holder of a Warrant by acceptance thereof agrees that it
will not sell or otherwise dispose of any Warrants or Preferred Shares unless
such Warrants or Preferred Shares have been registered under, or have been sold
pursuant to an exemption from registration under, the Securities Act.
Prior to any transfer of any Warrants or Preferred Shares
(either of the foregoing "Restricted Securities"), other than as set forth
later in this Section 1.6, the holder thereof will give written notice to the
Company of such holder's intention to effect such Transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall contain an undertaking by the holder giving such
notice to furnish such other information as may be required, to enable counsel
to render the opinion referred to below. The Company will promptly submit a
copy of such notice to its counsel, and the following provisions shall then
apply:
(x) If in the opinion of such counsel the proposed transfer
may be effected without registration of such Restricted Securities
under the Securities Act, the Company shall, as promptly as
practicable, so notify the holder of such Restricted Securities and
such holder shall thereupon be entitled, subject to the other
provisions of this Warrant, to transfer such Restricted Securities in
accordance with the terms of the notice delivered by such holder to
the Company.
(y) If such counsel is unable to conclude that the proposed
transfer may be effected without registration of such Restricted
Securities under the Securities Act (such view to be expressed in
writing in a letter stating the legal or factual basis of the
conclusions reached therein), the Company will, as promptly as
practicable, so notify the holder thereof and thereafter such holder
shall not be entitled to transfer such Restricted Securities until
either such Restricted Securities have been effectively registered
under the Securities Act or the provisions of this Section 1.6 have
otherwise been complied with.
4
<PAGE> 5
Notwithstanding the foregoing provisions of this Section 1.6, any holder of
Restricted Securities shall be permitted, subject to the other provisions of
this Warrant, the Purchase Agreement, and applicable law, to transfer any such
Restricted Securities to a limited number of institutional investors, provided
that each such investor either (A) represents in writing that it is an
institutional investor acquiring such Restricted Securities for investment and
not with a view to the distribution thereof (subject, however, to any
requirement of law that the disposition thereof shall at all times be within
the control of such transferee), or (B) is an institutional investor to whom
such Restricted Securities may be transferred pursuant to a rule or regulation
of the Commission permitting resales of securities to a limited class of
institutional investors. The Company shall pay the cost of any counsel
described above.
The restrictions imposed by this Section 1.6 upon the
transferability of Restricted Securities shall cease and terminate as to any
particular Restricted Securities (A) when, in the opinion of counsel for the
Company, such restrictions are no longer required in order to ensure compliance
with the Securities Act, (B) when such Restricted Securities shall have been
effectively registered under the Securities Act (including, without limitation,
pursuant to Section 17 of the Purchase Agreement), or (C) when such Restricted
Securities shall have been sold to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act. Whenever such restrictions
shall cease and terminate as to any Restricted Securities, the holder thereof
shall be entitled to receive from the Company, without expense (other than
applicable transfer taxes, if any), new certificates representing such
Restricted Securities of like tenor but not bearing the legend otherwise
required by this Section 1.6.
Section 2. Conversion of Warrant.
(a) In addition to and without limiting the rights of the
holder under the terms of this Warrant, the holder shall have the option, but
not the obligation, to convert this Warrant, or any portion thereof (the
"Conversion Right") into Preferred Shares as provided in this Section 2 at any
time when this Warrant can be exercised pursuant to the first paragraph hereof.
Upon exercise of the Conversion Right with respect to a particular number of
Preferred Shares (the "Converted Warrant Preferred Shares"), the Company shall
deliver to the holder (without payment by the holder of any exercise price or
any cash or other consideration) that number (which may be fractional) of
Preferred Shares equal to the quotient obtained by dividing (x) the value of
this Warrant (or the specified portion hereof) on the Conversion Date (as
defined in Section 2(b) hereof), which value shall be determined by subtracting
(A) the aggregate current exercise price applicable to the Converted Warrant
Preferred Shares immediately prior to the exercise of the Conversion Right from
(B) the aggregate Market Price of such Converted Warrant Preferred Shares on
the Conversion Date by (y) the Market Price of one Preferred Share on the
Conversion Date.
(b) The Conversion Right may be exercised by the holder by
surrendering this Warrant at the designated office of the Company together with
a written statement (a "Conversion Notice") specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of Converted
Warrant Preferred Shares (i.e., the Preferred Shares as to
5
<PAGE> 6
which this Warrant is being exercised in connection with the exercise of the
Conversion Right). Such conversion shall be effective upon receipt by the
Company of this Warrant together with the Conversion Notice, or on such later
date as is specified therein (the "Conversion Date") and, at the election of
the holder, may be made contingent upon the occurrence of any event specified
in the Conversion Notice. Certificates for the Preferred Shares issuable upon
exercise of the Conversion Right and, if applicable, a new Warrant evidencing
the balance of the Preferred Shares remaining subject to this Warrant, shall be
issued as of the Conversion Date and shall be delivered to the holder promptly
following the Conversion Date.
Section 3. Current Exercise Price and Adjustments.
3.1. Current Exercise Price. The term "current exercise
price" shall mean initially $100.00 per Preferred Share, subject to adjustment
from time to time as hereinafter provided, in effect at any given time. In
determining the current exercise price, the result shall be expressed to the
nearest $.001, but any such lesser amount shall be carried forward and shall be
considered at the time of and together with the next subsequent adjustment
which, together with any adjustments required to be carried forward, shall
amount to $.001 per Preferred Share or more.
3.2. Adjustment of Current Exercise Price. The current
exercise price shall be subject to adjustment, from time to time (but not below
zero), as follows:
(a) Adjustments for Certain Distributions. In case the
Company shall, after the Closing Date, make a distribution to all holders of
its Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation) of
(i) cash (whether or not payable out of earnings or surplus), (ii) other assets
(other than dividends payable in the Company's Common Stock), (iii) evidences
of indebtedness or other securities of the Company or of any entity other than
the Company (other than dividends payable in the Company's Common Stock), or
(iv) subscription rights, options or warrants to purchase any of the foregoing
assets or securities, whether or not such rights, options or warrants are
immediately exercisable (hereinafter collectively referred to as "Distributions
on Common Stock"), the Company shall deliver to the holders of outstanding
Warrants the Distributions on Common Stock to which the holders of outstanding
Warrants would have been entitled if they had exercised the Warrants held by
them for Preferred Shares and then converted such Preferred Shares into Common
Stock immediately prior to the record date for the purpose of determining
stockholders entitled to receive such Distributions on Common Stock.
(b) Adjustments for Issuance of Additional Stock. Subject to
the exception referred to in Section 3.2(d) hereof, in case the Company shall
at any time or from time to time after the Closing Date issue any additional
shares of its Common Stock, excluding shares of Common Stock issued pursuant to
the Existing Converts (as defined in the Purchase Agreement), ("Additional
Common Stock"), either (I) for consideration per share less than the quotient
of (A) the then current Market Price per Preferred Share (determined as
provided in Section 3.2(f) hereof) immediately prior to the issuance of such
Additional Common Stock, divided by (B) the number of shares of the Company's
Common Stock into which one Preferred Share is then
6
<PAGE> 7
convertible, or (II) for a consideration per Preferred Share less than the
quotient of (A) the then current exercise price per Preferred Share hereunder
immediately prior to the issuance of such Additional Common Stock, divided by
(B) the number of shares of the Company's Common Stock into which one Preferred
Share is then convertible, or (III) without consideration, then (in the case of
either clause (I), (II) or (III)), and thereafter successively upon each such
issuance, the current exercise price shall forthwith be reduced to a price
equal to the lesser of:
(A) the price determined by multiplying such current exercise
price by a fraction, of which
(1) the numerator shall be (i) the number of shares of the
Company's Common Stock outstanding when the then current exercise
price became effective plus (ii) the number of shares of the Company's
Common Stock which the aggregate amount of consideration, if any,
received by the Company upon all issues of its Common Stock since the
current exercise price became effective (including the consideration,
if any, received for such Additional Common Stock) would purchase at
the greater of (x) the quotient of the then current Market Price per
Preferred Share divided by the number of shares of the Company's
Common Stock into which one Preferred Share is then convertible, or
(y) the quotient of the then current exercise price per Preferred
Share divided by the number of shares of the Company's Common Stock
into which one Preferred Share is then convertible, and
(2) the denominator shall be (i) the number of shares of the
Company's Common Stock outstanding when the then current exercise
price became effective plus (ii) the number of shares of the Company's
Common Stock issued since the current exercise price became effective
(including the number of shares of such Additional Common Stock); or
(B) the price determined by multiplying (i) the quotient of
(x) the aggregate amount of consideration, if any, received by
the Company upon all issues of its Common Stock since the then
current exercise price became effective (including the
consideration, if any, received for such Additional Common
Stock) divided by (y) the number of shares of Common Stock of
the Company issued since the current exercise price became
effective (including the number of shares of such Additional
Common Stock), by (ii) the number of shares of the Company's
Common Stock into which one Preferred Share is then
convertible,
provided, however, that such adjustment shall be made only if the current
exercise price determined from the aforesaid calculations shall be less than
the current exercise price in effect immediately prior to the issuance of such
Additional Common Stock. The Company may, but shall not be required to, make
any adjustment of the current exercise price if the amount of such adjustment
shall be less than $.001, but any adjustment that would otherwise be required
then to be made which is not so made shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment which, together
with any adjustments so carried
7
<PAGE> 8
forward, shall amount to not less than $.001. The adjustment described in this
Section 3.2(b) shall be made whenever such Common Stock is issued, and shall
become effective retroactively immediately after the date on which the Company
committed to make such issuance.
For the avoidance of doubt, the issuance of shares of Common Stock after the
Closing Date pursuant to the Cigna Exchange Agreement shall be deemed to be the
issuance of Additional Common Stock for no consideration.
(c) Certain Rules in Applying the Adjustment for Additional
Stock Issuances. For purposes of any adjustment as provided in Section 3.2(b),
the following provisions shall also be applicable:
(1) Cash Consideration. In case of the issuance of
Additional Common Stock for cash, the consideration received by the
Company therefor shall (subject to the last sentence of Section 3.2(g)
hereof) be deemed to be the net cash proceeds received by the Company
for such Additional Common Stock after deducting any commissions or
other expenses paid or incurred by the Company for any underwriting
of, or otherwise in connection with the issuance of, such Additional
Common Stock.
(2) Non-Cash Consideration. In case of the issuance
(other than upon conversion or application of obligations or shares of
stock of the Company) of Additional Common Stock for a consideration
other than cash, or a consideration a part of which shall be other
than cash, the amount of the consideration other than cash so received
or to be received by the Company shall be deemed to be the value of
such consideration at the time of its receipt by the Company as
determined in good faith by the Board of Directors of the Company,
provided, that where the non-cash consideration consists of the
cancellation, surrender or exchange of outstanding obligations of the
Company (or where such obligations are otherwise converted into shares
of the Company's Common Stock), the value of the non-cash
consideration shall be deemed to be the amount, including principal
and any accrued interest, as of the time of the Company's receipt, of
the obligations canceled, surrendered, exchanged or converted. If the
Company receives consideration, part or all of which consists of
publicly traded securities, the value of such non-cash consideration
shall be the aggregate market value of such securities (based on the
latest reported trades on the principal securities exchange on which
such securities are then traded) as of the close of the day
immediately preceding the date of their receipt by the Company.
(3) Options, Warrants, Convertibles, etc. In case of
the issuance (other than by way of a Distribution on Common Stock
pursuant to Section 3.2(a) hereof), whether by distribution or sale to
holders of its Common Stock or to others, by the Company of (i) any
security that is convertible into the Company's Common Stock or (ii)
any rights, options or warrants to purchase the Company's Common Stock
(except for the
8
<PAGE> 9
Warrants), if inclusion thereof would result in a current exercise
price lower than if excluded, the Company shall be deemed to have
issued, for the consideration described below, the number of shares of
the Company's Common Stock into which such convertible security may be
converted when first convertible, or the number of shares of the
Company's Common Stock deliverable upon the exercise of such rights,
options or warrants when first exercisable, as the case may be (and
such shares shall be deemed to be Additional Common Stock for purposes
of Section 3.2(b) hereof). The consideration deemed to be received by
the Company at the time of the issuance of such convertible securities
or such rights, options or warrants shall be the consideration so
received determined as provided in Sections 3.2(c)(1) and (2) hereof
deducting any commissions or other expenses paid or incurred by the
Company for any underwriting of, or otherwise in connection with, the
issuance of such convertible securities or rights, options or
warrants, plus (x) any consideration or adjustment payment to be
received by the Company in connection with such conversion, or, as
applicable, (y) the aggregate price at which shares of the Company's
Common Stock are to be delivered upon the exercise of such rights,
options or warrants when first exercisable (or, if no price is
specified and such shares are to be delivered at an option price
related to the Market Price of the subject Common Stock, an aggregate
option price bearing the same relation to the Market Price of the
subject Common Stock at the time such rights, options or warrants were
granted). In case any such securities, rights, options or warrants
shall be issued in connection with the issue or sale of other
securities of the Company comprising one integral transaction in which
no specific consideration is allocated to such securities, rights,
options or warrants, such securities, rights, options or warrants
shall be deemed to have been issued without consideration. If,
subsequently, (1) such number of shares of Common Stock into which
such convertible security is convertible, or which are deliverable
upon the exercise of such right, options or warrants, is increased or
(2) the conversion or exercise price of such convertible security,
rights, options or warrants is decreased, then the calculations under
the preceding two sentences (and any resulting adjustment to the
current exercise price under 3.2(b) hereof) with respect to such
convertible security, rights, options or warrants, as the case may be,
shall be recalculated as of the time of such issuance but giving
effect to such changes (but any such recalculation shall not result in
the current exercise price being higher than that which would be
calculated without regard to such issuance). On the expiration or
termination of such rights, options or warrants, or rights to convert,
the current exercise price hereunder shall be readjusted (up or down
as the case may be) to such current exercise price as would have been
obtained had the adjustments made upon the issuance of such rights,
options, warrants or convertible securities been made upon the basis
of the delivery of only the number of shares of the Company's Common
Stock actually delivered upon the exercise of such rights, options or
warrants or upon the conversion of any such securities and at the
actual exercise or conversion prices (but any such recalculation shall
not result in the current exercise price being higher than that which
would be calculated without regard to such issuance).
9
<PAGE> 10
(4) Number of Shares of Common Stock Outstanding.
The number of shares of the Company's Common Stock as at the time
outstanding shall exclude all shares of the Company's Common Stock
then owned or held by or for the account of the Company but shall
include the aggregate number of shares of the Company's Common Stock
at the time deliverable in respect of the convertible securities,
rights, options and warrants referred to in Section 3.2(c)(3);
provided, that to the extent that such rights, options, warrants or
conversion privileges are not exercised, such shares shall be deemed
to be outstanding only until the expiration dates of the rights,
warrants, options or conversion privileges or the prior cancellation
thereof.
(5) Special Rules for Conny Minority Acquisition
Shares. If Conny Minority Acquisition Shares (as defined in the
Purchase Agreement) are issued for consideration per share
(determined in accordance with subsections (1) and (2) of this Section
3.2(c)) of less than the current exercise price of this Warrant
immediately prior to such issuance, the adjustment otherwise required
therefor under Section 3.2(b) hereof shall not apply and instead, the
current exercise price under this Warrant shall immediately be
adjusted to the lowest consideration per share received for the
issuance of any of such Conny Minority Acquisition Shares. If Conny
Minority Acquisition Shares are issued for a consideration per share
of more than the current exercise price of this Warrant immediately
prior to such issuance, but less than the current Market Price per
share of the Company's Common Stock immediately prior to the issuance
of such Additional Common Stock, the provisions of Section 3.2(b)
hereof shall be applicable.
(d) Exclusions from the Adjustment for Additional Stock
Issuances. No adjustment of the current exercise price under Section 3.2(b)
hereof shall be made as a result of or in connection with the issuance of
Preferred Shares or shares of Common Stock upon exercise of the Common
Warrants, Contingent Common Warrants, or Preferred Warrants or upon conversion
of Preferred Shares (as defined in the Purchase Agreement). To the extent that
the issuance (or deemed issuance) of the Company's Common Stock shall not
result in any adjustment of the current exercise price pursuant to the
provisions of this Section 3.2(d), then such Common Stock shall not be taken
into account for purposes of determining any fraction referred to in Section
3.2(b) hereof.
(e) Accountants' Certification. Whenever the current
exercise price is adjusted as provided in this Section 3.2, the Company will
promptly obtain a certificate of a firm of independent public accountants of
recognized national standing selected by the Board of Directors of the Company
(who may not be the regular auditors of the Company and who shall be reasonably
acceptable to the Majority Holders) setting forth the current exercise price as
so adjusted, the computation of such adjustment and a brief statement of facts
accounting for such adjustment, and will mail to the holders of the Warrants a
copy of such certificate from such firm of independent public accountants.
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<PAGE> 11
(f) Determination of Market Price. The current "Market
Price" per Preferred Share on any date shall be deemed to be the product of the
number of shares of Common Stock (or other capital stock into which the
Preferred Shares are then convertible) then issuable upon the conversion of one
Preferred Share multiplied by the average of the daily closing prices for a
share of Common Stock (or other capital stock into which the Preferred Shares
are then convertible) for the thirty (30) consecutive trading dates commencing
twelve (12) trading days before such date (subject to the last sentence of this
paragraph). The closing price for each day shall be the last reported sale
price or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, in either case on the principal national United
States or Canadian securities exchange on which the Company's Common Stock is
listed or admitted to trading, or if the Company's Common Stock is not listed
or admitted to trading on any such national securities exchange, the average of
the highest reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers Inc., Automated Quotation System
Level I, or comparable system. If the closing price cannot be so determined,
the Market Price shall be determined:
(x) by the written agreement of the Company and the
holders of Warrants representing a majority of the Preferred
Shares then obtainable from the exercise of outstanding
Warrants (the "Majority Holders"); or
(y) in the event that no such agreement is reached
within fifteen (15) days after the event giving rise to the
need to determine the Market Price, by a nationally recognized
U.S. investment banking firm, selected by the Company
("Company Appraiser") not more than 5 Business Days after the
end of such 15 day period. Any appraiser appointed pursuant
to this paragraph shall be instructed to make its
determination as promptly as possible and in any event within
30 days of appointment. If no such selection is made within
such period, then the Majority Holders shall as promptly as
possible select such a firm whose determination shall be final
and binding. If such selection is timely made by the Company,
and the Majority Holders do not object to the Market Price as
determined by the Company Appraiser within 10 days of receipt
of notice thereof by all holders of Warrants, then the Market
Price as determined by the Company Appraiser shall be the
Market Price. If the Majority Holders do so object to the
Company Appraiser's determination of Market Price, then the
Majority Holders can select a nationally recognized U.S.
investment banking firm ("Alternate Appraiser") to review the
Company Appraiser's report and other relevant information.
Within 10 days after receipt by the Alternate Appraiser of
such report and such other information as is reasonably
requested by the Alternate Appraiser, the Company Appraiser
and Alternate Appraiser shall communicate and/or meet to
resolve any questions or differences with respect to the
Market Price. If such appraisers agree on a Market Price,
such Market Price shall be the Market Price. If no agreement
is reached then the Company Appraiser and Alternate Appraiser
shall select a third nationally recognized firm ("Third
Appraiser"). If the Company Appraiser and the Alternate
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<PAGE> 12
Appraiser cannot agree on a Third Appraiser within 20 days of
the end of such 10 day period, either may apply to the
American Arbitration Association to appoint the Third
Appraiser. The Third Appraiser shall, within 30 days of their
hire, issue a report with its determination of Market Price
which shall be conclusive and binding. All expenses of the
Company Appraiser shall be borne by the Company. All expenses
of the Alternate Appraiser shall be borne by the holders of
the Warrants. All expenses of the Third Appraiser shall be
borne equally by the Company and such holders.
Market Price shall be determined on the basis of the fair market value of the
Company as if it were sold as a going concern on the date of valuation and
without regard to the lack of any trading market for, or the lack of liquidity
in, the Preferred Stock or Common Stock of the Company.
The Company shall cooperate, and shall provide all necessary information and
assistance, to permit any determination under the preceding clause (x) or (y).
Each Appraiser shall be instructed to use its best efforts to give the Company
and all holders of Warrants reasonable advance notice of the Market Price and
the contents of its report (by delivering a draft report) before the report is
delivered in final form. Any communications or reports by an appraiser to
either the Company or any of the holders regarding Market Price shall be given
simultaneously to both the Company and all of the holders.
(g) Antidilution Adjustments Under Other Securities. Without
limiting any other rights available hereunder to the holders of Warrants, if
there is an antidilution adjustment (x) under any security which is convertible
into Common Stock of the Company whether issued prior to or after the date
hereof or (y) under any rights, options or warrants to purchase Common Stock of
the Company whether issued prior to or after the date hereof (except for the
Warrants and except as stated in Section 3.2(d) hereof) which (in the case of
the preceding clause (x) or (y)) results in a reduction in the exercise or
purchase price with respect to such security or rights or results in an
increase in the number of shares obtainable under such security or rights, then
an adjustment shall be made under this Section 3.2(g) to the current exercise
price hereunder. Any such adjustment under this Section 3.2(g) shall be
whichever of the following results in a lower current exercise price: (A) a
reduction in the current exercise price equal to the percentage reduction in
such exercise or purchase price with respect to such security or rights or (B)
a reduction in the current exercise price which will result in the same
percentage increase in the number of shares of Common Stock of the Company
issuable upon the conversion of a Preferred Share available hereunder as the
percentage increase in the number of shares of Common Stock available under
such security or rights. Any such adjustment under this Section 3.2(g) shall
only be made if it would result in a lower current exercise price than that
which would be determined pursuant to any other antidilution adjustment
otherwise required hereunder as a result of the event or circumstance which
triggered the adjustment to the security or rights described in clause (x) or
(y) above (and if any such adjustment is so made under this Section 3.2(g),
then such other
12
<PAGE> 13
antidilution adjustment otherwise required hereunder shall not be made as a
result of such event or circumstance). Notwithstanding the foregoing, no
adjustment shall be made under this subsection (g) as a result of antidilution
adjustments to Existing Converts caused by the issuance or exercise of the
Warrants or the Preferred Warrants or the conversion of the Preferred Shares.
(h) Reorganization Adjustments. In case of any capital
reorganization or reclassification of the capital stock of the Company (other
than a change in par value or a stock split-up), the holder of this Warrant
shall thereafter be entitled to purchase for the current exercise price the
securities and property receivable upon such capital reorganization or
reclassification by a holder of the number of Preferred Shares which this
Warrant entitled the holder hereof to purchase immediately prior to such
capital reorganization or reclassification. In the event that at any time, as
a result of an adjustment made pursuant to this Section 3.2(h), the holder of
this Warrant shall become entitled to purchase any other securities or property
other than Preferred Shares, thereafter the number of such other securities or
property so purchasable upon exercise of this Warrant and the current exercise
price shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares and the Common Stock contained in this Section 3.2.
(i) Other Adjustments. Without limiting any provisions of
this Section 3.2 or any other provisions of this Warrant, in case any event
shall occur as to which any of the provisions of this Section 3.2 are not
strictly applicable but the failure to make any adjustment would not fairly
protect the exercise rights represented by the Warrants in accordance with the
intent and principles of this Section 3.2, the Company shall at its expense
appoint a firm of independent public accountants of recognized national
standing selected by the Board of Directors of the Company (who may not be the
regular auditors of the Company and who shall be reasonably acceptable to the
Majority Holders), which shall give their opinion upon the adjustment, if any,
on a basis consistent with the intent and principles established in this
Section 3.2, necessary to preserve, without dilution, the economic and other
rights represented by the Warrants. Upon receipt of such opinion, the Company
will promptly mail copies thereof to the holders of the Warrants and shall make
the adjustments described therein.
(j) Meaning of "Issuance". References in this Warrant to
"issuance" of stock by the Company include issuances by the Company of
previously unissued Preferred Shares or shares of Company Common Stock, as
appropriate, and issuances, sales or other transfers by the Company of treasury
stock.
(k) Limitation on Issuances of Series A Stock. In no event
shall the Company issue any shares of Series A Stock except upon the exercise
of the Preferred Warrants, and the Company shall not effect any
reclassification, split or subdivision of the Series A Stock or declare any
dividend payable in shares of Series A Stock.
Section 4. Company's Consolidation or Merger. If the Company
shall at any time consolidate with or merge into another corporation (where the
Company is not the continuing
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<PAGE> 14
corporation after such merger or consolidation), the holder of a Warrant shall
thereafter be entitled to receive, upon the exercise thereof in whole or in
part, the securities or other property to which (and upon the same terms and
with the same rights as) a holder of the number of Preferred Shares then
deliverable upon the exercise thereof would have been entitled upon such
consolidation or merger (subject to adjustments under Section 3.2 hereof), and
the Company shall take such steps in connection with such consolidation or
merger as may be necessary to assure such holder that the provisions of the
Warrants and the Purchase Agreement shall thereafter be applicable in relation
to any securities or property thereafter deliverable upon the exercise of this
Warrant, including, but not limited to, obtaining a written acknowledgment from
the continuing corporation of its obligation to supply such securities or
property upon such exercise and to be so bound by the Warrant and the Purchase
Agreement. A sale, transfer or lease (in one, or a series of related,
transactions) of all or substantially all of the assets of the Company to
another person shall be deemed a consolidation or merger for the foregoing
purposes.
Section 5. Notice to Holders of Warrants. In case at any time
(i) the Company shall take any action which would require an
adjustment in the current exercise price pursuant to Section 3.2 (b),
(g), (h) or (i); or
(ii) the Company shall authorize the granting to the holders
of its Common Stock of any Distributions on Common Stock as set forth
in Section 3.2(a); or
(iii) there shall be any capital reorganization or
reclassification of the Company's Series A Stock (other than a change
in par value or from par value to no par value or from no par value to
par value of the Common Stock), or any consolidation or merger to
which the Company is a party and for which approval of any
stockholders of the Company is required, or any sale, transfer or
lease (in one, or a series of related, transactions) of all or
substantially all of the assets of the Company; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give written notice
to the holders of the Warrants, not less than twenty (20) days before any
record date or other date set for definitive action, of the date on which such
action, reorganization, reclassification, sale, transfer, lease, consolidation,
merger, dissolution, liquidation or winding-up, as the case may be, and the
terms thereof.
If the Company shall propose to issue or sell Common Stock (other than pursuant
to the Warrants) or options, rights or warrants to purchase Common Stock, it
shall, as promptly as practicable and not later than the date of such sale or
the execution of a definitive agreement for such sale, notify the holder in
writing of the name and address of the purchaser, whether such purchaser is an
Affiliate of the Company, the price and terms of the sale and the type of
securities
14
<PAGE> 15
to be sold. If the Company determines that the provisions of Section 3.2 do
not result in any adjustment, such notice shall be accompanied by a written
certification approved by the Board of Directors of the Company, or a committee
thereof, to that effect. If the Majority Holders object they shall, within 15
days after receipt of such notice, notify the Company of the name of a
nationally recognized investment banking firm which has been selected by the
Majority Holders to determine whether any such adjustment is required. The
Company shall promptly make available to such firm all information and data it
may reasonably acquire to make such determination. The determination of such
investment banking firm shall be final. If the investment banker does not give
notice to the Company and the Holder of its decision prior to a date 45 days
following the Company's initial notice to the Holder, then the proposed sale
shall be deemed not to require an adjustment. All costs and expenses of the
investment banker shall be paid by the Company.
Section 6. Number of Preferred Shares. Upon any adjustment
of the current exercise price, the holder of this Warrant shall thereafter
(until another such adjustment) be entitled to purchase at the current exercise
price the number of Preferred Shares, calculated to the nearest 1/100 of a
Preferred Share, obtained by multiplying the current exercise price in effect
immediately prior to such adjustment by the number of Preferred Shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the new current exercise price resulting from such
adjustment.
Section 7. Specific Performance. The Company stipulates that
the remedies at law of a holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or compliance with any
of the terms of this Warrant are not and will not be adequate and that, to the
fullest extent permitted by law, such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
Section 8. No Rights or Liabilities as Stockholder. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof any rights as a stockholder of the Company (prior to exercise of all or
a portion of this Warrant) or as imposing any liabilities on such holder to
purchase any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or stockholders of the
Company or otherwise.
Section 9. Ownership; Transfer. The Company may treat the
Person in whose name this Warrant is registered pursuant to Section 13(a) of
the Purchase Agreement as the owner and holder of this Warrant for all
purposes, and the Company shall not be affected by any notice to the contrary
(except that the Company shall comply with the provisions of Section 16 of the
Purchase Agreement regarding the issuance of a new Warrant or Warrants to
transferees). This Warrant is transferable upon the conditions specified in
the Stockholders Agreement, Section 16 of the Purchase Agreement and Section
1.6 above.
Section 10. Covenants
15
<PAGE> 16
10.1. Reservation of Preferred Shares. There have been
reserved, and the Company shall at all times keep reserved, out of its
authorized and designated Series A Stock, a number of Preferred Shares
sufficient to provide for the exercise of the rights of purchase represented by
the then outstanding Warrants.
10.2. No Dilution or Impairment. The Company will not, by
amendment of its Certificate of Incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant. The Company will at all
times in good faith assist in the carrying out of all such terms, and in the
taking of all such action, as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a)
will not permit the par value of any Preferred Shares receivable upon the
exercise of this Warrant to exceed the amount payable therefor upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares, free from all taxes, Liens and charges with
respect to the issue thereof, upon the exercise of this Warrant from time to
time outstanding and (c) will not take any action which results in any
adjustment of this current exercise price under this Warrant if the total
number of Preferred Shares (or other securities) issuable after the action upon
the exercise of all of the Warrants would exceed the total number of Preferred
Shares (or other securities) then authorized by the Company's Certificate of
Incorporation and available for the purpose of issue upon such exercise.
10.3. Listing of Preferred Shares. If the Company shall list
any shares of Series A Stock on any national securities exchange, it will take
such action as may be necessary, from time to time, to list the Preferred
Shares, subject to issuance, on such exchange.
10.4. Maintenance of Public Market. At any time that the
Company is required to comply with Section 17.3 of the Purchase Agreement, the
Company will not proceed with a program of acquisition of its own Common Stock,
initiate a corporate reorganization or recapitalization or authorize or consent
to any action which would have the effect of:
(a) removing the Company from registration with the
Commission under the Securities Exchange Act,
(b) requiring the Company to make a filing under Section
13(e) of the Securities Exchange Act,
(c) reducing substantially or eliminating the public market
for Common Stock of the Company,
(d) if any shares of the Company's Common Stock are at any
time listed on the National Association of Securities Dealers Inc. Automated
Quotation System, causing a delisting
16
<PAGE> 17
of the Company's Common Stock from such System (unless such stock is delisted
as a result of being listed on a national securities exchange), or
(e) if any shares of the Company's Common Stock are at any
time listed on a national exchange, causing a delisting of such stock from such
exchange.
10.5. Delivery of Information for Rule 144A Transactions. If
a holder of Preferred Shares (or shares of Common Stock issued or issuable upon
conversion of such Preferred Shares) proposes to transfer any such Preferred
Shares (or shares of Common Stock issued or issuable upon conversion of such
Preferred Shares) pursuant to Rule 144A under the Securities Act (as in effect
from time to time), the Company agrees to provide (upon the request of such
holder or the prospective transferee) to such holder and (if requested) to the
prospective transferee any financial or other information concerning the
Company and its Subsidiaries which is required to be delivered by such holder
to any transferee of such Preferred Shares (or shares of Common Stock issued or
issuable upon conversion of such Preferred Shares) pursuant to such Rule 144A.
Section 11. Headings. The headings and captions in this
Warrant are for convenience of reference only and shall not define, limit or
otherwise affect any of the terms or provisions hereof.
Section 12. Governing Law. This Warrant shall be governed
by, and construed in accordance with, the laws of the State of New York (other
than any conflict of laws rule which might result in the application of the
laws of any other jurisdiction).
Section 13. Survival. The obligations of the Company under
this Warrant shall survive its full exercise.
Section 14. Definitions. Terms defined in the Purchase
Agreement are used herein with the same definition. The following terms are
defined in the following Sections of this Warrant:
<TABLE>
<S> <C>
Preferred Shares First Paragraph
Warrants Second Paragraph
Purchase Agreement Second Paragraph
current exercise price 3.1
Distributions on Common 3.2(b)
Stock
Additional Common Stock 3.2(c)
Market Price 3.2(g)
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
Majority Holders 3.2(g)
</TABLE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
dated and to be executed and issued on its behalf by its officer thereunto duly
authorized.
DECORA INDUSTRIES, INC.
By ________________________
Name: Timothy N. Burditt
Title: Executive Vice President,
Administration and Finance
18
<PAGE> 19
ANNEX A
FORM OF SUBSCRIPTION
(To be executed only upon exercise of the Warrant
in whole or in part)
To: DECORA INDUSTRIES, INC.
The undersigned registered holder of the accompanying Warrant
hereby irrevocably exercises such Warrant or portion thereof for, and purchases
thereunder, ____________(3) Preferred Shares (as defined in such Warrant) and
herewith [makes payment therefor by application pursuant to Section 2 of such
Warrant of ___________________] [or] [makes payment therefor of $_________.
The undersigned requests that the certificates for such Preferred Shares be
issued in the name of, and delivered to, _____________________ whose address is
_________________________________].
Dated: _______________________
______________________________________
(Name must conform to name of holder
as specified on the face of the Warrant)
______________________________________
(Street Address)
______________________________________
(City) (State) (Zip Code)
- --------------------
(3) Insert the number of Preferred Shares as to which this Warrant is being
exercised. In the case of a partial exercise, a new Warrant or Warrants
will be issued and delivered, representing the unexercised portion of this
Warrant, to the holder surrendering the same.
19
<PAGE> 20
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto
__________________________ the right represented by the within Warrant to
purchase _________ Preferred Shares of DECORA INDUSTRIES, INC. to which the
within Warrant relates, and appoints ___________________ __ Attorney to
transfer such right on the books of DECORA INDUSTRIES, INC. with full power of
substitution in the premises.
Dated: _________________
________________________________________
(Name must conform to name of
holder as specified on the
face of the Warrant)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
Signed in the presence of:
_____________________________
20
<PAGE> 1
EXHIBIT 99.7
No. __
THIS WARRANT CERTIFICATE (AND THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON
EXERCISE HEREOF) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
UNDER ANY APPLICABLE REGULATION OF ANY STATE AND ARE NOT TRANSFERABLE EXCEPT
UPON THE CONDITIONS SPECIFIED HEREIN AND IN THE PURCHASE AGREEMENT REFERRED TO
HEREIN.
DECORA INDUSTRIES, INC.
Contingent Common Stock Purchase Warrant Certificate
Dated September __, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned DECORA INDUSTRIES, INC., a Delaware
corporation (herein referred to as the "Company"), hereby certifies and agrees
that _____________________________,1/ or registered assigns, is entitled to
purchase from the Company a number of duly authorized, validly issued, fully
paid and nonassessable shares of the Company's Common Stock, par value $.01 per
share, or any stock into which such Common Stock shall have been changed or any
stock or other securities resulting from a reclassification thereof (all such
shares, stock or other securities which may be purchased by this, and all other,
Warrants are herein known as the "Shares") as shall equal 21.2% of the sum of
the shares of Common Stock, if any, which are issued after the Closing Date
pursuant to the terms of the Cigna Exchange Agreement (as defined in the
Purchase Agreement) and (ii) the Conny Minority Acquisition Shares (as defined
in the Purchase Agreement) at a purchase price per Share of $1.00 at any time
and from time to time, but not after September 30, 2005. The foregoing agreement
and rights are all subject to the terms, conditions and adjustments (in both the
number of Shares and the purchase price per Share) set forth below in this
Warrant Certificate.
This Warrant Certificate is one of the Contingent Common Stock Purchase
Warrant Certificates (the "Warrants", which term includes all Warrants issued in
substitution therefor) originally issued in connection with the issue and sale
by Decora, Incorporated, a
- --------
1/ Insert name of Warrantholder.
<PAGE> 2
Delaware corporation and a subsidiary of the Company (the "Borrower") of
$18,000,000 of its Senior Subordinated Notes (the "Notes"). The Warrants, the
Common Warrants, the Preferred Warrants (each, as defined in the Purchase
Agreement) and the Notes have been issued pursuant to the Note and Warrant
Purchase Agreement dated as of September 26, 1997 (the "Purchase Agreement")
between the Company, the Borrower and the Purchasers and Agent named therein.
The Warrants originally so issued evidence rights to purchase an aggregate
number of Shares as shall equal 21.2% of any Shares issued after the Closing
Date under the terms of the Cigna Exchange Agreement at an exercise price of
$1.00 per share, subject to adjustment as provided herein. This Warrant is
subject to the provisions, and is entitled to the benefits, of the Purchase
Agreement.
The Company represents that all Shares to which the holders of the
Warrants shall be entitled upon the exercise thereof (i) are, or will be no
later than June 30, 1998, duly authorized by the Certificate of Incorporation of
the Company in accordance with the laws of the State of Delaware, (ii) have been
duly authorized to be issued upon the exercise of the Warrants from time to time
in whole or in part, (iii) will be, when issued in accordance with the terms of
the Warrants, duly authorized and validly issued and fully paid and
nonassessable and free and clear of all Liens and preemptive and other rights of
others whatsoever (other than Liens and rights of others claiming by, through or
under the holder hereof) and (iv) will not be at the time of such exercise
subject to any restrictions on transfer or sale except as provided (A) in the
Purchase Agreement and (B) by applicable laws.
Section 1. Exercise of Warrant.
1.1. Manner of Exercise.
(a) This Warrant may be exercised by the holder hereof, in whole or in
part, during normal business hours on any Business Day by surrender of this
Warrant, together with the form of subscription attached as Annex A hereto (or a
reasonable facsimile thereof) duly executed by such holder in substantially such
form, to the Company at its office at One Mill Street, Fort Edward, New York
12828 (or, if such exercise is in connection with an underwritten public
offering of Shares subject to this Warrant, at the location at which the
underwriting agreement requires that such Shares be delivered).
(b) Payment of the exercise price for Shares shall be made, at the
option of the holder (i) as provided in Section 2 hereof or (ii) by check or
wire transfer payable to the order of the Company, in any case, in an amount
equal to (A) the number of Shares specified in such form of subscription,
multiplied by (B) the then current exercise price. Such holder shall thereupon
be entitled to receive the number of Shares specified in such form of
subscription.
1.2. Effective Date. Each exercise of this Warrant pursuant to Section
1.1(a) hereof shall be deemed to have been effected immediately prior to the
close of business on the Business Day on which this Warrant is surrendered to
the Company as provided in Section 1.1 hereof (except that if such exercise is
in connection with an underwritten public offering of Shares
2
<PAGE> 3
subject to this Warrant, then such exercise shall be deemed to have been
effected upon such surrender of this Warrant), and such exercise shall be at the
current exercise price in effect at such time. On each such day that an exercise
of this Warrant is deemed effected, the person or persons in whose name or names
any certificate or certificates for Shares are issuable upon such exercise (as
provided in Section 1.3 hereof) shall be deemed to have become the holder or
holders of record thereof.
1.3. Share Certificates, Fractional Shares, and Reissuance of Warrants.
As promptly as practicable after the exercise of this Warrant, in whole or in
part, and in any event within five (5) Business Days thereafter (unless such
exercise shall be in connection with a public offering of Shares subject to this
Warrant, in which event concurrently with such exercise), the Company at its
expense (including the payment by it of any applicable issue, stamp or other
taxes) will cause to be issued in the name of and delivered to the holder hereof
or such other person as such holder may direct:
(a) a certificate or certificates for the number (which may be
fractional) of Shares to which such holder shall be entitled upon such exercise;
and
(b) in case such exercise is in part only, a new Warrant or Warrants of
like tenor, calling in the aggregate on the face or faces thereof for the number
(which may be fractional) of Shares (without giving effect to any adjustment
therein) equal to the number of such Shares called for on the face of this
Warrant minus the number of Shares which could have been obtained upon such
exercise for the exercise price paid if the then current exercise price had been
$1.00 per Share. If this Warrant shall have been fully exercised, the new
Warrant shall indicate that no additional Shares may be purchased by the
exercise thereof.
1.4. Acknowledgment of Obligation. The Company will, at the time of or
at any time after each exercise of this Warrant, upon the request of the holder
hereof or of any Shares issued upon such exercise, acknowledge in writing its
continuing obligation to afford to such holder all rights (including, without
limitation, any rights to registration of any such Shares pursuant to the
Purchase Agreement) to which such holder shall continue to be entitled under
this Warrant, and the Purchase Agreement; provided, that if any such holder
shall fail to make any such request, the failure shall not affect the continuing
obligation of the Company to afford such rights to such holder.
1.5. Application of Note. The holder shall have the option, but not the
obligation, upon any exercise of this Warrant, to apply to the payment required
by Section 1.1 hereof all or any part of all or any part of the accrued and
unpaid interest on, or principal of (without prepayment penalty or premium), any
Notes at the time held by the holder. The Company will accept the amount of
accrued and unpaid interest or principal, if such election is selected,
specified in the form of subscription in satisfaction of the exercise price for
such Shares to be purchased. The holder shall have the right to apply all or any
portion of such accrued and unpaid interest or principal to exercise all or any
portion of this Warrant whether or not payment on the Notes is otherwise
prohibited.
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1.6. Restriction. The holder acknowledges that the Shares acquired upon
exercise of the Warrant will be "restricted securities" as that term is defined
under the regulations promulgated under the Securities Act, will not be saleable
in the absence of an effective registration statement under the Securities Act
or an exemption from registration, and accordingly may be required to be held
for an indefinite period of time. The holder agrees that Shares issued pursuant
hereto may contain the following legend on the face thereof: "This security has
not been registered pursuant to the Securities Act of 1933, as amended, and each
holder of this security by the acceptance hereof agrees that this security shall
not be transferred in violation of said Act."
Each holder of a Warrant by acceptance thereof agrees that it will not
sell or otherwise dispose of any Warrants or Shares unless such Warrants or
Shares have been registered under, or have been sold pursuant to an exemption
from registration under, the Securities Act.
Prior to any transfer of any Warrants or Shares (either of the
foregoing "Restricted Securities"), other than as set forth later in this
Section 1.6, the holder thereof will give written notice to the Company of such
holder's intention to effect such Transfer. Each such notice shall describe the
manner and circumstances of the proposed transfer in sufficient detail, and
shall contain an undertaking by the holder giving such notice to furnish such
other information as may be required, to enable counsel to render the opinion
referred to below. The Company will promptly submit a copy of such notice to its
counsel, and the following provisions shall then apply:
(x) If in the opinion of such counsel the proposed transfer
may be effected without registration of such Restricted Securities
under the Securities Act, the Company shall, as promptly as
practicable, so notify the holder of such Restricted Securities and
such holder shall thereupon be entitled, subject to the other
provisions of this Warrant, to transfer such Restricted Securities in
accordance with the terms of the notice delivered by such holder to the
Company.
(y) If such counsel is unable to conclude that the proposed
transfer may be effected without registration of such Restricted
Securities under the Securities Act (such view to be expressed in
writing in a letter stating the legal or factual basis of the
conclusions reached therein), the Company will, as promptly as
practicable, so notify the holder thereof and thereafter such holder
shall not be entitled to transfer such Restricted Securities until
either such Restricted Securities have been effectively registered
under the Securities Act or the provisions of this Section 1.6 have
otherwise been complied with.
Notwithstanding the foregoing provisions of this Section 1.6, any holder of
Restricted Securities shall be permitted, subject to the other provisions of
this Warrant, the Purchase Agreement, and applicable law, to transfer any such
Restricted Securities to a limited number of institutional investors, provided
that each such investor either (A) represents in writing that it is an
institutional investor acquiring such Restricted Securities for investment and
not with a view to the distribution thereof (subject, however, to any
requirement of law that the disposition thereof shall at all times be within the
control of such transferee), or (B) is an institutional investor to whom such
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Restricted Securities may be transferred pursuant to a rule or regulation of the
Commission permitting resales of securities to a limited class of institutional
investors. The Company shall pay the cost of any counsel described above.
The restrictions imposed by this Section 1.6 upon the transferability
of Restricted Securities shall cease and terminate as to any particular
Restricted Securities (A) when, in the opinion of counsel for the Company, such
restrictions are no longer required in order to ensure compliance with the
Securities Act, (B) when such Restricted Securities shall have been effectively
registered under the Securities Act (including, without limitation, pursuant to
Section 17 of the Purchase Agreement), or (C) when such Restricted Securities
shall have been sold to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act. Whenever such restrictions shall cease and
terminate as to any Restricted Securities, the holder thereof shall be entitled
to receive from the Company, without expense (other than applicable transfer
taxes, if any), new certificates representing such Restricted Securities of like
tenor but not bearing the legend otherwise required by this Section 1.6.
Section 2. Conversion of Warrant.
(a) In addition to and without limiting the rights of the holder under
the terms of this Warrant, the holder shall have the option, but not the
obligation, to convert this Warrant, or any portion thereof (the "Conversion
Right") into Shares as provided in this Section 2 at any time when this Warrant
can be exercised pursuant to the first paragraph hereof. Upon exercise of the
Conversion Right with respect to a particular number of Shares (the "Converted
Warrant Shares"), the Company shall deliver to the holder (without payment by
the holder of any exercise price or any cash or other consideration) that number
(which may be fractional) of Shares equal to the quotient obtained by dividing
(x) the value of this Warrant (or the specified portion hereof) on the
Conversion Date (as defined in Section 2(b) hereof), which value shall be
determined by subtracting (A) the aggregate current exercise price applicable to
the Converted Warrant Shares immediately prior to the exercise of the Conversion
Right from (B) the aggregate Market Price of such Converted Warrant Shares on
the Conversion Date by (y) the Market Price of one Share on the Conversion Date.
(b) The Conversion Right may be exercised by the holder by surrendering
this Warrant at the designated office of the Company together with a written
statement (a "Conversion Notice") specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of Converted Warrant
Shares (i.e., the Shares as to which this Warrant is being exercised in
connection with the exercise of the Conversion Right). Such conversion shall be
effective upon receipt by the Company of this Warrant together with the
Conversion Notice, or on such later date as is specified therein (the
"Conversion Date") and, at the election of the holder, may be made contingent
upon the occurrence of any event specified in the Conversion Notice.
Certificates for the Shares issuable upon exercise of the Conversion Right and,
if applicable, a new Warrant evidencing the balance of the Shares remaining
subject to this Warrant, shall be issued as of the Conversion Date and shall be
delivered to the holder promptly following the Conversion Date.
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Section 3. Current Exercise Price and Adjustments.
3.1. Current Exercise Price. The term "current exercise price" shall
mean initially $1.00 per Share, subject to adjustment from time to time as
hereinafter provided, in effect at any given time. In determining the current
exercise price, the result shall be expressed to the nearest $.001, but any such
lesser amount shall be carried forward and shall be considered at the time of
and together with the next subsequent adjustment which, together with any
adjustments required to be carried forward, shall amount to $.001 per Share or
more.
3.2. Adjustment of Current Exercise Price. The current exercise price
shall be subject to adjustment, from time to time (but not below zero), as
follows:
(a) Adjustments for Stock Dividends, Recapitalization, etc. In the
event the Company shall, after the Closing Date, issue any shares of voting or
non-voting common stock of any class ("Common Stock") (i) by stock dividend or
any other distribution upon the stock of the Company payable in Common Stock or
in securities convertible into or exercisable or exchangeable for shares of
Common Stock or (ii) in subdivision of its outstanding Common Stock, by
reclassification or otherwise, the current exercise price then in effect shall
be reduced proportionately; and, in like manner, in the event of any combination
of shares of Common Stock, by reclassification or otherwise, the current
exercise price then in effect shall be proportionately increased. An adjustment
made pursuant to this Section 3.2(a) shall become effective retroactively
immediately after the record date in the case of a dividend and shall become
effective immediately after the effective date in the case of a subdivision or
combination.
(b) Adjustments for Other Distributions. In case the Company shall,
after the Closing Date, make a distribution to all holders of its Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing corporation) of (i) cash (whether
or not payable out of earnings or surplus), (ii) other assets (other than
dividends payable in the Company's Common Stock), (iii) evidences of
indebtedness or other securities of the Company or of any entity other than the
Company (other than dividends payable in the Company's Common Stock), or (iv)
subscription rights, options or warrants to purchase any of the foregoing assets
or securities, whether or not such rights, options or warrants are immediately
exercisable (hereinafter collectively referred to as "Distributions on Common
Stock"), the Company shall deliver to the holders of outstanding Warrants the
Distributions on Common Stock to which the holders of outstanding Warrants would
have been entitled if they had exercised the Warrants held by them for Common
Stock immediately prior to the record date for the purpose of determining
stockholders entitled to receive such Distributions on Common Stock.
(c) Adjustments for Issuance of Additional Stock. Subject to the
exception referred to in Section 3.2(e) hereof and except as otherwise provided
for in Section 3.2(a) hereof, in case the Company shall at any time or from time
to time after the Closing Date issue any additional shares of its Common Stock,
excluding shares of Common Stock issued pursuant to the Existing Converts (as
defined in the Purchase Agreement), ("Additional Common Stock") either
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<PAGE> 7
(I) for consideration per share less than the then current Market Price per
share of the Company's Common Stock (determined as provided in Section 3.2(g)
hereof) immediately prior to the issuance of such Additional Common Stock, or
(II) for a consideration per share less than the then current exercise price
immediately prior to the issuance of such Additional Common Stock, or (III)
without consideration, then (in the case of either clause (I), (II) or (III)),
and thereafter successively upon each such issuance, the current exercise price
shall forthwith be reduced to a price equal to the lesser of:
(A) the price determined by multiplying such current exercise
price by a fraction, of which
(1) the numerator shall be (i) the number of shares of the
Company's Common Stock outstanding when the then current exercise price
became effective plus (ii) the number of shares of the Company's Common
Stock which the aggregate amount of consideration, if any, received by
the Company upon all issues of its Common Stock since the current
exercise price became effective (including the consideration, if any,
received for such Additional Common Stock) would purchase at the
greater of (x) the then current Market Price per share of the Company's
Common Stock or (y) the then current exercise price per Share, and
(2) the denominator shall be (i) the number of shares of the
Company's Common Stock outstanding when the then current exercise price
became effective plus (ii) the number of shares of the Company's Common
Stock issued since the current exercise price became effective
(including the number of shares of such Additional Common Stock); or
(B) the price determined by dividing (x) the aggregate amount
of consideration, if any, received by the Company upon all
issues of its Common Stock since the then current exercise
price became effective (including the consideration, if any,
received for such Additional Common Stock) by (y) the number
of shares of Common Stock of the Company issued since the
current exercise price became effective (including the number
of shares of such Additional Common Stock),
provided, however, that such adjustment shall be made only if the current
exercise price determined from the aforesaid calculations shall be less than the
current exercise price in effect immediately prior to the issuance of such
Additional Common Stock. The Company may, but shall not be required to, make any
adjustment of the current exercise price if the amount of such adjustment shall
be less than $.001, but any adjustment that would otherwise be required then to
be made which is not so made shall be carried forward and shall be made at the
time of and together with the next subsequent adjustment which, together with
any adjustments so carried forward, shall amount to not less than $.001. The
adjustment described in this Section 3.2(c) shall be made whenever such Common
Stock is issued, and shall become effective retroactively immediately after the
date on which the Company committed to make such issuance.
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For the avoidance of doubt, the issuance of shares of Common Stock after the
Closing Date pursuant to the Cigna Exchange Agreement shall be deemed to be the
issuance of Additional Common Stock for no consideration.
(d) Certain Rules in Applying the Adjustment for Additional Stock
Issuances. For purposes of any adjustment as provided in Section 3.2(c), the
following provisions shall also be applicable:
(1) Cash Consideration. In case of the issuance of Additional
Common Stock for cash, the consideration received by the Company
therefor shall (subject to the last sentence of Section 3.2(g) hereof)
be deemed to be the net cash proceeds received by the Company for such
Additional Common Stock after deducting any commissions or other
expenses paid or incurred by the Company for any underwriting of, or
otherwise in connection with the issuance of, such Additional Common
Stock.
(2) Non-Cash Consideration. In case of the issuance (other
than upon conversion or application of obligations or shares of stock
of the Company) of Additional Common Stock for a consideration other
than cash, or a consideration a part of which shall be other than cash,
the amount of the consideration other than cash so received or to be
received by the Company shall be deemed to be the value of such
consideration at the time of its receipt by the Company as determined
in good faith by the Board of Directors of the Company, provided, that
where the non-cash consideration consists of the cancellation,
surrender or exchange of outstanding obligations of the Company (or
where such obligations are otherwise converted into shares of the
Company's Common Stock), the value of the non-cash consideration shall
be deemed to be the amount, including principal and any accrued
interest, as of the time of the Company's receipt, of the obligations
canceled, surrendered, exchanged or converted. If the Company receives
consideration, part or all of which consists of publicly traded
securities, the value of such non-cash consideration shall be the
aggregate market value of such securities (based on the latest reported
trades on the principal securities exchange on which such securities
are then traded) as of the close of the day immediately preceding the
date of their receipt by the Company.
(3) Options, Warrants, Convertibles, etc. In case of the
issuance (other than by way of a Distribution on Common Stock pursuant
to Section 3.2(b) hereof), whether by distribution or sale to holders
of its Common Stock or to others, by the Company of (i) any security
that is convertible into the Company's Common Stock or (ii) any rights,
options or warrants to purchase the Company's Common Stock (except for
the Warrants), if inclusion thereof would result in a current exercise
price lower than if excluded, the Company shall be deemed to have
issued, for the consideration described below, the number of shares of
the Company's Common Stock into which such convertible security may be
converted when first convertible, or the number of shares of the
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Company's Common Stock deliverable upon the exercise of such rights,
options or warrants when first exercisable, as the case may be (and
such shares shall be deemed to be Additional Common Stock for purposes
of Section 3.2(c) hereof). The consideration deemed to be received by
the Company at the time of the issuance of such convertible securities
or such rights, options or warrants shall be the consideration so
received determined as provided in Sections 3.2(d)(1) and (2) hereof
deducting any commissions or other expenses paid or incurred by the
Company for any underwriting of, or otherwise in connection with, the
issuance of such convertible securities or rights, options or warrants,
plus (x) any consideration or adjustment payment to be received by the
Company in connection with such conversion, or, as applicable, (y) the
aggregate price at which shares of the Company's Common Stock are to be
delivered upon the exercise of such rights, options or warrants when
first exercisable (or, if no price is specified and such shares are to
be delivered at an option price related to the Market Price of the
subject Common Stock, an aggregate option price bearing the same
relation to the Market Price of the subject Common Stock at the time
such rights, options or warrants were granted). In case any such
securities, rights, options or warrants shall be issued in connection
with the issue or sale of other securities of the Company comprising
one integral transaction in which no specific consideration is
allocated to such securities, rights, options or warrants, such
securities, rights, options or warrants shall be deemed to have been
issued without consideration. If, subsequently, (1) such number of
shares into which such convertible security is convertible, or which
are deliverable upon the exercise of such right, options or warrants,
is increased or (2) the conversion or exercise price of such
convertible security, rights, options or warrants is decreased, then
the calculations under the preceding two sentences (and any resulting
adjustment to the current exercise price under 3.2(c) hereof) with
respect to such convertible security, rights, options or warrants, as
the case may be, shall be recalculated as of the time of such issuance
but giving effect to such changes (but any such recalculation shall not
result in the current exercise price being higher than that which would
be calculated without regard to such issuance). On the expiration or
termination of such rights, options or warrants, or rights to convert,
the current exercise price hereunder shall be readjusted (up or down as
the case may be) to such current exercise price as would have been
obtained had the adjustments made upon the issuance of such rights,
options, warrants or convertible securities been made upon the basis of
the delivery of only the number of shares of the Company's Common Stock
actually delivered upon the exercise of such rights, options or
warrants or upon the conversion of any such securities and at the
actual exercise or conversion prices (but any such recalculation shall
not result in the current exercise price being higher than that which
would be calculated without regard to such issuance).
(4) Number of Shares Outstanding. The number of shares of the
Company's Common Stock as at the time outstanding shall exclude all
shares of the Company's Common Stock then owned or held by or for the
account of the Company but shall include the aggregate number of shares
of the Company's Common Stock at the time deliverable in respect of the
convertible securities, rights, options and warrants referred to
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in Section 3.2(d)(3); provided, that to the extent that such rights,
options, warrants or conversion privileges are not exercised, such
shares of Common Stock shall be deemed to be outstanding only until the
expiration dates of the rights, warrants, options or conversion
privileges or the prior cancellation thereof.
(5) Special Rules for Conny Minority Acquisition Shares. If
Conny Minority Acquisition Shares (as defined in the Purchase
Agreement) are issued for consideration per share (determined in
accordance with subsections (1) and (2) of this Section 3.2(d)) of less
than the current exercise price of this Warrant immediately prior to
such issuance, the adjustment otherwise required therefor under Section
3.2(c) hereof shall not apply and instead, the current exercise price
under this Warrant shall immediately be adjusted to the lowest
consideration per share received for the issuance of any of such Conny
Minority Acquisition Shares. If Conny Minority Acquisition Shares are
issued for a consideration per share of more than the current exercise
price of this Warrant immediately prior to such issuance, but less than
the current Market Price per share of the Company's Common Stock
immediately prior to the issuance of such Additional Common Stock, the
provisions of Section 3.2(c) hereof shall be applicable.
(e) Exclusions from the Adjustment for Additional Stock Issuances. No
adjustment of the current exercise price under Section 3.2(c) hereof shall be
made as a result of or in connection with the issuance of Shares upon exercise
of the Warrants or upon conversion of Preferred Shares (as defined in the
Purchase Agreement). To the extent that the issuance (or deemed issuance) of the
Company's Common Stock shall not result in any adjustment of the current
exercise price pursuant to the provisions of this Section 3.2(e), then such
Common Stock shall not be taken into account for purposes of determining any
fraction referred to in Section 3.2(c) hereof.
(f) Accountants' Certification. Whenever the current exercise price is
adjusted as provided in this Section 3.2, the Company will promptly obtain a
certificate of a firm of independent public accountants of recognized national
standing selected by the Board of Directors of the Company (who may not be the
regular auditors of the Company and who shall be reasonably acceptable to the
Majority Holders) setting forth the current exercise price as so adjusted, the
computation of such adjustment and a brief statement of facts accounting for
such adjustment, and will mail to the holders of the Warrants a copy of such
certificate from such firm of independent public accountants.
(g) Determination of Market Price. The current "Market Price" per share
of the Company's Common Stock on any date shall be deemed to be the average of
the daily closing prices for the thirty (30) consecutive trading dates
commencing twelve (12) trading days before such date (subject to the last
sentence of this paragraph). The closing price for each day shall be the last
reported sale price or, in case no such sale takes place on such day, the
average of the
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closing bid and asked prices, in either case on the principal national United
States or Canadian securities exchange on which the Company's Common Stock is
listed or admitted to trading, or if the Company's Common Stock is not listed or
admitted to trading on any such national securities exchange, the average of the
highest reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers Inc., Automated Quotation System
Level I, or comparable system. If the closing price cannot be so determined, the
Market Price shall be determined:
(x) by the written agreement of the Company and the holders of
Warrants representing a majority of the Shares then obtainable from the
exercise of outstanding Warrants (the "Majority Holders"); or
(y) in the event that no such agreement is reached within
fifteen (15) days after the event giving rise to the need to determine
the Market Price, by a nationally recognized U.S. investment banking
firm, selected by the Company ("Company Appraiser") not more than 5
Business Days after the end of such 15 day period. Any appraiser
appointed pursuant to this paragraph shall be instructed to make its
determination as promptly as possible and in any event within 30 days
of appointment. If no such selection is made within such period, then
the Majority Holders shall as promptly as possible select such a firm
whose determination shall be final and binding. If such selection is
timely made by the Company, and the Majority Holders do not object to
the Market Price as determined by the Company Appraiser within 10 days
of receipt of notice thereof by all holders of Warrants, then the
Market Price as determined by the Company Appraiser shall be the Market
Price. If the Majority Holders do so object to the Company Appraiser's
determination of Market Price, then the Majority Holders can select a
nationally recognized U.S. investment banking firm ("Alternate
Appraiser") to review the Company Appraiser's report and other relevant
information. Within 10 days after receipt by the Alternate Appraiser of
such report and such other information as is reasonably requested by
the Alternate Appraiser, the Company Appraiser and Alternate Appraiser
shall communicate and/or meet to resolve any questions or differences
with respect to the Market Price. If such appraisers agree on a Market
Price, such Market Price shall be the Market Price. If no agreement is
reached then the Company Appraiser and Alternate Appraiser shall select
a third nationally recognized firm ("Third Appraiser"). If the Company
Appraiser and the Alternate Appraiser cannot agree on a Third Appraiser
within 20 days of the end of such 10 day period, either may apply to
the American Arbitration Association to appoint the Third Appraiser.
The Third Appraiser shall, within 30 days of their hire, issue a report
with its determination of Market Price which shall be conclusive and
binding. All expenses of the Company Appraiser shall be borne by the
Company. All expenses of the Alternate Appraiser shall be borne by the
holders of the Warrants. All expenses of the Third Appraiser shall be
borne equally by the Company and such holders.
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Market Price shall be determined on the basis of the fair market value of the
Company as if it were sold as a going concern on the date of valuation and
without regard to the lack of any trading market for, or the lack of liquidity
in, the Common Stock of the Company.
The Company shall cooperate, and shall provide all necessary information and
assistance, to permit any determination under the preceding clause (x) or (y).
Each Appraiser shall be instructed to use its best efforts to give the Company
and all holders of Warrants reasonable advance notice of the Market Price and
the contents of its report (by delivering a draft report) before the report is
delivered in final form. Any communications or reports by an appraiser to either
the Company or any of the holders regarding Market Price shall be given
simultaneously to both the Company and all of the holders.
(h) Antidilution Adjustments Under Other Securities. Without limiting
any other rights available hereunder to the holders of Warrants, if there is an
antidilution adjustment (x) under any security which is convertible into Common
Stock of the Company whether issued prior to or after the date hereof or (y)
under any rights, options or warrants to purchase Common Stock of the Company
whether issued prior to or after the date hereof (except for the Warrants and
except as stated in Section 3.2(e) hereof) which (in the case of the preceding
clause (x) or (y)) results in a reduction in the exercise or purchase price with
respect to such security or rights or results in an increase in the number of
shares obtainable under such security or rights, then an adjustment shall be
made under this Section 3.2(h) to the current exercise price hereunder. Any such
adjustment under this Section 3.2(h) shall be whichever of the following results
in a lower current exercise price: (A) a reduction in the current exercise price
equal to the percentage reduction in such exercise or purchase price with
respect to such security or rights or (B) a reduction in the current exercise
price which will result in the same percentage increase in the number of Shares
available hereunder as the percentage increase in the number of shares of Common
Stock available under such security or rights. Any such adjustment under this
Section 3.2(h) shall only be made if it would result in a lower current exercise
price than that which would be determined pursuant to any other antidilution
adjustment otherwise required hereunder as a result of the event or circumstance
which triggered the adjustment to the security or rights described in clause (x)
or (y) above (and if any such adjustment is so made under this Section 3.2(h),
then such other antidilution adjustment otherwise required hereunder shall not
be made as a result of such event or circumstance). Notwithstanding the
foregoing, no adjustment shall be made under this subsection (h) as a result of
antidilution adjustments to Existing Converts caused by the issuance or exercise
of the Warrants or the Preferred Warrants or the conversion of the Preferred
Shares.
(i) Reorganization Adjustments. In case of any capital reorganization
or reclassification of the capital stock of the Company (other than a change in
par value or a stock split-up), the holder of this Warrant shall thereafter be
entitled to purchase for the current exercise price the securities and property
receivable upon such capital reorganization or reclassification by a holder of
the number of shares of Common Stock which this Warrant entitled the holder
hereof
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to purchase immediately prior to such capital reorganization or
reclassification. In the event that at any time, as a result of an adjustment
made pursuant to this Section 3.2(i), the holder of this Warrant shall become
entitled to purchase any other securities or property other than Common Stock,
thereafter the number of such other securities or property so purchasable upon
exercise of this Warrant and the current exercise price shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in this
Section 3.2.
(j) Other Adjustments. Without limiting any provisions of this Section
3.2 or any other provisions of this Warrant, in case any event shall occur as to
which any of the provisions of this Section 3.2 are not strictly applicable but
the failure to make any adjustment would not fairly protect the exercise rights
represented by the Warrants in accordance with the intent and principles of this
Section 3.2, the Company shall at its expense appoint a firm of independent
public accountants of recognized national standing selected by the Board of
Directors of the Company (who may not be the regular auditors of the Company and
who shall be reasonably acceptable to the Majority Holders), which shall give
their opinion upon the adjustment, if any, on a basis consistent with the intent
and principles established in this Section 3.2, necessary to preserve, without
dilution, the economic and other rights represented by the Warrants. Upon
receipt of such opinion, the Company will promptly mail copies thereof to the
holders of the Warrants and shall make the adjustments described therein.
(k) Meaning of "Issuance". References in this Warrant to "issuance" of
stock by the Company include issuances by the Company of previously unissued
shares and issuances, sales or other transfers by the Company of treasury stock.
Section 4. Company's Consolidation or Merger. If the Company shall at
any time consolidate with or merge into another corporation (where the Company
is not the continuing corporation after such merger or consolidation), the
holder of a Warrant shall thereafter be entitled to receive, upon the exercise
thereof in whole or in part, the securities or other property to which (and upon
the same terms and with the same rights as) a holder of the number of Shares
then deliverable upon the exercise thereof would have been entitled upon such
consolidation or merger (subject to adjustments under Section 3.2 hereof), and
the Company shall take such steps in connection with such consolidation or
merger as may be necessary to assure such holder that the provisions of the
Warrants and the Purchase Agreement shall thereafter be applicable in relation
to any securities or property thereafter deliverable upon the exercise of this
Warrant, including, but not limited to, obtaining a written acknowledgment from
the continuing corporation of its obligation to supply such securities or
property upon such exercise and to be so bound by the Warrant and the Purchase
Agreement. A sale, transfer or lease (in one, or a series of related,
transactions) of all or substantially all of the assets of the Company to
another person shall be deemed a consolidation or merger for the foregoing
purposes.
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Section 5. Notice to Holders of Warrants. In case at any time
(i) the Company shall take any action which would require an
adjustment in the current exercise price pursuant to Section 3.2(a),
(c), (h), (i) or (j); or
(ii) the Company shall authorize the granting to the holders
of its Common Stock of any Distributions on Common Stock as set forth
in Section 3.2(b); or
(iii) there shall be any capital reorganization or
reclassification of the Company's Common Stock (other than a change in
par value or from par value to no par value or from no par value to par
value of the Common Stock), or any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the
Company is required, or any sale, transfer or lease (in one, or a
series of related, transactions) of all or substantially all of the
assets of the Company; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give written notice to
the holders of the Warrants, not less than twenty (20) days before any record
date or other date set for definitive action, of the date on which such action,
reorganization, reclassification, sale, transfer, lease, consolidation, merger,
dissolution, liquidation or winding-up, as the case may be, and the terms
thereof.
If the Company shall propose to issue or sell Common Stock (other than pursuant
to the Warrants) or options, rights or warrants to purchase Common Stock, it
shall, as promptly as practicable and not later than the date of such sale or
the execution of a definitive agreement for such sale, notify the holder in
writing of the name and address of the purchaser, whether such purchaser is an
Affiliate of the Company, the price and terms of the sale and the type of
securities to be sold. If the Company determines that the provisions of Section
3.2 do not result in any adjustment, such notice shall be accompanied by a
written certification approved by the Board of Directors of the Company, or a
committee thereof, to that effect. If the Majority Holders object they shall,
within 15 days after receipt of such notice, notify the Company of the name of a
nationally recognized investment banking firm which has been selected by the
Majority Holders to determine whether any such adjustment is required. The
Company shall promptly make available to such firm all information and data it
may reasonably acquire to make such determination. The determination of such
investment banking firm shall be final. If the investment banker does not give
notice to the Company and the Holder of its decision prior to a date 45 days
following the Company's initial notice to the Holder, then the proposed sale
shall be deemed not to require an adjustment. All costs and expenses of the
investment banker shall be paid by the Company.
Section 6. Number of Shares. Upon any adjustment of the current
exercise price, the holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase
14
<PAGE> 15
at the current exercise price the number of Shares, calculated to the nearest
1/100 of a Share, obtained by multiplying the current exercise price in effect
immediately prior to such adjustment by the number of Shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the new current exercise price resulting from such adjustment.
Section 7. Specific Performance. The Company stipulates that the
remedies at law of a holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or compliance with any
of the terms of this Warrant are not and will not be adequate and that, to the
fullest extent permitted by law, such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
Section 8. No Rights or Liabilities as Stockholder. Nothing contained
in this Warrant shall be construed as conferring upon the holder hereof any
rights as a stockholder of the Company (prior to exercise of all or a portion of
this Warrant) or as imposing any liabilities on such holder to purchase any
securities or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors or stockholders of the Company or
otherwise.
Section 9. Ownership; Transfer. The Company may treat the Person in
whose name this Warrant is registered pursuant to Section 13(a) of the Purchase
Agreement as the owner and holder of this Warrant for all purposes, and the
Company shall not be affected by any notice to the contrary (except that the
Company shall comply with the provisions of Section 16 of the Purchase Agreement
regarding the issuance of a new Warrant or Warrants to transferees). This
Warrant is transferable upon the conditions specified in the Stockholders
Agreement, Section 16 of the Purchase Agreement and Section 1.6 above.
Section 10. Covenants
10.1. Reservation of Shares. There have been reserved, and the Company
shall at all times keep reserved, out of its authorized Common Stock, a number
of shares of Common Stock sufficient to provide for the exercise of the rights
of purchase represented by the then outstanding Warrants.
10.2. No Dilution or Impairment. The Company will not, by amendment of
its Certificate of Incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant. The Company will at all times in good faith
assist in the carrying out of all such terms, and in the taking of all such
action, as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against dilution or other impairment. Without limiting
the generality of the foregoing, the Company (a) will not permit the par value
of any shares of Common Stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid
15
<PAGE> 16
and nonassessable shares of the Company's Common Stock, free from all taxes,
Liens and charges with respect to the issue thereof, upon the exercise of this
Warrant from time to time outstanding and (c) will not take any action which
results in any adjustment of this current exercise price under this Warrant if
the total number of shares of the Company's Common Stock (or other securities)
issuable after the action upon the exercise of all of the Warrants would exceed
the total number of shares of Common Stock (or other securities) then authorized
by the Company's Certificate of Incorporation and available for the purpose of
issue upon such exercise.
10.3. Listing of Shares. If the Company shall list any shares of its
Common Stock on any national securities exchange, it will take such action as
may be necessary, from time to time, to list the Shares, subject to issuance, on
such exchange.
10.4. Maintenance of Public Market. At any time that the Company is
required to comply with Section 17.3 of the Purchase Agreement, the Company will
not proceed with a program of acquisition of its own Common Stock, initiate a
corporate reorganization or recapitalization or authorize or consent to any
action which would have the effect of:
(a) removing the Company from registration with the Commission under
the Securities Exchange Act,
(b) requiring the Company to make a filing under Section 13(e) of the
Securities Exchange Act,
(c) reducing substantially or eliminating the public market for shares
of Common Stock of the Company,
(d) if any shares of the Company's Common Stock are at any time listed
on the National Association of Securities Dealers Inc. Automated Quotation
System, causing a delisting of the Company's Common Stock from such System
(unless such stock is delisted as a result of being listed on a national
securities exchange), or
(e) if any shares of the Company's Common Stock are at any time listed
on a national exchange, causing a delisting of such stock from such exchange.
10.5. Delivery of Information for Rule 144A Transactions. If a holder
of Shares proposes to transfer any such Shares pursuant to Rule 144A under the
Securities Act (as in effect from time to time), the Company agrees to provide
(upon the request of such holder or the prospective transferee) to such holder
and (if requested) to the prospective transferee any financial or other
information concerning the Company and its Subsidiaries which is required to be
delivered by such holder to any transferee of such Shares pursuant to such Rule
144A.
16
<PAGE> 17
Section 11. Headings. The headings and captions in this Warrant are for
convenience of reference only and shall not define, limit or otherwise affect
any of the terms or provisions hereof.
Section 12. Governing Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of New York (other than any
conflict of laws rule which might result in the application of the laws of any
other jurisdiction).
Section 13. Survival. The obligations of the Company under this Warrant
shall survive its full exercise.
Section 14. Definitions. Terms defined in the Purchase Agreement are
used herein with the same definition. The following terms are defined in the
following Sections of this Warrant:
Shares First Paragraph
Warrants Second Paragraph
Purchase Agreement Second Paragraph
current exercise price 3.1
Distributions on Common Stock 3.2(b)
Additional Common Stock 3.2(c)
Market Price 3.2(g)
Majority Holders 3.2(g)
IN WITNESS WHEREOF, the Company has caused this Warrant to be dated and
to be executed and issued on its behalf by its officer thereunto duly
authorized.
DECORA INDUSTRIES, INC.
By _________________________________
Name: Timothy N. Burditt
Title: Executive Vice President,
Administration and Finance
17
<PAGE> 18
ANNEX A
FORM OF SUBSCRIPTION
(To be executed only upon exercise of the Warrant
in whole or in part)
To: DECORA INDUSTRIES, INC.
The undersigned registered holder of the accompanying Warrant hereby
irrevocably exercises such Warrant or portion thereof for, and purchases
thereunder, _________2/ Shares (as defined in such Warrant) and herewith [makes
payment therefor by application pursuant to Section 2 of such Warrant of ______]
[or] [makes payment therefor of $_________. The undersigned requests that the
certificates for such Shares be issued in the name of, and delivered to, ______
_______________ whose address is ___________________________________].
Dated: ___________________________
__________________________________
(Name must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
- --------
3/ Insert the number of Shares as to which this Warrant is being exercised. In
the case of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of this Warrant, to the
holder surrendering the same.
18
<PAGE> 19
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells,
assigns, and transfers unto __________________________ the right represented by
the within Warrant to purchase __________ shares of Common Stock of DECORA
INDUSTRIES, INC. to which the within Warrant relates, and appoints
_________________________ Attorney to transfer such right on the books of
DECORA INDUSTRIES, INC. with full power of substitution in the premises.
Dated: ___________________
_______________________________________
(Name must conform to name of holder as
specified on the face of the Warrant)
_______________________________________
(Street Address)
_______________________________________
(City) (State) (Zip Code)
Signed in the presence of:
_______________________________
19
<PAGE> 1
EXHIBIT 99.8
FORM OF NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER ANY APPLICABLE REGULATION OF ANY STATE AND IS NOT TRANSFERABLE EXCEPT
UPON THE CONDITIONS SPECIFIED IN SECTION 16 OF THE PURCHASE AGREEMENT REFERRED
TO HEREIN.
THIS INSTRUMENT AND THE OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATED, IN THE
MANNER AND TO THE EXTENT SET FORTH IN A SUBORDINATION AGREEMENT (THE
"SUBORDINATION AGREEMENT") DATED AS OF SEPTEMBER 26, 1997 AMONG THE NOTE
PURCHASERS NAMED THEREIN AND FLEET BANK TO CERTAIN OTHER OBLIGATIONS OF THE
COMPANY TO FLEET BANK, AND EACH HOLDER OF THIS INSTRUMENT, BY ITS ACCEPTANCE
HEREOF, AGREES TO BE BOUND BY THE TERMS OF THE SUBORDINATION AGREEMENT.
DECORA, INCORPORATED
13% Senior Subordinated Note
Due 2005
Dated September 26, 1997
New York, New York
No. __
FOR VALUE RECEIVED, the undersigned DECORA, INCORPORATED, a Delaware
corporation (herein, together with any successor, referred to as the "Company"),
hereby promises to pay to [name of purchaser] or registered assigns, the
principal sum of _______________ Dollars ($_________), one-third on September
30, 2003, one-third on September 30, 2004 and the balance on September 30, 2005,
plus interest (compounded quarterly and computed on the basis of the actual
number of days elapsed over a 360-day year) on the unpaid balance of such
principal sum from the date hereof at the Base Interest Rate (hereinafter
defined), which interest is payable on September 30, 1998 and thereafter
quarterly on the last day of March, June, September and December of each year,
commencing December 31, 1998 (which first interest payment shall be for the
period from and including the date hereof through and including September 30,
1998) until the entire principal amount hereof shall have become due and
<PAGE> 2
payable, whether at maturity or at a date fixed for prepayment or by
acceleration or declaration or otherwise, and at the Default Rate on any overdue
installment of principal (including any overdue prepayment of principal) and on
any overdue premium and (to the extent permitted by law) on any overdue
installment of interest until paid. The Default Rate shall be equal to the Base
Interest Rate on this Note, plus two percent (2%). The "Base Interest Rate"
shall mean 13% per annum, except that in the event that on or prior to December
31, 1997 the Certificate of Incorporation of Holdings is not amended to
authorize, and the Board of Directors of the Holdings has not validly reserved,
a sufficient number of additional shares of Common Stock of Holdings to permit
the exercise in full of the Warrants (as defined in the Purchase Agreement) and
the conversion in full of the Preferred Shares (as defined in the Purchase
Agreement) (a "Certificate Default"), the Base Interest Rate shall be 14%
effective as of the date hereof, and if the Certificate Default has not been
cured by March 31, 1998, the Base Interest Rate shall then increase to 15% per
annum effective as of March 31, 1998 and thereafter. Following the cure of a
Certificate Default, the Base Interest Rate will revert to the original rate of
13% per annum effective for all periods after such cure.
Capitalized terms not otherwise defined herein shall have the meaning
ascribed to such term in the Note and Warrant Purchase Agreement dated as of
September 26, 1997 (the "Purchase Agreement"), among Decora Industries, Inc.,
the Company, the Agent and Note Purchasers named therein.
If any payment due hereunder becomes due and payable on a day which is
not a Business Day, the due date thereof shall be the next day which is a
Business Day, and the interest payable on such next Business Day shall be the
interest accruing through such actual date of payment.
Payments of principal and interest shall be made in lawful money of the
United States of America at the principal office of the Company at One Mill
Street, Fort Edward, New York 12828, or at such other place as the Company shall
have designated for such purpose to the holder thereof in writing, and may be
paid by check mailed, or shall be made by wire transfer, all as provided in the
Purchase Agreement, to the address or account designated by the holder hereof
for such purpose.
This Note is one of a duly authorized issue of Notes issued to the
Purchasers pursuant to the Purchase Agreement. This Note is subject to the
provisions of and is entitled to the benefits of the Purchase Agreement and the
Collateral Documents referenced therein. In addition, the payment of the
principal of, premium, if any, and interest on this Note is subordinated in
right of payment to the prior payment in full of certain other obligations of
the Company to the extent and in the manner set forth in the Subordination
Agreement dated as of September 26, 1997, among the Purchasers and the Senior
Lender (the "Subordination Agreement"). Each holder of this Note, by accepting
the same, agrees to and shall be bound by the provisions of the Purchase
Agreement and the Subordination Agreement.
-2-
<PAGE> 3
This Note is transferable only upon the terms and conditions specified
in the Purchase Agreement.
In case an Event of Default shall occur and be continuing, all amounts
then remaining unpaid on this Note shall become or may be declared due and
payable in the manner and with the effect provided in the Purchase Agreement.
No reference herein to the Purchase Agreement, the Collateral Documents
or the Subordination Agreement and no provision hereof or thereof shall alter or
impair the obligations of the Company, which are absolute and unconditional, to
pay the principal hereof and interest hereon at the respective times and places
specified herein and in the Purchase Agreement.
This Note is delivered in and shall be construed and enforced in
accordance with and governed by the laws of the State of New York (other than
any conflict of laws rules which might result in the application of laws of any
other jurisdiction).
Subject to the provisions of Section 16 of the Purchase Agreement, the
Companies may treat the person in whose name this Note is registered as the
owner and holder of this Note for the purpose of receiving payment of principal
of, premium, if any, and interest on this Note and for all other purposes
whatsoever, and the Company shall not be affected by any notice to the contrary
(except that the Company shall comply with the provisions of Section 12 of the
Purchase Agreement regarding the issuance of a new Note or Notes to permitted
transferees).
-3-
<PAGE> 4
IN WITNESS WHEREOF, the undersigned has caused this Note to be dated
and to be executed and issued on its behalf by its officer thereto duly
authorized.
DECORA, INCORPORATED
By _________________________
Name: Timothy N. Burditt
Title: Vice President, Administration
<PAGE> 1
EXHIBIT 99.9
INTERCREDITOR SUBORDINATION AGREEMENT
THIS INTERCREDITOR SUBORDINATION AGREEMENT (this "Agreement"), made and
entered into as of the 26th day of September, 1997, by and among FLEET BANK
(formerly NORSTAR BANK OF UPSTATE NY), a banking corporation organized and
existing under the laws of the State of New York with a business address at 69
State Street, Albany, New York 12201 and a mailing address of Peter D. Kiernan
Plaza, Broadway, Albany, New York 12207, Attention: Corporate Banking
(hereinafter, together with any "Affiliate" thereof, as that term is defined
below, as and where the context of this Agreement so requires, called "Fleet");
PURCHASERS more particularly defined on Schedule A attached hereto and made a
part hereof, with business addresses and mailing addresses as more particularly
set forth on said Schedule A (hereinafter, together with any "Affiliate"
thereof, as that term is defined below, as and where the context of this
Agreement so requires, collectively called "Purchasers"); DECORA, INCORPORATED,
a Delaware corporation authorized to do business in the State of New York as
Decora Manufacturing, with its principal place of business at 1 Mill Street,
Fort Edward, New York 12828 (hereinafter called the "Borrower") and DECORA
INDUSTRIES, INC., a Delaware corporation, with its principal place of business
at 1 Mill Street, Fort Edward, New York 12828 (the "Corporate Guarantor").
W I T N E S S E T H:
WHEREAS, Fleet has extended credit and hereafter may extend additional
credit to Borrower upon the security of a lien upon, and security interest in,
all, or substantially all, assets of Borrower, as more particularly described
below, all pursuant to those certain loan agreements more particularly described
on Exhibit "A" attached hereto and made a part hereof between Borrower and
Fleet, as heretofore modified and amended (hereinafter, as they may be further
modified or amended hereafter collectively called the "Fleet Loan Agreements");
and
WHEREAS, Purchasers have extended credit to Borrower and hereafter may
extend additional credit to Borrower, upon the security of a lien upon, and
security interest in, all, or substantially all, assets of Borrower, as more
particularly described below, all pursuant to a certain Note and Warrant
Purchase Agreement, dated as of even date herewith, between Borrower, Decora
Industries, Inc., Dorrance Street Capital Advisors, L.L.C., as Agent (the
"Agent") and Purchasers (hereinafter, as it may be modified or amended
hereafter, called the "Purchasers Loan Agreement"); and
WHEREAS, the repayment of all of the obligations of the Borrower to
both Fleet and the Purchasers are unconditionally guaranteed by the Corporate
Guarantor; and
1
<PAGE> 2
WHEREAS, Fleet and Purchasers have agreed to enter into this Agreement
in order to establish, as between themselves, the relative priority of their
respective liens and security interests in the assets of Borrower and the
Corporate Guarantor and to evidence certain other understandings and agreements
they have reached between themselves in regard thereto; and
WHEREAS, Borrower and Corporate Guarantor have agreed to join in the
execution of this Agreement in order to acknowledge their consent to the terms
hereof and their agreement to be bound hereby, and to make certain other
agreements with Fleet and Purchasers in connection therewith;
NOW THEREFORE, in consideration of the foregoing premises, the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Fleet, Purchasers,
Borrower and Corporate Guarantor hereby agree as follows:
1. DEFINITIONS
1.1 Affiliate shall mean, with respect to any person or entity, any other
person or entity (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control
with, such person or entity, (ii) which directly or indirectly, of record
or beneficially, owns or holds five percent (5%) or more of the shares of
any class of the capital stock of such person or entity having voting
powers, or (iii) five percent (5%) or more of the shares of such stock of
which are owned or held, directly or indirectly, of record or beneficially,
by or for such person or entity. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
management and policies of a person or entity, whether through ownership of
common stock, by contract or otherwise.
1.2 Purchasers Claim shall mean all "Purchasers Obligations", as that term is
defined below, whether now or hereafter existing, including, particularly,
but without limitation, all such "Purchasers Obligations" as are evidenced
by the "Notes", as that term is defined in the Purchasers Loan Agreement,
and any and all subsequent loans, leases, letters of credit and other
financial accommodations made by Purchasers or any of Purchasers'
Affiliates to or on behalf of Borrower, together with accrued interest
thereon, fees chargeable in connection therewith and costs of collection
and enforcement of rights and remedies in regard thereto which are
chargeable to Bor rower, in each instance in accordance with, and pursuant
to, the terms and conditions of such "Notes", the Purchasers Loan Agreement
and any other "Loan Documents" as that term is defined in the Purchasers
Loan Agreement, pertinent thereto.
1.3 Purchasers Documents shall mean any and all documents, whether now or
hereafter existing, which evidence, pertain to or secure the Purchasers
Claim, or any portion thereof,
2
<PAGE> 3
including, without limitation, the Purchasers Loan Agreement, the "NoteS"
(as that term is defined therein) and all those other "Loan Documents" (as
that term is defined therein) executed by Borrower and/or Corporate
Guarantor to or with Purchasers in connection therewith.
1.4 Purchasers Obligations shall mean and include all loans, advances, debts,
liabilities, obligations, covenants and du ties owing by Borrower or
Corporate Guarantor to Purchasers or to any of Purchasers Affiliates of any
kind or nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, whether arising under the Purchasers Loan
Agreement or under any other agreement, instrument or document, whether or
not for the payment of money, whether arising by reason of an extension of
credit, opening of a letter of credit, loan, lease, guaranty,
indemnification or in any other manner, whether direct or indirect
(including, without limitation, those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and
however acquired. The term includes, without limitation, all interest,
charges, expenses, fees, attorneys' fees and any other sums chargeable to
Borrower and/or Corporate Guarantor under the Purchasers Loan Agreement or
any other agreement of Borrower and/or Corporate Guarantor with Purchasers
or any of Purchasers' Affiliates.
1.5 Claims shall mean, collectively, the Fleet Claim and the Purchasers Claim.
1.6 Collateral shall mean all property, and interests in property, of Borrower
and/or Corporate Guarantor, whether real or personal, tangible or
intangible, now existing or hereafter existing, and wherever located, in
which, now or hereafter, a security interest or lien is granted to either
Lender to secure the repayment, in whole or in part, either directly or
indirectly, of the whole, or any portion of the Claim of such Lender,
together with all proceeds and the products thereof.
1.7 Event of Default shall mean any event which, pursuant to the operative
terms of the Purchasers Documents or the Fleet Documents, as the case may
be, permits the Lender thereunder to accelerate the payment of, and take
enforcement actions with respect to the collection of its Claim.
1.8 Fleet Claim shall mean all of "Fleet Obligations", as that term is defined
below, whether now or hereafter existing, including, particularly, but
without limitation, such "Fleet Obligations" as are evidenced by the Fleet
Notes, as that term is defined below, and any and all subsequent loans,
leases, letters of credit and other financial accom modations made by Fleet
or any of Fleet's Affiliates to or on behalf of Borrower, together with
accrued interest thereon, fees chargeable in connection therewith and cost
of collection and enforcement of rights and remedies in regard thereto
which are chargeable to Borrower, in each instance in
3
<PAGE> 4
accordance with, and pursuant to, the terms and conditions of the Fleet
Notes, the Fleet Loan Agreements and any of the Fleet Documents.
1.09 Fleet Documents shall mean any and all documents whether now or hereafter
existing, which evidence, pertain to or secure the Fleet Claim, or any
portion thereof, including, without limitation, the Fleet Loan Agreements,
the Fleet Notes and each of the other documents, instruments and agreements
referred to in the Fleet Loan Agreements or contemplated thereby to which
Borrower and/or Corporate Guarantor is a party or which Borrower and/or
Corporate Guarantor is obligated to deliver pursuant thereto, together with
all such documents, instruments and agreements as are hereafter executed
and/or delivered by Borrower and/or Corporate Guarantor to Fleet.
1.10 Fleet Notes shall mean those notes, guarantees and credit and reimbursement
agreements more particularly described on Exhibit "B" attached hereto and
made a part hereof, executed by Borrower to Fleet, together with any
extensions or renewals thereof, or any amendments thereto.
1.11 Fleet Obligations shall mean and include all loans, advances, debts,
liabilities, obligations, covenants and duties owing by Borrower and/or
Corporate Guarantor to Fleet or to any of Fleet's Affiliates (as that term
is defined above) of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, whether arising under
the Fleet Loan Agreements or under the Fleet Notes (as that term is defined
above) or under any other agreement, instrument or document, whether or not
for the payment of money, whether arising by reason of an extension of
credit, opening of a letter of credit, loan, lease, guaranty,
indemnification or in any other manner, whether direct or indirect
(including, without limitation, those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and
however acquired. The term includes, without limitation, all interest,
charges, expenses, fees, attorneys' fees and any other sums chargeable to
Borrower and/or Corporate Guarantor under the Fleet Loan Agreements or any
other agreement of Borrower and/or Corporate Guarantor with Fleet or any of
Fleet's Affiliates.
1.12 Fleet Senior Collateral shall mean all that Collateral set forth and
described on Exhibit "C" attached hereto and made a part hereof, in which,
as between Purchasers and Fleet, Fleet is to have a senior lien or security
interest as described in and provided by paragraph 2.1(a) hereof.
1.13 Lender shall mean Purchasers or Fleet, or both, as the context shall
require.
1.14 Purchasers Subordinate Collateral shall mean all that Collateral set forth
and described on Exhibit "C" attached
4
<PAGE> 5
hereto and made a part hereof, in which, as between Purchasers and Fleet,
Purchasers are to have a subordinate lien or security interest as described
in and provided by paragraph 2.1(a) hereof.
2. INTERCREDITOR SUBORDINATION AGREEMENT
2.1 Lien Priorities. Notwithstanding the date, manner or order of perfection of
any security interests and liens now or hereafter granted in any Collateral
by Borrower and/or Corporate Guarantor to Purchasers or Fleet, any
provisions of any applicable Uniform Commercial Code or any applicable
statute, law or decision or any term of any of the Purchasers Documents or
the Fleet Documents, or whether either Purchasers or Fleet now or hereafter
holds possession of all or any part of any Collateral of Borrower and/or
Corporate Guarantor, or any other matter whatsoever, the following, as
between Purchasers and Fleet, shall be the relative priority of their
respective security interests and liens:
(a) To the extent necessary to pay in full the Fleet Claim, Fleet shall
have a first and prior security interest in and lien upon the
Collateral; and Purchasers shall have a second and subordinate
security interest therein;
(b) The priorities established hereunder are only as between Fleet and
Purchasers and are expressly conditioned upon the proper perfection,
and non-avoidibility by a bankruptcy trustee, of the security
interests and liens which have been accorded priority pursuant hereto.
If any security interest or lien of either Lender in any Collateral
which, pursuant hereto, has been accorded priority hereafter ceases to
be perfected, or is avoid able by a bankruptcy trustee, such lien
priority established pursuant hereto shall cease to be effective;
(c) The relative priorities of any security interests or liens in any
Collateral which are not established, altered or specified herein (or
which, hereafter, by operation of the foregoing subparagraph or any
other provision of this Agreement, cease to be effective), shall exist
and continue in accordance with, and subject to, applicable law.
2.2 Distribution of Proceeds of Collateral - Unless otherwise expressly agreed
to the contrary by each Lender or then prohibited by applicable law, all
proceeds of the Collateral shall be paid to Fleet for application to the
Fleet Claim, until it is fully satisfied, with any residual proceeds after
satisfaction of the Fleet Claim being paid to Purchasers for application to
the Purchasers Claim.
2.3 Enforcement Actions.
5
<PAGE> 6
(a) Subject to the terms of Section 2.5 below, so long as any portion of
the Fleet Claim remains outstanding, Purchasers may not take any
action to accelerate payment of the Purchasers Claim and/or to
foreclose or realize upon or enforce any of its rights with respect to
the Collateral, if such acceleration, foreclosure and realization
and/or enforcement occurs within one hundred eighty (180) days of
either (i) the date of the Purchasers receipt of a notice of an
occurrence of an Event of Default from Fleet or (ii) the date of the
giving by the Purchasers to the Borrower of a notice of an occurrence
of an Event of Default (said 180 day period being hereinafter referred
to as the "Standstill Period"), without first giving notice to, and
obtaining the prior written consent of Fleet; provided, however, that
a) nothing contained herein shall be deemed to prohibit Purchasers
from intervening or participating in or commencing any judicial
proceeding to the extent necessary to preserve or protect its
interests in any such Collateral and/or its rights against the
Borrower and/or Corporate Guarantor, b) the Purchasers shall not be
required to observe more than one Standstill Period in any twelve
month period during the term of this Agreement, and c) no such consent
shall be needed and any such Standstill Period will be deemed
terminated if Fleet accelerates payment of one or more of the notes
evidencing its Claim and takes any action to foreclose or --- realize
upon or enforce any of its rights with respect to the Collateral;
(b) Subject to the terms of Section 2.5 below, Fleet may, at its option,
take any action to accelerate payment of the Fleet Claim, and/or to
foreclose or realize upon or enforce any of its rights with respect to
the Collateral, upon giving notice to, but without any necessity for
obtaining the prior written consent of, Purchasers; provided, however,
that nothing contained herein shall be deemed to prohibit Fleet from
intervening or participating in or commencing any judicial proceeding
to the extent necessary to preserve or protect its interests in any
such Collateral and/or its rights against the Borrower and/or the
Corporate Guarantor.
2.4 Additional Credit Extensions. Subject to any contrary provisions of
Sections 3.5 and 3.9 below, each of Purchasers and Fleet shall have the
right, upon giving notice to, but without the necessity of first obtaining
the consent of, the other, to enter into additional, supplemental or
replacement Purchasers Documents or the Fleet Documents, as the case may
be, or to modify or amend, or waive any provision of, the Purchasers
Documents or the Fleet Documents, as the case may be, or to extend credit
or other financial accommodations (or increase any existing credit or
financial accommodation) to Borrower hereafter pursuant to the Purchasers
Documents or the Fleet Documents in such amounts and subject to such terms
and
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<PAGE> 7
conditions as each Lender elects, and to secure the repayment thereof with
any or all of the Collateral; provided, however, that nothing contained
herein shall constitute a waiver of any right of either Lender, pursuant to
any agreement between such Lender and Borrower, to require Borrower to
obtain such Lender's prior written consent to any such credit or pledge
made by or to the other Lender.
2.5 Notices of Defaults. Each Lender agrees to give to the other Lender a copy
of any notice of the occurrence or existence of an Event of Default given
to Borrower by such Lender hereafter concurrently with the sending of such
notice to Borrower; thereafter, but within a period equal to the greater of
(i) ten (10) days after receipt of such notice or (ii) the cure period (if
any) granted to the Borrower in such notice or otherwise to cure such Event
of Default, the Lender receiving any such notice shall have the right,
without obligation to do so, to cure (or cause the cure) of such Event of
Default (to the extent such Event of Default can be cured by the payment of
money) before the Lender giving such notice shall take any enforcement
actions with respect to its Claim.
2.6 Agency for Perfection. To the extent that Purchasers now has possession of,
or hereafter obtains possession of any Collateral including, without
limitation, any proceeds thereof which may be collected by operation of any
lockbox, blocked account reserve account or other collection method
instituted by Purchasers on which Fleet has a prior security interest or
lien pursuant hereto the Purchasers having possession of such Collateral
shall deliver such Collateral to Fleet, and pending such delivery, such
Purchasers shall hold such Collateral in trust, as trustee and agent for
the benefit of Fleet; and Fleet shall hold such Collateral as bailee and
agent of the Purchasers for the purposes of facilitating the perfection of
such Purchasers' security interest therein so long as such Collateral
remains in its possession pending application to the Fleet Claim, and
thereafter, pending distribution of any surplusage to the Purchasers
pursuant hereto. Purchasers designate Fleet pursuant to section 8-313(1)(a)
of the Uniform Commercial Code to hold certificates representing all of the
common stock of the Borrower (the "Stock") and the notes of the Corporate
Guarantor to the Borrower identified as item 9 in Exhibit "C" hereof (the
"Pledged Notes") on its own behalf and on behalf of the Purchasers, and
Fleet acknowledges that it so holds the Stock and the Pledged Notes;
provided that this sentence shall not limit Fleet's ability to exercise
remedies against the Stock and the Pledged Notes in accordance with this
Agreement.
2.7 Actions Upon Repayment of Fleet. If the Fleet Claim is paid in full, but
not the Purchasers Claim, and, in connection therewith, the Fleet Documents
are terminated, then Fleet, if and to the extent it then or thereafter has
no other claim against Borrower, shall, at the Purchasers' request transfer
any such Collateral held by it to the Purchasers and shall
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<PAGE> 8
assign its security interest therein and all of its rights under financing
statements to Purchasers; provided however, that any such transfer or
assignment shall be without recourse to Fleet and at the Purchasers'
expense.
2.8 Insurance. Notwithstanding anything to the contrary herein, Fleet, having a
senior security interest or lien in any Collateral the value of which is
insured by any hazard or casualty or similar insurance maintained by
Borrower shall, subject to Fleet's rights under its agreements with
Borrower, have the sole and exclusive right, as against the Purchasers to
adjust settlement of insurance claims in the event of any covered loss,
theft or destruction of such Collateral so long as Fleet does so in good
faith, in a commercially reasonable manner. All proceeds of such insurance
shall be paid to Fleet, as named in the mortgagee or loss payable
endorsement corresponding to such insurance in the same manner as
hereinabove prescribed with respect to other proceeds of Collateral.
2.9 UCC Notices. In the event that either Lender shall be required by the
Uniform Commercial Code or any other ap plicable law to give notice to the
other of intended disposi tion of Collateral, such-notice shall be given in
accordance with paragraph 3.1 hereof and ten (10) days' notice shall be
deemed to be commercially reasonable.
2.10 Payment of Purchasers Claim in the Event of a Default Under any of the
Fleet Documents and/or the Purchasers Documents.
(a) In the event that Fleet should send a Notice of Default to the Borrower
and the Purchasers (as set forth in Section 2.5 hereof) specifying a
payment default by the Borrower, the Purchasers agree not to accept
payments of principal or interest upon the Purchasers Claim, without the
prior written consent of the Fleet, until the earlier to occur of (i) the
payment Event of Default set forth in the aforementioned Notice of Default
is cured, or (ii) the Fleet Claim is paid in full. During any such period,
Purchasers also agree to hold any and all such payments received by
Purchasers without demand, in trust for Fleet in the same medium in which
received, not to commingle the same with any of the assets of Purchasers,
to immediately notify Fleet on the receipt of the same and to dispose of
the same as Fleet shall direct.
(b) In the event that Fleet should send a Notice of Default to the Borrower
and the Purchasers (as set forth in Section 2.5 hereof) specifying a
default by the Borrower other than a payment default, and as a result of
said non-payment default, Fleet elects to accelerate payment of the Fleet
Claim and to foreclose or realize upon or enforce any of its rights with
respect to the Collateral, the Purchasers agree not to accept payments of
principal or interest upon the Purchasers Claim, without the prior written
consent of the Fleet, until the earlier to occur of (i) the non-payment
Event of Default set
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<PAGE> 9
forth in the aforementioned Notice of Default is cured and Fleet elects to
cancel its payment acceleration of the Fleet Claim and cancel its
foreclosure or realization upon or enforcement of its rights with respect
of the Collateral, or (ii) the Fleet Claim is paid in full. During any such
period, Purchasers also agree to hold any and all such payments received by
Purchasers without demand, in trust for Fleet in the same medium in which
received, not to commingle the same with any of the assets of Purchasers,
to immediately notify Fleet on the receipt of the same and to dispose of
the same as Fleet shall direct.
(c) In the event that Fleet should send a Notice of Default to the Borrower
and the Purchasers (as set forth in Section 2.5 hereof) specifying a
default by the Borrower other than a payment default, and as a result of
said non-payment default, Fleet, does not elect to accelerate payment of
the Fleet Claim and to foreclose or realize upon or enforce any of its
rights with respect to the Collateral, the Purchasers may accept payments
of principal or interest upon the Purchasers Claim, without the prior
written consent of the Fleet, until such time, if any, that Fleet elects to
accelerate payment of the Fleet Claim and to foreclose or realize upon or
enforce any of its rights with respect to the Collateral; in which event
the provisions of subparagraph (b) above shall control.
(d) In the event that Purchasers should send a Notice of Default to the
Borrower and Fleet (as set forth in Section 2.5 hereof) specifying a
default by the Borrower and, after receipt of said Notice of Default,
Fleet, at its option, elects not to declare a cross-default and send a
Notice of Default to the Borrower and Purchasers (as set forth in Section
2.5 hereof), the Purchasers may accept payments of principal or interest
upon the Purchasers Claim, without the prior written consent of the Fleet,
until such time, if any, that Fleet elects to accelerate payment of the
Fleet Claim and to foreclose or realize upon or enforce any of its rights
with respect to the Collateral; in which event the provisions of
subparagraph (b) above shall control.
3. MISCELLANEOUS
3.1 Notices. All notices hereunder shall be effective upon receipt and shall be
in writing and sent by personally delivered mail or sent by express mail or
overnight mail delivery, to the addresses as first set in the opening
paragraph to this Agreement, in the case of Fleet, and as set forth on
Schedule A hereof, in the case of the Purchasers, or to such other address
or person as either of the parties hereto may designate in writing to the
other party. Notice shall be deemed received when hand delivered or when
deposited in a United States express mail post office box, postage prepaid
or delivered to the overnight mail delivery service properly addressed.
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<PAGE> 10
3.2 Contesting Liens or Security Interests. Neither Lender shall contest the
validity, perfection, priority or enforceability of any lien or security
interest granted to the other Lender, and each of the Lenders hereby agrees
to cooperate in the defense of any action contesting the validity,
perfection, priority or enforceability of such liens or security interest.
Each Lender shall also use its best efforts to notify the other Lender of
any change in the location of any of the Collateral or the business
operations of Borrower, or of any change in law which would make it
necessary or advisable for the other Lender to file additional financing
statements in another location as against Borrower but the failure to do so
shall not create a cause of action against the party failing to give such
notice or create any claim or right on behalf of any third party.
3.3 Independent Credit Investigations. Neither of the Lenders, nor any of their
respective directors, officers, agents or employees, shall be responsible
to the other or to any other person, firm or corporation, for Borrower's
solvency, financial condition or ability to repay the Purchasers Claim or
the Fleet Claim, as the case may be, or for any statements of Borrower,
oral or written, or for the validity, sufficiency or enforceability of the
Purchasers Claim or the Fleet Claim, as the case may be, or the Purchasers
Documents or the Fleet Documents, or any liens or security interests
granted by Borrower to the Lenders in connection therewith. Each Lender has
entered into its respective financing agreements with Borrower based upon
its own independent investigation and makes no warranty or representation
to the other Lender nor does it rely upon any representation of the other
Lender with respect to matters identified or referred to in this paragraph.
3.4 Limitation on Liability of Lenders to Each Other. Fleet shall not have any
liability to the Purchasers with respect to the exercise of its rights and
remedies in any Collateral on which it has retained a first priority
security interest or lien pursuant hereto so long as such exercise is
conducted in the same manner and with the same degree of care as Fleet then
is using with respect to the exercise of its rights and remedies in any
other, similar collateral securing any loan which is not the subject of
this Agreement, and, then, such liability shall extend only to the extent
that the Purchasers' loss, damage or expenses is proximately caused by the
gross negligence or willful misconduct of Fleet in exercising such rights
and remedies.
3.5 Amendments to Financing Arrangements or to this Agreement. Subject to any
contrary provisions of Section 3.9 below, each Lender shall use its best
efforts to notify the other Lender of any amendment or modification in the
Purchasers Documents or the Fleet Documents, as the case may be, but the
failure to do so shall not create a cause of action against the party
failing to give such notice or create any claim or right on
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<PAGE> 11
behalf of any third party; and each Lender shall, upon request of the other
Lender, provide copies of all such modifications or amendments and copies
of all other documentation relevant to the Collateral. All modifications or
amendments of this Agreement must be in writing and duly executed by an
authorized officer of each Lender to be binding and enforceable.
3.6 Marshalling of Assets. Purchasers hereby waive any and all rights to have
the Collateral, or any part thereof, marshalled by Fleet upon any
foreclosure of any security interest in, or lien on, such Collateral.
3.7 Further Assurances. If, at any time or from time to time hereafter, it
becomes necessary or advisable in connection with the foreclosure,
liquidation or disposition of any Col lateral by Fleet, as a result of an
Event of Default, to obtain a subordination, release or discharge of the
Purchasers' lien or security interest in any such Collateral in order to
convey good and marketable title to such Collateral, then, so long as such
foreclosure, liquidation or disposition, and the application of the
proceeds derived therefrom, have been accomplished in conformity herewith,
the Purchasers, upon the request of Fleet, shall execute such instruments
of subordination, release or discharge of such liens or security interests,
in recordable form, as may be reasonable and appropriate in the
circumstances; provided, however, that in no event shall any such
subordination, release or discharge alter, impair, release, discharge or
otherwise modify the liens and security interests of the Purchasers in and
to any other portion of the Collateral then existing or the claim of
Purchasers against the Borrower for any obligations due them.
3.8 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respec tive successors and assigns
of each of the parties hereto. Neither Lender shall assign or transfer any
interest in its Claim to any third party unless such assignee or transferee
shall have executed and delivered to the other Lender, not later than the
date of such assignment or transfer, an instrument in form and substance
satisfactory to the other Lender, pursuant to which the assignee or
transferee agrees to be bound by this Agreement. Notwithstanding the above,
however, nothing in this Agreement shall be construed as restricting the
right of either Lender to participate an interest in its Claim out to
another lender or third party.
3.9 Additional Documents or Security Interests. In the event that, from and
after the date hereof, either Lender shall obtain or negotiate to obtain
any additional document guaranteeing, confirming, perfecting or otherwise
affecting its Claim or any security interest or lien in Borrower's as sets,
it shall: (a) promptly thereafter notify the other Lender that such
document has been obtained or that it is
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<PAGE> 12
negotiating to obtain such document; (b) either directly or by
incorporation by reference, cause any such document to reflect the relative
priorities of the Lenders with respect to the Collateral; and (c) provide a
copy of the document to the other Lender.
3.10 Borrower's and Corporate Guarantor's Agreement. Borrower and Corporate
Guarantor each hereby consent to the foregoing arrangements and agree to be
bound by the provisions hereof as they relate to the relative rights of
Fleet and Purchasers as between such Lenders with respect to such parties
and the Collateral; provided, however, that Borrower and Corporate
Guarantor further acknowledge and agree that nothing in this Agreement
shall amend, modify, change or supersede the respective terms of the Fleet
Documents or the Purchasers Documents as between each Lender and Borrower
and/or each Lender and Corporate Guarantor, as the case may be; and
provided, further, however, that, as among Purchasers, Fleet, Corporate
Guarantor and Borrower, in the event of any conflict or inconsistency
between the terms of this Agreement and the Fleet Documents or the
Purchasers Documents, as the case may be, the terms of this Agreement shall
govern and Borrower and Corporate Guarantor each shall govern itself
accordingly in connection therewith. Borrower and Corporate Guarantor
further agree that the terms of this Agreement shall not give either
Borrower or Corporate Guarantor any substantive rights vis-a-vis either
Fleet or Purchasers. Without limiting the generality of the foregoing, and
as further inducement to the Lenders to enter into this Agreement, Borrower
and Corporate Guarantor each further (i) recognizes and agrees if either
Lender shall enforce its rights or remedies in violation of the terms of
this Agreement, Borrower and Corporate Guarantor each agrees that it shall
not use such violation as a defense to the enforcement by either Lender of
any rights or remedies under the Purchasers Documents and/or the Fleet
Documents, as the case may be, nor assert such violation as a counterclaim
or basis for set-off or recoupment against either Lender; (ii) authorizes
and directs each Lender to assign its security interest to the other in
accordance with and subject to the terms and limitations of Section 2.7
above; and (iii) nominates and appoints each Lender to serve as the bailee
of the other Lender with respect to any Collateral now or hereafter in the
custody, control or possession of such Lender as security for the payment
of any Claim in accordance with Section 2.7 above.
3.11 Governing Law. This Agreement shall be governed as to valid ity,
interpretations, enforcement and effect by the laws of the State of New
York.
3.12 Consent to Jurisdiction and Service of Process. The Borrower and each
Lender hereby consent to the jurisdiction of any state or federal court
located within the County of Albany, State of New York and irrevocably
agree that, subject to the election of Fleet, all actions and proceedings
relating to
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<PAGE> 13
this Agreement may be litigated in such courts. The Borrower, Corporate
Guarantor and each Lender accept generally and unconditionally the
nonexclusive jurisdiction of the aforesaid courts and waive any defense of
forum non conveniens, and irrevocably agree to be bound by any judgment
rendered thereby in connection with this Agreement. The Borrower, Corporate
Guarantor and each Lender agree that service upon it at its address
provided in the opening paragraph to this Agreement, in the case of Fleet,
Borrower and Corporate Guarantor, and as set forth on Schedule A hereof, in
the case of the Purchasers shall constitute sufficient notice and service
of process. Nothing herein shall affect the right of either Lender to serve
process in any other manner permitted by law or shall limit the right of
Fleet to bring proceedings or obtain or enforce judgments against the
Purchasers in the courts of any other jurisdictions or the right of
Purchasers to enforce judgments against Fleet in other jurisdictions.
3.13 Waiver of Trial By Jury. THE BORROWER, THE CORPORATE GUARANTOR AND EACH
LENDER HEREBY WAIVES ITS RESPECTIVE RIGHT TO A TRIAL BY JURY OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT AND ALSO
WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR
THIS WAIVER, BE REQUIRED OF EITHER LENDER AND/OR BORROWER AND/OR CORPORATE
GUARANTOR. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF
ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THE BORROWER, CORPORATE GUARANTOR AND EACH LENDER FURTHER
REPRESENT THAT THEY HAVE REVIEWED THIS WAIVER WITH THEIR RESPECTIVE LEGAL
COUNSEL, AND THAT THEY KNOWINGLY AND VOLUNTARILY WAIVE THEIR RESPECTIVE
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
SUPPLEMENTS OR OTHER MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT.
IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written individually and as agent for, and on behalf of,
each party's Affiliates.
"Purchasers"
By:____________________
Name:__________________
Title:_________________
By:____________________
Name:__________________
Title:_________________
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"Fleet"
FLEET BANK
By:__________________
James M. Marini
Vice President
14
<PAGE> 15
"Borrower"
DECORA, INCORPORATED
By:____________________
Name:__________________
Title:_________________
15
<PAGE> 16
"Corporate Guarantor"
DECORA INDUSTRIES, INC.
By:____________________
Name:__________________
Title:_________________
STATE OF NEW YORK )
) ss.:
COUNTY OF )
On this ____ day of September, 1997, before me personally appeared James M.
Marini, to me known, who being by me duly sworn, did depose and say that he
resides in Valatie, New York, that he is a Vice President of Fleet Bank, the
corporation described in and which executed the above instrument; and that he
signed his name thereto by order of the Board of Directors of said corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF )
On this ____ day of September, 1997, before me personally appeared
________________________________, to me known, who being by me duly sworn, did
depose and say that _he resides in _____________________________, that _he is
the __________________ of Decora, Incorporated, the corporation described in and
which executed the above instrument; and that _he signed _____ name thereto by
order of the Board of Directors of said corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF )
On this ____ day of September, 1997, before me personally appeared
________________________________, to me known, who being by me duly sworn, did
depose and say that _he resides in _____________________________, that _he is
the __________________ of Decora Industries, Inc., the corporation described in
and which executed the above instrument; and that _he signed _____ name thereto
by order of the Board of Directors of said corporation.
------------------------------
Notary Public
16
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STATE OF NEW YORK )
) ss.:
COUNTY OF )
On this ____ day of September, 1997, before me personally appeared
________________________________, to me known, who being by me duly sworn, did
depose and say that _he resides in _____________________________, that _he is
the __________________ of __________________________________________, the
corporation described in and which executed the above instrument; and that _he
signed _____ name thereto by order of the Board of Directors of said
corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF )
On this ____ day of September, 1997, before me personally appeared
________________________________, to me known, who being by me duly sworn, did
depose and say that _he resides in _____________________________, that _he is
the __________________ of __________________________________________, the
corporation described in and which executed the above instrument; and that _he
signed _____ name thereto by order of the Board of Directors of said
corporation.
------------------------------
Notary Public
17
<PAGE> 18
Schedule A
(List of Purchasers and their Addresses)
18
<PAGE> 19
EXHIBIT A
LOAN AGREEMENTS
1. Loan and Security Agreement executed by the Borrower, the Corporate
Guarantor and Fleet on April 18, 1990 as modified pursuant to the terms of (i)
Loan and Security Agreement Amendment No. 1 by and between the Borrower, the
Corporate Guarantor and Fleet dated July 19, 1994, (ii) Loan and Security
Agreement No. 2 by and between the Borrower, the Corporate Guarantor and Fleet
dated August 13 1996, (iii) Note and Loan and Security Agreement Amendment No. 3
by and between the Borrower, the Corporate Guarantor and Fleet dated March 27,
1997, and (iv) Note and Loan and Security Agreement Amendment No. 4 by and
between the Borrower, the Corporate Guarantor and Fleet dated as of even date
herewith and those Instruments of Collateral Security identified in paragraph 3.
(k) thereof.
2. Secured Revolving Line of Credit Agreement by and between the
Borrower and Fleet dated April 18, 1990 as amended by (i) Amendment to Secured
Revolving Line of Credit Agreement effective and dated as at July 31, 1992 by
and between the Borrower and Fleet, (ii) Second Amendment to Secured Revolving
Line of Credit Agreement effective and dated as of July 29, 1993 by and between
the Borrower and Fleet, (iii) Third Amendment to Secured Revolving Line of
Credit Agreement effective and dated as of July 19, 1994 by and between the
Borrower and Fleet, (iv) Fourth Amendment to Secured Revolving Line of Credit
Agreement effective and dated as of the 13th day of August, 1996 by and between
the Borrower and Fleet, (v) Fifth Amendment to Secured Revolving Line of Credit
Agreement effective and dated as at the 27th day of March, 1997 by and between
the Borrower and Fleet, and (iv) Sixth Amendment to Secured Revolving Line of
Credit Agreement dated as at even date herewith by and between the Borrower and
Fleet.
3. Loan and Security Agreement executed by the Borrower and Fleet on
July 19, 1994, as modified pursuant to the terms of (i) First Amendment to Loan
and Security Agreement by and between the Borrower and Fleet dated March 27,
1997, and (ii) Second Amendment to Loan and Security Agreement by and between
the Borrower and Fleet dated as at even date herewith, and the Security
Documents defined therein.
4. ISDA Master Agreement dated as of March 21, 1997 by and between
Fleet National Bank and the Borrower, plus that certain Assignment, Pledge and
Security Agreement dated as of March 27, 1997, executed by the Borrower in favor
of Fleet, assigning to Fleet all of the Borrower's right, title and interest in
and to the aforementioned ISDA Master Agreement.
5. Export-Import Bank of the United States Notification by Insured of
Amounts Payable under Multi-Buyer Export Credit
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<PAGE> 20
Insurance Policy assignment, pledge and security agreement executed by the
Borrower in favor of Fleet on March 27, 1997.
6. The Security Documents defined in that certain Credit and
Reimbursement Agreement executed by the Borrower in favor of Fleet on November
1, 1996 in connection with that certain Letter of Credit issued by Fleet in
favor of Mellon Bank, FSB as Trustee, concerning the issuance by the counties of
Warren and Washington Industrial Development Agency of Two Million Four Hundred
Sixty Thousand and no/100 Dollars ($2,460,000.00) aggregate principal amount
Industrial Development Revenue Bonds (Decora, Incorporated Project Series 1996)
as modified by (i) Credit and Reimbursement Agreement Modification Agreement No.
1 dated as of March 27, 1997 and (ii) Credit and Reimbursement Agreement
Modification Agreement No. 2 dated as of even date herewith.
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EXHIBIT B
NOTES
1. Credit and Reimbursement Agreement executed by the Borrower in favor
of Fleet on November 1, 1996 in connection with that certain Letter of Credit
issued by Fleet in favor of Mellon Bank, FSB as Trustee, concerning the issuance
by the counties of Warren and Washington Industrial Development Agency of Two
Million Four Hundred Sixty Thousand and no/100 Dollars ($2,460,000.00) aggregate
principal amount Industrial Development Revenue Bonds (Decora, Incorporated
Project Series 1996) as modified by (i) Credit and Reimbursement Agreement
Modification Agreement No. 1 dated as of March 27, 1997 and (ii) Credit and
Reimbursement Agreement Modification Agreement No. 2 dated as of even date
herewith.
2. Five Million One Hundred and Sixty Nine Thousand and no/100 Dollar
($5,169,000.00) Amended and Restated Term Note dated as at March 27, 1997 and
executed by the Borrower on said date in favor of Fleet.
3. One Million and no/100 Dollar ($1,000,000.00) Line of Credit Note
dated March 27, 1997 and executed by the Borrower on said date in favor of
Fleet, as amended by that certain First Amendment to Note executed by the
Borrower and Fleet on even date.
4. Six Million and no/100 Dollar ($6,000,000.00) Restated Promissory
("Grid") Note dated as at the 13th day of August, 1996 and executed by the
Borrower on said date in favor of Fleet.
5. Three Million Three Hundred Fifty Four Thousand One Hundred Sixty
Six and 69/100 Dollars ($3,354,166.69) Consolidated and Restated Promissory Note
dated March 27, 1997 and executed by the Borrower on said date in favor of
Fleet.
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<PAGE> 22
EXHIBIT C
COLLATERAL
1. All of Borrower's now and hereafter owned and acquired, wherever
located: machinery, equipment, furniture, fixtures, goods, inventory, accounts
receivable, instruments, contract rights, general intangibles, chattel paper and
choses in action, including but not limited to, those items set forth on Exhibit
C-1 attached hereto and made a part hereof.
2. All that property, or interest in property, of Borrower constituting
the "mortgaged premises" as that term is defined and described in that certain
Mortgage in the amount of Four Million and no/100 Dollars ($4,000,000.00) dated
April 18, 1990 made by Borrower to Fleet, which Mortgage was recorded in the
Office of the Washington County Clerk on April 23, 1998 in Liber 601 at page
291. Said Mortgage was modified by Mortgage Modification Agreement dated July
19, 1994 and recorded July 25, 1994 in the Washington County Clerk's office in
Liber 846 at page 199, and further modified by Mortgage Modification Agreement
dated March 27, 1997 and recorded March 28, 1997 in the Washington County
Clerk's office in Liber 995 at page 213.
3. Unconditional Guaranty of Corporate Guarantor.
4. All issued and outstanding shares of capital stock of the Borrower,
which shares of stock are owned by the Corporate Guarantor and are pledged to
Fleet to secure the guaranty of the Corporate Guarantor to Fleet as referenced
in 3 above.
5. All of Borrower's right, title and interest in that certain ISDA
Master Agreement executed by the Borrower in favor of Fleet National Bank on
March 27, 1997 and each transaction entered into thereunder (including, without
limitation, all amounts payable or deliverable thereunder).
6. All of Borrower's interest to claim payments which may become due
under policy number ESC-147470 issued by Export-Import Bank of the United States
to Borrower, as insured.
7. All machinery and equipment leases received by Borrower from United
Merchant's and Manufacturers, Inc. pursuant to that certain Asset Purchase
Agreement dated November 28, 1989.
8. All of Borrower's United States Letters Patent.
9. All of Borrower's right, title and interest in and to (i) that
certain promissory note in the face amount of $15,207,000.00 to be executed by
the Corporate Guarantor in favor of the Borrower on even date herewith and (ii)
that certain promissory note in the
22
<PAGE> 23
face amount of $6,000,000.00 to be executed by the Corporate Guarantor in favor
of the Borrower on July 19, 1994.
10. All books and records of Borrower pertaining to the foregoing or
any thereof.
11. All products and proceeds (including, without limitation, insurance
proceeds) pertaining to the foregoing or any thereof.
23
<PAGE> 24
EXHIBIT "C-1"
DECORA INCORPORATED EXPANSION/RENOVATION PROJECT
DETAILED ASSET LISTING
<TABLE>
<CAPTION>
Asset Asset ADS In-Service
Number Description Utility Life (1) Date
------ ----------- ------- -------- ----------
<S> <C> <C> <C> <C>
1 347 Computer Tracks production data and flow 5 9/30/95
2 348 Oven exhaust system Required to vent air from machinery oven 10 9/30/95
3 349 DC Drive system Required to improve reliability and efficiency of #1 coater 10 9/30/95
4 350 Heat Exchanger Burns toxic production emissions prior to venting to outside 10 9/30/95
5 351 Explosion proof containment area Required on production machine to run solvent-based coated
products 10 9/30/95
6 352 Monorail beams Transports work-in-process goods on and off machines 10 9/30/95
7 353 Trim removal system Transports waste trimmings from production machines
to compactor 10 9/30/95
8 354 Tennant floor cleaner Removes dust and other contaminants from finish packaging
work area 10 9/30/95
9 355 Cad-cam engineering software Required to perform engineering drawings for machinery
installation/maintenance 5 9/30/95
10 356 Underground storage tank removal Required per EPA regulations 40 9/30/95
11 357 Shipping dock truck locks Holds trucks against shipping docks while loading (safety) 40 9/30/95
12 358 Verduin embosser Embosses vinyl film with woodgrain texture 10 9/30/95
13 359 Concrete truck shipping pad Required to support weight of shipping trucks 40 9/30/95
14 360 Floor sealing Required under installed machinery for removal of contaminants
and safety 40 9/30/95
15 361 Roof modifications Required to protect new machinery and insert venting ducts 40 9/30/95
16 362 Machine winng Required to operate production machinery 40 9/30/95
17 363 Work area lighting Required to operate production machinery 40 9/30/95
18 364 Air piping Required to operate production machinery 40 9/30/95
19 365 Air compressor Required to operate production machinery 10 9/30/95
20 366 HVAC Required for machine operator comfort 40 9/30/95
21 367 WIP Racking Required for staging of work-in-process goods during
production flow 10 9/30/95
22 368 Emission controls Required for EPA compliance 10 9/30/95
23 369 Narrow-aisle lift truck Required to handle work-in-process goods 10 9/30/95
24 370 Lift truck Required to handle work-in-process goods 10 9/30/95
25 371 Bar code hardware/installation Required to track work-in-process goods through production 10 9/30/95
26 372 Voice mail switch Required for internal and external communications 10 9/30/95
27 373 Fork lift truck batteries Required to power fork-lift trucks noted above 10 9/30/95
28 374 Corone treatment head Required to surface treat products to improve applied adhesive
performance 10 9/30/95
29 375 Lift truck batteries Required to power fork-lift trucks noted above 10 9/30/95
30 246 Operations supplies Hand tools and other supplies necessary to operate production
machines 10 9/30/95
</TABLE>
24
<PAGE> 1
EXHIBIT 99.10
ASSIGNMENT, PLEDGE AND SECURITY AGREEMENT
The undersigned, DECORA, INCORPORATED, a Delaware corporation
authorized to do business in the State of New York as DECORA MANUFACTURING with
an office and place of business at One Mill Street, Fort Edward, New York 12828
("Assignor"), in consideration for loans and other credit accommodations
(collectively the "Loans") by FLEET BANK ("Assignee"), to Assignor, does hereby
deliver to the Assignee, and does hereby assign, pledge and grant a security
interest in favor of the Assignee, in all of the Assignor's right, title and
interest in and to that which is listed at Schedule A attached hereto and made a
part hereof plus all additions thereto and substitutions therefor, and all sums
due or hereafter due the Assignor therefrom, plus all proceeds and products
arising therefrom (all hereinafter called the "Collateral").
Upon Assignor's failure to pay all or any part of the principal or
interest on the Loans when due and payable after the expiration of any
applicable grace period provided therein, whether by acceleration or otherwise,
the Assignee has the authority to demand and receive all sums due from the
Collateral without demand on Assignor, advertisement or public or private sale,
all of which are hereby expressly waived. After deducting all expenses in
connection with the demand and receipt of the sums from the above mentioned
Collateral, Assignee may apply the balance of the proceeds to payment of the
principal and interest on the Loans, and to pay any other indebtedness of the
Assignor to the Assignee, and shall pay the excess, if any, to Assignor.
Assignor hereby waives to the extent permitted by law, all rights of redemption
and appraisement.
In the event that perfection of a security interest on the part of the
Assignee is required by law, in terms of filing Financing Statements in offices
of public record, the Assignor irrevocably authorizes Assignee to file at any
time Financing Statements without its execution thereof, indicating the
Assignee's security interest in the Collateral. In addition, in the event that
the Assignee must make demand and receive all sums due from the Collateral as a
result of Assignor's default as aforesaid, the expenses of pursuing, searching
for, retaking, receiving, holding, storing, safeguarding, insuring, accounting
for, advertising, preparing for sale or lease, selling, leasing, and the like,
plus attorney's fees for certified public accountants, fees for auctioneers,
fees for brokers and/or appraisers or any other cost of disbursements whatsoever
incurredby or contracted for by the Assignee in connection with the disposition
of the Collateral (including any of the foregoing incurred or contracted for by
the Assignee in connection with any bankruptcy or insolvency proceedings
involving the Assignor) - shall all be chargeable and constitute a lien on the
Collateral. Assignor shall be liable to Assignee and on demand shall pay to the
Assignee any deficiency which may remain under the Loans after such sale or
other
1
<PAGE> 2
disposition; and Assignee agrees to remit to the Assignor any surplus resulting
therefrom after payment in full of the obligations and such expenses of sale.
It is expressly understood and agreed that, upon the payment of all
indebtedness of the Assignor to the Assignee pursuant to the terms of the Loans
in full, plus all accrued interest thereon, the COLLATERAL held pursuant to this
Agreement shall be promptly reassigned, transferred, delivered and released to
the Assignor.
It is further agreed by the Assignor that in the event any of the
Collateral is in the form of bank accounts or certificates of deposit, duly
executed Assignment of Bank Account as Collateral Forms for all COLLATERAL, true
copies of which are attached hereto at Schedule B will be delivered by the
Assignor to the Assignee herewith, and that all said Assignment of Bank Account
as Collateral Forms will be duly executed, with the corporate seal affixed.
It is further agreed by the Assignor that in the event that any of the
Collateral is transferable by stock or bond powers, that duly executed stock or
bond powers will be delivered by the Assignor to the Assignee, and that all said
stock or bond powers will be duly executed, with the corporate seal affixed if
executed by a corporation, and that the signatures will be guaranteed by a
commercial bank or a brokerage agency.
If any of the Collateral is an instrument or other document requiring
delivery to the Assignee for purposes of perfection, Assignor will deliver to
the Assignee said instrument or document simultaneously herewith.
Once the COLLATERAL is transformed or converted into an instrument or
other document requiring delivery to the Assignee for purposes of perfection,
Assignor will deliver to the Assignee said instrument or document within
twenty-four (24) hours of said transformation.
If any of the COLLATERAL requires a withdrawal slip or check or any
written instrument for the purposes of transferring sums of money into or from
the COLLATERAL, the Assignor hereby irrevocably authorizes the Assignee, and
grants the Assignee full power of attorney, to make withdrawals from and
deposits into the COLLATERAL in the name of the Assignor, including but not
limited to signed checks, checks and withdrawal statements on behalf of the
Assignor, and to endorse any check or instrument made payable to the Assignor
for deposit into the COLLATERAL.
If the undersigned are more than one, all obligations hereunder are
both joint and several.
IN WITNESS WHEREOF, the undersigned has caused this Instrument to be
executed as of the 26th day of September, 1997.
2
<PAGE> 3
DECORA, INCORPORATED
d/b/a DECORA MANUFACTURING
By: ___________________________________
Name: _________________________________
Title: ________________________________
STATE OF NEW YORK )
)ss.:
COUNTY OF )
On this ____ day of September, 1997, before me, personally came
_____________________, to me personally known, who, being by me duly sworn, did
depose and say that _he resides at _____________________________________________
__________________________________, that _he is the __________ of DECORA,
INCORPORATED d/b/a DECORA MANUFACTURING, the corporation described in and which
executed the above Instrument; and that _he signed his/her name thereto by like
order of the Board of Directors of said corporation.
_________________________________________
Notary Public
3
<PAGE> 4
SCHEDULE A
Promissory note from DECORA INDUSTRIES, INC. to DECORA, INCORPORATED
d/b/a DECORA MANUFACTURING in the principal amount of Fifteen Million Two
Hundred Seven Thousand and no/100 Dollars ($15,207,000.00) dated September 26,
1997, a copy of which is attached hereto as Exhibit A, and the original of which
has been surrendered by DECORA, INCORPORATED d/b/a DECORA MANUFACTURING to FLEET
BANK on even date herewith.
4
<PAGE> 1
EXHIBIT 99.11
FIRST AMENDMENT TO
NOTE
THIS AGREEMENT, to be effective and dated as at the 26th day September,
1997, by and between FLEET BANK, a bank organized and existing under the laws of
the State of New York, and having its principal banking house located at 69
State Street, Albany, New York 12201 (herein called the "Lender"), and DECORA,
INCORPORATED, a Delaware corporation duly authorized to do business in the State
of New York as Decora Manufacturing and having its principal place of business
at One Mill Street, Fort Edward, New York 12828 (herein called the "Borrower").
W I T N E S S E T H:
WHEREAS, the Borrower executed in favor of the Lender on March 27, 1997
a Line of Credit Note in the face amount of One Million and no/100 Dollars (the
"Note"), pursuant to the terms and conditions of which the Lender agreed, from
time to time, up to and including August 31, 1998, to make loans to the Borrower
in such amount or amounts as the Lender would determine, but not to exceed
$1,000,000.00 outstanding in the aggregate at any one time; and
WHEREAS, the Note was subject to the terms and conditions of
that certain Security Agreement (as defined in the Note); and
WHEREAS, the Lender, at the request of the Borrower, has agreed to
extend the time for making advances under the Note to August 31, 1999 and to
make certain other changes to the Note; provided, however, that the Note, as
modified, would remain subject to the terms of the Security Agreement.
NOW, THEREFORE, in consideration of the Lender agreeing to extend the
time for making additional advances under the Note, and other good and valuable
consideration, receipt of which is hereby acknowledged, it is agreed on the part
of the Borrower with the Lender as follows:
1. That the time for making loans under the Note is extended to August
31, 1999.
2. That subparagraph (g) on pages 4 and 5 of the Note under the "Event
of Default" section is hereby modified to read in its entirety as follows:
"(g) Failure by the Borrower to at all times keep proper books
and records and accounts in accordance with generally accepted
accounting principals consistently applied ("GAAP"), and provide the
following financial reporting to the Bank;
(i) within ninety five (95) days of the end of its fiscal
year, annual certified public accountant audited,
consolidated statements for the Borrower
1
<PAGE> 2
and Decora Industries, Inc. (which must include a
consolidating statement schedule), all prepared in
accordance with generally accepted accounting
principles ("GAAP") consistently applied, as well as
copies of the Borrower's 10-k reports;
(ii) within thirty (30) days of each calendar month end,
internally prepared financial statements for the
Borrower for the preceding month, in form acceptable to
the Bank, all prepared in accordance with GAAP;
(iii) within fifty (50) days of the end of each fiscal
quarter, 10Q reports for Decora Industries, Inc.;
(iv) within thirty (30) days of the end of each month,
separate domestic and international account receivable
aging reports concerning the Borrower in form
acceptable to the Bank;
(v) within sixty (60) days after the end of each fiscal
quarter, a compliance letter acknowledged by the Chief
Financial Officers of both the Borrower and Decora
Industries, Inc. concerning those financial covenants
referenced below in subparagraph (h); and
(vi) At the time of submittal of each Request for Advance,
but in no event less frequently than monthly, a Loan
Formula Certificate."
3. That subparagraph (h) on pages 4 and 5 of the Note under the "Event
of Default" section is hereby modified to read in its entirety as follows:
"(h) Failure by the Borrower to maintain compliance with the following
financial covenants, as would be shown on the quarterly and fiscal year
end financial statements of the Borrower prepared in accordance with
GAAP:
(i) a minimum current ratio of 1.30 to 1.00 during fiscal year
1998 and 1.50 to 1.00 during fiscal year 1999 and thereafter.
For the purposes of this Agreement, current ratio shall be
defined as the ratio of the Borrower's current assets
(including the unused formula loan availability under that
certain $6,000,000.00 revolving line of credit loan previously
extended by the Bank to the Borrower and under this Note
[collectively the "Revolver Loans"]) to the Borrower's current
liabilities (excluding the aforementioned Revolver Loans) as
would be shown on each fiscal quarter end and fiscal year end
balance sheets of the Borrower prepared in accordance with
GAAP;
(ii) a minimum working capital of Four Million and no/100
Dollars ($4,000,000.00) as at September 30, 1997 through
-2-
<PAGE> 3
December 31, 1997 and Five Million Five Hundred Thousand and
no/100 Dollars ($5,500,000.00) as at March 31, 1998. During
fiscal year 1999 and thereafter, the Borrower must maintain a
minimum working capital of Seven Million and no/100 Dollars
($7,000,000.00), all as would be shown on the fiscal quarter
end and fiscal year end balance sheets of the Borrower
prepared in accordance with GAAP. For the purposes of
determining working capital, the Borrower's liability to the
Bank pursuant to the Revolver Loans will be excluded, and the
Borrower's current assets shall be increased by the Borrower's
unused formula loan availability under the Revolver Loans;
(iii) a total debt to tangible net worth ratio at fiscal year
end March 31, 1998 of 5.00 to 1.00, at fiscal year end March
31, 1999 of 4.00 to 1.00, at fiscal year end March 31, 2000 of
3.00 to 1.00 and at fiscal year end March 31, 2001 and
thereafter at each March 31 fiscal year end of 2.50 to 1.0.
For the purposes of this Agreement, debt to tangible net worth
ratio shall be defined as the ratio of the Borrower's total
liabilities (less subordinated debt) divided by the sum of the
Borrower's tangible net worth plus subordinated debt less the
amount of the outstanding principal balance of the notes
receivable from Decora Industries, Inc. (the "Corporate
Guarantor"), as would be shown on the fiscal quarter end and
fiscal year end balance sheets of the Borrower prepared in
accordance with GAAP. For the purposes of this Agreement, the
calculation for fiscal year end March 31, 1998 shall exclude
the one time charge to earnings from September 26, 1997 to and
including December 31, 1997, in an amount not to exceed
$750,000.00, for efficiencies realized as a result of "right
sizing" of the business of the Borrower, its Corporate
Guarantor and Decora Industries Deutscheland GmbH which reduce
the Borrower's consolidated stockholders equity;
(iv) a minimum debt service coverage ratio during fiscal year
1998 of 1.15 to 1.00 and during fiscal year 1999 and
thereafter of 1.20 to 1.00. For the purposes of this
Agreement, debt service coverage ratio will be calculated
using the trailing four quarters of the Borrower's earnings
before interest, taxes, depreciation and amortization minus
the Borrower's cash capital expenditures (net of financed
capital expenditures) divided by the sum of Borrower's
trailing four quarters debt service payments (principal and
interest) less funds used to repay the Borrower's indebtedness
owed to CIGNA (whether in the form of debt or equity) minus
amortization of non-cash debt discount associated with
subordinated debt, as would be shown on the fiscal quarter end
and fiscal year end balance sheets of the Borrower prepared in
accordance with GAAP. For the purposes of this Agreement, the
calculation for fiscal
-3-
<PAGE> 4
year end March 31, 1998 shall exclude the one time charge to
earnings from September 26, 1997 to and including December 31,
1997, in an amount not to exceed $750,000.00, for efficiencies
realized as a result of "right sizing" of the business of the
Borrower, the Corporate Guarantor and Decora Industries
Deutscheland GmbH which reduce the Borrower's consolidated
stockholders equity;
(v) the Borrower shall be limited to making annual capital
expenditures in the maximum amount of One Million Five Hundred
and no/100 Dollars during fiscal year 1998 and One Million and
no/100 Dollars during the balance of the term of this Note. If
required by the terms of the manufacturing agreement between
the Borrower and Rubbermaid, for each year during the term of
this Note, the Borrower must provide evidence, satisfactory to
the Bank, that the Borrower has received the consent of
Rubbermaid to make capital expenditures exceeding One Million
and no/100 Dollars ($1,000,000.00) in said year;
(vi) the Borrower's expenditures for management fees shall not
exceed Eight Hundred Thousand and no/100 Dollars ($800,000.00)
per annum;
(vii) the consolidated stockholders equity of the Borrower as
of March 31, 1998 shall not be less than the remainder of
$14,415,000.00 minus the lesser of (a) $750,000.00 or (b) the
one time charge to earnings from September 26, 1997 to and
including December 31, 1997 for efficiencies realized as a
result of "right sizing" of the business of the Borrower, the
Corporate Guarantor and Decora Industries Deutscheland GmbH
which reduce the Borrower's consolidated stockholders equity
(such remainder the "1998 Borrower Net Worth"); the
consolidated stockholders equity of the Borrower at March 31,
1999 shall not be less than the sum of the 1998 Borrower Net
Worth plus $2,500,000.00; the consolidated stockholders equity
of the Borrower at March 31, 2000 shall not be less than the
sum of the 1998 Borrower Net Worth plus $6,500,000.00; and at
each fiscal year end thereafter, the consolidated stockholders
equity of the Borrower shall not be less than the sum of
consolidated stockholders equity of the Borrower required to
be maintained at the end of the immediately prior fiscal year
plus $6,000,000.00; and
(viii) the consolidated stockholders equity of the Corporate
Guarantor at March 31, 1999 shall not be less than the sum of
the consolidated stockholders equity of the Corporate
Guarantor at March 31, 1998 (the "1998 Guarantor Net Worth")
plus $4,000,000.00; the consolidated stockholders equity of
the Corporate Guarantor at March 31, 2000 shall not be less
than the sum of the 1998 Guarantor Net Worth plus
$10,000,000.00;
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<PAGE> 5
and at each fiscal year end thereafter, the consolidated
stockholders equity of the Corporate Guarantor shall not be
less than the sum of consolidated stockholders equity of the
Guarantor required to be maintained at the end of the
immediately prior fiscal year plus $8,000,000.00."
4. That a new subparagraph (i) - under "Event of Default" is added on
page 6 of the Note as follows:
"(i) In the event the Borrower is in default pursuant to the terms of
that certain Note and Warrant Purchase Agreement dated as of September
26, 1997 among the Borrower, Decora Industries, Inc., Dorrance Street
Capital Advisors, L.L.C., as Agent and the Purchasers named therein or
any of the "Loan Documents" as that term is defined therein."
5. That all of the other terms and conditions of the Note shall remain
in full force and effect, except as modified by the terms of this Agreement.
6. The Borrower hereby warrants and covenants to the Lender that as of
the date of this Agreement, there are no disputes, offsets, claims or
counterclaims of any kind or nature whatsoever under the Note, the Security
Agreement, this Agreement or any of the documents executed in connection
herewith or therewith or the obligations represented or evidenced hereby or
thereby.
7. By signing this Agreement, the Corporate Guarantor, Decora
Industries, Inc., hereby consents to all the provisions of this Agreement and
ratifies and affirms its obligations to the Lender pursuant to the Guaranty
Agreement (the "Guaranty") previously executed by it and modifies, confirms and
approves of this First Amendment to Note and hereby warrants and covenants to
the Lender that as of the date of this First Amendment to Note that there are no
disputes, offsets, claims or counterclaims of any kind or nature whatsoever
under the Guaranty or any of the documents executed herewith or therewith or the
obligations represented or evidenced hereby or thereby.
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed by their duly authorized officers as of the effective date above
written.
DECORA, INCORPORATED d/b/a FLEET BANK
DECORA MANUFACTURING
By: ________________________________ By: _______________________________
Timothy N. Burditt James M. Marini
Vice President, Finance Vice President
CONSENT OF UNCONDITIONAL GUARANTOR:
DECORA INDUSTRIES, INC.
By: ________________________________
-5-
<PAGE> 6
Timothy N. Burditt
Executive Vice President,
Finance and Administration
-6-
<PAGE> 1
EXHIBIT 99.12
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT, to be effective and dated as at the 26th day of
September, 1997, by and between FLEET BANK, a bank organized and existing under
the laws of the State of New York, and having its principal banking house
located at 69 State Street, Albany, New York 12201 (herein called the "Lender"),
and DECORA, INCORPORATED, a Delaware corporation duly authorized to do business
in the State of New York as Decora Manufacturing and having its principal place
of business at One Mill Street, Fort Edward, New York 12828 (herein called the
"Borrower").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender entered into a Loan and Security
Agreement on July 19, 1994 (the "Loan Agreement") pursuant to the terms and
conditions of which the Lender agreed, from time to time, up to and including
July 18, 1995, to make loans to the Borrower in such amount or amounts as the
Lender would determine, but not to exceed $1,000,000.00 outstanding in the
aggregate at any one time, with all borrowings evidenced on Borrower's
Promissory Note executed and delivered by the Borrower to the Lender on July 19,
1994 (the "Prior Note"); and
WHEREAS, on March 27, 1997, the Borrower executed in favor of the
Lender and Amended and Restated Promissory Note in the principal amount of
$3,354,166.69 (the "New Note"); which New Note was subject to the terms of the
Loan Agreement, as modified by the terms of a First Amendment to Loan and
Security Agreement, also dated March 27, 1997 executed by and between the
Borrower and the Lender (hereinafter the "First Amendment"); and
WHEREAS, the Lender, at the request of the Borrower has agreed
to make further modifications to the Loan Agreement; and
NOW, THEREFORE, in consideration of $1.00 and other good and valuable
consideration, receipt of which is hereby acknowledged, it is agreed on the part
of the Borrower with the Lender as follows:
1. That those certain financial covenants contained in paragraph 3(d)
and those certain financial reporting requirements contained in paragraph 3(g)
of that certain Loan and Security Agreement entered into by and between the
Borrower and the Lender on April 18, 1990, which Loan and Security Agreement was
modified and amended by that certain Loan and Security Agreement Amendment No. 1
dated as of July 19, 1994, by and between the Borrower and the Lender, that
certain Loan and Security Agreement Amendment No. 2 dated as of August 13, 1996
by and between the Borrower and the Lender, that certain Loan and Security
Agreement No. 3 dated as of March 27, 1996 by and between the Borrower and the
Lender and that certain Loan and Security Agreement Amendment No. 4 dated as of
even date herewith by and between the Borrower and the Lender
1
<PAGE> 2
(collectively the "Loan and Security Agreement") shall be incorporated into and
become a part of the Loan Agreement, as modified pursuant to the terms of this
Agreement, and shall continue to govern the loan which is the subject of this
Agreement and shall remain in full force and effect, even if the loan which is
the subject the aforementioned Loan and Security Agreement should be paid in
full and said Loan and Security Agreement should be terminated.
2. That paragraph 6 of the Loan Agreement shall be modified, in part,
to add another default condition as follows:
"or in the event the Borrower is in default pursuant to the terms of
that certain Note and Warrant Purchase Agreement dated as of September
26, 1997 among the Borrower, Decora Industries, Inc., Dorrance Street
Capital Advisors, L.L.C., as Agent and the Purchasers named therein or
any of the "Loan Documents" as that term is defined therein. . ."
3. That all of the other terms and conditions of the Loan Agreement
shall remain in full force and effect, except as further modified by the terms
of this Agreement.
4. The Borrower hereby warrants and covenants to the Lender that as of
the date of this Agreement, there are no disputes, offsets, claims or
counterclaims of any kind or nature whatsoever under the Prior Note, the New
Note, the Loan Agreement, the First Amendment, this Agreement or any of the
documents executed in connection herewith or therewith or the obligations
represented or evidenced hereby or thereby.
5. By signing this Agreement, Decora Industries, Inc. the ("Guarantor")
hereby consents to all the provisions of this Agreement and ratifies and affirms
its obligations to the Lender pursuant to the Guaranty Agreement (the
"Guaranty") previously executed by it and modifies, confirms and approves of
this Second Amendment to Loan and Security Agreement and hereby warrants and
covenants to the Lender that as of the date of this Second Amendment to Loan and
Security Agreement that there are no disputes, offsets, claims or counterclaims
of any kind or nature whatsoever under the Guaranty or any of the documents
executed herewith or therewith or the obligations represented or evidenced
hereby or thereby.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed by their duly authorized officers as of the effective date above
written.
DECORA, INCORPORATED d/b/a FLEET BANK
DECORA MANUFACTURING
By: ________________________________ By: _______________________________
Timothy N. Burditt James M. Marini
Vice President, Finance Vice President
CONSENT OF UNCONDITIONAL GUARANTOR:
DECORA INDUSTRIES, INC.
By: ________________________________
Timothy N. Burditt
Executive Vice President,
Finance and Administration
3
<PAGE> 1
EXHIBIT 99.13
CREDIT AND REIMBURSEMENT AGREEMENT
MODIFICATION AGREEMENT NO. 2
This Credit and Reimbursement Agreement Modification Agreement No. 2
dated as of September 26, 1997 by and between Decora, Incorporated, a business
corporation organized and existing under the laws of the State of Delaware and
authorized to do business in the State of New York under the name Decora
Manufacturing, having an office for the transaction of business located at 1
Mill Street, Fort Edward, New York 12828 (hereinafter referred to as the
"Company") and Fleet Bank, a banking corporation organized and existing under
the laws of the State of New York having an office for the transaction of
business located at 69 State Street, Albany, New York 12201 (the "Bank").
W I T N E S S E T H:
WHEREAS, as of November 1, 1996, the Company executed in favor of the
Bank a Credit and Reimbursement Agreement (the "Credit and Reimbursement
Agreement") in connection with that certain letter of credit issued by the Bank
in favor of Mellon Bank, FSB, as Trustee, concerning the issuance by the
Counties of Warren and Washington Industrial Development Agency of Two Million
Four Hundred Sixty Thousand and no/100 Dollars ($2,460,000.00) aggregate
principal amount industrial development revenue bonds (Decora, Incorporated
Project, Series 1996), which Credit and Reimbursement Agreement was modified
pursuant to the terms of that certain Credit and Reimbursement Agreement
Modification Agreement No. 1 by and between the Company and the Bank dated March
27, 1997 (the "Amendment No. 1"); and
WHEREAS, the Company and the Bank have agreed to further modify certain
terms of the Credit and Reimbursement Agreement.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, the receipt of which is acknowledged by the parties,
the Company and the Bank hereby agree as follows:
1. Section 6.01(G) of Article VI of the Credit and Reimbursement
Agreement entitled "Reporting Requirements" is hereby amended,
modified and restated in its entirety to read as follows:
"(G) REPORTING REQUIREMENTS. Furnish, or cause to be
furnished, to the Bank:
(1) within ninety five (95) days of the end of its
fiscal year, annual certified public accountant
audited, consolidated statements for the Company
and its Guarantor (which must include a
consolidating statement schedule), all prepared
in accordance with generally
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accepted accounting principles ("GAAP")
consistently applied, as well as copies of the
Company's 10-k reports;
(2) within thirty (30) days of each calendar month
end, internally prepared financial statements
for the Company for the preceding month, in form
acceptable to the Bank, all prepared in
accordance with GAAP;
(3) within fifty (50) days of the end of each fiscal
quarter, 10Q reports for the Guarantor;
(4) within thirty (30) days of the end of each
month, separate domestic and international
account receivable aging reports concerning the
Company in form acceptable to the Bank;
(5) within sixty (60) days after the end of each
fiscal quarter, a compliance letter acknowledged
by the Chief Financial Officers of both the
Company and its Guarantor concerning those
financial covenants referenced below in
subparagraph (H);
(6) promptly after the commencement thereof, but in
any event not later than ten (10) days after
service of process with respect thereto on the
Company or its Guarantor, notice of all actions,
suits or proceedings before any court or
governmental department, commission, board,
bureau, agency or instrumentality which could
materially adversely effect the Company's or its
Guarantor's financial condition or operations;
and
(7) such other information with respect to the
condition or operations, financial or otherwise,
of the Company, its Guarantor or of any entity
which is a Related Person thereto."
2. Section 6.01(H) of Article VI of the Credit and Reimbursement
Agreement entitled "Financial Covenants" is hereby amended,
modified and restated in its entirety as follows:
(H) FINANCIAL COVENANTS. The Company shall maintain the following
financial covenants:
(i) a minimum current ratio of 1.30 to 1.00 during fiscal
year 1998 and 1.50 to 1.00 during fiscal year 1999 and
thereafter. For the purposes of this Agreement, current
ratio shall be defined as the ratio of the Company's
current assets (including the unused formula
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loan availability under that certain $6,000,000.00
revolving line of credit loan extended by the Bank to
the Company and that certain $1,000,000.00 revolving
line of credit loan extended by the Bank to the Company
[collectively the "Revolver Loans"]) to the Company's
current liabilities (excluding the aforementioned
Revolver Loans) as would be shown on the fiscal quarter
end and fiscal year end balance sheets of the Company
prepared in accordance with GAAP;
(ii) a minimum working capital of Four Million and no/100
Dollars ($4,000,000.00) as at September 30, 1997
through December 31, 1997 and Five Million Five Hundred
Thousand and no/100 Dollars ($5,500,000.00) as at March
31, 1998. During fiscal year 1999 and thereafter, the
Company must maintain a minimum working capital of
Seven Million and no/100 Dollars ($7,000,000.00), all
as would be shown on the fiscal quarter end and fiscal
year end balance sheets of the Company prepared in
accordance with GAAP. For the purposes of determining
working capital, the Company's liability to the Bank
pursuant to the Revolver Loans will be excluded, and
the Company's current assets shall be increased by the
Company's unused formula loan availability under the
Revolver Loans.
(iii) a total debt to tangible net worth ratio at fiscal year
end March 31, 1998 of 5.00 to 1.00, at fiscal year end
March 31, 1999 of 4.00 to 1.00, at fiscal year end
March 31, 2000 of 3.00 to 1.00 and at fiscal year end
March 31, 2001 and thereafter at each March 31 fiscal
year end of 2.50 to 1.0. For the purposes of this
Agreement, debt to tangible net worth ratio shall be
defined as the ratio of the Company's total liabilities
(less subordinated debt) divided by the sum of the
Company's tangible net worth plus subordinated debt
less the amount of the outstanding principal balance of
the notes receivable from the Guarantor, as would be
shown on the fiscal quarter end and fiscal year end
balance sheets of the Company prepared in accordance
with GAAP. For the purposes of this Agreement, the
calculation for fiscal year end March 31, 1998 shall
exclude the one time charge to earnings from September
26, 1997 to and including December 31, 1997, in an
amount not to exceed $750,000.00, for efficiencies
realized as a result of "right sizing" of the business
of
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<PAGE> 4
the Company, its Guarantor and Decora Industries
Deutscheland GmbH which reduce the Company's
consolidated stockholders equity;
(iv) a minimum debt service coverage ratio during fiscal
year 1998 of 1.15 to 1.00 and during fiscal year 1999
and thereafter of 1.20 to 1.00. For the purposes of
this Agreement, debt service coverage ratio will be
calculated using the trailing four quarters of the
Company's earnings before interest, taxes, depreciation
and amortization minus the Company's cash capital
expenditures (net of financed capital expenditures)
divided by the sum of Company's trailing four quarters
debt service payments (principal and interest) less
funds used to repay the Company's indebtedness owed to
CIGNA (whether in the form of debt or equity) minus
amortization of non-cash debt discount associated with
subordinated debt, as would be shown on the fiscal
quarter end and fiscal year end balance sheets of the
Company prepared in accordance with GAAP. For the
purposes of this Agreement, the calculation for fiscal
year end March 31, 1998 shall exclude the one time
charge to earnings from September 26, 1997 to and
including December 31, 1997, in an amount not to exceed
$750,000.00, for efficiencies realized as a result of
"right sizing" of the business of the Company, the
Guarantor and Decora Industries Deutscheland GmbH which
reduce the Company's consolidated stockholders equity;
(v) the Company shall be limited to making annual capital
expenditures in the maximum amount of One Million Five
Hundred and no/100 Dollars during fiscal year 1998 and
One Million and no/100 Dollars during the balance of
the term of this Agreement. If required by the terms of
the manufacturing agreement between the Company and
Rubbermaid, for each year during the term of this
Agreement, the Company must provide evidence,
satisfactory to the Bank, that the Company has received
the consent of Rubbermaid to make capital expenditures
exceeding One Million and no/100 Dollars
($1,000,000.00) in said year;
(vi) the Company's expenditures for management fees shall
not exceed Eight Hundred Thousand and no/100 Dollars
($800,000.00) per annum;
(vii) the consolidated stockholders equity of the Company as
of March 31, 1998 shall not be less
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<PAGE> 5
than the remainder of $14,415,000.00 minus the lesser
of (a) $750,000.00 or (b) the one time charge to
earnings from September 26, 1997 to and including
December 31, 1997 for efficiencies realized as a result
of "right sizing" of the business of the Company, the
Guarantor and Decora Industries Deutscheland GmbH which
reduce the Company's consolidated stockholders equity
(such remainder the "1998 Company Net Worth"); the
consolidated stockholders equity of the Company at
March 31, 1999 shall not be less than the sum of the
1998 Company Net Worth plus $2,500,000.00; the
consolidated stockholders equity of the Company at
March 31, 2000 shall not be less than the sum of the
1998 Company Net Worth plus $6,500,000.00; and at each
fiscal year end thereafter, the consolidated
stockholders equity of the Company shall not be less
than the sum of consolidated stockholders equity of the
Company required to be maintained at the end of the
immediately prior fiscal year plus $6,000,000.00; and
(viii) the consolidated stockholders equity of the Guarantor
at March 31, 1999 shall not be less than the sum of the
consolidated stockholders equity of the Guarantor at
March 31, 1998 (the "1998 Guarantor Net Worth") plus
$4,000,000.00; the consolidated stockholders equity of
the Guarantor at March 31, 2000 shall not be less than
the sum of the 1998 Guarantor Net Worth plus
$10,000,000.00; and at each fiscal year end thereafter,
the consolidated stockholders equity of the Guarantor
shall not be less than the sum of consolidated
stockholders equity of the Guarantor required to be
maintained at the end of the immediately prior fiscal
year plus $8,000,000.00."
3. Except as expressly modified pursuant to the terms hereof, all the
remaining terms of the Credit and Reimbursement Agreement, as
previously modified pursuant to Amendment No. 1, remain in full
force and effect without modification.
4. The Company hereby warrants and covenants to the Bank that as of
the date of this Credit and Reimbursement Agreement Modification
Agreement No. 2, there are no disputes, offsets, claims or
counterclaims of any kind or nature whatsoever under the Credit and
Reimbursement Agreement, Amendment No. 1 or any of the documents
executed herewith or therewith or the obligations represented or
evidenced hereby or thereby.
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<PAGE> 6
5. By signing this Credit and Reimbursement Agreement Modification
Agreement No. 2, Decora Industries, Inc. (the "Guarantor") hereby
consents to all the provisions of this Credit and Reimbursement
Agreement Modification Agreement No. 2 and ratifies and affirms its
obligations to the Bank pursuant to that certain Guaranty Agreement
also dated as of November 1, 1996, executed by the Guarantor in
favor of the Bank (the "Guaranty") and ratifies, confirms and
approves of this Credit and Reimbursement Agreement Modification
Agreement No. 2 and hereby warrants and covenants to the Bank that
as of the date of this Credit and Reimbursement Agreement
Modification Agreement No. 2 there are no disputes, offsets, claims
or counterclaims of any kind or nature whatsoever under the
Guaranty or any of the documents executed in connection herewith or
therewith or the obligations represented or evidenced hereby or
thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Credit and
Reimbursement Agreement Modification Agreement No. 2 the day and year first
above written.
Fleet Bank
By: ______________________________
James M. Marini, Vice President
Decora, Incorporated d/b/a Decora
Manufacturing
By: ________________________________
Timothy N. Burditt,
Vice President - Finance
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<PAGE> 7
Decora Industries, Inc.
By: ________________________________
Timothy J. Burditt,
Executive Vice President -
Finance and Administration
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<PAGE> 1
EXHIBIT 99.14
SIXTH AMENDMENT TO
SECURED REVOLVING LINE OF CREDIT AGREEMENT
THIS AGREEMENT, to be effective and dated as at the 26th day of
September, 1997, by and between FLEET BANK (formerly Norstar Bank of Upstate
NY), a bank organized and existing under the laws of the State of New York, and
having its principal banking house located at 69 State Street, Albany, New York
12201 (herein called the "Lender"), and DECORA, INCORPORATED, a Delaware
corporation duly authorized to do business in the State of New York as Decora
Manufacturing and having its principal place of business at One Mill Street,
Fort Edward, New York 12828 (herein called the "Borrower").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender entered into a Secured Revolving
Line of Credit Agreement on April 18, 1990 (the "Secured Revolving Line of
Credit Agreement") pursuant to the terms and conditions of which the Lender
agreed, from time to time, up to and including July 31, 1992, to make loans to
the Borrower in such amount or amounts as the Lender would determine, but not to
exceed $5,000,000.00 outstanding in the aggregate at any one time, with all
borrowings evidenced on Borrower's Promissory ("GRID") Note executed and
delivered by the Borrower on April 18, 1990; and
WHEREAS, the Borrower and the Lender entered into an Amendment to
Secured Revolving Line of Credit Agreement effective and dated as at July 31,
1992 (the "First Amendment"), pursuant to the terms and conditions of which the
Lender agreed, from time to time, on a month-to-month basis, to make loans to
the Borrower in such amount or amounts as the Lender would determine, but not to
exceed $5,000,000.00 outstanding in the aggregate at any one time, with all
borrowings evidenced by Borrower's Promissory ("GRID") Note dated July 31, 1992,
which Note substituted the Promissory ("GRID") Note dated April 18, 1990; and
WHEREAS, the Borrower and the Lender entered into a Second Amendment to
Secured Revolving Line of Credit Agreement effective and dated as of the 29th
day of July, 1993 (the "Second Amendment"), pursuant to the terms and conditions
of which the Lender agreed, from time to time, on a month to month basis, to
make loans to the Borrower in such amount or amounts as the Lender would
determine but not to exceed $5,000,000.00 outstanding in the aggregate at any
one time, with all borrowings evidenced by Borrower's Promissory ("Grid") Note
dated July 29, 1993, which Note substituted the Promissory ("Grid") Note dated
July 31, 1992; and
WHEREAS, the Borrower and the Lender entered into a Third Amendment to
Secured Revolving Line of Credit Agreement effective and dated as of the 19th
day of July, 1994 (the "Third Amendment") pursuant to the terms and conditions
of which the Lender agreed, from time to time, on a month to month basis, to
make loans to the Borrower in such amount or amounts as the Lender would
determine
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<PAGE> 2
not to exceed $6,000,000.00 outstanding in the aggregate at any one time, with
all borrowings evidenced by Borrower's Promissory ("GRID") Note dated as at the
19th day of July, 1994, which Note substituted the Promissory ("GRID") Note
dated July 29, 1993; and
WHEREAS, the Borrower and the Lender entered into a Fourth Amendment to
Secured Revolving Line of Credit Agreement effective and dated as of the 13th
day of August, 1996 (the "Fourth Amendment") pursuant to the terms and
conditions of which the Lender agreed, from time to time, on a month to month
basis, to make loans to the Borrower in such amount or amounts as the Lender
would determine not to exceed $6,000,000.00 outstanding in the aggregate at any
one time, with all borrowings evidenced by Borrower's Restated Promissory
("GRID") Note dated as at the 13th day of August, 1996, which Note substituted
the Promissory ("GRID") Note dated July 19, 1994; and
WHEREAS, the Borrower and the Lender entered into a Fifth Amendment to
Secured Revolving Line of Credit Agreement effective and dated as of the 27th
day of March, 1997 (the "Fifth Amendment") pursuant to the terms and conditions
of which the Lender agreed, from time to time, on a month to month basis, to
make loans to the Borrower in such amount or amounts as the Lender would
determine not to exceed $6,000,000.00 outstanding in the aggregate at any one
time, with all borrowings evidenced by Borrower's Restated Promissory ("GRID")
Note dated as at the 13th day of August, 1996; and
WHEREAS, the Borrower has requested that the Lender further extend the
time for making loans under the Secured Revolving Line of Credit Agreement until
August 31, 1999 and make certain further changes to the Secured Revolving Line
of Credit Agreement, and the Lender is willing to do so, but only pursuant to
the terms of this Sixth Amendment to Secured Revolving Line of Credit Agreement.
NOW, THEREFORE, in consideration of the Lender agreeing to extend the
time to make loans and to make further amendments under the Secured Revolving
Line of Credit Agreement as previously amended by the terms of the First
Amendment the Second Amendment, the Third Amendment, the Fourth Amendment and
the Fifth Amendment, and other good and valuable consideration, receipt of which
is hereby acknowledged, it is agreed on the part of the Borrower with the Lender
as follows:
1. That the Secured Revolving Line of Credit Agreement is amended to
extend the time for making loans thereunder to August 31, 1999.
2. That those certain financial covenants contained in paragraph 3(d)
and those certain financial reporting requirements contained in paragraph 3(g)
of that certain Loan and Security Agreement entered into by and between the
Borrower and the Lender on April 18, 1990, which Loan and Security Agreement was
modified and amended by that certain Loan and Security Agreement Amendment No. 1
dated as of July 19, 1994, by and between the Borrower and
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<PAGE> 3
the Lender, that certain Loan and Security Agreement Amendment No. 2 dated as of
August 13, 1996 by and between the Borrower and the Lender, that certain Loan
and Security Agreement Amendment No. 3 dated as of March 27, 1997 by and between
the Borrower and the Lender and that certain Loan and Security Agreement
Amendment No. 4 dated as of even date herewith by and between the Borrower and
the Lender (collectively the "Loan and Security Agreement") shall be
incorporated into and become a part of the Secured Revolving Line of Credit
Agreement, as previously amended by the terms of the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment and the Fifth Amendment,
and as further modified pursuant to the terms of this Agreement, and shall
continue to govern the loan which is the subject of this Agreement and shall
remain in full force and effect, even if the loan which is the subject the
aforementioned Loan and Security Agreement should be paid in full and said Loan
and Security Agreement should be terminated.
3. That paragraph 6 of the Loan Agreement shall be modified, in part,
to add another default condition as follows:
"or in the event the Borrower is in default pursuant to the terms of
that certain Note and Warrant Purchase Agreement dated as of September
26, 1997 among the Borrower, Decora Industries, Inc., Dorrance Street
Capital Advisors, L.L.C., as Agent and the Purchasers named therein or
any of the "Loan Documents" as that term is defined therein. . ."
4. That all of the other terms and conditions of the Secured Revolving
Line of Credit Agreement, as previously modified by the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment and the Fifth
Amendment, shall remain in full force and effect, except as further modified by
the terms of this Agreement.
5. The Borrower hereby warrants and covenants to the Lender that as of
the date of this Agreement, there are no disputes, offsets, claims or
counterclaims of any kind or nature whatsoever under the Note, the Secured
Revolving Line of Credit Agreement, as previously modified by the First
Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment and
the Fifth Amendment or any of the documents executed in connection herewith or
therewith or the obligations represented or evidenced hereby or thereby.
6. By signing this Agreement, Decora Industries, Inc. the ("Guarantor")
hereby consents to all the provisions of this Agreement and ratifies and affirms
its obligations to the Lender pursuant to the Guaranty Agreement (the
"Guaranty") previously executed by it and modifies, confirms and approves of
this Sixth Amendment to Secured Revolving Line of Credit Agreement and hereby
warrants and covenants to the Lender that as of the date of this Sixth Amendment
to Secured Revolving Line of Credit Agreement that there are no disputes,
offsets, claims or counterclaims of any kind or nature whatsoever under the
Guaranty or any of the documents
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<PAGE> 4
executed herewith or therewith or the obligations represented or evidenced
hereby or thereby.
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed by their duly authorized officers as of the effective date above
written.
DECORA, INCORPORATED d/b/a FLEET BANK
DECORA MANUFACTURING
By: _________________________ By: ________________________
Name: _______________________ James M. Marini
Title: ______________________ Vice President
CONSENT OF UNCONDITIONAL GUARANTOR:
DECORA INDUSTRIES, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
4
<PAGE> 1
EXHIBIT 99.15
NOTE and LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 4
This Agreement dated this 26th day of September, 1997 by and between
Decora, Incorporated, a Delaware corporation authorized to do business in the
State of New York as Decora Manufacturing and having its principal place of
business at 1 Mill Street, Fort Edward, New York 12828 (hereinafter called the
"Borrower"), Decora Industries, Inc., a Delaware corporation, successor by
merger to Utilitech, Incorporated, a California corporation, and having its
principal place of business at 1 Mill Street, Fort Edward, New York 12828
(hereinafter called the "Corporate Guarantor") and Fleet Bank f/k/a Norstar Bank
of Upstate NY, a bank organized and existing under the laws of the State of New
York and having its principal place of business at 69 State Street, Albany, New
York 12201 (hereinafter called the "Lender" or the "Bank").
W I T N E S S E T H:
WHEREAS, the Borrower, the Lender and the Corporate Guarantor entered
into a Loan and Security Agreement on April 18, 1990 (the "Loan Agreement")
pursuant to the terms and conditions of which the Lender agreed to lend to the
Borrower Ten Million and no/100 Dollars ($10,000,000.00), with all borrowings
evidenced on Borrower's Term Note in the face amount of Ten Million and no/100
Dollars ($10,000,000.00) executed and delivered by the Borrower to the Lender on
April 18, 1990 (the "Prior Note"); and
WHEREAS, on July 19, 1994, the Borrower and the Lender via a
Consolidated and Restated Note in the face amount of Eight Million and no/100
Dollars ($8,000,000.00) consolidated, modified and restated in full the terms of
the Prior Note with a new Demand Note in the face amount of Six Million and
no/100 Dollars ($6,000,000.00) executed by the Borrower in favor of the Lender
on said July 19, 1994 date. Said consolidated, modified and restated Eight
Million and no/100 Dollar ($8,000,000.00) Note is hereinafter called the "Prior
Note No. 2"). Said Prior Note No. 2 was subject to the terms and conditions of
the Loan Agreement, as modified pursuant to the terms of a Loan and Security
Agreement Amendment No. 1 (the "First Amendment") by and between the Borrower,
the Corporate Guarantor and the Lender dated July 19, 1994; and
WHEREAS, the Loan Agreement was further modified pursuant to the terms
of a Loan and Security Agreement Amendment No. 2 (the "Second Amendment") by and
between the Borrower, the Corporate Guarantor and the Lender dated August 13,
1996; and
WHEREAS, the on March 27, 1997 the Borrower and the Bank amended,
modified and restated in its entirety the terms of the Prior Note No. 2 pursuant
to the terms of a new note (the "New Note") in the original principal amount of
Five Million One Hundred Sixty Nine Thousand and no/100 Dollars, executed and
delivered by the Borrower in favor of the Lender on said March 27, 1997 date;
which New Note was subject to the terms and conditions of the Loan Agreement, as
modified pursuant to the terms of the First
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<PAGE> 2
Amendment, the Second Amendment and a Loan and Security Agreement
Amendment No. 3 (the "Third Amendment") by and between the
Borrower, the Corporate Guarantor and the Lender dated March 27,
1996; and
WHEREAS, at the request of the Borrower, has agreed to make certain
changes to the Loan Agreement, as previously modified by the First Amendment,
the Second Amendment and the Third Amendment.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
valuable consideration, receipt of which is hereby acknowledged, it is agreed on
the part of the Borrower and the Lender as follows:
1. Paragraph 3(d) of the Loan Agreement, as previously modified
pursuant to the terms of the First Amendment, the Second Amendment and the Third
Amendment, is hereby modified and amended to read in its entirety as follows:
"(d) The Borrower must be in compliance with the following financial
covenants, as would be shown on the quarterly and fiscal year end
financial statements of the Borrower prepared in accordance with
generally accepted accounting principles consistently applied ("GAAP"):
(i) a minimum current ratio of 1.30 to 1.00 during fiscal year
1998 and 1.50 to 1.00 during fiscal year 1999 and thereafter.
For the purposes of this Agreement, current ratio shall be
defined as the ratio of the Borrower's current assets
(including the unused formula loan availability under that
certain $6,000,000.00 revolving line of credit loan previously
extended by the Bank to the Borrower and that certain
$1,000,000.00 revolving line of credit loan previously
extended by the Bank to the Borrower [collectively the
"Revolver Loans"]) to the Borrower's current liabilities
(excluding the aforementioned Revolver Loans) as would be
shown on each fiscal quarter end and fiscal year end balance
sheets of the Borrower prepared in accordance with GAAP;
(ii) a minimum working capital of Four Million and no/100
Dollars ($4,000,000.00) as at September 30, 1997 through
December 31, 1997 and Five Million Five Hundred Thousand and
no/100 Dollars ($5,500,000.00) as at March 31, 1998. During
fiscal year 1999 and thereafter, the Borrower must maintain a
minimum working capital of Seven Million and no/100 Dollars
($7,000,000.00), all as would be shown on the fiscal quarter
end and fiscal year end balance sheets of the Borrower
prepared in accordance with GAAP. For the purposes of
determining working capital, the Borrower's liability to the
Bank pursuant to the Revolver Loans will be excluded, and the
Borrower's current assets shall be increased by the Borrower's
unused formula loan availability under the Revolver Loans.
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<PAGE> 3
(iii) a total debt to tangible net worth ratio at fiscal year
end March 31, 1998 of 5.00 to 1.00, at fiscal year end March
31, 1999 of 4.00 to 1.00, at fiscal year end March 31, 2000 of
3.00 to 1.00 and at fiscal year end March 31, 2001 and
thereafter at each March 31 fiscal year end of 2.50 to 1.0.
For the purposes of this Agreement, debt to tangible net worth
ratio shall be defined as the ratio of the Borrower's total
liabilities (less subordinated debt) divided by the sum of the
Borrower's tangible net worth plus subordinated debt less the
amount of the outstanding principal balance of the notes
receivable from the Corporate Guarantor, as would be shown on
the fiscal quarter end and fiscal year end balance sheets of
the Borrower prepared in accordance with GAAP. For the
purposes of this Agreement, the calculation for fiscal year
end March 31, 1998 shall exclude the one time charge to
earnings from September 26, 1997 to and including December 31,
1997, in an amount not to exceed $750,000.00, for efficiencies
realized as a result of "right sizing" of the business of the
Borrower, its Corporate Guarantor and Decora Industries
Deutscheland GmbH which reduce the Borrower's consolidated
stockholders equity;
(iv) a minimum debt service coverage ratio during fiscal year
1998 of 1.15 to 1.00 and during fiscal year 1999 and
thereafter of 1.20 to 1.00. For the purposes of this
Agreement, debt service coverage ratio will be calculated
using the trailing four quarters of the Borrower's earnings
before interest, taxes, depreciation and amortization minus
the Borrower's cash capital expenditures (net of financed
capital expenditures) divided by the sum of Borrower's
trailing four quarters debt service payments (principal and
interest) less funds used to repay the Borrower's indebtedness
owed to CIGNA (whether in the form of debt or equity) minus
amortization of non-cash debt discount associated with
subordinated debt, as would be shown on the fiscal quarter end
and fiscal year end balance sheets of the Borrower prepared in
accordance with GAAP. For the purposes of this Agreement, the
calculation for fiscal year end March 31, 1998 shall exclude
the one time charge to earnings from September 26, 1997 to and
including December 31, 1997, in an amount not to exceed
$750,000.00, for efficiencies realized as a result of "right
sizing" of the business of the Borrower, the Corporate
Guarantor and Decora Industries Deutscheland GmbH which reduce
the Borrower's consolidated stockholders equity;
(v) the Borrower shall be limited to making annual capital
expenditures in the maximum amount of One Million Five Hundred
and no/100 Dollars during fiscal year 1998 and One Million and
no/100 Dollars during the balance of the term of this
Agreement. If required by the terms of
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the manufacturing agreement between the Borrower and
Rubbermaid, for each year during the term of this Agreement,
the Borrower must provide evidence, satisfactory to the Bank,
that the Borrower has received the consent of Rubbermaid to
make capital expenditures exceeding One Million and no/100
Dollars ($1,000,000.00) in said year;
(vi) the Borrower's expenditures for management fees shall not
exceed Eight Hundred Thousand and no/100 Dollars ($800,000.00)
per annum;
(vii) the consolidated stockholders equity of the Borrower as
of March 31, 1998 shall not be less than the remainder of
$14,415,000.00 minus the lesser of (a) $750,000.00 or (b) the
one time charge to earnings from September 26, 1997 to and
including December 31, 1997 for efficiencies realized as a
result of "right sizing" of the business of the Borrower, the
Corporate Guarantor and Decora Industries Deutscheland GmbH
which reduce the Borrower's consolidated stockholders equity
(such remainder the "1998 Borrower Net Worth"); the
consolidated stockholders equity of the Borrower at March 31,
1999 shall not be less than the sum of the 1998 Borrower Net
Worth plus $2,500,000.00; the consolidated stockholders equity
of the Borrower at March 31, 2000 shall not be less than the
sum of the 1998 Borrower Net Worth plus $6,500,000.00; and at
each fiscal year end thereafter, the consolidated stockholders
equity of the Borrower shall not be less than the sum of
consolidated stockholders equity of the Borrower required to
be maintained at the end of the immediately prior fiscal year
plus $6,000,000.00; and
(viii) the consolidated stockholders equity of the Corporate
Guarantor at March 31, 1999 shall not be less than the sum of
the consolidated stockholders equity of the Corporate
Guarantor at March 31, 1998 (the "1998 Guarantor Net Worth")
plus $4,000,000.00; the consolidated stockholders equity of
the Corporate Guarantor at March 31, 2000 shall not be less
than the sum of the 1998 Guarantor Net Worth plus
$10,000,000.00; and at each fiscal year end thereafter, the
consolidated stockholders equity of the Corporate Guarantor
shall not be less than the sum of consolidated stockholders
equity of the Guarantor required to be maintained at the end
of the immediately prior fiscal year plus $8,000,000.00."
2. Paragraph 3(g) of the Loan Agreement, as previously modified
pursuant to the terms of the First Amendment, the Second Amendment and the Third
Amendment, is hereby modified and amended to read in its entirety as follows:
4
<PAGE> 5
"(g) The Borrower and its Corporate Guarantor will at all times keep
proper books of record and account in accordance with GAAP, and the
Borrower shall furnish to the Lender:
(i) within one ninety-five (95) days of the end of its
fiscal year, annual certified public accountant
audited, consolidated statements for the Borrower and
its Corporate Guarantor (which must include a
consolidating statement schedule), all prepared in
accordance with generally accepted accounting
principles ("GAAP") consistently applied, as well as
copies of the Borrower's 10-k reports;
(ii) within thirty (30) days of each calendar month end,
internally prepared financial statements for the
Borrower for the preceding month, in form acceptable
to the Bank, all prepared in accordance with GAAP;
(iii) within fifty (50) days of the end of each fiscal
quarter, 10Q reports for the Corporate Guarantor;
(iv) within thirty (30) days of the end of each month,
separate domestic and international account receivable
aging reports concerning the Borrower in form
acceptable to the Bank;
(v) within sixty (60) days after the end of each fiscal
quarter, a compliance letter acknowledged by the Chief
Financial Officers of both the Borrower and its
Corporate Guarantor concerning those financial
covenants referenced above in subparagraph 3(d);
(vi) with reasonable promptness upon the written request of
the Lender, such further information regarding the
business affairs at financial condition of the
Borrower and its Corporate Guarantor as the Lender may
reasonably request; and
(vii) simultaneously at the time they are so furnished, a
copy of all statements and reports furnished to
stockholders of the Borrower and its Corporate
Guarantors."
3. Paragraphs 3. (k)(1), 3. (o) and 8. (i) of the Loan Agreement are
hereby eliminated.
4. Paragraph 3. (k) (10) of the Loan Agreement is hereby revised in its
entirety to read as follows:
"(10) The Borrower has delivered, signed and pledged to the Lender all of the
Borrower's right, title and interest in and to (i) that certain
$6,000,000.00 note from the Corporate Guarantor to the Borrower dated
July 19, 1994, and (ii) that certain $15,207,000.00 note from the
5
<PAGE> 6
Corporate Guarantor to the Borrower dated September 26,
1997 (collectively the "Guarantor's Note")."
5. Paragraph 3. (n) of the Loan Agreement is hereby revised in its
entirety to read as follows:
"(n) If a Change in Control (as hereinafter defined) shall occur, the Lender
shall have the right, by written notice given to the Borrower not
earlier than ten nor later than twenty-five days after the first to
occur of (i) receipt by the Lender from the Borrower of written notice
of the occurrence of such Change in Control or (ii) the date on which
Lender, having otherwise obtained actual knowledge of such Change of
Control, notifies the Borrower thereof, to demand that the Borrower
prepay the Note, the $1,000,000.00 Note and/or the Grid Note. Five (5)
business days after receipt by the Borrower of demand for the
prepayment of the Note, the $1,000,000.00 Note and/or the Grid Note,
the Borrower shall pay to the Lender all principal and accrued interest
on the Note, the $1,000,000.00 Note and/or the Grid Note. Promptly
after obtaining knowledge of the occurrence of any Change of Control
(or any proposed or attempted Change of Control), the Borrower will
notify the Lender thereof, specifying in reasonable detail the facts
and circumstances surrounding such event. As used in this subparagraph
(n) a "Change in Control" shall be deemed to have occurred upon the
occurrence of any of the following:
(i) The Corporate Guarantor shall fail to own, of record and
beneficially, with full power to vote, shares of capital stock
entitling the Corporate Guarantor to cast at least 80% of the
votes for the election of directors of the Borrower at any
meeting of the shareholders of the Borrower;
(ii) Any person or group of related persons for purposes of
Section 13(d) of the Securities Exchange Act (a "Group")
either (A) is or becomes, by purchase, tender offer, exchange
offer, open market purchases, privately negotiated purchases
or otherwise, the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Securities Exchange Act, whether or
not applicable, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has
the right to acquire, whether such right is exercisable
immediately or after the passage of time only, directly or
indirectly, of more than 30% of the total then outstanding
voting stock of the Corporate Guarantor (for the purposes of
this clause (ii), such person or Group will be deemed to
"beneficially own" (determined as aforesaid) any voting stock
of a corporation (the "specified corporation") held by any
other corporation (the
6
<PAGE> 7
"parent corporation") if such person or Group "beneficially
owns", directly or indirectly, a majority of the voting power
of the voting stock of such parent corporation), or (B)
otherwise has the ability to elect, directly or indirectly, a
majority of the members of the Board of Directors of the
Corporate Guarantor;
(iii) The Corporate Guarantor consolidates with or merges into
another person and the stockholders immediately prior to such
merger or consolidation hold less than a majority of the
voting stock of the resulting entity;
(iv) With respect to the Borrower, Timothy N. Burditt shall
fail to be substantially involved in the management and
operations of the Borrower; and
(v) With respect to the Corporate Guarantor, if Nathan Hevrony
shall fail to be substantially involved in the management and
operations of the Corporate Guarantor;
provided, however, that a Change in Control shall not be deemed to
have occurred if, with respect to Timothy N. Burditt and Nathan
Hevrony, either shall fail to be substantially involved in the
management and operation of the Borrower and the Corporate
Guarantor, respectively, and the Borrower and/or the Corporate
Guarantor, as the case may be, shall within ninety (90) days of such
failure replace Burditt and/or Hevrony, as the case may be, with a
person acceptable to the Lender."
6. Paragraph 8. (l) of the Loan Agreement is hereby modified to read in
its entirety as follows:
"(l) Except for (i) those management fees referred to in paragraph 8 (k)
hereof; (ii) those income taxes payable by the Borrower to the
Corporate Guarantor pursuant to the terms of the Tax Sharing
Agreement; and (iii) the loaning by the Borrower to the Corporate
Guarantor of the $15,207,000.00 being received by the Borrower in
connection with that certain Note executed by the Borrower in favor
of the "Purchasers" (as defined in that certain Note and Warrant
Purchase Agreement among the Borrower, the Corporate Guarantor,
Dorrance Street Capital Advisors, L.L.C, as Agent and the Purchasers
named therein) on September 26, 1997, during the term of this
Agreement, the Borrower shall be prohibited from advancing, loaning
or upstreaming any funds to the Corporate Guarantor."
7. A new paragraph 9. (n) is hereby added to the Loan Agreement as
follows:
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<PAGE> 8
"(n) Upon the occurrence of an "Event of Default" as such term is defined
in that certain Note and Warrant Purchase Agreement among the
Borrower, the Corporate Guarantor, Dorrance Street Capital Advisors,
L.L.C., as Agent and the Purchasers named therein, dated as of
September 26, 1997."
8. The Borrower and the Corporate Guarantor hereby warrant and covenant
to the Lender that as of the date of this Agreement there are no disputes,
offsets, claims or counterclaims of any kind or nature whatsoever under the
Prior Note, the New Note, the Loan Agreement as previously amended by the First
Amendment, the Second Amendment and the Third Amendment, any instrument of
collateral security referred to in the Loan Agreement, or any other documents
executed in connection herewith or therewith or the obligations represented or
evidenced hereby or thereby.
9. Except as expressly modified hereunder, all the remaining terms and
conditions of the Loan Agreement, as previously modified pursuant to the terms
of the First Amendment, the Second Amendment and the Third Amendment, shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the day and year first above
8
<PAGE> 9
written.
Decora, Incorporated d/b/a Fleet Bank
Decora Manufacturing
By: ________________________________ By: _________________________________
Timothy N. Burditt James M. Marini
Vice President Finance Vice President
Decora Industries, Inc.
By: ________________________________
Timothy N. Burditt
Executive Vice President
Finance and Administration
9
<PAGE> 1
EXHIBIT 99.16
PROMISSORY NOTE
---------------
$15,207,000.00 Fort Edward, New York
FOR VALUE RECEIVED, the undersigned, Decora Industries, Inc., a
Delaware Corporation, promises to pay to the order of Decora, Incorporated (dba
Decora Manufacturing), a Delaware corporation, at 1 Mill Street, Fort Edward, NY
12828, or at such other place as the holder of this Note may from time to time
designate, the principal sum of Fifteen Million Two Hundred Seven Thousand
Dollars ($15,207,000), without interest except upon default as provided below.
Principal shall be payable on demand; however, such demand may not be made prior
to September 30, 2002 and can only be made if the borrower has sufficient
unsecured free cash balances to repay 100% of the balance of the Note.
The undersigned agrees that time is of the essence and that in the
event any payment of principal due under this Note is not made when due, the
outstanding principal balance hereof shall immediately bear interest at the rate
of the Lesser of (i) ten percent (10%), per annum, or (ii) the maximum lawful
rate permitted by the laws of the State of New York, from the date of such
default until such time as all such payments have been made in full by the
undersigned. Any payments made hereunder may be applied to interest or principal
due hereunder all in such order and in such proportions as the holder hereof
may, in its sole and absolute discretion, determine.
If this Note is not paid when due, whether at maturity or by
acceleration, the undersigned promises to pay all costs of collection including,
but not limited to, reasonable attorneys' fees and court costs incurred by the
order hereof on account of such collection, whether or not suit is filed hereon.
The undersigned may, at any time and from time to time, without
penalty, make prepayments which will be applied to the final payment of
principal under this Note.
Presentment, demand and protest, and notices of protest, dishonor, and
non-payment of this Note and all notices of every kind, are hereby waived.
No single or partial exercise of any power hereunder shall preclude the
other or further exercise thereof or the exercise of any other power. No delay
or omission o n the part of the holder hereof in exercising any right hereunder
shall operate as a waiver of such right or of any other right under this Note.
Decora Industries, Inc.
By:_______________________________
Its:_______________________________
<PAGE> 1
EXHIBIT 99.17
[TRANSLATION FROM THE GERMAN LANGUAGE]
LOAN AGREEMENT
(Final Version, as signed on September 29, 1997)
between CELESTE 97 VERMOGENSVERWALTUNGS GMBH, MUNICH
hereinafter referred to as "Borrower"
and DRESDNER BANK AG, STUTTGART
hereinafter referred to as "Dresdner Bank AG" or "Bank"
PREAMBLE
Decora Industries Inc., New York (hereinafter referred to as "Decora"), intends
to acquire up to 100 % of shares in Konrad Hornschuch AG, Wei(beta)bach, for a
total amount of DM 79,800,000.- via the Borrower which has been acquired for
this purpose. In this context, it is also intended to restructure the existing
payment obligations of Konrad Hornschuch AG.
In this context, the Borrower has acquired, free of rights of third parties,
approximately 51.2 % of shares in Konrad Hornschuch AG for a purchase price of
DM 46,690,700.- pursuant to purchase agreement of August 18, 1997 (ANNEX 1A) and
approximately 22 % of shares in Konrad Hornschuch AG for a purchase price of DM
14,891,580.- pursuant to purchase agreement of September 3, 1997 (ANNEX 1B). A
further approximately 1.8 % of shares in Konrad Hornschuch AG will be acquired
shortly for a purchase price of DM 1,250,000.-. The ancillary transaction costs
for the acquisition of such 75 % of shares amount to DM 1,100,000.-. For
purposes of the acquisition of the above-mentioned 75 % of shares in Konrad
Hornschuch AG and in order to cover
<PAGE> 2
Translation of the Loan Agreement Dresdner Bank AG - Celeste 97
Vermogensverwaltungs GmbH
the ancillary transaction costs, the Borrower will be provided by Decora with
equity in the amount of DM 26,689,250.-; additionally, funds from an acquisition
loan in the amount of DM 37,310,750.- will be made available.
Object of business of the Borrower is in particular the management of its own
assets.
The financing of the transaction is contemplated as follows:
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
ORIGIN OF FUNDS DM Use of Funds DM %
- --------------------------------------------------------------------------------
Purchase Price 62,832,280.- Equity 26,689,250.- 42%
- --------------------------------------------------------------------------------
Interest on 67,720.- Acquisition 37,310,750.- 58%
Purchase Price Loan
- --------------------------------------------------------------------------------
Transaction 1,100,000.-
Cost
- --------------------------------------------------------------------------------
TOTAL 64,000,000.- Total 64,000,000.- 100%
- --------------------------------------------------------------------------------
</TABLE>
The acquisition of these 75 % of shares in Konrad Hornschuch AG will be effected
in a "first step". In addition thereto, it is contemplated and required that
immediately after the acquisition of 75 % of shares in Konrad Hornschuch AG, in
a "second step" a public offer pursuant to the German Take-Over Code for the
acquisition of the remaining 25 % of shares will be prepared. It is contemplated
that this measure and the intended restructuring of existing payment obligations
of Konrad Hornschuch AG in the maximum amount of DM 40,000,000.- will be
effected within 18 months after execution of this loan agreement under the
leadership of Dresdner Bank AG.
Now therefore, the Bank declares to be willing to make available to the Borrower
in the "first step" the following loan, subject to the following conditions and
on the basis of the general terms and conditions of the Bank which are attached
as ANNEX 1C (hereinafter referred to as "AGB").
<PAGE> 3
Translation of the Loan Agreement Dresdner Bank AG - Celeste 97
Vermogensverwaltungs GmbH
1. LOAN
ACQUISITION LOAN IN THE TOTAL AMOUNT OF DM 37,310,750.-
(in words: German marks thirty-seven million three hundred ten thousand
seven hundred fifty)
The loan shall be syndicated at a later point in time. In the meantime,
Dresdner Bank AG declares to be willing to make available the whole
amount of the loan.
2. DRAWING MODALITIES
The loan can be drawn by the Borrower in one amount after all payment
conditions pursuant to no. 10 have been met. The loan amount will be
made available to the Borrower by Dresdner Bank AG on its account no. 9
190 600 01 at Dresdner Bank AG Stuttgart under the proviso that this
amount can only be used in accordance with no. 3 of this agreement. The
loan cannot be revalued [ist nicht revalutierbar].
3. PURPOSE OF USE
The loan is made available to the Borrower exclusively for the purpose
of partly financing the purchase price for the acquisition of 75 % of
shares in Konrad Hornschuch AG as described in the Preamble including
the consideration for the non-compete covenant of Kunz Holding KG and of
partly covering the ancillary transaction costs. Upon request, the use
of the loan has to be evidenced to the Bank.
4. TERMS AND CONDITIONS
The following terms and conditions shall apply:
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Translation of the Loan Agreement Dresdner Bank AG - Celeste 97
Vermogensverwaltungs GmbH
4.1 INTEREST RATE on the basis of 3- or 6-months-DM-LIBOR (as ascertained by
Dresdner Bank AG two banking days before drawing) plus a MARGIN OF 2.5 %
P.A.. The interest is calculated on the basis of 365/360 days.
4.2 The PAYMENT will be made at 100%.
4.3 INTEREST is due and payable in arrears at the end of an interest period,
at the latest, however, every three months.
4.4 Interest has to be made available by the Borrower at the respective due
date on the account no. 9 190 600 00 at Dresdner Bank AG.
4.5 The first interest period is 3 months. Thereafter, the choice of the
interest period has to be made three banking days before the beginning
of the respective interest period. In case that the Bank will not be
informed three banking days before the beginning of an interest period
about the chosen time period, the preceding interest period shall be
applicable.
4.6 DM-LIBOR is defined as London Inter Bank Offered Rate for the legal
currency of the Federal Republic of Germany as ascertained by the Bank
two banking days each before the beginning of the first or the expiry of
the preceding interest period at 11.00 a.m. London time. A DM-LIBOR
quotation can only be made if corresponding funds are made available on
the money market. If, at any time during the term of the LOAN, no
DM-LIBOR quotations are available, Dresdner Bank AG will request from
two banks which are situated in Frankfurt am Main and which are not
involved in the transaction, offering quotations [Einstandssatze Brief]
for loans with corresponding durations, the average [einfacher
Mittelwert] of which shall substitute DM-LIBOR as the basis for the
calculation of interest.
4.7 Banking days are days on which the offices of the Bank in Stuttgart and
of banks in London and Frankfurt am Main are generally open for
business.
5. COMMISSIONS
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Vermogensverwaltungs GmbH
5.1 Commitment commission 0.5 % p.a. on the committed but not used loan. The
commission will be calculated on the basis of 360/360 days, commencing
with the signing of the loan agreement. The account no. 9 190 600 00 at
the Bank will be debited monthly in arrears with the commitment
commission.
5.2 Front-end fee 2.0 % one time on the total amount of the loan, payable on
the day of first use of the loan. The Bank is entitled to debit any
accounts of the Borrower with the Bank with the front-end fee (invoice
will be prepared separately). If a work fee has been paid in the course
of the retainer agreement of August 18, 1997, this will be credited
against the front-end fee.
6. DURATION
The LOAN is time-wise limited until September 30, 2004.
7. REPAYMENT
7.1 The loan has to be repaid in installments according to the following
repayment schedule, beginning on March 30, 1999. Until then, repayments
are suspended. Final installment is due and payable on September 30,
2004. To the extent that the aforementioned dates are no banking days,
repayment has to be effected on the preceding banking day, respectively.
Repaid amounts cannot be revalued [sind nicht revalutierbar].
<TABLE>
<CAPTION>
PAYMENT ON INSTALLMENT REMAINING BALANCE
<S> <C> <C>
March 30, 1998 Repayment suspended 37,310,750.-
September 30, 1998 Repayment suspended 37,310,750.-
March 30, 1999 2,950,000.- 34,360,750.-
</TABLE>
<PAGE> 6
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Vermogensverwaltungs GmbH
<TABLE>
<CAPTION>
PAYMENT ON INSTALLMENT REMAINING BALANCE
<S> <C> <C>
September 30, 1999 2,950,000.- 31,410,750.-
March 30, 2000 2,900,000.- 28,510,750.-
September 30, 2000 2,900,000.- 25,610,750.-
March 30, 2001 3,150,000.- 22,460,750.-
September 30, 2001 3,150,000.- 19,310,750.-
March 30, 2002 3,200,000.- 16,110,750.-
September 30, 2002 3,200,000.- 12,910,750.-
March 30, 2003 3,300,000.- 9,610,750.-
September 30, 2003 3,300,000.- 6,310,750.-
March 30, 2004 3,300,000.- 3,010,750.-
September 30, 2004 3,010,750.- 0.-
</TABLE>
The respective amounts to be repaid have to be made available by the
Borrower for debiting on the respective due date on the account no. 9
190 600 00 of the Borrower with Dresdner Bank AG.
If amounts which are due and payable in connection with this loan
agreement are not paid by the Borrower, the Borrower will be in default
of payment without a payment demand being required. For the duration of
the default of payment, the Borrower is obliged to pay default interest
on the outstanding due amounts to be repaid at a rate of 5 percentage
points over the applicable discount rate of Deutsche Bundesbank (or the
rate which substitutes the discount rate of Deutsche
<PAGE> 7
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Vermogensverwaltungs GmbH
Bundesbank pursuant to Section 11 para. 1 German Consumer Credit Act
[Verbraucherkreditgesetz] or - if such rate should not be available - a
rate which is designated by the Bank pursuant to Section 315 German
Civil Code) for the time period from due date until receipt of the
amounts by the bank. If the Borrower is in default of payment with
respect to interest payments, the Borrower shall be obliged to pay
liquidated damages to the banks [should read: Bank]. The amount of
liquidated damages equals to an interest rate of 5 percentage points
over the applicable discount rate of Deutsche Bundesbank (or, after its
abolition, the aforementioned corresponding rate) for the time period
from due date to the receipt of the amounts by the Bank. The Borrower is
free to prove that a damage has not occurred or not in the asserted
amount, whereas the Bank has the right to assert exceeding damages.
7.2 Premature repayments can be made at the end of each interest period with
a minimum amount of DM 500,000.- or a multiple thereof, and such
payments will be credited against the respective last repayment
installments in a time- wise order ("inverse order of maturity"). The
Borrower has to inform the Bank of any intended premature repayment at
least five banking days before the end of the respective interest
period.
7.3 In addition to the repayment conditions pursuant to no. 7.1, the loan
has to be repaid by the excess-cash-flow of the Borrower (as determined
pursuant to ANNEX 7.3) while taking into consideration the respective
interest period. The excess-cash-flow shall be determined on the basis
of the audited annual accounts and has to be used for repayment upon
expiry of the respective interest period which is applicable on such
date referred to in no. 9.1.1. The crediting shall be made in accordance
with no. 7.2.
8. COLLATERAL
8.1.1 First-rank pledge of the existing and future shares in Konrad Hornschuch
AG which are owned by the Borrower by pledge of the securities account
for purposes of holding such shares in custody of the Borrower with the
Bank, account no. 9
<PAGE> 8
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Vermogensverwaltungs GmbH
190 600 00, pursuant to form no. A 1625 (ANNEX 8.1.1).
8.1.2 Pledge of the shares in Konrad Hornschuch AG which have been acquired
from Kunz Holding KG pursuant to form no. A 1626 (ANNEX 8.1.2) by
assignment of the claim for delivery against Deutsche Bank AG (Annex 1a,
Section 3 para 1). The Borrower hereby irrevocably authorizes the Bank
to procure in the name of the Borrower the transfer of these shares from
Deutsche Bank AG to the securities account referred to in no. 8.1.1.
8.1.3 Pledge of the shares in Konrad Hornschuch AG which have been acquired
from Baden-Wurttembergische Bank AG pursuant to form no. A 1626 (ANNEX
8.1.3) which are or will be, respectively, kept in save custody on a
securities account of the Borrower at Baden-Wurttembergische Bank AG
(Annex 1b, Section 3 para1). The Borrower hereby irrevocably authorizes
the Bank to procure in the name of the Borrower the transfer of these
shares from Baden-Wurttembergische Bank AG to the securities account
referred to in no. 8.1.1.
8.2 Guarantee of Decora Industries, Inc. ["Decora"], in the amount of
DM 5,000,000.- pursuant to form no. A 1604 f (ANNEX 8.2).
8.3 Obligation of Decora to pay such interest for the loan which becomes due
and payable before the first repayment installment becomes due and
payable pursuant to no. 7.1; such amounts have to be made available to
the Borrower by Decora as subordinated shareholder's loans (ANNEX 8.3).
8.4 Decora will undertake pursuant to ANNEX 8.3 to make a public tender
offer to the minority shareholders of Konrad Hornschuch AG pursuant to
the German Takeover Code. Decora - via the Borrower - may have the
option to make either a cash offer or an exchange offer of shares in
Decora for shares in Konrad Hornschuch AG. In either case the ratio of
equity to debt at the Borrower will be 47 % to 53 % following the
completion of the takeover of all those shares in Konrad Hornschuch AG
as acquired by the Borrower. If Decora elects to make - via the Borrower
- the offer in cash, Decora will place such funds which are necessary to
achieve the equity portion of 47 % following the takeover of all those
shares in Konrad
<PAGE> 9
Translation of the Loan Agreement Dresdner Bank AG - Celeste 97
Vermogensverwaltungs GmbH
Hornschuch AG as acquired by the Borrower, in cash in an account with
the Bank prior to making the public tender offer.
8.5 Declaration of subordination along with obligation to retain the loaned
amounts to the Borrower with respect to all existing and future
shareholder's loans to the Borrower pursuant to form no. A1613 of
Dresdner Bank AG (ANNEX 8.5).
Additionally, the collateral secures all existing, future and contingent claims
of the Bank along with all of its domestic and foreign branches resulting from
the banking relationship with the Borrower. Details have been or will be -
respectively - determined upon granting of the respective collateral.
Additionally, the pledge and security rights which are stipulated in the AGB of
the Bank shall serve as collateral for the loan. In case of an increase of the
risk which may occur later on, the Bank is furthermore allowed to demand an
improvement of the collateral or the granting of additional collateral.
9. CONDITIONS
9.1 The Borrower will inform the Bank during the duration of the loan
(including extensions) regularly about the development of its economical
conditions and will, for these purposes, submit without delay and
without being requested at least the following documents - with which
the Bank is satisfied.
9.1.1 ANNUAL ACCOUNTS of the Borrower and Konrad Hornschuch AG, each separate
and consolidated, which have been audited by an auditor or an auditing
firm, including the notes [Anhang], management report [Lagebericht] and
auditor's report, at the latest 120 days after the end of the respective
business year.
9.1.2 QUARTERLY STATUS of Borrower and of Konrad Hornschuch AG, each separate
and consolidated, comprising balance sheet, profit and loss account and
cash flow calculation of the current period and a comparison to the
business plan, prepared
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by the respective management, at the latest 45 days after the end of the
respective quarter.
9.1.3 Monthly FIGURES of Konrad Hornschuch AG with respect to the turnover and
profit situation including comparison of projected and actual figures
for each month and on a cumulated basis, at the latest 25 days after the
end of the respective month.
9.1.4 Detailed BUSINESS PLANS for the respective next business year for the
Borrower and Konrad Hornschuch AG, comprising statements as to the
planned development of turnover and profit, projective balance sheets
and a liquidity projection as well as basic figures of the strategic
planning for the next three years, at the latest 30 days before the end
of the respective business year.
9.1.5 Confirmation by an auditor or an auditing firm in accordance with ANNEX
9.1.5 with respect to compliance with the key financial figures of the
Borrower, at the latest 120 days after the end of the respective
business year; upon request of the Bank in shorter time periods.
The Borrower is obliged to comply with the key financial figures as
listed in ANNEX 9.1.5 during the whole duration of the loan and to
inform the Bank immediately of any deviations therefrom. In addition
thereto, the Borrower will inform the Bank about the reasons which have
led to deviations and will explain the measures which have been or will
be taken in order to regain compliance with the key financial figures.
In case of non-compliance with the key figures, the Borrower is granted
a period of 60 days after the date of realization of non-compliance by
the Borrower in order to regain compliance with the key figures; during
this time period, the Bank has the right to reject any further drawings
of the loan.
In addition thereto, the Borrower will inform the Bank immediately about
any business developments which are deviating from the business plan as
applicable from time to time, irrespective of its information duties
pursuant to no. 9.1.
9.2. The Borrower will inform the Bank in writing about the following
business incidents before any contractual obligations are concluded:
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9.2.1 ACQUISITIONS OF TANGIBLE ASSETS OR FINANCIAL ASSETS which exceed 120 %
of the respective annual figures of the business plan of the borrower
for the current business year.
9.2.2 Additional use/assumption of LOAN LIABILITIES - comprising liabilities
which are similar to a loan (e.g. Euronotes, leasing) or guarantee
credits [Avalkredite] of whatever kind including repurchase obligations
in the course of sales financing.
9.2.3 That GRANTING OF LOANS or ASSUMING of suretyships, guarantees of
whatever kind or similar obligations vis-a-vis or in favor of group
companies of the Borrower or other third parties. Exempted therefrom is
the granting of credit periods vis-a-vis trade debtors in the ordinary
course of business.
9.2.4 Granting of assets which are owned at present or will be in future
(including current assets) as COLLATERAL to any other creditor. Exempted
therefrom is the agreement on usual retentions of title in favor of
suppliers in the ordinary course of business.
9.2.5 SALE or any other disposal of ASSETS which are owned at present or will
be in future (including current assets) which are of relevance for the
business activities of the Borrower. Exempted therefrom is the sale of
assets in the ordinary course of business which, however, does not
comprise factoring or leasing transactions.
9.2.6 SALE of current or future PARTICIPATIONS by the Borrower.
9.2.7 ACQUISITION OR ESTABLISHING OF COMPANIES - directly or via subsidiaries
or further third parties as well as transformations, spin-offs or
mergers, including a transformation involving Konrad Hornschuch AG.
9.2.8 All business incidents which do or might have a substantial NEGATIVE
IMPACT ON THE ASSETS- LIQUIDITY- AND EARNINGS SITUATION of the Borrower.
9.2.9 Any CHANGES of the MANAGEMENT TEAM of the Borrower.
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9.2.10 Payment of MANAGEMENT FEES of whatever kind exceeding in total DM
100,000.- p.a.
9.2.11 Any LITIGATIONS/LEGAL DISPUTES of the Borrower, which together exceed a
total amount of DM 100,000.-.
9.2.12 Change of the AUDITOR or the AUDITING FIRM.
9.2.13 Changes in the SHAREHOLDER STRUCTURE.
9.2.14 Conclusion, amendment or termination of CONTRACTS of whatever kind with
shareholders or subsidiaries of the Borrower or with persons which are
related to the shareholders or subsidiaries, comprising also companies
in which these hold directly or indirectly a participation.
In case of intended measures pursuant to nos. 9.2.1 - 9.2.14, the
Borrower will explain in writing to the Bank whether and how these
measures do or might affect the risk position of the bank. The Bank
decides in its own discretion (Section 315 German Civil Code) upon
written request by the Borrower within thirty banking days - after
receipt of reasonable documentation and information which are relevant
for its decision - to what extent a negative impact on the risk position
has to be expected in the Bank's view. The scope of documents which are
relevant for the decision is determined by the Bank.
9.3 In order to limit the risk resulting from changes of interest rates for
the loan, satisfying hedging strategies have to be reconciled with the
bank.
9.4 The Borrower will work towards Konrad Hornschuch AG maintaining adequate
insurance coverage with respect to its assets and its business
activities, corresponding to the standards of this business.
9.5 Exercise of voting rights resulting from the acquired shares in Konrad
Hornschuch AG in the way that future annual profits of Konrad Hornschuch
AG
from the
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business year 1998 onwards will be fully paid out, if economically
reasonable and if possible under corporate law.
9.6 The Borrower is obliged not to make any interest payments or repayment
of loan capital under shareholder's loans until the loan [should read:
the loan under this loan agreement] has fully been repaid.
9.7 During to the duration of this loan the Borrower is obliged not make
available to other creditors any share of direct subsidiaries as
collateral.
9.8 If during the duration of this credit the Borrower is granted a
shareholder's loan from Decora, the respective loan agreement has to be
submitted to the bank.
9.9 Presentation of a "fairness opinion" with which the Bank is satisfied,
at the latest 4 weeks after signing of this loan agreement.
9.10 Presentation of evidence with respect to the legal validity and
enforceability of the declarations of Decora pursuant to nos. 8.2 and
8.3 (Certificate of Resolution pursuant to form no. A 1604 g (ANNEX
9.10A), Certificate of Incumbency and Signature pursuant to form no. A
1604 h (ANNEX 9.10B), Legal Opinion pursuant to form no. A 1604 k (ANNEX
9.10C), with which the Bank is satisfied), within 4 weeks after signing
of this loan agreement.
10. CONDITIONS OF PAYMENT
The payment of the loaned funds will be effected upon receipt of the following
documents and evidence with which the Bank is satisfied:
10.1 Legally valid and binding purchase agreement with respect to the
acquisition of shares in Konrad Hornschuch AG along with confirmation of
the Borrower that no breach of contract by Kunz Holding KG or
Baden-Wurttembergische Bank AG or Decora Industries Inc. or the Borrower
has occured and no termination right or unconditional right of
withdrawal of any contractual party under the purchase
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agreements (ANNEXES 1A AND 1B) exists.
10.2 Signing and execution of this loan agreement.
10.3 "Letter of Intent" of Dorrance Street Capital Advisors, L.L.C. pursuant
to letter of September 24, 1997 (ANNEX 10.3).
10.4 Evaluation of the transaction structure from a tax law perspective by
Arthur Andersen, Frankfurt am Main.
10.5 Legal evaluation of the transaction structure, including cartel law
issues, by Oppenhoff & Radler, Munich.
10.6 Legally valid and binding creation of security interests in accordance
with no. 8 of this loan agreement.
10.7 Payment of equity of the Borrower in the total amount of DM 26,689,250.-
to the account no. 9 190 600 00 of the Borrower at Dresdner Bank AG
under the sole condition that these amounts may only be disposed of upon
payment of the loan.
10.8 Extract from the commercial register of Konrad Hornschuch AG.
10.9 Articles of association of the Borrower and charter of Konrad Hornschuch
AG.
10.10 No breach of the conditions pursuant to no. 9 of this loan agreement.
10.11 No termination rights pursuant to no. 11 of this loan agreement.
10.12 At the date of conclusion of this loan agreement up-to-date quarterly
figures concerning the development of business of Konrad Hornschuch AG.
10.13 No substantial changes of the economical and financial conditions and
the business perspectives of the Borrower and Konrad Hornschuch AG.
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10.14 No current litigation/legal disputes against the Borrower which
substantially impair the economical and financial conditions.
10.15 Confirmation by Decora that the investment and maintenance measures to
be taken at Konrad Hornschuch AG during the duration of this loan do not
exceed in total an amount of DM 10,000,000.- p.a.
10.16 Giving of an irrevocable payment order for payment of the purchase
prices pursuant to the provisions of the share purchase agreements
(Annex 1a and 1b).
11. TERMINATION RIGHTS
Irrespective of termination rights resulting from the AGB of Dresdner Bank AG,
the Bank has the right to terminate the loan in part or in total and to call in
the loan for immediate repayment and to make use of the collateral, if
11.1 the purpose of use according to no. 3 is not met or
11.2 a condition of payment according to no. 10 is not met or ceased to exist
subsequently, or
11.3 one or several conditions pursuant to no. 9 are not complied with by the
Borrower, although having been granted in a time period of 20 banking
days, irrespective of whether or not the Borrower was able to influence
compliance with these conditions, or
11.4 the Borrower is in default of payment of the agreed interest or
repayment of the loan, or
11.5 the Bank discovers that further substantial contractual obligations have
been breached by the Borrower, or
11.6 the statements with respect to the assets and earnings conditions of the
Borrower or of Konrad Hornschuch AG subsequently turn out to be
incorrect or incomplete
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with respect to substantial points, or
11.7 composition or bankruptcy proceedings or comparable proceedings are
opened or applied for with respect to the Borrower or a company of the
Konrad Hornschuch AG group, or
11.8 further circumstances occur or become known by which the repayment of
the loan is substantially endangered, or
11.9 the Borrower has not acquired at least 75 % of shares in Konrad
Hornschuch AG within 18 months from the signing of this loan agreement,
and the restructuring of the existing payment obligations of Konrad
Hornschuch AG has not been effected under the leadership of Dresdner
Bank AG within this period of time.
11.10 a public offer for taking over all shares in Konrad Hornschuch AG which
are not owned by the Borrower has not been made within 18 months from
the signing of this loan agreement, while the ratio between own funds
contributed to the financing of the acquisition and debt after
completion of the "second step" must be 47 % to 53 %.
The Borrower is obliged to immediately inform the Bank in writing about the
arising of any termination right or about any circumstances which might lead to
a termination right.
12. LENDING BANK OFFICE
Dresdner Bank AG in Stuttgart.
13. EXPENSES
Expenses which are or will be incurred in the course of reviewing,
structuring and completion of this loan agreement (external legal,
consultancy and auditing fees as
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well as all costs of providing, management and realization of
collateral) shall be borne by the Borrower.
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14. PLACE OF VENUE AND PLACE OF PERFORMANCE
Place of venue and place of performance is Stuttgart. The laws of the
Federal Republic of Germany are applicable.
15. SYNDICATION
The Bank is entitled any time to syndicate to other banks a partial
amount or several partial amounts, respectively, of the financing. In
this context, vis-a-vis banks which are likely to participate in the
syndication, all information may be disclosed which in the opinion of
the Bank are necessary for the syndication. The choice of syndicating
partners will be reconciled with the Borrower.
It is intended to achieve the credit financing which is necessary in
order to implement the "second step" as described in the Preamble in the
course of a syndication by way of a consortium loan agreement under the
leadership of Dresdner Bank AG. The consortium loan agreement shall be
prepared in close accordance with the term sheet of August 20, 1997
which Decora has received and with this loan agreement. The ratio
between contributed owned funds and debt will be 47 % to 53 % after
completion of the "second step".
The Bank will endeavour in close co-operation with the Borrower to
successfully syndicate this loan and to set up the consortium.
16. MISCELLANEOUS
Should any of the foregoing provisions be invalid or unenforceable, the
remaining provisions shall not be affected thereby. The parties will
replace an invalid or unenforceable provision by a provision which
corresponds as closely as possible to the economical result of the
unenforceable or invalid provision. If it turns out later on that this
loan agreement contains one or several gaps, the same applies mutatis
mutandis.
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In addition thereto, the AGB of Dresdner Bank AG are applicable.
If rights under this loan agreement are temporarily or partly not
asserted, this does not limit in any way those rights unless Dresdner
Bank AG expressly waives such rights in writing.
Changes of or amendments to this loan agreement require written form.
This applies also to the abolition of this clause.
Frankfurt am Main, this September 29, 1997
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Celeste 97 Vermogensverwaltungs GmbH, Munich
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Dresdner Bank AG, Stuttgart
We agree to the loan agreement between the Borrower and the Bank of September
29, 1997, in particular to nos. 8.2, 8.3, 8.4, 8.5, 9.5 and 9.6. We undertake to
procure that the obligation concerning us will be met and that the shareholders'
resolutions which are necessary in this respect will be adopted.
Frankfurt am Main, September 29, 1997
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Decora Industries Inc., New York
